ALIGNING THE APPEAL OF ENTREPRENEURS TO INVESTORS:
WHY IS THERE A NEED FOR AN OPTIMAL ENTREPRENEURSHIP TRAINING MODULE IN THE KINGDOM OF SAUDI ARABIA TO BETTER ENGAGE ENTREPRENEURS WITH INVESTORS

Abstract

Little of the available funding reaches entrepreneurs and SMEs in the Kingdom of Saudi Arabia. This lack of financing ability, known as credit rationing, is mainly due to information asymmetries and is a pressing issue in Saudi Arabia. The Saudi government is relying on the entrepreneurship and SMEs subsector to diversify the Kingdom’s economy away from the dominance of oil and to create jobs for young Saudis who are underemployed.
This study aims to answer a question that hypothesizes that entrepreneurs need an optimal training module to understand the types of information that investors utilize in investment decisions and the type of “signals” from entrepreneurs that inspire confidence in investors. The human capital theory suggests that a quality training program can establish a skill base that will improve return on investment. The signaling theory suggests that the challenge of imperfect information can be largely overcome by training entrepreneurs to send more accurate and more targeted signals to investors regarding their character, skills, and the viability of their projects.
The study uses both quantitative and qualitative methods in data collection. The research was conducted within the Saudi cities of Riyadh, Jeddah, and Dammam, where most of the entrepreneurial activities and SMEs development are located. It suffered some limitations due to access to data and the conservativeness of the Saudi population in responding to academic studies that affected the sample size
The findings reveal that entrepreneurs with an in-depth understanding of investors’ due diligence process are more likely to invest adequately to assemble appropriate skill sets and learn to signal the characteristics that investors appreciate while tailoring their ventures and business plans to meet investors’ ideals. A training module that includes these components can be vital in overcoming credit rationing in the Kingdom. Universities, mainly business schools, may play a significant role in providing the optimal training module, with collaboration from investors.
This study contributes to the literature by representing the history of the entrepreneurship and SMEs development in the Kingdom through three main periodical stages. Also, it identifies the assessment studies that international management consultants prepared to several Saudi government agencies in the subject field. This contribution is more likely to help future researchers in having more practical information about the entrepreneurship and SMEs ecosystem in the Kingdom.
Furthermore, the study has implications on entrepreneurship and SMEs development stakeholders such as entrepreneurs, investors, training institutes, and regulators. Few recommendations are proposed. The study concludes with suggestions for research in related subject areas in Saudi Arabia and potentially other countries with similar economies.