Factors Affecting e-Business Systems Introduction Process by Small ...

Factors Affecting e-Business Systems Introduction Process by Small and Medium sized Enterprises (SMEs) in Saudi Arabia PhD Confirmation of Candidature: Research Proposal By ALI ABU ABID

Supervisors: Dr Mahbubur Rahim Associate Professor Stephen Burgess

Monash University Faculty of Information Technology Caulfield School of Information Technology November, 2010

1.0 INTRODUCTION ...................................................................................................... 2 1.1 Motivations for the Research .................................................................................. 2 1.2 Research Goal and Questions ................................................................................. 5 2.0 PROPOSED CONTRIBUTION ................................................................................. 6 3.0 LITERATURE ANALYSIS ....................................................................................... 6 3.1 e-Businesses: Definition, Types, and Benefits for SMEs ....................................... 6 3.1.1 IT/e-Business in Saudi Arabia: Potential and Current Studies ............................ 7 3.2 Small and Medium sized Enterprises (SMEs) ...................................................... 11 3.3 Defining Adoption ................................................................................................ 13 4.0 Adoption Theory Review ......................................................................................... 14 4.1 Stage Model Adoption Theory Review ................................................................ 14 4.2 IT/e-Business Adoption Decision Making/Implementation literature Review .... 24 5.0 RESEARCH MODEL DEVELOPMENT ............................................................... 26 5.1 Research Design Phases ....................................................................................... 26 5.2 Development of the Research Model ................................................................... 28 5.2.1 The Filtering Process Used for Shortlisting Factors .......................................... 28 5.2.2 Research Propositions and Initial Research Model ........................................... 31 5.2.3 Factors Affecting Initiation Stage of e-Business Introduction .......................... 34 5.2.4 Factors Affecting Adoption Stage of e-Business Introduction .......................... 34 5.2.5 Factors Affecting Implementation Stage of e-Business Introduction ............... 34 6.0 RESEARCH APPROACH ....................................................................................... 34 6.1 Selection of Research Approach........................................................................... 34 6.2 Why a Multiple Case Study Approach ................................................................ 35 6.3 Online Experts Panel (phase 3) ............................................................................ 35 6.4 Target SME Population (Phase 4) ........................................................................ 35 6.5 Interviewees Profile .............................................................................................. 36 6.6 Unit of Analysis .................................................................................................... 36 6.7 Sources of Data ..................................................................................................... 36 6.8 Research Ethics..................................................................................................... 36 6.9 Data Analysis (Phase 5) ........................................................................................ 36 6.10 Reliability and Validity ...................................................................................... 37 7.0 PROPOSED PROJECT PLAN ................................................................................ 38 8.0 REFERENCES ......................................................................................................... 39

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1.0 INTRODUCTION 1.1 Motivations for the Research SMEs in Saudi Arabia play an important role in its economy. They contribute 28% of total national economic activity and employ about 40% of all employees in Saudi Arabia. Due to rapid globalization, SMEs in Saudi Arabia are however encountering greater intensity in competition. Moreover, computer and Internet literacy is gradually increasing in Saudi Arabia (Shaikh, 2009). Hence, the expectations on the part of the Saudi population in general and large industries in particular for SMEs to deliver products and services in more innovative manners are increasing. In response, Saudi SMEs are expected to consider the introduction of innovative e-business technologies at both sides of their supply chains. However, successful introduction of these technologies require the existence of a range of facilitating factors (Dubelaar, Sohal, & Savic, 2005). Existing e-business literature (e.g. Kuan and Chau, 2001 ; Wen and Chen, 2010 ) identifies a rich set of factors, categorizes them into three broad groups, and expresses them in terms of Technology-OrganizationalEnvironmental (TOE) framework proposed by Tornatzky and Fleischer (1990). Regrettably, it is not known whether these factors (which were identified and assessed for the SMEs operating in Western nations and some developed Asian countries such as Hong Kong, Japan, Singapore) apply equally to SMEs in Saudi Arabia due to the differences in national and organizational cultures. According to some scholars (e.g. Bagchi, Hart, & Peterson, 2004; AlGahtani, Hubona, & Wang, 2007), adoption and subsequent diffusion of innovative information technologies (including e-business technologies) are to a large extend moderated by the broader national culture within which organizations (particularly SMEs) operate. The context of Saudi Arabia differs in many ways from those of the Western nations and developed Asian countries. Saudi Arabia is rich with great natural resources and is ranked first in the world for oil reserve (Global Oil Reserve, 2010). Saudi Arabia has one of the fastest growing economies in the Arab world, and future economic outlook remains upbeat supported by record high world prices of both oil and natural gas (Darrat & Al-Sowaidi, 2010). In contrast, Saudi Arabia has been globally ranked 52nd in the annual benchmarking study of digital development for countries (Economist Intelligence Unit, 2010). The cultural context of Saudi Arabia differs significantly in many dimensions from those of Western nations and developed Asian countries. Traditionally, the influence of culture is evaluated using Hofstede (2010) theory. This theory suggests that culture can be operationalized in terms of five dimensions: Power Distance Index (PDI) that is the extent to which the less powerful members of organizations and institutions accept and expect that power is distributed unequally, Individualism (IDV) means that the degree to which individuals are integrated into groups, Masculinity (MAS) refers to the distribution of roles between the genders which is another fundamental issue for any society, Uncertainty Avoidance Index (UAI) deals with a society's tolerance for uncertainty and ambiguity; it ultimately refers to man's search for Truth, and Long-Term Orientation (LTO) deals with virtue regardless of truth. Saudi Arabia is almost identical to other Arab countries; the Islamic faith plays a large role in the people‟s lives. Large power distance (PD score: 80) and uncertainty avoidance (UA score: 68) are the predominant characteristics for this region. This indicates that it is expected and perhaps accepted that leaders separate themselves from the community, and issue complete and specific directives to citizens. This implies that at an organizational level, a clear distinction is likely to be maintained between owner and operational levels of management. Management would like to make business decisions to reduce level of [2]

uncertainty within their sector. Hence, technological solutions are more likely to be considered useful when they help management to reduce the uncertainty in their business decision making process. These characteristics are quite different from those found in developed nations. Therefore, without further empirical evaluation, the applicability of the existing factors affecting e-business introduction process for SMEs would remain questionable. Furthermore, it is argued that the assumptions about the context of SMEs (e.g. the attitude of SME owners and employees about e-business technology, Information and Communication Technology infrastructure) operating in the developed nations may not directly apply to the Saudi Arabian SME sector. According to Hertog (2010), there exists some unique characteristics of Saudi SMEs. For example, although ownership of Saudi SMEs is limited to Saudi citizens, 98% of SME employees are non-Saudi citizens. Another characteristic is that the employment within Saudi SMEs is strongly dominated by two distinct types of expatriates. One group involves knowledgeable and educated managers and another group includes less educated labor force employed from various developing Asian/African countries (e.g. India, Philippines, and Sudan). Therefore, the culture and education level of employees among Saudi SMEs is quite heterogeneous. The implication is that the exploration of new technologies (such as e-business) is likely to be prompted by knowledgeable expatriate managers, while major business decisions involving investment in technology adoption are likely to be made by Saudi SME owners alone (Tashkandi, 2010). Furthermore, actual implementation and use of the technological innovations in SMEs are likely to be influenced by less educated expatriate labor force. Hence, unlike other developed nations, the employee characteristics of Saudi SMEs are quite different due to the involvement of three distinct groups of people (i.e. Saudi owners, knowledgeable expatriate managers, and expatriate labor force). It is argued that the attitude of these varied groups of people may in turn affect ebusiness introduction process in Saudi SMEs. This argument is in broad sense consistent with other technology adoption researchers who observed that employee characteristics and their attitudes may moderate how technologies are designed, introduced and assimilated by SMEs (Devins, Johnson, & Sutherland, 2004). However, despite an exclusive growth in e-business research, the existing literature does not report how heterogeneous workforce shapes ebusiness systems introduction process among SMEs. Furthermore, as the research on ebusiness in Saudi Arabia is still in its infancy stage, further research efforts are needed to examine how the unique characteristics of Saudi Arabian SMEs may play a role in influencing their e-business introduction process. Another motivation for this research emerges from the call of such scholars as Vega, Chiasson and Brown (2008) who urge e-business researchers to broaden their investigation agenda by addressing the influence of government assistance programs to understand the uptake of e-business systems particularly within a SME context. It is commonly acknowledged in business and IT literature sources that adoption of technological innovations can be encouraged through government supported programs (OECD, 2004; European Commission, 2009). The e-business literature reports how government patronage may diffuse e-business systems in organizations. There exists some studies which examine how government influences the uptake of e-commerce, e-procurement, and electronic data interchange (EDI) technologies for such countries as Singapore (Zhu & Thatcher, 2010), Hong Kong (Gunasekaran & Ngai, 2008), and Finland (Panayotopoulou, Galanaki, & Papalexandris, 2010). In Singapore, the government encouraged e-commerce uptake by qualified local companies through supporting their costs of e-commerce consultancy, hardware and software purchases, and Internet connections. In recent years, the influence of [3]

government policy choices on IT/e-business systems has also been acknowledged for the greater Gulf region (of which Saudi Arabia is part) by Al-Qirim (2006). Nonetheless, few scholars have attempted to actually examine how the existence of such programs may influence the broader introduction process of e-business systems among SMEs for an emerging economy like Saudi Arabia. In Saudi Arabia, government provides assistance to SMEs using two specific programs: Management Assistance Program (MAP) and Financial Assistance Program (FAP). MAP is delivered through SME development centers (in each Chamber of Commerce) which are located in five provinces of Saudi Arabia. It provides free consultation and advice regarding investment opportunities, feasibility studies including adoption of innovative technological solutions for implementation (Council of Saudi Chambers, 2010). Whereas FAP provides a financial program known as “Kafala” which is administered through the Saudi Industrial Development Fund (SIDF) (under the umbrella of Ministry of Finance). Through this program, Saudi banks offer finance (up to SR 2 million= AUD$ 540,540) to SMEs in order to upgrade their infrastructure (including new technology adoption) based on a guarantee issued by SIDF to the bank (SIDF 2010). It is not however known how these programs contribute in promoting the uptake of e-business systems among SMEs. Hence, this research is initiated to develop an understanding of the role of these programs on the various stages of e-business introduction process among Saudi SMEs.

Another motivation for this research arises from the fact that e-business represents a complex technology (Oliveira & Martins, 2010), and hence, its introduction within an organization needs to be understood over an extended period of time. This argument is supported by several innovation adoption scholars (e.g. Tarafdar and Roy 2003; Lin, Huang et al. 2007) who recommend studying complex IT systems (such as e-business) adoption phenomenon using a research approach that frames introduction over a time period rather than at a particular point in time. For the Saudi SME context, it is not clear how over time they conceive, decide, implement and then use e-business systems, and what issues, challenges, and facilitators may affect their e-business introduction process. Much of the existing ebusiness literature on SMEs focuses on understanding adoption decision making which represents a particular (though important) stage of broader e-business introduction process. In particular, considerable attention has been given to identify the factors affecting SMEs‟ adoption decision of e-business systems. Some literature also exists that primarily focus on implementation impact and describes e-business benefits experienced by SMEs. In contrast, relatively less emphasis is given in the scholarly literature about understanding e-business introduction as a temporal process involving multiple stages. Even though, the notion of stage model approach to represent IT/information system (IS) introduction process is not entirely new, and considerable research attention has been paid by innovation scholars (e.g. Kwon and Zmud, 1987; Rogers, 1995; Rogers, 2003) to investigate the introduction of IT/IS systems in organizations using the Diffusion of Innovation (DOI) as a guiding framework, their attention is restricted primarily to large organizations operating in developed nations. As such, studies reporting the application of DOI-based stage model approach to evaluate ebusiness systems introduction process for the SME context are limited. In this context, it is important to acknowledge that some researchers (e.g. Daniel, Wilson, & Myers, 2002; Magal, Koslage, & Levenburg, 2008) have referred to the stage model concept to propose e-business adoption maturity levels of SMEs. However, such e-business maturity models (although are temporal in nature and involve stages) are concerned with the evolving sophistication of ebusiness technologies adopted by an organization, they certainly do not refer to DOI stage model framework for describing the e-business introduction process in terms initiation, adoption decision making, implementation, and acceptance. This observation is supported by [4]

views of such scholars as Chong and Bauer (2000) and Lin, Huang and Tseng (2007). This in turn calls for further research to examine e-business introduction process among Saudi SMEs using DOI based stage model as an appropriate theoretical lens. It is argued that the use of DOI driven stage model is quite useful for better understanding the barriers, issues, and facilitators of e-business introduction process. This argument is consistent with the views expressed by Rajagopal (2002). The final motivation for this research project is driven by the fact that unlike other complex IT systems, e-business systems can be used with different business partners depending on at which ends of the SME supply chains they are introduced. According to e-business guru Turban et al.(2010), the concerns pressures, priorities and motives of organizations to invest in e-business systems tend to vary depending on whether such technologies are targeted at doing e-trading with customers or suppliers. It is thus argued that the drivers, issues, and challenges associated with e-business systems connecting SMEs with suppliers‟ community may differ from those of the customer community. This particular distinctive characteristic of e-business technologies has not received much recognition by scholars for investigating ebusiness introduction process. Therefore, it would be interesting to find out whether Saudi SMEs experience a variation in the influence of the factors affecting their e-business introduction process depending on which side of their supply chains these systems are used. Therefore, the characteristics of SMEs ( i.e. labor force and government programs) operating in Saudi Arabia, the need to evaluate factors identified in TOE framework for non-Western cultural context, the unique characteristics of e-business systems (i.e. supply side and customer side), and the lack of e-business studies involving stage model (and addressing contextual conditions) approach for SMEs in general, have motivated this research project to examine whether the factors identified in the existing literature sources are truly applicable to Saudi SME context and to explore new factors that may possibly be discovered due to the unique characteristics of Saudi SME and e-business systems.

1.2 Research Goal and Questions In light of the research motivations outlined in the previous section, this research project seeks to address the following broad research goal:  To develop a comprehensive model that would facilitate understanding of the ebusiness systems introduction process for the SMEs operating in Saudi Arabia and how various factors influence the key stages of that process. This broad goal is translated into the following specific research questions: a) How do the unique employee characteristics of SMEs operating in Saudi Arabia affect e-business systems introduction process? b) In what ways, the Saudi government assistance programs influence e-business systems introduction process for Saudi SMEs? c) How does the influence of Technology-Organizational-Environmental (TOE) factors (including unique employee characteristics of Saudi SMEs and Saudi government assistance programs) affect e-business introduction process across the key stages of ebusiness introduction of the Saudi SMEs? d) Does the influence of the factors affecting e-business introduction process tend to vary depending on which side of supply chains e-business systems are introduced? [5]

e) Are there any common or new factors that are perceived important across the key stages of e-business introduction by Saudi SMEs?

2.0 PROPOSED CONTRIBUTION This study is expected to make important theoretical and practical contributions. Existing e-business literature primarily identifies factors affecting adoption decision for SME context and is silent on how those factors affect other stages of the broader e-business introduction process. Therefore, on the theoretical side, the notion of conceptualizing the ebusiness introduction process into multiple distinct stages and identifying new factors along with existing known factors associated with each stage represents a genuine contribution to theory development. On the practical side, knowledge of the factors affecting each stage of e-business technology introduction process by Saudi SMEs can alert the SME development policy makers and SME management about formulating appropriate policies encouraging e-business diffusion.

3.0 LITERATURE ANALYSIS 3.1 e-Businesses: Definition, Types, and Benefits for SMEs Defining e-business is not a simple task because of the existence of different perceptions of scholars who introduced a range of related terms (e.g. Internet commerce, digital commerce, digital business) with some overlapping meaning. However, the root of „e-business‟ can be traced to two related concepts: Inter-Organizational Systems (IOS) and e-commerce. The notion of IOS emerged in mid-1980s when Electronic Data Exchange (EDI) systems appeared in the marketplace (which used proprietary protocols and networks) and electronically linked supply chain members. These systems enabled organizations (including large customers with SME suppliers) exchange structured documents (e.g. purchase orders, invoices, and advance shipping notices). At later stage, the EDI systems have led to the development of B2B e-commerce when the Internet became commercially available as a communication medium and relevant web protocols were developed. The term „e-commerce‟ became popular in early 1990s when commercial organizations started to use the Internet and web protocols to develop online applications for their individual customers to buy products and services directly from them using home based computers. Many of these technologies later evolved and facilitated B2B transactions over the web. The term „e-business‟ was introduced by IBM (1997) and received enormous popularity in late 1990s due to the recognition that e-commerce technologies and the Internet can be used by both internal and external customers. Regrettably, there is no single definition of ebusiness because it has been interpreted from three perspectives: technology, business model, and system. First, e-business is not just the Internet; it involves such technologies as wireless, intranets, portals, and content management software among others to improve business productivity (Stone, 2003). Second, e-business refers to a business model that creatively and intelligently utilizes and exploits the capabilities of IT and Internet technologies to create efficiencies, as well as to achieve effective gains such as flexibility and responsiveness, and to create strategic opportunities through competitive uses of IT to alter market and industry structure (McKay & Marshall, 2004).Third, e-business is envisaged to be “a system where [6]

Internet technology is employed to streamline the business processes of organisations to improve their productivity and efficiency” (Muffatto & Payaro, 2004). Therefore, a broad definition of e-business is: “conducting businesses both internally (employees) and externally (suppliers and customers) using online technologies”. It is also acknowledged that e-business systems can be introduced within an organization to link with different members of a supply chain. As such, different motives, implementation strategies, and priorities may drive the introduction of these systems within an organization (M. Rahim, Shanks, & Johnston, 2011). This research project acknowledges the broader view of e-business but restricts its focus to transactions and information sharing between SMEs and external members (including trading partners, like suppliers and customers, and government agencies) who are linked via the Internet. This project further acknowledges that exchange of information between organizations over the web may involve financial transactions or any other business related documents (e.g. forecasting, budgets, designed documents, tenders). Depending on the nature of participants, e-business systems appear in two popular types (Turban, et al., 2010): Business to Business (B2B) and Business to Customer (B2C). B2B ebusiness represents the largest and oldest category of e-business and accounts for about 85% of e-business transactions (Turban, et al., 2010). Well known technologies representing B2B e-business include: EDI systems, e-procurement systems, and e-marketplace. Whereas, B2C involves electronic interactions (transactions/communications) of products or services between a business and an individual consumer (Lim, 2001). For instance, online banking and online auctions represent instance of B2C e-business. Regardless of type, when successfully implemented e-business systems can offer many benefits to SMEs: like cost reduction (Gunasekaran, McGaughey, Ngai, & Rai, 2009), access to global markets (Pearson & Grandon, 2006), improved relationships with business partners (Abu Abid, Rahim, & Scheepers, 2010) and competitive advantages (Rahim & Singh, 2008).

3.1.1 IT/e-Business in Saudi Arabia: Potential and Current Studies 3.1.1.1 IT/e-Business Potential of Saudi Arabia Saudi Arabia is endowed with large natural resources and it is ranked first in the world in oil reserves (Global Oil Reserve, 2010). It has one of the fastest growing economies in the Arab world, and future economic outlook remains upbeat supported by record high world prices of both oil and natural gas (Darrat & Al-Sowaidi, 2010). Benefiting from government efforts to diversify the domestic economy and enlist alternative (non-energy) sources of national income, Saudi Arabia has experienced a remarkable growth record, at least over the recent period 2000-2010, whereby its real non-oil economy has been growing by more than 10% annually (Darrat & Al-Sowaidi, 2010). The flourishing economy has led to a number of government initiatives promoting a leading innovation-based knowledge economy, the most notable being establishment of "smart cities". For instance, King Abdullah Economic City. This city contributes to increase the number of organizations implementing e-business systems to become an integral part of their business transactions (Manibo, 2010). Furthermore, Saudi Arabia has the biggest e-business market in the Gulf region, with a forecast value of US$3.3bn in 2010 which is expected to rise to US$4.6bn by 2014 (ReportLinker, 2010). E-business spending in Saudi Arabia helds up better than some other neighbouring countries located in the Middle Eastern region (Sait, Al-Tawil, Hussain, Dhahran, & Riyadh, 2004). Despite the global financial crisis that restricted the global economic recovery, the Kingdom still continues to be a lucrative market for e-business [7]

products and services over the forecast period as it heavily invests to upgrade its IT and communications infrastructure (Tashkandi, 2010). Saudi Arabia‟s e-business market has a figure of positive drivers, including a growing population and government supporting programs (e.g. Management Assistance Program, Financial Assistance Program) (ReportLinker, 2010). It is predicted that per capita e-business spending will reach US$173 by 2014, as PC penetration rises to more than 30%. Youthful demographics and a growing population is expected to support a positive market trajectory as well (ReportLinker, 2010).

3.1.1.2 Current IT/e-Business Studies in Saudi Arabia In recent years, some scholars have initiated e-business related studies for the Saudi Arabian context. A summary of these studies is provided in Table 1 and a number of observations are derived. First, most studies focus on B2C business systems and a few studies look at B2B type of ebusiness. Second, the primary focus of most studies is to understand the decision of individual (people/organization) to adopt e-business systems. Third, little studies focus on IT/e-business introduction in SMEs. Those few studies that examine some aspects of IT/ebusiness introduction identify several key factors that affect their adoption for the Saudi context. These factors include relative advantage (Al-Gahtani, 2003), compatibility (AlGahtani, 2003), complexity (Al-Gahtani, 2003), technical issues (Al-hawari, Al–Yamani, & Izwawa, 2008), security concerns (Al-hawari, et al., 2008), enterprise IT experience (Alfuraih, 2008) and cost (Alfuraih, 2008). Finally, none of these studies examine technology introduction in SMEs by using stage model framework perhaps due to the lengthy time periods needed for undertaking such an investigation.

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Literature Source Al-Gahtani (2003)

Table1: IT/e-Business studiess in Saudi Arabia: A summary Focus Research Type of Relevant Research Participant Technology Theory Approach Computer Medium and Computer Diffusion of Survey technology adoption Large technology Innovation N=1200 in Saudi Arabia Organizations

Sait, et al. (2004)

E-commerce adoption

Alwabel and Zairi (2005)

Factors affecting e- Managers of E-commerce commerce Financial implementation by Service financial services in Organizations Saudi Arabia

Critical Success Survey Factor (CSF) N=294

Ahmed, Zairi and Alwabel (2006)

To examine issues related to the development of the Internet and ecommerce in Saudi Arabia

Not specified

Individual (users)

E-commerce

TPB Diffusion Innovation

Organizations Internet and E(the size was commerce not specified)

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Key Factors Relative advantage Compatibility Complexity Triability Observability

& Online survey Internet experience of N=4000 Confidence of Internet skills Internet security Internet privacy

Survey N=92

Top management support Knowledgeable employee‟s attitude toward technology Lower level employee‟s attitude toward technology Owner‟s attitude toward technology, Enterprise IT experience External pressure Communication factor which includes target, media, message and timing Cultural issues Cost The need for technical support,

Table1: IT/e-Business studies in Saudi Arabia: A summary (Continued) Literature Sources

Focus

Research Participant

Type of Technology Internet commerce

Relevant Theory Not specified

Nature of Research Case study N=1

Key Factors

Al-hawari, et al. (2008)

Small business‟ decision to have website in Saudi Arabia To discuss the potential market for ecommerce in Saudi Arabia

Small

Organizations (the size was not specified)

E-commerce

Not specified

Case study N=1

Enterprise IT experience Cost

Al-Somali, Gholami and Clegg (2009)

To identify the factors affecting customers to adopt online banking

Individual (customers)

Online banking

TAM

Survey N=400

Quality of the Internet Connection Awareness of online banking benefits Computer self-efficacy

Aleid, Rogerson and Fairweather (2009)

Barriers to ecommerce adoption by customers

Individual (customers)

E-commerce

Grounded theory (GT)

Case study N=22

Internet infrastructure Internet cost Limited in official postal services Security and privacy E-commerce law Lack of Internet skills

Al-Ghaith, Sanzogni and Sandhu (2010)

To identify factors affecting the adoption and use of online services in Saudi Arabia

Individual (users)

Online service

Diffusion of Innovation

Survey N=651

Relative advantage Compatibility Complexity

Alfuraih (2008)

Technical issues Website hosting concern Security concerns

Triability Observability

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3.2 Small and Medium sized Enterprises (SMEs) 3.2.1 Definition of SMEs There is no single definition of SMEs. Several criteria such as employment, sales and investment are often used for defining the term „SMEs‟. However, the most popular definition uses the “number of employees” as the primary criterion to describe a SME. Even the definition of an SME on the basis of a specific criterion (e.g. number of employees) is not uniform across countries(Ayyagari, Beck, & Demirguc-Kunt, 2007) example, in the United States of America (USA), a SME represents an enterprise with less than 500 employees (Wen & Chen, 2010), whereas European Union (EU) defines SME as an enterprise with less than 250 employees (European Commission, 2010). The fourth and fifth columns of Table 2 clearly indicate that there is no agreement about the upper limit of the number of employees used in defining either a small or medium enterprise. For the purpose of this research, the definition of Saudi SME provided by Otsuki (2002) is accepted. Therefore, for the Saudi context, a SME is an enterprise with less than100 employees. A micro enterprise in Saudi Arabia is considered to be an enterprise which has less than 10 employees. This definition is acceptable because the majority of countries use it and there is no specific definition for them for the context of Saudi Arabia.

Regions USA EU Australia Asian Singapore Malaysia Korea Hong Kong Gulf Region Saudi Arabia Bahrain Oman UAE

Table 2: SME Definitions by Region Literature sources Micro Small

Medium

Ward (2010) European Commission (2010) ABS (2004)