The Moderating Role of Environmental Dynamism between Entrepreneurial Leadership and Sustainable Development in SME Sector, Punjab

Abstract

The current study addresses the important investigation by analyzing how entrepreneurial leadership impact on sustainable development with the moderating role of environmental dynamism in SME sector of Pakistan. SMEs contribute around 30% of the total GDP of the country, where 73% of SMEs are located in Punjab province, which signifies its essential role in economic and social development. The SME sector faces many challenges like low adopted sustainable practice and has high failure rate, which is 30% in first three years. The research gap is the entrepreneurial leadership distinctive type of leadership which deals with the challenges and problems of the current enterprises. Entrepreneurial leadership may lead to sustainable development through SME development by articulating clear future goals. SMEs serve as the driving force in eradicating poverty, social development, diffusion of innovation and capital mobilization. To enhance the contribution of SME sector in the country, entrepreneurial leadership is inevitable. It is a general perception that the enterprises do not operate in vacuum but are surrounded by many unforeseen challenges like environmental problems, external policy shocks and internal challenges of SMEs sector. Environmental dynamism refers to rapid changing conditions and is considered as big challenge to SMEs. The study focuses on the sustainable development of SMEs in the five major cities of Punjab. To attain this objective, data about respective variables is collected from manufacturing, service and commercial units, situated in Punjab province. To address research gap, the significant role of environmental dynamism and the moderating effect of environmental dynamism under the contingency theory is investigated. To infer the empirical results, deductive approach is used by collecting quantitative data with a pre-established questionnaire. The data is collected from SMEs, located in five cities of Punjab Province which included Rawalpindi, Faisalabad, Gujranwala, Wazirabad and Sialkot with a sample size of 501 respondents. The results of the present study are ascertained by applying Structural Equation Model with Smart PLS (Software) which includes measurement of outer and inner models. Outer model includes algorithm approach, reliability, discriminant validity, composite validity and model fit tests. Measurement of inner model includes bootstepping approach and Q square test. Main results of the present study explain that there is significant impact of entrepreneurial leadership on sustainable development. Another important outcome of the study is the impact of entrepreneurial leadership on economic, environmental and social sustainable development. One of the significant outcomes reveals that environmental dynamism negatively moderates the relationship between entrepreneurial leadership and sustainable development which means that the greatest influences on the sustainable development of the economy, environment, and society are coming from shifting market practices, governmental regulations, technology advancements, and consumer behavior patterns. The present study contributes to the SMEs development that by dint of providing resources, training, and access to networks, SMEs development programs can empower entrepreneurial leaders to implement sustainable practices by accessing funding for green technologies or learning about resource efficiency. The study makes an additional contribution by navigating regulations that can have better understanding of environmental, economic and social sustainable development. The current study further extends the contingency theory in examining the relationship between entrepreneurial leadership and sustainable development in the presence of environmental dynamism as a moderator. Future research directions would be to expand the geographic areas to other provinces like Sindh, Baluchistan, Khyber Pakhtunkhwa, and Gilgit Baltistan to develop the generalizability. Besides the SMEs, large conglomerates can be studied by testing the moderating impact of environmental dynamism in varied industries. Examine other moderators or mediators like innovation capacity, organization structures, strategical and financial flexibility. Longitudinal and mix method approach can be used to support the cross verification of quantitative findings. Moreover, there is a scope for exploring other antecedents of leadership traits like green mindset, emotional intelligence and risk appetite.