Entrepreneurial Orientation and SMEs Efficiency With Government Financial and Non-Financial Incentives as Moderators

Abstract

Entrepreneurship drives economic growth in the modern knowledge-based economy. Furthermore, entrepreneurial orientation (EO) and small and medium-sized enterprises (SMEs) Efficiency, combined with government financial and non-financial incentives, play a vital role in fostering the growth of SMEs. Therefore, this study aims to investigate the impact of EO with government incentives as moderators on SMEs efficiency from the perspective of Pakistan. The primary data were collected from 412 top-level managers of SMEs across three cities. A structural equation modeling was used for analysis. Results showed that risk-taking, innovativeness, and proactiveness had a positive and significant impact on SMEs efficiency, and autonomy had a negative and significant impact. It was found that government financial incentives had a significant positive moderating impact on risk-taking, proactiveness, and competitive aggressiveness. Moreover, government non-financial incentives as a moderating variable positively and significantly influenced risk-taking, proactiveness, innovativeness, and competitive aggressiveness. The positive and significant impact of government financial incentives on risk-taking, proactiveness, and competitive aggressiveness emphasizes the potential to amplify SMEs efficiency and growth through enhanced promotion of such incentives. Governments should deliberate on delivering more targeted financial support to encourage entrepreneurial activities. Complementary to this, government non-financial incentives positively and significantly influenced key entrepreneurial factors such as risk-taking, proactiveness, innovativeness, and competitive aggressiveness. Consequently, augmenting SMEs efficiency and competitiveness can be achieved by implementing non-financial incentives such as mentorship programs, technological access, and market insights.