ENTREPRENEURIAL LEADERSHIP AND SME PERFORMANCE IN PAKISTAN'S FACTOR-DRIVEN ECONOMY: A MULTI-MEDIATION CONCEPTUAL MODEL

Abstract

Pakistan's small and medium enterprise (SME) sector constitutes over 90% of all registered businesses, employs approximately 78% of the non-agricultural workforce, and contributes more than 40% of GDP (SMEDA, 2024; SBP, 2022). Yet Pakistan ranks 122nd on the Global Entrepreneurship Development Institute (GEDI) Index and faces one of the most challenging institutional environments for entrepreneurial growth in the developing world (Frontiers, 2025; World Bank, 2023). Recent comparative evidence from Choudhary and Shahid (2025) demonstrates that the mediation pathways linking leadership to performance

— well-established in developed economies — do not hold in Pakistan's factor-driven context, creating an urgent theoretical gap. This conceptual paper develops a multi-mediation model in which entrepreneurial leadership (EL) influences SME performance through three contextually grounded mediators: (1) innovation capability, (2) organisational resilience, and (3) institutional trust. Grounded in Resource-Based View (Barney, 1991), Institutional Theory (North, 1990), and Upper Echelons Theory (Hambrick & Mason, 1984), the model identifies five testable hypotheses and proposes a sequential explanatory mixed-methods design (PLS-SEM + qualitative interviews) for empirical validation. The paper contributes to the EL literature by (a) theorising context-specific mediation mechanisms for developing economies; (b) introducing institutional trust as an understudied mediating variable in the EL-performance nexus; and (c) providing a validated conceptual framework for future empirical research in Pakistan and analogous developing-economy contexts.