The Role of Philanthropy in Entrepreneurship and Innovation: The Case of the Gulf Cooperation Council (GCC)

 Dina H. Sherif  and Prof. Mona Atia  (Lead Authors)

Dr. Sumaya Hashim, Valeria Budinich, Dr. Salma El Sayeh, and Sumaya Nair (Co-Authors)

About this Report 

The Gulf Cooperation Council (GCC) has seen rapid socioeconomic growth due to oil and gas revenues, but diversification has been at the top of economic growth agendas for over a decade now. GCC countries are increasingly encouraging entrepreneurship and innovation as a pathway to achieving diversity and sustained economic prosperity. This report explores the role of philanthropy in supporting entrepreneurship and innovation (E&I) ecosystems within the region and how it can be broadened going forward. 

The study focuses on the United Arab Emirates (UAE), the Kingdom of Saudi Arabia (KSA), and the Kingdom of Bahrain, each with varied stages of E&I development. The UAE stands out as the most developed and economically diversified ecosystem among its peers, while the KSA is quickly catching up. Bahrain's small domestic market presents challenges to its E&I ecosystem growth prospects.

The report is divided into four sections: an introductory section that sets the stage for the study, followed by key-region wide insights, country-specific insights, and a concluding section with recommendations for the way forward. 

The Context and Key Region-Wide Insights 

The GCC is shifting towards a more diversified and sustainable economic framework, moving away from its traditional reliance on oil. This shift aligns with global environmental objectives and opens up new avenues for economic growth and innovation. Investing in the Sustainable Development Goals (SDGs) presents a pathway for this transition, as areas such as renewable energy, food security, and digital technologies are ripe for exploration and investment. Renewable energy stands out as a field with enormous potential in the GCC region due to its natural resources and climatic conditions.

Government initiatives and regulatory reforms have in fact driven significant growth in regional entrepreneurship ecosystems. Yet, the study reveals that philanthropy plays a relatively passive role in regional E&I ecosystems due to factors such as limited understanding of philanthropy's role in promoting sustainable economic prosperity, cultural traditions, and systemic inefficiencies. Bureaucratic, regulatory, and legal hurdles also hinder the effective role of philanthropy in the GCC. There is also a perception that problem-solving within certain socioeconomic realms is often the burden of governments, rather than private wealth. 

Corporate entities also hold untapped potential in the evolving landscape of the GCC's E&I ecosystems. In parallel, talent shortages in technical skill-sets and managerial talent are identified as challenges to growth in the E&I ecosystem. To address these gaps, GCC countries have been sourcing foreign talent, such as the UAE and KSA, through funding mechanisms and infrastructure. However, sustainability demands local skills development, and philanthropists can play a role in this area by focusing on education and skills development. 

Entrepreneurial ecosystems in the GCC face a shortfall in deeptech innovation due to a lack of focus on scientists commercializing their work and going to market. Patient philanthropists who are committed to supporting systemic change and innovative solutions are needed in the region. While numerous entrepreneurs are finding creative ways to address pressing challenges, they require philanthropists willing to invest patiently and align with the entrepreneurs' visions and timelines.

Recommendations 

Broadening the funding scope of regional philanthropy is essential, as many regional philanthropists draw a distinction between business investments for the purpose of financial gain and the objectives of philanthropic activity. A broader understanding of philanthropy and its contribution to longer-term social change, in part through E&I investments, is needed. Examples include using philanthropic funds in seed/early-stage projects to mitigate risk and spearheading innovation.

Encouraging open dialogue about the role of philanthropy in the ecosystem and promoting collaboration is crucial for moving forward. Engaging with the emerging generation of philanthropists, who combine traditional philanthropic values with a keen interest in innovation and impact, could significantly propel the region's entrepreneurial and philanthropic sectors into a new era of growth and sustainability.

Governments can also play a strategic role in highlighting how philanthropy can complement and deepen the work of the public sector, specifically with regards to economic diversification through entrepreneurship and innovation.

In other words, philanthropy in GCC markets must develop strategic and adaptive models, build trust, commit to long-term partnerships, and embrace a collaborative and inclusive approach to ecosystem building.

The involvement of corporate players must also be leveraged through a more integrated and strategic partnership approach. This could include identifying and investing in key innovation areas, such as sustainable technologies, green energy solutions, or digital transformation efforts, and addressing the shortage of skilled talent.

Investment in education and entrepreneurship training by philanthropic entities can fill critical gaps in the ecosystem and promises to multiply the overall impact and sustainable growth of the region. 

There is a pressing need for a more integrated approach for research commercialization, creating synergies between research institutions, government initiatives, private sector investments, and philanthropic endeavors. Establishing effective Technology Transfer Offices (TTOs), incentivizing private sector participation in R&D, and fostering a culture that values long-term investment in research and innovation are critical steps towards filling these gaps.

Continued access to capital through blended financing strategies is also essential for bridging the funding gap and fostering a more sustainable ecosystem for long-term entrepreneurial success. The integration of philanthropic funds into the venture capital (VC) space can introduce flexibility and patience, providing startups with the necessary breathing room to innovate, iterate, and scale effectively. In parallel, corporate funds bring a market-driven perspective that ensures the commercial viability and scalability of ventures. By partnering with philanthropic entities, private investors can leverage their market insights, networks, and operational expertise to guide startups through their growth phases, aligning entrepreneurial innovation with market needs and opportunities.

Leveraging investments, and ecosystem growth, towards the sustainable development agenda would position the GCC as a forward-thinking and responsible player on the international stage. By focusing key regional and global sustainable development priorities, the GCC can diversify its economy, reduce its dependence on oil, and make significant contributions to global sustainability efforts.

The successful implementation of these recommendations can significantly propel the region's journey towards a robust, sustainable, and diversified entrepreneurial landscape.