Entrepreneurial orientation and the efficiency of SMEs: The role of government financial incentives in an emerging industry

Abstract

This study examines the moderating role of government financial incentives on the relationship between each dimension of entrepreneurial orientation (i.e., innovativeness, proactiveness and risk‐taking) on the efficiency of SMEs. Data were collected through a structured questionnaire using a sample size of 260 SMEs operating in Pakistan, an emerging economy. The findings indicate that two dimensions of entrepreneurial orientation (i.e., innovativeness and proactiveness) have a significant positive impact on SMEs' efficiency but risk‐taking has an insignificant influence on the efficiency of SMEs. Furthermore, government financial incentives significantly strengthen the relationship of innovativeness and efficiency as well as between risk‐taking and efficiency. Surprisingly, the relationship between innovativeness and efficiency is not significantly tighter by government financial incentives in emerging SMEs. This study recommends that SMEs need to emphasize innovative and proactive entrepreneurial activities. This study also suggested that in particular, risk‐averse owners and managers should build strong ties with the government to access financial resources, so they will likely take the risk and invest enough capital in several projects. Moreover, our research advises the government to facilitate SMEs to boost the industrial growth that will result in high economic growth.

The Development of Good Micro, Small and Medium Enterprises Governance Indicators

“…Apart from family participation, many MSMEs rely substantially on government assistance, notably in the financial sector. Government involvement benefits MSMEs significantly in obtaining access to financial resources (Khattak & Shah, 2020). According to a survey conducted by the Indonesian government statistics office, capital concerns are the most prominent challenges faced by MSMEs, and they are the primary reason for their failure to develop.…”

Strategic Orientation and Sustainable Competitive Performance of Family Firms: Evidence of an Emerging Economy

“…Thereby it is crucial to check the impact of strategic flexibility in developing economies because in developing economies, 90% of organizations have a deficiency of resources and capabilities (Bokhari et al, 2020) which sparked a red light for defending his position as compared to competitors and sustain for long-term (Arnold & Artz, 2015). Hence, many researchers have been studied different factors to sustain the organizational performance for the long-term such as (Khattak & Shah, 2020) on governmental financial support (Imran et al, 2018) on R & D while Awang et al (2009) on environmental factors. However, they all missed the creation of the strategic flexibility of the organization according to the current market situation.…”

The role of entrepreneurial orientation in tangible and intangible resource acquisition and new venture growth

“…Considering the recent theories and arguments, many researchers believe that EO does not directly contribute to firm performance, but it first creates and crosses market orientation (Amin, Thurasamy, Aldakhil, & Kaswuri, 2016), networking ability (Karami & Tang, 2019), organization culture (Jeong, Ali, Zacca, & Park, 2019), and so forth. In addition to the indirect relationship, studies have also suggested that several moderators such as government financial incentives (Khattak & Shah, 2020a) and observation capacity (Kohtamäki, Heimonen, & Parida, 2019). Moreover, Jiang, Liu, Fey, and Jiang (2018) claimed that resource acquisition plays a significant mediating role between EO and performance.…”