Collectivism, Entrepreneurship, Leadership, Innovation, and other Antecedents of Externally Financed Growth in Pakistani Firms

Abstract

To foster firm growth, it is now established that access to finance through well-functioning capital markets is a necessary pre-requisite. Moreover, other factors like formal institutions embedded in the legal environment and framework also condition financial constraints at the macro level. Similarly, informal institutional structures like culture, Entrepreneurship, Leadership, and Innovation can also interact at the firm level, and serve as a constraint to the use of external finance in firms’ growth strategies. Internal factors affecting willingness are sometimes more important drivers as compared to external factors that enhance capabilities. This paper explored the role of these internal factors like Collectivism, Innovation, leadership, entrepreneurship, customer orientation, level of employee development, communication strategies, that serve as informal institutional frameworks that condition self-imposed external financial constrain in firms’ growth strategies. To establish empirical validity, data was gathered from 150 companies ranging from small to midsize organizations based in Karachi. Data were collected by conducting a survey using a close-ended questionnaire and analyzed using confirmatory factor analysis and structured equation modeling. The results suggested that communication strategies, level of employee development, entrepreneurship, and Innovation have a positive and significant effect on Externally Financed Growth. Interestingly, leadership affects growth negatively. The finding implies that firms' ability to overcome financial constraints is significantly affected by internal factors along with financial development.