Leadership Styles and Organizational Performance: A Case Study of SMEs in Kuwait

Abstract

Small and Medium Enterprises (SMEs) have a crucial role in improving the economies of developed and developing countries. SMEs contribute to the GDP of the country, thus improving its economy while providing jobs and reducing poverty. Kuwait has a unique history with SMEs by attempting continuously to increase the contribution of SMEs to Kuwait’s economy through the initiation of public funds and governmental support. However, as most of the attempts were unfruitful, it is essential to understand what determines the success of SMEs in Kuwait. The leadership style of SME owners/managers is one of the determinants of the success of SMEs. Thus, understanding the association between leadership style and organizational performance of SMEs and challenges to SME success is essential. The majority of literature on leadership style and organizational performance has evolved from Western culture, and literature is scarce on the topic of leadership style, challenges facing SMEs, and organizational performance of SMEs. This research aims to develop an understanding of how leadership affects the performance of SMEs in Kuwait by exploring the challenges to the growth of SMEs, investigating the style of leadership associated with better organizational performance, and how other factors affect leadership and SMEs. The research framework sheds light on the associations of three main elements, two leadership styles, two organizational performance measures, and five categories of challenges facing SMEs. The research adopts a mixed-method approach to answer four research questions that surfaced from the literature review. The data was collected by 275 self-completed questionnaires and 17 semi-structured interviews with owners/managers of SMEs in Kuwait. The findings of this research indicate that SME owners/managers in Kuwait are leaning towards adopting more transformational leadership components than transactional leadership components towards their employees. Nonetheless, transactional leadership is correlated more with organizational performance components, growth, and profitability, than transformational leadership. In terms of specific leadership behaviours, inspirational motivation and passive management by exception are significant predictors for the growth and profitability of SMEs, while active management by exception is a predictor of only the profitability of SMEs. Of the five SME challenge categories, the market challenge negatively affects the growth of SMEs, while the finance challenge negatively affects the profitability of SMEs. More specifically, within the market challenges, too many competing firms/products and high advertising costs were negatively correlated with profitability and growth. In contrast, inadequate demand for the product in the market was negatively correlated with profitability. Furthermore, managers/owners who received funding from the National Fund for SME Development had significantly lower profitability than those who did not receive money from the National Fund. Other factors that affect leadership style or organizational performance are age, gender, and education.

Date of Award	1 Aug 2024
Original language	English
Awarding Institution	The University of Manchester
Supervisor	Aminu Mamman (Supervisor) & Christopher Rees (Supervisor)