Entrepreneurial Ecosystem and Performance of SMEs in Pakistan

Abstract

Purpose: This study aims to measure the entrepreneurial ecosystem of Pakistan and examining its effect on SMEs' performance. A thriving business sector is indispensable for the economic growth of a country. Businesses nurture an environment that is supportive for the entry, survival, and growth of entrepreneurs. The concept of the entrepreneurial ecosystem, as a combination of interdependent factors, is relatively new in entrepreneurship, especially in developing countries. Research/Methodology/Design: The World Bank Enterprise Survey data of 2049 SMEs for the years 2006 and 2013 has been used to get entrepreneurs' perceptions of Pakistan's entrepreneurial ecosystem. The cluster analysis and canonical discriminant analysis are used to measure the entrepreneurial ecosystem of Pakistan, and regression analysis is used to estimate its effect on SMEs' performance. Findings: The findings suggest that the entrepreneurial ecosystem of Pakistan, as a system, is a constraint on SMEs' performance. However, the lack of a skilled workforce to meet the needs of modern industrial technologies is most negatively affecting SMEs' performance. Practical Implications: It can be concluded that there is no one perfect recipe for setting up an entrepreneurial economy, however, research should use a bottom-up approach to provide these practical yet imperfect roadmaps to the policymakers for devising a set of actions for gradually shaping the entrepreneurial ecosystems in a specific direction. Originality/Value: Entrepreneurial ecosystems is a novel way of looking at entrepreneurial activity in a region. Most of the research in this domain is descriptive and theoretical, lacking empirical support, especially in developing countries. Therefore, this research is a contribution to the body of knowledge on entrepreneurship and entrepreneurial ecosystems.