Impact of government support policies on entrepreneurial orientation and SME performance

Abstract

Small and medium enterprises (SMEs) are often resource-constrained and motivated by necessity or opportunity. They play an essential role in national economies due to their contributions to employment, human capital development, knowledge spillovers, and social mobility in maintaining diverse entrepreneurial ecosystems. Government support policies (GSP), both financial and nonfinancial, can directly impact SME performance or indirectly by developing an entrepreneurial orientation (EO). Few studies have investigated the important question of how GSP simultaneously may impact both the EO and the performance of an SME. Thus, this paper aims to identify the current understanding of how different forms of GSPs relate to and impact the EO and the performance of SMEs. A systematic literature review was conducted using the PRISMA methodology to synthesize this understanding, resulting in 65 relevant articles from the ABI/INFORM, ScienceDirect, Scopus and Web of Science databases. The relationships between the constructs were analyzed using thematic and semantic analyses, employing computer-assisted data analysis software (NVivo 12 and Leximancer 4.5). This resulted in the categorization of GSPs as direct and indirect support policies, with financial and nonfinancial-subcategories, and depicted their pathways of influence on SMEs’ EO and performance. The study found that GSPs have four different pathways by which they can impact performance. Both direct and indirect policies have moderating effects that can magnify the impact of EO on performance. The review established that the direct effect of GSP on EO varies by sector, SME growth-intention, and type of GSP. Based on the findings, we recommend policymakers develop support policies tailored to SMEs’ specific sector and its intentions to enhance performance.