Doing business in Saudi Arabia

The Kingdom of Saudi Arabia is the largest market in the Arabian Gulf region and, despite current political and economic uncertainties, offers investors and exporters many opportunities in a wide variety of business sectors. Key factors driving economic policy include the desire to reduce the dependence on oil, and the need to provide jobs, housing, and services to citizens in a time of rapid population growth. The foreign investment law of 2000 significantly changed the rules for foreign investors, permitting 100% ownership of projects. There is a streamlined foreign investment application process with various investment incentives. Important policies are privatization, economic diversification (such as the development of a tourism sector), and the education and training of Saudi workers. Although lifestyle in the kingdom is ultramodern and high‐tech, Saudi Arabia is an extremely conservative country and many of its citizens desire to preserve their religious values and ancient traditions. The Saudi culture is influenced by two dimensions: Islam and the Bedouin tradition. Foreign executives doing business in Saudi Arabia must be prepared to conduct thorough preliminary research, visit the kingdom regularly, show genuine concern for Saudi development goals and culture, be patient in business negotiations, and adapt carefully to the Saudi environment. © 2004 Wiley Periodicals, Inc.     

Source Country Characteristics and the Inflow of Foreign Direct Investment into Saudi Arabia

The paper examines the impact of source country characteristics on the inflow of FDI into Saudi Arabia using a gravity‐type model including economic, distance and socio‐political variables. A unique database listing all new investments involving foreign ownership is used to construct a panel of 33 countries in the period 1980–2005. To account for many country–year observations with zero FDI, the negative binomial regression, the Tobit regression and the Heckman selection procedure are used. The conclusions drawn from the analysis employing panel‐based techniques differ from the results obtained from pooled regression models. Also, the determinants of FDI differ depending on whether foreign investment is measured in terms of investment expenditure or the number of individual foreign projects. The Heckman selection results reveal that there are a large number of factors affecting the decision to invest in Saudi Arabia, compared with relatively few determinants of the actual size of investment. Traditional size and distance characteristics hold to a great extent but the relationship between FDI and bilateral trade is unclear and there is some evidence that the countries that export to Saudi Arabia do not invest there. In terms of scope for possible spillovers, there is mixed evidence on whether the investment comes from more technologically advanced economies but volume‐wise important investments originate from countries characterised by high income per capita.     

Foreign direct investment: A strategic move toward sustainable free enterprise and economic development in Saudi Arabia

Foreign direct investment (FDI) has been viewed in many circles as one of the key drivers for economic development. Irrespective of their ideological differences, most countries around the world have been competing to attract FDI. China, for example, is a country formally characterized by communist ideology. It has been highly proactive in formulating policies amenable to FDI so much so that in 2003, China overtook the United States as the biggest recipient of FDI, having attracted U.S. $53 billion from Organisation for Economic Co‐operation and Development (OECD) countries and elsewhere. In this article, an attempt is made to critically examine aspects of FDI, especially with reference to economic development in Saudi Arabia. The research study in this article reports new research findings based on a survey of Saudi managers/enterprises that highlight the current status of FDI in the Kingdom of Saudi Arabia. In particular, the study finds that while Saudi managers generally welcome FDI into the country, at the same time, they do retain ambivalent attitudes toward its perceived benefits.     

Beyond cops and robbers: The contextual challenge driving the multinational corporation public crisis in China and Russia

Entering the new century, foreign Fortune 500 companies operating in China and Russia have encountered an increasing number of public crises concerning various social and environmental issues. The public crisis refers to an unexpected, non-routine, and media-exposed event in which affected stakeholders (e.g., community members, employees, customers) charge that a company has compromised their interests. Although many of these crises involved the misdeeds of multinational corporations (MNCs), the story is beyond catching baddies. Instead, there are contextual challenges rooted in the social, political, and market environments of China and Russia that drive the occurrence of the public crisis regardless of MNC misdeeds. Considering the institutional change and stakeholder growth in these countries, it is increasingly important for MNCs to understand and effectively deal with these challenges. This article provides insights to MNCs and researchers in three ways. First, the article reveals the patterns of MNC crises in the two countries from 2000 to 2011 and presents the variation between the two countries. Second, the article identifies four types of contextual challenges, including the global-national challenge, the social-trust challenge, the institutional-voids challenge, and the normalized-misdeed challenge. Finally, the article discusses the managerial implications of these challenges and recommends tackling strategies.     

International briefing 11: Training and development in Saudi Arabia

The people of the Kingdom of Saudi Arabia are, just like the citizens of any other country, the most valuable resource potential it possesses (Al‐Dogether, 1993). Thus, in its development plans the Kingdom makes all possible efforts to spend its wealth on preparing the citizen for his expected role in modern development (GOTEVOT, 1996). The current government policy thrust is to expand technical education and industrial training to meet the labour market requirements. This article explores the training and development strategies and practices in Saudi Arabia.     

To bribe or to convince? Political stakeholders and political activities in German multinational corporations

In this paper, the relevance of political stakeholders and political activities in German multinational corporations (MNCs) is examined. The focus is on three main questions: First, which political stakeholders influence the behavior of MNCs? Second, which political activities do MNCs develop to cope with stakeholder interests? Third, how are political stakeholders and political activities influenced by situational conditions?A seemingly unrelated regression (SUREG) analysis of data collected from the largest 19 German MNCs in their home country and in their subsidiaries in China, France, India, Russia, and the US demonstrates that the influence of political stakeholders increases with the size of the MNC. Both the relevance of political stakeholders and the intensity of political activities depend on several country- and firm-specific conditions. Moreover, a strong influence due to the impact of political stakeholders on the intensity of political activities can be observed.     

U.S. Corporate Assessment of Joint Ventures in a Non-Western Country

This research investigates the U.S. firms' assessment of their joint ventures in Saudi Arabia. Ninety-three firms participated in this study. The results indicate that U.S. firms in Sauydi Arabia have set a multiple rather than a single objective (e.g., profit, return on investment, sales growth, etc.). The majority of the respondents (55%) rate JV profitability as below profitability of U.S. parent firms, yet they rate it as the most important for establishing JVs in Saudi Arabia. The results also show that the majority of the participants approached Saudi enterprises to establish JVs. In addition, U.S. firms seem Saudi partners in order to deal effectively and/or meet political/governments' demands.     

Multinational corporate social responsibility,ethics, interactions and Third World governments: An agenda for the 1990s

A critical literature on mulitnational corporate social responsibility has developed in recent years. Many authors addressed the issue in the Third World countries. This paper reviews the literature, focusing on the relationship between the multinational corporations (MNCs) and Third World governments in fulfilling the social responsibility, based on the underlying ethical imperative.There is a growing consensus that both corporations and governments should accept moral responsibility for social welfare and individual interests in their economic transactions. A collaborative relationship is proposed where the MNCs share information based on global experiences and offer input into host government developmental policies, and aid their implementation. The government, in turn, provides a reasonable regulatory environment. This calls for ongoing interactions among officials at all levels of the two institutions, with the local corporate subsidiary playing a pivotal role. The desired conduct of the parties is reinforced by international organizations and other constituents, representing common human concerns across cultures. These relationships are examined and an agenda for policy and action by the MNCs and the Third World governments is developed.The accelerated growth in the number of multinational corporations (MNCs) and their worldwide scope, with concentration of economic and political power draws attention to corporate social responsibility. Furthermore, a meeting of the United Nations Conference on Trade and Development (UNCTAD) in 1987, with delegates from 141 developed and developing countries concluded with a major agreement.Sita C. Amba-Rao professional interests involve Human Resource Management (HRM) and Organizational Development. She taught Business and Society, and her research on business social responsibility includes a publication on the Union Carbide accident in India. Amba-Rao had worked in Indian Industry. She will be conducting a field study in India on comparative HRM and managerial values.An earlier version of this paper was presented at the Association for the Advancement of Policy Research and Development in the Third World (APRDT) at Mexico City in November, 1990.     

The relationship between Arab values and work beliefs: An exploratory examination

In this study, 365 employees from three Middle Eastern countries (Saudi Arabia, Kuwait, and Oman) are queried about their cultural values and work‐related beliefs. This analysis is unique both in its sample and its focus on the relationship between individual cultural values and beliefs about work. Results suggest that the cultural value dimensions individualism (p < .001) and masculinity (p < .001) are related to both an individual's beliefs about organizational commitment and work ethic. Additional findings reveal patterns between cultural values and humanistic and political beliefs. Future research directions and managerial implications are also discussed. © 2002 Wiley Periodicals, Inc.     

The merchant prince

Executive Summary Youssef Mohammed has returned to the Kingdom of Saudi Arabia after completing a Ph.D. in Business. He is expected to take a leadership position within a family business that is experiencing a multitude of operational and strategic problems. For Youssef, the problem is whether to accept a position where he directs an organizational‐change effort or as a detailed, hands‐on manager as family tradition commands. In addition, Youssef wonders if the Western‐management principles he has learned would be effective in the Kingdom. The case provides background information on doing business in Saudi Arabia, highlighting differences between U.S. and Middle‐Eastern business practices. © 2000 John Wiley & Sons, Inc.     

Internet banking acceptance model: Cross-market examination

This article proposes a revised technology acceptance model to measure consumers' acceptance of Internet banking, the Internet banking acceptance model (IBAM). Data was collected from 618 university students in the United Kingdom and Saudi Arabia. The results suggest the importance of attitude, such that attitude and behavioral intentions emerge as a single factor, denoted as “attitudinal intentions” (AI). Structural equation modeling confirms the fit of the model, in which perceived usefulness and trust fully mediate the impact of subjective norms and perceived manageability on AI. The invariance analysis demonstrates the psychometric equivalence of the IBAM measurements between the two country groups. At the structural level, the influence of trust and system usefulness on AI varies between the two countries, emphasizing the potential role of cultures in IS adoption. The IBAM is robust and parsimonious, explaining over 80% of AI.     

Has Globalisation Affected Collective Bargaining? An Empirical Test, 1980–2009

We investigate whether globalisation has affected the nature of collective bargaining in OECD and emerging countries. The main innovations over the existing empirical literature are (i) the consideration of three distinct aspects of collective bargaining (union density, decentralised bargaining and the extent of government intervention), (ii) the reliance on a sample with a larger cross‐sectional and time dimension (44 countries from 1980 to 2009), and (iii) the application of a more appropriate empirical methodology (dynamic panel data models). We find that globalisation, on average, depresses unionisation but neither affects the degree of decentralisation nor government intervention in collective bargaining. We also uncover significant heterogeneity effects, both across countries and over time.     

The development of consumer protection in Saudi Arabia

The development of consumer protection in Saudi Arabia is of interest for a number of reasons. First, Saudi Arabia presents a unique combination of size, stage of development of the economy and wealth, coupled with strictness of Islamic observance. Second, consumer protection in the Saudi context has received very little attention from researchers. Despite the richness of Islamic teachings on the conduct of business and trade, very little has been written on consumer protection in Islamic societies other than discussions of financial markets and consumer credit and monopoly. This article briefly explores the background to the emergence of consumer protection in Saudi Arabia. Consumer credit and financial markets are excluded from the discussion. Islamic (Shari’ah) law is analysed as a basis for the regulation of consumer affairs; this system of law is then compared in its major outcomes for consumers with legal systems in advanced Western economies. The development of secular commercial law during recent times in Saudi Arabia is also considered as a parallel development to those in Shari’ah. Both strands of development are then set in the context of Saudi Arabia's 5‐year development plans and the changing position of consumer policy issues is tracked through successive plans. The institutional location of consumer policy within the Saudi government system is discussed before finally considering the changing nature of the Saudi consumer and the possible future for consumer protection in the country.     

In green consumption,why consumers do not walk their talk: A cross cultural examination from Saudi Arabia and UK

Green consumption is evolving and has received much attention from retailers and academic. Previous studies reveal a gap among green purchase intention and green purchase actual behaviour under different cultural contexts. This intention-behaviour gap is unresearched in the green consumption context. Therefore, our examination seeks to plug this gap by exploring the mediating role of implementation intention and the moderating role of action self-efficacy, environmental knowledge, coping self-efficacy, and green value on the link among intention and behaviour in two different cultural contexts. Data were gathered from two different countries (i.e., Saudi Arabia and UK) consumers who are familiar with green consumption. We analysed our data using structural equation modelling to test the suggested model. The findings revealed that implementation intentions fully mediate the relationships between purchase intentions and purchase behaviour. They also indicated that action self-efficacy, environmental knowledge, coping self-efficacy, and green value moderate the association between intention and actual behaviour. Moreover, results indicated that the influence of green purchase intentions and implementations intentions on green purchase behaviour was stronger in the UK sample than in Saudi Arabia sample. This paper provides managers and retailers with meaningful implications that show how to convert green purchase intentions into green purchase behaviour within different cultural contexts.     

海湾六国经货联盟经济周期同步性分析

海湾六国计划在2010年建立单一货币联盟,而经济周期同步性是货币联盟稳定性的重要基础条件。本文从经济周期同步性角度考察海湾六国是否具备货币联盟稳定性的基础条件。本文通过建立多变量向量误差修正模型(VECM),并依据共同趋势和共同周期理论,对海湾六国的经济周期同步性进行了经验分析。分析结果表明:海湾六国不仅在长期内经济周期有共同的随机发展趋势;而且在短期内,经济周期是完全同步的。因此,海湾六国基本上满足货币联盟稳定性的基础条件。     

Exploring the mismatch between skills and jobs for women in Saudi Arabia in technical and vocational areas: the views of Saudi Arabian private sector business managers

Saudi Arabia’s rapid development has highlighted the shortage of national technical manpower and the subsequent need to recruit non‐Saudi technical workers, on the one hand, and the difficulty of replacing these workers with qualified Saudis, on the other. Therefore successive Development Plans have tried to raise the quality and quantity of technical and vocational education for both men and women. In 1995/96 only 5 per cent of Technical and Vocational Education (TEVT) enrolled students were female. This compares with an average of 29 per cent in other Islamic countries and 45 per cent in Japan (UNESCO, 1997, 1999). Part of this may be due to the preferences of female students in education, part due to the structure of TEVT in Saudi Arabia, part due to the availability of technical and vocational jobs available for women after completing their training and part due to the natural place of women in Saudi society. The Seventh Development Plan (2000–2004) assumes that the private sector will play a very significant role in employing a Saudi labour force including both men and women. As part of a comprehensive study concerning the factors affecting women’s employment in the Saudi private sector private sector business managers in four large cities were surveyed to see what factors they felt were important. The main factors affecting employment of women in technical and vocational education were seen by the managers as those relating to the structure of TEVT education in Saudi Arabia rather than preferences of women or pressures from society.     

Emerging Asian MNCs

Developed countries traditionally account for the lion's share of outward foreign direct investment (FDI) and multinational corporations (MNCs). More recently, however, developing countries are emerging as a significant source of outward FDI and globally influential MNCs. The central objective here is to analyze and compare the main issues facing emerging Asian MNCs today with the main issues which faced developed-country MNCs 30 years ago. Our basic hypothesis is that the two groups of MNCs significantly differ due to both exogenous and endogenous factors. Particularly important are differences in motivation and behaviour, ownership patterns, ownership-specific advantages and the institutional infrastructures of their home countries.     

How “space” and “place” influence subsidiary host country political embeddedness

As a part of multinational corporations (MNCs), subsidiaries operate in distinct host countries and have to deal with their external context. Host country political embeddedness, in particular, helps subsidiaries to obtain knowledge and understanding of the regulatory and political context, and to get access to local networks. Moreover, they get some guidance and support from their headquarters. Distance between MNC home and host countries, however, alienates subsidiaries from the MNC and influences the extent of subsidiary host country political embeddedness. We suggest that the host country political and regulatory context moderates the effect of distance on subsidiary host country political embeddedness by reducing the need and/or value of headquarters support. Using a sample of 124 European manufacturing subsidiaries, we find that distance (space) and context (place) matter jointly: the impact of distance is stronger for subsidiaries that operate in host countries with low governance quality and low political stability in place.     

Emerging Economies: Operational Issues in China and India

This article addresses the current state of the infrastructure and other factors within China and India to consider in making operation expansion decisions. We compare the logistics, telecommunication, and energy infrastructure of these two nations followed by a discussion of their labor productivity, economic growth, and political and cultural stability. We find that China is ahead of India in terms of transportation and telecommunications infrastructure, but India leads in terms of skilled labor for supporting information technology (IT) and complex manufacturing-based operations. While it will be difficult for India to catch up with China's manufacturing base, there is a strong opportunity for India to become the back office of the world. We then outline the opportunities and challenges that MNCs may face by investing in these countries and close with advice for managers in making expansion decisions.     

International work experience: Is it really accelerating the way to the management board of MNCs?

International work experience is often claimed to be a prerequisite for managers in an MNC. This paper investigates how international work experience affects those managers who reach upper echelons. Drawing on both human capital theory and elite theory, we argue that stays abroad not only have beneficial, but also adverse effects on managers’ ascent to the top. By analysing the careers of 212 management board members from Germany, we find that once a certain threshold of international work experience is exceeded, being away from home impedes managers’ long-term career advancement. However, it is not only longer stays abroad that show a negative time effect; we are also able to reveal that being in countries with high geographic and cultural distance to the home country significantly decelerates managers’ speed of being appointed to the management board. Our findings demonstrate that conflicting interests exist between MNCs and high potentials who consider an international career. We stress that these conflicts call for being solved in managerial practice.