SMEs as Catalysts for Entrepreneurial Growth in Algeria: Analyzing the determinants of investment, policies, challenges and future prospects

Abstract

This study explores the role of investment in SMEs as a key factor in supporting entrepreneurship in Algeria. This is done by analyzing the impact of three key variables on the dynamics of entrepreneurial growth. The first variable is the annual new investment flows, the second is related to the transition of enterprises towards more profitable areas, reflecting an improvement in the business climate, while the third variable deals with the role of competitiveness in affecting distressed investments and its implications for the investment environment. The research adopts a descriptive and analytical approach to study the growth of entrepreneurship in Algeria by analyzing a set of economic indicators associated with investment in the SME sector. It focuses on market dynamics and entrepreneurial behavior, based on a statistical analysis of data over 19 years (2003-2021), a period marked by economic reforms that had a significant impact on the business environment. The results reveal fluctuations in annual new SME investments in Algeria, with investment opportunities created by the exit of some enterprises from the market. The reorientation of investments towards more competitive sectors, supported by government policies, contributes to improving the business environment and enhancing investment competitiveness. The results also showed that the services sector is the most competitive and growing area of entrepreneurship in Algeria, indicating a growing structural shift towards a service-based economy. The study suggests that a favorable business environment, supported by effective economic incentives, plays a crucial role in encouraging the establishment and sustainability of entrepreneurial ventures. These factors also contribute to revitalizing stalled businesses by improving investment conditions and boosting entrepreneurs' confidence in the market.