GRM 2010 GRM 2011

Abstract Details

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Title of Paper:
Role of Clusters in Enhancing Entrepreneurship in GCC
Paper Proposal Text :
The Vision 2030 and the National Transformation Program in Saudi Arabia call for the urgent participation and a bigger contribution of the private sector to the local economy. Privatization and public-private partnerships are emphasized in these two government documents as vehicles to support economic transformation in the Kingdom, and shoulder the financing of public services at large. Other GCC countries have also emphasised on PPP as a model of economic groeth and development. PPPs enable the public sector to harness the expertise and efficiencies that the private sector can bring to the delivery of certain facilities and services traditionally procured and delivered by the public sector.
In the present paper we extend the prevailing notion of PPP toward the development and contribution of entrepreneurs to the economic growth and thus lessening the expenditure burden on the government and become a partner in the sustainable development of the country.

According to Casson (1982), entrepreneurial activity is a major public government policy. Its contribution to economic growth and development at the national and state level is a well-established fact. Entrepreneurial activity is the main contributor to the economic development of peripheral areas and a reversing factor for urban decline (Butler and Hansen 1991).

Entrepreneurs are categorized as those who have the ability to identify opportunities and exploit them. Shane and Venkatraman (2000) have defined entrepreneurial behavior as “opportunity identification, resource mobilization and organization creation”. The creation of opportunity is a result of technological changes or emergence of new markets. The resource based organizational perspective emphasizes that an organization identifies an opportunity, conducts resource gap and acquires suitable resources from the environment, to pursue the opportunity. In order to exploit identified opportunity, an additional set of complementary activities such as government supported financial sources and advice, selection of appropriate customers and suppliers. The business environment is characterized by providing access to newer market opportunities and other resources essential for establishment of new business ventures besides triggering innovation in the already existing firms (Hoang and Antoncic, 2003). Shane has emphasized that networking amongst the entrepreneurs provide them an access to knowledge of opportunities, resources and scarce capabilities. It is further emphasized by Eckardt and Shane (2003) that those who make the best use of their social and business network often become successful entrepreneurs. Successful entrepreneurs contribute to the development of entrepreneurial activity clusters.

According to Harvard Business School, cluster is a group of interconnected companies and related institutions consisting of producers, suppliers, trade associations, service providers, educational institutions and similar institutes, located in geographical proximity. In a cluster, the knowledge transfer takes place through an externality of interfirm transactions through individual employees. Though a cluster is not constrained by geographical proximity, but the co-location provides an effective channel for knowledge exchange.

Learning form the business environment and through networks takes place over time. It is also argued that learning takes place in the environment where the new knowledge is closer to the already existing one (Cohen and Levinthall, 1990). And self-supporting cycles occur, with the kind of community members, institutions and their relationships generate the entrepreneurial capability for opportunity identification and exploitation. It has been described as an evolving model of cluster development resulting from interaction at the firm and inter-firm level activities. The interaction also takes place at the entrepreneurial strategies level and the changing environment level. These two sources of change provide source of opportunities. A cluster is generated through a continuous cycle of increased improvement. The growth results from individual firm success, continuous exploitation of new opportunities and improvement of inter-firm relationships.

Clusters of already existing business are a source of newer opportunities through cumulative learning. Cumulative learning leads to the success of entrepreneurs in the cluster. Opportunities related knowledge is transferred within the clustered firms through mutual interaction. New entrepreneurs are also able to exploit new opportunities within the cluster. The dynamics therefore occurs at two levels; at the individual level the firms increasingly develop the opportunity identification and exploitation capability. At the environmental level, the environment becomes increasingly readable for entrepreneurial search (Butel and Watkins, 2006).

Adapted from Butel and Watkins (2006)

Through this paper we have tried to unearth and understand the following points:
1. What are the key challenges faced during the entrepreneurial development and its contribution to the economic growth in GCC countries?
2. What are the key recommendations for encouraging and advancing effective entrepreneurial development in GCC?


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