An assessment of Entrepreneurship in The Kurdistan Region
1. Introduction
The concept of entrepreneurship from an academic point is primarily concerned with the processes through which opportunities for the production of future goods and services are identified, assessed, as well as utilized (Shane and Venkataraman, 2000). The same concept plays a fundamental role within the frame of management while at the same time affecting other fields including science as well as engineering (Kirzner, 2009). The concept may also be understood as finding out opportunities that could cause changes in the situation of an economic environment usually in the form of new entities (Reynolds, 2005). Individuals play a significant role in identifying opportunities which means that both the factors relating to the economy as well as the human contributions are crucial within the idea of entrepreneurship (Meek et al., 2010). This means that an individual who has the capacity to identify and take on opportunities, as well as to generate value through developing their thoughts into newly discovered products or services within society, is referred to as an entrepreneur (Niyazi, 2008). Kerr, Kerr & Xu, (2017) emphasize that the concept is generally believed to be more relevant amongst younger individuals. Nonetheless, it doesn’t have a specific connection with age as some believe. According to Jones et al., (2020), the outcomes of entrepreneurship are generally expected to be good and have a beneficial impact. However, there are situations where it is believed to result in an influence that is not necessarily positive (Ratten, 2019). According to Kézai & Szombathelyi, 2021; bhandar, 2022; Bhandari & Mohite, 2023; entrepreneurship can result in achievement that is not solely based on the individual initiating the idea but also on the general entrepreneurial ecosystem, meaning that the concept encompasses a variety of elements. In the perspective of Dovbiy et al. (2017), entrepreneurship can affect societies largely in terms of contribution to more job opportunities, global market expansions, resource optimization, fresh technology generation, as well as in affluence. Through the establishment of new enterprises, entrepreneurship serves a function in mitigating unemployment. At times when labor market inactivity becomes a critical societal concern, entrepreneurship presents an opportunity to address not only the issue of unemployment but also the associated social and economic challenges that unemployment is the root cause of (Tasie, 2017). In the academic discourse, most of the study conducted by scholars have emphasised entrepreneurship amongst the youth while drawing attention to the obstacles they are exposed to (Fatoki and Chindoga, 2011). In the perspective of Abdullah and Othman (2021), one of the major obstacles confronting entrepreneurship, specifically amongst the youth, is the existence of administrative impediments and intricate laws. In the Kurdistan Region, also referred to as the KRI, entrepreneurs face numerous barriers that impede the execution of their business concepts. These obstacles predominantly encompass insufficient foundations, restricted access to guidance, and complications in obtaining funding from governmental sources. Abdullah and Othman (2019) also suggest that government funding may fall short, especially for smaller enterprises.
1.2 Research Objective
This study seeks to examine the situation of entrepreneurship in the KRI along with its legal prospects and limitations, with a focus on the economy of KRI, the level of support for SMEs, existing policies, and the nature of investment in the KRI. The results of this research will add to the academic understanding of entrepreneurship in the context of the KRI while providing valuable insights for policymakers, business owners, and other stakeholders willing to improve the entrepreneurial environment in the KRI.
1.3 Research Question
The questions this paper aims to answer are the following:
What are the prospects and challenges that pertain to entrepreneurship in the KRI?
How is the concept of a transitional economy relevant to the KRI, and how does it affect the region’s ecosystem?
What is the nature of investment like in the KRI, and how do policies impact entrepreneurship in the region
2. Methodology
This research paper is written based on a secondary research approach that is qualitative in nature and aims to study the entrepreneurial ecosystem in the KRI. The paper is mostly based on the analysis of previous literature, most of which revolves around the concept of entrepreneurship in general as well as the situation of entrepreneurship within the KRI with a focus on the importance of concept, the prospects and challenges, the policies, and transitional economy. Also, the research is descriptive in its analysis as it focuses on analyzing existing work instead of focusing on hypotheses. However, due to the secondary nature of the research, there might be a few limitations within the paper such as in concerns relevant to up to date research due to the dynamic political and economic situation of the KRI.
3. Literature Review
3.1 Importance of Entrepreneurship
There are many reasons why understanding entrepreneurship is important. Prior to technological innovations and advancements, entrepreneurial qualities drive economic progress. Subsequently, entrepreneurship is an equalization process that involves both demand and supply, according to the arguments of Austrian economists such as Carl Menger. Another reason is entrepreneurship is the process of transforming novel information into something that can be traded. Also, we must recognize the role that entrepreneurship performs in the development of human and intellectual resources as it has evolved to be an important profession (Mohammadali & Abdulkhaliq, 2019). Ultimately, entrepreneurship is currently considered as an occupation requiring training and academic achievement, the same as other fields (Abtahi et al., 2014).
3.2 Government roles and policies
Focusing on policies and governmental contributions regarding entrepreneurship, Mohammadali & Abdulkhaliq (2019), state that from the 1980s, governments have adjusted their laws to encourage and enable entrepreneurship while taking advantage of the entrepreneurs’ administrative capabilities. This change may be understood as an adaptation to nations' transforming economic and social environment because of factors including technological developments, increased global competitiveness, the establishment of knowledge-based industries, macroeconomic and industrial restructuring, as well as rising cultural shifts. Governments have made initiatives to foster entrepreneurship thanks to the fast developments (Nkechi et al., 2012). Entrepreneurship contributes to economic growth not just by increasing the income of each person, but also through initiating fundamental transformations within the economy and society. According to Adenuga and Ayodele (2013), this development contributes to greater revenue and development, which leads to greater equitable allocation between individuals. Since the early 1980s, there has been an increase in entrepreneurial activity within organisations, resulting in a novel theoretical understanding (Forsström et al., 2015). Also, from the 1980s and onwards, there has been a greater focus on the role of entrepreneurship within big firms because of rising international rivalry and researchers have looked into how to incorporate entrepreneurship into the frameworks of corporate administration (Abdullah et al., 2014). In the context of Iraq, and specifically the KRI, the prior presence of a socialist system of economics, along with its dependence on the government's economy makes it necessary to understand entrepreneurship in the perspective of a transitional economy.
3.3 Transitional Economy
Estrin et al. (2008) explain transitional economy as a series of separate phases, each of which encourages a particular kind of entrepreneurship. The beginning phase, for instance, which has elevated levels of instability, only one specific type of entrepreneurial activity will be present, and it will encompass market and cost insights to an extremely limited extent. This means that the later phases of a transitional economy will have more stability, increased pricing information with decreased needs for a larger network. Diving deeper into transitional contexts, the achievement or decline of an economy is significantly influenced by its entrepreneurs (Desai, 2011). Nevertheless, in the specific instance of Iraq, the economic transition, the post-conflict environment, reliance on an oil-focused economy, and the deliberate attempts to minimize the significant public sector have proven to be harmful (Yousif, 2016). Also, as highlighted by Farzanegan (2014), an increasing reliance on oil revenues dramatically lowers the rate of new startups in economies which are orientated around the oil industry. There is a general belief that tensions within and between nations put an end to entrepreneurship and to most businesses in the private sector (Desai, 2011). considering the decades of armed strife, this particular aspect is relevant to Iraq and the KRI, as well as the whole of the region. However, Desai (2012) argues that even in times of war, business deals could be extremely profitable and those who can discover a way to take full advantage of these opportunities will be successful enough to thrive in the after-conflict economy. Such an ecosystem can be of great importance if it is utilized properly by investors from other countries who aim to contribute to the region through investments in variety of sectors such as in agriculture and tourism (Muramalla and Gurram, 2021).
3.4 Prospects for Entrepreneurship in the KRI
The KRI strives to become the primary entrepreneurship center within Iraq through utilizing scientific capacity, effective technological advances, and an adaptable structure. Also, The KRI offers entrepreneurial education as well as advertisement, in addition to consultation on the growth of technology and the knowledge-based economy (Mohammadali and Abdulkhaliq, 2019). The Kurdistan Region Government (KRG) and the Government of Iraq (GOI) depend significantly on the public sector in order to power their economies. According to Bartnick (2017), the public sector employs 40% of Iraq's workforce, a percentage significantly larger compared to more diverse countries such as Turkey (12%), Iran (17%), and Jordan (31%). The government or public sector employment could reduce economic challenges and threats to security, providing value to areas such as the KRI and Iraq, both of which have gone through a long-term turmoil. The region's financial crisis since 2014 brought attention to problems with too much reliance upon public sector jobs (Mohammadali and Abdulkhaliq, 2019). Several reasons have hindered economic growth as well as the development of the private sector. The initial problem is the decline in global oil prices since 2014, whereas the other problem is the ongoing budgets issues between Baghdad and Erbil. In 2014, the central government cut off the KRG's funding from the national budget (DeWeaver, 2015; Sümer and Joseph, 2019). Other concerns included the fight against the Islamic State of Iraq and al-Sham (ISIS), fraud, and inadequate management, along with the mentality that encourages employment in the government sector (Sümer and Joseph, 2019). In both the KRG and the GOI, the private sector needs to undergo major shifts pertaining to entrepreneurship. These characteristics that are region-specific include social and physical bases, employment specifications, and civic efficiency (Mihaela, 2016). Individuals such as entrepreneurs and investors play significant roles in economic growth across the globe and it shows that entrepreneurship can have major positive impacts on sustainable economic development by creating more job opportunities, contributing to GDP, and through decreasing levels of poverty (Burke, 2011; Djukić, and Lepojević, 2015). Meanwhile, the growing popularity of Small and medium-sized enterprises (SMEs) in countries that are developing has made economists change their points of view on factors that help boost the economy. Weinberger (2016) argues that SMEs contribute to over 50% of worldwide employment growth, therefore creating double the amount of employment opportunities than the amount that companies and other entities lead to. However, as Ali (2019) claims, more than 80% of the KRI’s revenue was generated from the petroleum industry as of 2016. This means the revenue generated from other sectors is quite low. The same author also suggests that the KRI must pay more attention to the level of support provided to SMEs, particularly in terms of performance and growth and that it must become an important strategy for the government to work on.
3.5 Challenges for Entrepreneurship in the KRI
The KRI has plans for the growth of entrepreneurship which will have an important position in global markets in terms of facing long-term productivity and the job market. The KRI along with the GOI, is constantly supporting efforts to enhance capacity in the region, which generally include implementing training programs at various levels of education on developing skills which is the same situation as other market-based ecosystems (Muramalla and Gurram, 2021). However, the growth of entrepreneurship not solely emphasises finding opportunities but also overcoming difficulties, leading to the emergence of proper conditions to strengthen economic growth and help increase serviceability (Mohammadali and Abdulkhaliq, 2019). According to Abdullah and Othman, (2021), some of the major challenges that entrepreneurs in the KRI face, particularly the youth, include issues relating to the infrastructure, issues relating to mentorship as well as not enough access to funding. Apart from these issues, nevertheless, include concerns associated with intellectual regulations. Entrepreneurs in the KRI sometimes feel uncertain when it comes to starting new businesses as their ideas and plans may be easily copied by others as the current rules in the KRI do not provide enough protection to further encourage young people to initiate new ideas which also hinders innovative cooperation and creativity. This basically allows replication and technology piracy. Moreover, Muramalla and Gurram (2021) argues that issues such as dishonesty and terrorism also play significant roles which is generally in the form of conflicts that cause terrible impacts on the economy and lead people to partake in professional roles within governmental positions for the sake of stability.
4. Discussion
The entrepreneurial environment in the KRI demonstrates considerable potential and major obstacles. Although the region desires to be a centre for entrepreneurship, employing educational institutions, technological advances, and SME development it faces obstacles through its economic dependence on oil revenue and an overburdened government sector. Businesses encounter challenges because of inadequate infrastructure, limited funding possibilities, and weak intellectual property (IP) enforcement. These basic obstacles discourage innovation and impede new business owners from undertaking opportunities. Meanwhile, the KRI economy's transitional nature perplexes the scenario even more. As the a big part of the KRI’s economy depends on revenue generated from oil resources, there exist other important sectors that tend to be overlooked such as the agriculture sector. While the KRI promotes diversification in the economy, preserving a safe and reliable environment for enterprises remains essential. Governing authorities need to focus on changes that make regulations less strict and strengthen legal structures that protect businesses. Aiming to eliminate corruption and strict enforcement of laws are essential components of helping attract investors. In order to further encourage entrepreneurship, the introduction of programs that focus on skill improvement might be necessary. Incubators for businesses as well as apprenticeships have a chance to change the way in which entrepreneurs learn the skills they require to prosper in the ecosystem. Also, strengthening collaboration among the public and private sectors could solve financing shortfalls. Entrepreneurs have to overcome the difficulties of the present ecosystem through looking for emerging markets and building endurance in the midst of unpredictability. Partnership among governing bodies, educators, private sector stakeholders, and international investors are essential in establishing an environment that promotes innovation, development, and long-term economic diversification.
5. Conclusions
At the moment, the scenario for entrepreneurship in the KRI can be considered as mostly favorable for the entrepreneurs. However, there are numerous challenges the entrepreneurs as well as the startups face mostly because of reasons that include uncertainty in the regulations that help contemporary business ideas, problems with the infrastructure, and other socioeconomic influences. A few recommendations for a better ecosystem for entrepreneurship in the KRI may include promoting regulations that are transparent and that protects the enterprises rights such as intellectual property (IP), and more business incubators that help the enterprises through providing funds and/or simply providing business development programs. These can help the economy thrive and create more job opportunities within the KRI.
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