Gulf Business Environment for the Arabic Family Firms: Evidence From Oman During the COVID-19 Pandemic

Gulf Business Environment for the Arabic Family Firms: Evidence From Oman During the COVID-19 Pandemic

Irfan Saleem, Tahir Masood Qureshi, Muntazir Hussain, Amitabh Verma
Copyright: © 2021 |Pages: 19
DOI: 10.4018/978-1-7998-7164-4.ch014
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The purpose of this chapter is to understand the business environment for the family businesses in the Gulf Cooperation Council (GCC) based on the theoretical foundation of organisational ecology and open system perspective during the COVID-19 pandemic. More specifically, the reader can understand the business environment of the family firms and how firms can recover from the pandemic by fighting against the infodemic in the GCC region. The authors have used a survey to collect data online from the family firms from Oman during the first and second waves of COVID-19 (i.e., Feb.-Dec. 2020). The results of the study demonstrate that business infodemic negatively moderates the linkage between the business environment-innovation performance nexus and positively moderates between the business environment-commerce association. This research implies the scanning of the Gulf business environment and continuous innovation by family-owned enterprises is vital to avoid a U-shaped recovery in the Arab economies.
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Seven pandemics have been recorded in the last 130 years of human’s history, including COVID-19. Nevertheless, the recently COVID-19 epidemic has not only the worsen the world’s economies but also the business environment in the Gulf region, including top-performing economies of the Gulf Cooperation Council (GCC). When family businesses face the dual challenge of survival and growth in a turbulent gulf business environment, then the family firm’s survival becomes difficult without scanning for the business environment of oil-dependent GCC economies like Oman, Saudi Arabia, Qatar, Kuwait and UAE. For instance, family firms may avoid investing in innovate business plans due to potential social, technological, political and economic factors.

Family firms in the emerging market are unique and somewhat different from the western family-owned enterprises (Saleem et al., 2019). The research on Arabian family firms is also scarce when we talk about the business environment in specific (Mariotti et al., 2020). For instance, a recent study reveals that the families mainly control the corporations in the GCC. However, ownership concentration in the family firms of the GCC does not influence the family firm’s performance (Matinez-Garcia et al. 2020). Similarly, a recently published statistical report about 692 listed firms in the GCC by Family business in the Arab World confirms that mostly the families own the company in the GCC region. Thus family firms in the GCC are suffering from the recent pandemic and need to understand the post-pandemic business environment for survival. For instance, the report reveals that financial firms in Kuwait, Oman and Qatar have a higher degree of ownership concentration than those in the UAE Saudi Arabia, and Bahrain (Basco et al., 2020).

Furthermore, a shareholder is found to be positively related to a firm’s size in the GCC and the families as the largest shareholder across the GCC countries, with Qatar having the lowest proportion the UAE having the highest (Basco et al., 2020; Matinez-Garcia et al. 2020). The key shareholders of the GCC business, the ownership concentration, the ownership identity and control mechanisms of the family firms are presented in Appendix 2, which demonstrate the significance of studying the family firms in the GCC. Thus further investigation is required, how the family firms can further expand the business by scanning the business environment of the GCC.

The COVID-19 has also caused wide spread of both inaccurate and accurate information about the business environment. The business infodemic is the type of disinformation, which is circulated during the period of economic distress and a health crisis like COVID -19 to gain a short term profit and to kill the competition (Okan et al., 2020). Such disinformation is usually based on rumours in the market, deception of the underestimated business environment, and gossipy (See, e.g. Bunker, 2020). The business infodemic is generally spread by social media such as WhatsApp, YouTube and Facebook have confused not only the business leaders of multinationals firms operating in the GCC but also the family firms. Because such disinformation not only impacts negatively on the performance of the family businesses in general but has consequences for employees in the form of job loss, psychological and physical health, poor performance for the expatriate - workforce working (Mariotti et al., 2020) in the GCC region since last many decades. Sooner or later, the COVID-19 maybe finished; nevertheless, the role of infodemic may continue on the Gulf’s businesses for several more years to come, and economic recovery could be in many shapes.

The objectives of this chapter include followings:

  • To familiarise readers with the GCC business environment.

  • To describe the business environment in terms of social, technological, political, environmental and legal factors in the GCC and its impact during COVID-19.

  • To explain the moderating role of the business infodemic during a recent health crisis.

  • To forecast how the family firms can recover from crisis and fight against the business infodemic in the GCC region.

This chapter has introduced the business environment of the GCC and family firms in the GCC. In the subsequent sections, we have developed the proposed conceptual model to link business environment and family firms’ outcomes, related methodology, research findings and implications for critical stakeholders operating family businesses in the GCC region in the post-pandemic business environment.

Key Terms in this Chapter

Legal Environment: Understanding of legal environment clarifies the family firm to know what is legal and what is illegal to trade ethically and successfully in a particular economic region like GCC such as employee’s health and safety laws and consumer protection laws.

Open System Perspective: The perspective argues that a family firm cannot survive or operate in isolation. In that view, a family firm is affected and controlled from external factors such as the political, economic, technological and social environment.

GCC: The Gulf Cooperation Council (GCC) is a regional union of Persian-Gulf region with common economic and political interests. The GCC was created on May 25, 1981, and six Arabian states are included, i.e. United Arab Emirates, Oman, Bahrain, Qatar, Saudi Arabia and Kuwait.

External Business Environment: A collection of external and internal and factors which affect the firm’s performance and usually are uncontrollable. The example for such factors includes customer’s needs, product’s supply and demand in the market, suppliers, ownership structure in the family firm, legislation by government, evolution in technology, social demography, product life cycle and economic changes.

Infodemic: Jointly, “information” and “epidemic” is usually referred to as infodemic. Technically speaking, this term is a hybrid of incorrect and correct information, coined in 2003 and frequently being related to the pandemic of this century, i.e., COVID-19.

Political Environment: Politics may be regarded as the activity concerned with determining the rules under which we live in a society like Oman. The political environment refers to the actions of a government that impact business operations—for instance, kingdom, monarch, Majles Al-Umma and democracy.

Economic Environment: The economic factors such as interest rates, inflation, exchange rates, recession due COVID 19 and value-added tax usually affect family business performance and are generally uncontrollable.

COVID 19: ‘CO’ stands for the corona, ‘VI’ for the virus, ‘D’ for the disease and 19 refer to the year 2019.

Resource Dependence Theory: This theory assumes that an organisation, including family business, engages in business transactions with stakeholders (e.g. suppliers) and institutes in its business environment to acquire useful resources. So resource acquisition impacts organisational behaviour.

Technological Environment: This factor environment for business refers to the state of technological developments such as the rate of technological advancement - for instance, 5G- Mobile Technology – a fifth-generation standard for a broadband cellular network like Omantel in Oman.

Ecological Environment: The environmental aspects include climate, and climate changes like global working affecting industries such as tourism, agriculture and farming.

Family Firm: A business that is run and owned by a single family since the last few generations.

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