Construction industry investment challenges: barriers for SME expansion

Abstract

This research concentrates upon the requirements for expanding Small and Medium (SME) contractors into the level of large scale contractors and barriers for such. Adequate assets are a key requirement for succeeding in construction business. Construction companies have many physical and impalpable assets. Given the SMEs fulfil required asset levels, with proper management, it is possible for SMEs to expand over time and achieve the goal of becoming large scale organisations. However, improving the grades should not focus only upon turnover, yet various other resource and management requirements need to be met. In order to identify the exact requirements of SME to large scale conversion, necessary asset level changes and barriers for such conversions were required to be analysed. A quantitative approach was taken in collecting field data and the data were collected through a questionnaire survey. Contracting organisations were considered as the unit of analysis and data were collected from 205 units with a response rate of 76%. The research reveals the necessity of improving annual turnover, P&E, and staff assets of SMEs in reaching the large-scale organisation level. In doing so; management issues, lack of finance and motivation, and employees with insufficient knowledge and skills are the critical internal challenges. The external barriers were identified as: high cost of capital, inadequate financial structure, changes in the government policies and the political unrest, and lack of information. Thereby overcoming the identified barriers will enable SME expansion, which will increase construction industry investment complementing the economic development.