Al-Shaikh, F.N. (2013).

"Opportunities and Challenges of Entrepreneurship in Developing

Countries: The Case of Jordan", Journal for International Business and Entrepreneurship
Development, Vol.7, No.2, pp.163-178.

1
 Opportunities and Challenges of Entrepreneurship in Developing Countries: The Case of
Jordan

Abstract

This research aims to investigate the opportunities and challenges of entrepreneurial firms in
developing countries, with particular reference to Jordan. Data was collected via a questionnaire
developed following a review of previous studies. Analysis is based on the responses of 140
small firms operating in Irbid Governorate. Of responding firms, 26.40% are less than five years
old. Most entrepreneurs are university graduates and below 40 years of age. The greatest
challenges faced are lack of finance, high raw material prices, and high interest rates. Most
entrepreneurs had no training before starting businesses. Entrepreneurs considered skills in
finance, marketing, and preparing business plans the most desirable. Company age, size and
entrepreneur’s qualifications explain 33% of obstacles, i.e. the younger and smaller the company
and the less qualified the entrepreneur, the more serious the challenges. Respondents believe
firms should be supported to play their role in the country’s development. Recommendations are
made in light of results.

Keywords: Entrepreneurship, developing countries, Jordan, challenges and opportunities

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 Opportunities and Challenges of Entrepreneurship in Developing Countries: The Case of
Jordan

Introduction

It is widely recognized that entrepreneurs play a pivotal role in the world economy. The
prominent economist Schumpeter (1939) highlighted how entrepreneurs create what he calls
creative destruction by coming up with new business ideas and changing the nature of demand,
thereby revitalizing the economy and giving more impetus to innovation and economic
development.

Entrepreneurial small firms create employment opportunities and support big firms by providing
services to customers that big firms may not be able or willing to provide, therefore boosting the
economic and social welfare of the societies in which they operate. Despite the fact that the
degree of contribution of small businesses to national economies varies from country to country,
the contributions of these firms are extremely important, taking into consideration their size and
resources compared to large counterparts.

No wonder, therefore, that the promotion of small and entrepreneurial firms has increasingly
been recognized by many governments and economic and social development scholars as one of
the means by which the dual problems of poverty and unemployment can be alleviated. These
two problems are serious challenges that most countries face nowadays. Statistics show that in
the year 2010 there were 925 million hungry people in the world. In other words, almost one in
seven people is hungry (FAO, 2010). Unemployment and poverty are probably more critical in
less developed countries. For instance, “the average per capita income of Muslims--from
Morocco to Bangladesh and beyond to Indonesia--is half the world average” (Lodge and Wilson
2006, p. 18).

Probably one of the most remarkable developments in the world economy over the past two
decades is the liberalization of economic policies. This shift caused many governments to
abandon many of the previous roles, such as providing employment opportunities for citizens. As
a result, entrepreneurship is increasingly viewed by many circles as one of the major pillars of
economic development similar to the traditional factors of production such as labour and capital.
Hence, the term ‘entrepreneurial capital’ has become a popular concept. For instance, the
European Union formulated what is called the Green Paper on Entrepreneurship, which revolves
around making Europe a more entrepreneurial region. The European 2020 strategy considers
entrepreneurship as a key objective for the implementation of this strategy (Rizza and Varum,

3
2011). Similar policies and plans are also formulated in other countries such as China, Japan, and
the UK that aim at sustaining growth in small and entrepreneurial firms (Atherton, 2005).

Entrepreneurship and small businesses in Jordan

Jordan, the main concern of the present study, has been more interested than ever before in
promoting the role of the private sector in the development of the country. Policy makers believe
that the creation and development of small and entrepreneurial firms is one of the mechanisms
by which unemployment and poverty can be alleviated. According to the formal statistics, the
unemployment level in 2009 was estimated at 12.5% (Department of Statistics, 2010). The
informal statistics claim that the real figures are much higher and may reach 30% (CIA World
Fact Book, 2013). Statistics also show that the percentage of people below the poverty line was
14.2% in 2008 (CIA World Fact Book, 2013).

Therefore, entrepreneurs, not politicians or economists, are the ones who make the difference.
McClelland (1987) stresses this view by indicating that there is no better way to give momentum
to economic development in any society than developing entrepreneurs and promoting
entrepreneurship.

Consistent with the above argument, Gibb and Li (2003) stress that small and micro firms played
the most important role in the development and economic growth of China, which has been
achieving impressive rates of growth over more than two decades.

Empirical evidence indicates that small firms in Jordan are more efficient economically and
enjoy higher productivity levels than large ones (Batayneh, 2005). Furthermore, small firms
provide employment opportunities for young people and those who migrate from rural to urban
areas who are more likely to have difficulty finding jobs in big firms. Big firms usually require
skills and qualifications that this group of people does not possess most of the time (Alasrag,
2007).

Based on the above reasoning, one can easily say that the present study represents an important
contribution to the field of management and development. Furthermore, this study will hopefully
be of great help to policy makers by providing guidelines for their decision-making processes. In
fact, the literature suggests that if small firms are to be developed, an understanding of the reality
of these firms becomes an important issue to address (Harris et al., 2005; Pelham, 1999).

How to define small business? There is no universal agreement on this. It may vary from country
to country. More than one definition can be found in the same country. Some of the criteria used
for this purpose are capital, volume of sales, technology, and number of employees, the latter
probably being the most popular. However, there is no agreement about the cut-off point
regarding number of employees as an indicator of size. For instance, in the USA small
4
businesses are defined as those that hire less than 100 employees (Longenecker et al., 2003),
which is not necessarily the same in other countries.

Another important issue should be highlighted here. Some scholars distinguish between small
business managers and entrepreneurs. However, the present study takes a slightly different view.
An entrepreneur is the person who starts and/or operates a business. In fact, this definition is
consistent with that of some scholars such as the prominent scholar Longenecker and his
associates, who consider all active managers involved in operating small businesses to be
entrepreneurs (Longenecker et al., 2003). The present study will also consider firms that hire 19
employees or less as the cut-off point between small and medium firms. This is consistent with
the formal definition adopted by the Ministry of Trade and Industry in Jordan (Department of
Statistics, 2010).

Objectives of the research

This study aims to answer the following questions: What are the main features of small industrial
firms in Jordan and the backgrounds of people in charge of them? Do people in charge of small
industrial firms receive any entrepreneurial training before starting their businesses? What
obstacles do small industrial firms in Jordan face? Do the characteristics of small industrial firms
have an impact on the intensity of the challenges that they face? What skills do small industrial
firms in Jordan wish to acquire? And finally, how can small industrial firms in Jordan be
supported? Finding answers to the above questions will enable small firms to play their expected
role in the economy, therefore boosting the economic and social welfare of the country.

Literature Review

This part of the research sheds light on previous studies. It is noteworthy that most literature
addresses both small and entrepreneurial firms as one topic or interrelated topics. This study will
follow the same approach.

In Al-Shaikh’s (1998) field study about factors that cause small business failures in developing
countries with particular reference to the case of Jordan, it was found that the most important
factors are: poor planning, lack of finance, poor management, competition from big firms, and
lack of experience. Therefore, special emphasis should be placed on enabling these companies to
play an important role in activating the economy. Organizations supporting small firms can
greatly help to achieve this objective. The early years of establishing firms are the most critical
for success and failure. Hence, more support is needed in the early years of these firms’ life
cycle.

Al-Sahlawi (2001) investigated the impact of factors such as level of education and availability
of finance on the spread of small and medium enterprises in Saudi Arabia. He concluded that
5
these factors are related positively to the spread of small and medium enterprises. Therefore, the
study recommended the importance of providing support for these firms because of their
significant role in the Saudi economy and the country’s social development.

Based on a survey of previous studies and secondary data, Mahroug and Magableh (2006)
addressed the problems that face small and medium enterprises. They pointed out that the most
important problems are: high cost of capital, inflation, intense competition from large firms,
financing difficulties due to lack of warranties that can be provided by small and medium
enterprises, bureaucracy and complexity of government procedures, high taxes and scarcity of
raw materials.

The contribution of entrepreneurial firms to economic and social development was the main
concern of an increasing number of researcher
s over the past decade. Kronn et al. (2003) stress the vitality of coordination between
educational institutions and business firms. They emphasize that educational institutions and
business firms should work together to incorporate entrepreneurship in South African schools’
curriculum to increase students’ awareness of the impact of entrepreneurship on development.
They emphasize the need to instil entrepreneurship values and the importance of self-
employment in the curriculum with special reference to secondary schools because these students
will soon enter the workforce.

The role of small firms in alleviating poverty and unemployment and leveraging economic
development was highlighted by Gibb and Li (2003), who compare China’s level of economic
development over recent years with that in the Tigers Countries. Emphasizing that China uses a
model that suits its culture, they believe the success of the Chinese experience is attributed to the
fact that the Chinese do not follow the Western models of privatization and intellectual
copyrights. On the contrary, they adopt models, based on teamwork and ownership of the local
authorities, which fit the Chinese culture. According to Gibb and Li, this model not only helped
improve the economic well-being of the people but was also successful in stabilizing the
population in rural areas which represents 70% of the Chinese population.

In another study on the impact of small firms on social and economic development,
Gebremariam et al. (2004) highlighted the experience of West Virginia in the United States.
They concluded that small firms had a significant impact on the reduction of poverty,
unemployment and on the achievement of higher rates of economic growth in West Virginia,
which is considered one of the poorest states in the country.

To promote entrepreneurship, Venkataraman (2004) emphasizes the importance of what he calls

the intangible infrastructure. He argues that governments and organizations that are concerned
about supporting entrepreneurial firms stress the tangible structure but have less concern about
the intangible infrastructure. He provides some examples of this; chief among these are:
6
generating ideas that are relevant to the region, as some ideas generated in one region may not
necessarily be relevant for other regions; the promotion of informal entrepreneurship forums, and
motivating entrepreneurs to generate new ideas. Venkataraman argues that motivation occurs by
creating what he calls security networks. These networks are meant to provide assurance to
entrepreneurs that they will have job opportunities even if they fail to turn their ideas into
successful enterprises. He also stresses that entrepreneurs must be given opportunities to test
their creative and new ideas in big markets or markets with potential because these are the right
place to test them. Venkatarman also urges strong coordination among government agencies,
universities and private firms to implement the above-mentioned strategies.

Lodge and Wilson (2006) pinpoint that the trillions of dollars given to poor countries in financial
assistance did not help their neediest citizens. On the contrary, it may have made things worse by
sustaining the corrupt and leaving these nations with incredible debts. Therefore, they stress the
roles that multinational companies can play. Chief among these are providing access to credit,
market and technology.

The factors influencing entrepreneurs’ success in Malaysia was the main concern of Rose et al.’s
study (2006). They concluded that personal initiative and efficiency are the key factors for
successful entrepreneurship. They also concluded that each of level of education, experience, and
training of entrepreneurs has a positive relationship with the tendency to take the initiative.

Edmiston (2007) highlights the contribution of small firms compared to large firms in economic
development, with special reference to the case of the United States of America. He stresses the
idea that small firms are more innovative than large firms in some industries such as the small
computer industry.

Tambunan (2007) distinguishes three types of problems facing entrepreneurial firms in Indonesia
which she believes to be universal problems and encountered by almost all entrepreneurial firms.
She classifies these into three main types: infrastructure problems, problems related to the
availability of organizations that support entrepreneurial firms and economic problems.

To mitigate poverty in rural areas in developing countries, Ozgen and Minsky (2007) emphasize
the significance of developing entrepreneurship. They suggest a model consisting of two major
types of resources. The first is intellectual and human resources, which includes training,
knowledge and education, the second, environmental resources, comprising the social and
cultural environment. In addition to these, Ozgen and Minsky add what they call a moderating
variable, which is financial and legal resources.

Joshi and Ganapathi (2008) highlight the importance of changing the attitudes and future
orientations of people in South and Southeast Asia towards social, political and economic
problems, which they consider key for development. They also argue that such change will lead
7
to entrepreneurship and creativity becoming the mechanism and key for development, solving
the many social and economic problems of these areas.

Is entrepreneurship born or can it be acquired through training? In trying to answer this

question, Laxmana and Ishwara (2008) followed up training programs designed for potential
entrepreneurs in two Indian states. They found that 77% of trainees established their own
businesses after completing training. They also found that women were more serious and
motivated to start their own businesses than men, evidenced by the higher percentage, 80%, of
women trainees who launched businesses after completing training.

A careful reading of previous studies can lead to different observations. It can be seen clearly
that there is wide recognition among scholars and agents that entrepreneurial firms have
significant influence on the social and economic development of the countries in which they
operate. They can also have significant impact on eradicating poverty and reducing
unemployment (Edmiston, 2007; Gebremariam et al., 2004; Gibb and Li, 2003; Joshi and
Ganapathi, 2008; Kronn et al., 2003). Therefore, to enable small firms to energize the economy
more support must be provided. This need not be restricted to the public sector; other sectors can
also contribute to this important objective (Al-Shaikh, 1998; Al-Sahlawi, 2001; Venkataraman,
2004). Another important point is worth highlighting. More emphasis should be placed on
establishing small firms in rural areas to boost development and social welfare. This will be
useful in reducing the burden on urban areas and motivating residents of rural areas to stay where
they are (Ozgen and Minsky, 2007; Venkataraman, 2004). Scholars also stress the unique
features of these areas. That is to say, to enable developing countries and deprived areas to
develop, the ideas implemented and the nature of the businesses established should capitalize on
the resources of these areas rather than exporting or imitating alien ideas or models that may be
irrelevant (Ozgen and Minsky, 2007; Venkataraman, 2004). Finally, it should be noted that many
of the studies conducted on the region especially on Jordan relied heavily on secondary sources
of data or targeted different populations in other areas (Mahrouq and Magableh, 2006; Haddad
and Al-Khatib, 2010). Hence, the validity of these studies is somewhat questionable and hard to
rely on. Areas that are more rural in nature are rarely covered and addressed. They tend to be
more deprived and experience higher rates of unemployment and poverty. In fact, it is common
to hear people interested in developing rural areas or living in these areas complaining about the
failure of the Jordanian government to help develop these areas. This has led to a substantial
reduction of the population in rural areas and drastic growth in urban areas.

Methodology

Based on a census by the Department of Statistics, the vast majority of firms in Jordan are small.
Firms that hire 19 workers or less represent 97.5% of total firms. The formal definition adopted
by Jordan distinguishes between small and medium enterprises. Medium enterprises are defined
as firms hiring between 20-99 employees (Department of Statistics, 2010). This differs from
8
most of the literature in this field which usually studies both small and medium enterprises
(SMEs) together.

The industrial sector was chosen as the population of the study because it has been increasing in
importance in terms of its contribution to the gross domestic product (GDP). It is the second
most important sector after the service sector in terms of its contribution to the gross domestic
product. It accounts for approximately 26% of the country’s GDP (Department of Statistics,
2010).

Most previous studies were conducted on Amman Governorate, which is the capital governorate.
Little research has been conducted on other areas like Irbid, which may have obstacles differing
from those faced by firms in the capital. Most areas outside the capital are rural and
underprivileged, resulting in fewer opportunities for people and forcing them to migrate to the
capital.

Unfortunately, there is no list containing the population frame for this study. Therefore, it
depended on a convenient sample of industrial firms located in Irbid Governorate, the second
largest governorate in terms of population after Amman, and the first in terms of density of the
population (Department of Statistics, 2010).

The researcher contacted 210 firms which were requested to complete the questionnaire. The
achieved sample consisted of 150 male entrepreneurs (71%), 10 of which were unusable.
Therefore, the analysis is based on 140 returned questionnaires.

The questionnaire was designed based on a review of previous studies and the researcher’s
observation regarding obstacles that small firms face. It consists of questions about the
respondents and their firms as well as questions addressing the challenges encountered by small
firms, whether respondents received any training before starting their businesses, the type of
skills they would like to acquire and how their firms can be supported. The validity of the
questionnaire was tested by three university business professors. It was also piloted on eight
business owners who were excluded from the analysis. Then some modifications were made in
the phrasing and structure of the questionnaire.

Data Analysis and Recommendations

This section will present research results by addressing responses to each research question
separately.

What are the main features of small industrial firms in Jordan and the backgrounds of people in
charge of these firms?

9
Three background characteristics are addressed here. These are age of firm, age of respondent
and qualifications of respondent.

It can be seen from Table 1 that a substantial percentage of the sample has been established
recently. More than a quarter of the sample (26.40%), 37 firms are less than five years old.
There are 32 firms (22.90%) in the age category of 5 to less than 10 years. Hence, almost half the
sample (49.30%) is less than 10 years old. It can be concluded that small firms in Jordan are in
real need of help especially during the early years. Newly established firms tend to be more
vulnerable to problems than older firms, with failure rates higher in the early years. Big firms
may enjoy the benefits of economies of scale which small firms lack. For example, the entry of
the famous French retailing firm, Carrefour, in China had a negative impact on what are called
mom-and-pop operators in China’s food market (Barboza, 2003). Table 1 also shows 50 firms in
the age category of 10-less than 15 years, representing 35.7% of the sample. Finally, 21 firms are
aged 15 years and above, representing 15% of the responding firms.

Table 1. Age of small firms

Age category Number Percentage
Less than 5 years 37 26.40
5-less than 10 32 22.90
10-less than 15 50 35.70
15 and above 21 15.00
Total 140 100.00

Table 2 shows ages of respondents. It can be seen that 49 respondents (35%) are below 30 years
of age. Fifty-two respondents are aged from 30 years to below 40 years (37 %), and those who
are aged between 40 and below 50 years represent 15% (21 respondents). Finally, the table
shows that those aged 50 years and above represent 13% (18 respondents). Therefore, it can be
observed that the vast majority (72%) of Jordanian entrepreneurs are below 40 years of age. Such
a result is consistent with the view that people who choose to be owners of businesses tend to be
in their mid-20s and mid-30s (Longenecker et al., 2003). Older people aged 50 years and above
are less likely to have their own business because by this age they are likely to have jobs. They
are also more likely to be married and therefore, feel more secure in having paid employment
rather than taking the risk of establishing their own businesses. However, recent evidence
indicates that in some countries such as the United States there is an upward trend in the number
of people aged 50 years and above who become entrepreneurs. Gill (2006) attributes this trend to
unemployment, which he believes to be a powerful motivator for entrepreneurship.

The above results indicate clearly that both entrepreneurs and entrepreneurial firms in Jordan are
relatively young. This should represent strength. Young people are expected to be more
energetic, open-minded and more willing to accept and initiate change. Furthermore, being

10
recently established is likely to give these firms the advantages of being flexible, creative and
less bureaucratic. While these features are important for entrepreneurial firms, being young may
also indicate little experience and more vulnerability than big firms. This result reinforces our
earlier recommendation regarding the need to help small firms with particular emphasis on the
ones that are run by young people.

Table 2. Age of the respondents

Age category Number Percentage
Below 30 years 49 35.00
30-below 40 52 37.00
40-below 50 21 15.00
50 and above 18 13.00
Total 140 100.00

As for respondents’ qualifications, Table 3 indicates that 49 of the sample (35%) have high
school or lower than high school education. A community college degree is held by 18
respondents (12.80%). The most popular degree seems to be a Bachelor’s, with 58 respondents
(41.40%) holding this degree. Finally, holders of a Master’s degree and PhD are 11 (8%) and 4
(2.80%) respectively. Such results indicate clearly that Jordanian entrepreneurs are relatively
highly qualified, as 52.20% of them have a BSc degree or higher.

Table 3. Qualifications of the respondents

Level of education Number Percentage
High school or below 49 35.00
Community college 18 12.80
BSc 58 41.40
Master’s 11 8.00
Doctorate 4 2.80
Total 140 100.00

Do people in charge of small industrial firms receive any entrepreneurial training before
starting their businesses?
Respondents were asked whether they received any training related to entrepreneurship before
starting their businesses. Table 4 indicates that the vast majority (127) responded in the negative,
representing 90.70% of the sample. The author raises a question here: had those entrepreneurs
taken any kind of training, would that have made them less vulnerable to problems?
Unfortunately, it is difficult to answer this question without empirical evidence. However,
common sense, as well as studies in other countries, suggests that training has a significant
influence not only on improving the management of the small firm but also on the motivation of
trainees to establish businesses (Laxmana and Ishwara, 2008; Kher et al., 2011; Nelson, 2012).
Accordingly, it can be recommended that entrepreneurial training can make a difference. Being a
Jordanian and somewhat knowledgeable about the contents of the training programs offered
sporadically, most training is not sufficiently effective to provide entrepreneurial skills.

11
However, assessing the impact of entrepreneurial training on the establishment of small firms
can be a promising topic for future research.

Table 4. Training before starting business

Did you have training? Number Percentage
Yes 13 9.30
No 127 90.70

What obstacles do small industrial firms in Jordan face?

Table 5 shows the obstacles that face small firms. They were measured on a scale from one to
five. The higher the score, the higher is the challenge facing these firms. Lack of finance is the
most important challenge with a mean score of 4.19, followed by high prices of raw materials
with an average mean of 3. 91. Inflation, high oil prices, currency fluctuations followed with
means of 3.79, 3.69, and 3.57 respectively. As for the least important obstacles, poor quality of
product and lack of political stability were the last obstacles on the list with means of 1.70 and
1.61 respectively. These results are consistent with the findings of previous research (Al-
Sahlawi, 2001; Al-Shaikh, 1998). Lack of finance was considered in the above two-mentioned
studies as the first challenge.

Table 5. Challenges facing small firms*

Lack of finance 4.19
Raw material prices 3.91
Inflation 3.79
High oil prices 3.69
Currency fluctuations 3.57
Lack of qualified employees 3.30
High wages 3.15
High interest rate 3.05
Product poor quality 1.70
Lack of political stability 1.61

*The higher the mean the more serious is the challenge

Do characteristics of small industrial firms have an impact on the intensity of the challenges that
they face?
An attempt to answer the above question was made using multiple regression analysis. Three
variables were introduced as independent variables: age of firm measured by number of years
since establishment; size of company measured by number of employees; and qualification of
entrepreneur. The latter variable was measured by identifying the highest academic level the
respondent had achieved. The challenges were treated as one construct consisting of different

12
dimensions. In other words, they are viewed as the dependent variable. The term ‘intensity of
the challenges’ is used here to refer to the degree to which the independent variables explain the
dependent variable.

Table 6 shows that the R square is .345 and the adjusted R square is .331. The ANOVA table
(Table 7) shows that the F value is significant. In other words, 33% of the variance in the
challenges that face small firms is explained by the three independent variables. Table 8
provides the beta coefficients, t values and the level of significance. It can be seen that each of
the variables, company age and company size, are statistically significant. In other words, the
variation explained by the model is not due to chance. The results indicate that if obstacles are to
be eliminated or reduced, it is essential to provide support to small and newly established firms.
The intention here is not to suggest providing direct financial support from the government but to
facilitate tangible help to these firms. For instance, the government can promote the
establishment of banks that guarantee loans. Sometimes entrepreneurs find it difficult to offer
any guarantee or mortgage to banks in return for the loans that they need. Campaigns can also be
helpful to increase entrepreneurs’ awareness about the services that public and non-profit
organizations provide to entrepreneurial firms. This idea is important in light of the fact that 78%
of small and medium enterprises in Jordan are not members of any type of professional
associations and 86% of these firms have never gone into any network relationship with other
firms (United Nations Development Programme and Ministry of Planning, 2011). International
and regional organizations which are concerned about promoting small entrepreneurial firms can
also be another avenue of help to accomplish this objective.

Table 6. Regression of the independent variables against obstacles

R R square Adjusted R square Std. error of the estimate

.588a .345 .331 .72973
a. Predictors: (Constant), company age, qualifications, company size
Table 7. Results of ANOVA test

Model Sum of squares df Mean square F Sig.

1 Regression 38.487 3 12.829 24.092 .000

Residual 72.954 137 .533

Total 111.442 140

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 Table 8. Beta Coefficient, T-values and level of significance

Model Coefficients Sig

Beta
(Constant) 6.731 .000

Company age -.421 -4.111 .000

Qualifications -.131 -.1.360 .123
Company size -.209 -.3.731 .000

What skills do small industrial firms in Jordan wish to acquire?

Finance-related skills were the most important to respondents. As Table 9 shows, 67 respondents
(47.80%) stressed their need to develop these skills. Marketing skills came next in importance,
expressed by 36 respondents (25.70%), followed by the desire to learn how business plans are
built and to acquire human resource management skills with 17.20% (24 respondents) and 9.30%
(13 respondents) respectively. These results reinforce previous findings about the importance of
finance-related skills as critical success factors for entrepreneurial firms (Al-Sahlawi, 2001; Al-
Shaikh, 1998; Mahroug and Magableh, 2006).

Table 9: Types of skills needed

Type of skill Number Percentage

Finance 67 47.80

Marketing 36 25.70

Building business plans 24 17.20

Human resource 13 9.30

management

Total 140 100

How can small industrial firms in Jordan be supported?

Table 10 addresses this issue. Forty-one respondents (29%) believe the government should
support domestic industries. Reducing taxes was considered by 32 respondents (22.80%) as an
effective means to support small firms. Table 10 also shows that support should be provided to

14
start-up firms. Of the sample, 22 respondents (16%) highlighted the need for this. Such
recommendations may be attributed to the fact that these firms are more vulnerable than
established ones. Ten per cent of respondents (14) stressed the importance of encouraging the
establishment of firms in areas outside the capital. Finally, 11 respondents (8%) stressed the need
to facilitate government procedures. The emphasis on locating businesses in different areas is
noteworthy. In fact, some respondents emphasized this point verbally to the author, saying that
most businesses are either in Amman, the capital of Jordan, or its suburbs. Therefore, promoting
the establishment of businesses outside urban areas can help development in these areas.
Furthermore, it can reduce pressures on public services in urban areas. Also, residents of rural
areas will be less likely to think about migrating to the capital. The transferability and
applicability of the Chinese experience, which was highlighted earlier, is worth assessment (Gibb
and Li, 2003).

Table 10. How can small firms be supported?

Means of support Number Percentage
Government support to local industry 41 29.00
Reducing taxes 32 22.80
Support startup firms 22 16.00
Do not concentrate projects in one area 14 10.00
(especially the capital)
Reduce bureaucracy and facilitate 11 8.00
procedures
Others 20 14.20
Total 140 100.00

Conclusion

Results indicate that almost half of the entrepreneurial firms in Jordan are less than 10 years old
and that more than one third (35%) of respondents are less than 30 years old. Therefore, it can be
concluded that both firms and people in charge of them are young and lack experience. These
features may be viewed as advantages. Small firms are likely to be more flexible and have little
or no formalization, which means little restriction on creative ideas. However, early years of
establishment can be challenging and the most critical in the life of firms. Unfortunately, no
statistics are available about failure rates of small firms in Jordan, but statistics from other
countries show the survival rate of small firms within the first six years is only 39.5% (Harris et
al., 2005).

The results show that only 9.3% of the respondents had training before starting their businesses.
In fact, some respondents believe that training does not add much and can be done on the job.
While this argument might be partially true, training before starting business is likely to make a
big difference and reduce the risk and time that it takes entrepreneurs to acquire the skills they
need. Empirical evidence highlighted earlier in this research shows that earlier training can have
a significant impact (Laxmana and Ishwara, 2008; Kher et al., 2011; Nelson, 2012). Therefore,

15
special emphasis should be placed on training in general and finance and marketing skills in
particular, as these are the most needed. Government agencies, business schools, and non-
government sectors can help in the pursuit of this mission. However, future research about the
extent to which training impacts the establishment and effectiveness of small businesses in
Jordan is probably a promising topic for future research.

Improving the awareness of small business owners and potential entrepreneurs about sources of
financing and the benefits of networking is recommended. Networking can create synergy and
help entrepreneurs to learn from the experience of others. Chambers of industry, media,
government agencies, higher education institutions, professional associations and networking
associations can help in achieving this objective. One way to give momentum to these efforts is
to urge entrepreneurial firms-supporting organizations to exert more effort in that direction. It is
also essential to improve the awareness of potential entrepreneurs and managers of small firms
about the significant role that can be played by small firm-supporting organizations.

As remote, rural and less developed areas in the country have high rates of unemployment and
poverty, more effort should be made to help these deprived areas. This can take the form of
providing more incentives to establish firms in other governorates, therefore creating more
employment opportunities for dwellers in these areas and reducing the pressure on urban areas.
To achieve this, laws and regulations need to be enacted to make deprived areas more attractive
to invest in and establish new firms.

A substantial percentage of Jordanians still believe that having jobs in public organizations
provides security and more prestige. Furthermore, Jordanians belong to a culture described as
uncertainty-avoiding culture (Hofstede, 1980). This makes them less willing to take risks and
establish their own businesses. Therefore, revising the curriculum of educational institutions can
be helpful, with emphasis placed on incorporating creative thinking and entrepreneurship.
According to a report by the World Bank (2008), although the Middle East and North Africa
(MENA) region has made significant strides in the education sector, it has not been able to meet
the needs of the market. Too much emphasis in the curriculum is placed on memorizing facts
rather than analysing and thinking creatively.

This research represents a good contribution to the body of knowledge. It fills a gap in the
literature of social and economic development of less privileged areas in developing countries in
general and Jordan in particular. Furthermore, hopefully it will be useful for government agents
and nongovernment agents interested in developing and fostering the role of small businesses. As
previously mentioned, small business creation has been promoted as one of the mechanisms by
which the dual problems of poverty and unemployment can be solved. These two problems are
considered among the most important challenges facing the country over the past two decades.
The Jordanian government has declared many times that it is almost impossible to provide
employment opportunities for all people graduating from higher education institutions. The
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findings of the study may represent a diagnosis of the challenges and obstacles that face the
responding organizations in particular and entrepreneurial firms in general. This might be
especially true for firms in the early years of establishment as they tend to be more fragile and
failure rates are higher (Harris et al., 2005). Gurus of management and economics such as
Schumpeter (1939) and Maslow (1968) have long emphasized this idea. According to Maslow
(1968), the most important way to help underdeveloped societies to develop is to give help to
entrepreneurs and people with creative ideas.

It is hard to conclusively state the extent to which results of the present research can provide
enough evidence about the challenges that face entrepreneurial firms in other parts of the
country. More research is worth conducting on other areas of the country and on other sectors of
the economy. Each area and sector may have its own unique challenges. Therefore, investigating
the challenges in other sectors and in other areas represents promising topics for future research .
Furthermore, entrepreneurial firms established and run by women need to be investigated.
Challenges for these firms could also differ from those for male-managed firms in a male-
dominated society.

Another avenue for future research is addressing the impact that training and support provided to
entrepreneurial firms on their success. One way to do that is to investigate the challenges
encountered before the training and support and the challenges encountered afterwards. A
longitudinal study or an experimental design approach is probably the most appropriate to
achieve such an objective.

Limitations of the study

It has been previously highlighted that the present research will hopefully be useful for both
practitioners and academicians. However, it is worth mentioning that the research has two
limitations. The first is related to the fact that the methodology relied on the use of a survey
answered by respondents. In surveys, respondents may sometimes give answers that do not
reflect real situations. Therefore, it becomes difficult to clarify responses (Sekaran and Bougie,
2012). Another limitation is that the sample selected was not random. As previously mentioned,
the researcher was unable to identify a reliable and comprehensive sampling frame combining all
elements of the population. Therefore, precautions should be taken regarding the external
validity or generalization of the research results to other settings.

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