Constraining factors for effective entrepreneurship policy implementation in a developing economyevidence from Oman

Resumen

This thesis focuses in understanding the effectiveness of entrepreneurship policy in the context of developing countries. The debate continues over the effectiveness of entrepreneurship policy to address market and institutional failures, as mixed findings from the literature have led to unclear conclusions. While this subject has been extensively analyzed in advanced economies, little is known about the impact of entrepreneurship policy in developing countries. My study aims to elaborate on the discussion of entrepreneurship policy in four main areas: government support, market failure, entrepreneurs ́ human capital, and new firm growth in the context of a developing economy. To address these issues, I draw on several research streams and the debate in the literature on entrepreneurship policy in developing countries to propose two main arguments which lead later on to two empirical analyses performed by this study. Because new firm owners often lack the entrepreneurship-promoting conditions (i.e., skilled human capital, financial resources, policy incentives, etc.) that are prevalent in developed countries (González-Pernía et al., 2015; Ramadani et al., 2015), the first study argues that it is misleading to extrapolate lessons on entrepreneurship policy from advanced economies and apply them to developing regions. Therefore, the purpose of the first study is to examine the extent to which current insights on entrepreneurship policy are applicable to less developed countries, where market and institutional failures are more pronounced. More specifically, the implementation of a government support program aimed at granting loans for venture growth in the context of a developing economy is assessed. Using bias- corrected matching estimation techniques, the results reveal that a policy designed to address severe financial market failure in a developing economy positively contributes to new firms’ overcoming barriers to growth during the critical early stages of their development. In the second empirical study, I argue that in a developing context, entrepreneurship policy is necessary but not a sufficient condition to deal with financial market failure. Entrepreneurs human capital matters in overcoming barriers to growth, and this may be especially true in the context of a developing country where resources are scarce. Thus, the aims of the second study are to disentangle the reasons behind the stagnation of new ventures that obtain government financing support in the context of a developing economy (i.e., the case of Oman). A crisp-set Qualitative Comparative Analysis (csQCA) technique was applied to obtain results (Rihoux & Ragin, 2009). The study’s findings shed some light on the factors that prevent new firms from growth in developing economies despite the financial support they receive from public institutions. I build on previous work on entrepreneurship policy, human capital and new firm growth (Erikson, 2002; Shaw et al., 2009) to argue that providing small business loans may be a necessary, yet insufficient condition to achieve venture growth, as the founders (and recipients of the government financing support) often lack human capital attributes to scale up their new businesses in disadvantaged contexts. Implications and key findings extracted from this study are intended to interest and be of use to researchers, policymakers, entrepreneurs and government institutions in the context of developing countries, and specifically Oman. It is worth mentioning that the first study from this thesis has been accepted for publication in the International Journal for Entrepreneurship and Small Business (IJESB), and in two international conferences: the 61st annual ICSB World Conference in New Jersey (US) during June 15-18, 2016, and in the 26th ACEDE conference (Spanish Scientific Association for Business Economics and Management) in Vigo (Spain) during June 26-28, 2016. The second part of the study from this thesis has been accepted in 2017 BCERC – Babson College conference at The University of Oklahoma Michael F. Price College of Business, in Norman, Oklahoma, USA, on June 7-10, 2017. This indicates that the research findings can be of use to researchers either in Oman, or the Gulf region, or be of interest in international journals and conferences. All these issues are integrated into a cohesive, consistent manuscript that follows a unique conceptual framework that will be explained in the first chapter of this study. Chapter Two gives an overview about entrepreneurship policy and build the theoretical background and insights for my empirical work. Chapter Three outlines in details a brief description of the study’s context (i.e. the case of Oman) and explains the research approach and methodology adopted. The results and discussion are in Chapter Four, and the study ends with my main conclusions, implications, and limitations in Chapter Five.