Sustainability 15 01808 v4

sustainability
Article
Does Strategic Change Enhance the Relationship between
Firms’ Resources and SMEs Performance in Pakistan?
Sheema Matloob 1 , Mónica Lorena Sánchez Limón 2, * , Halia Mayela Valladares Montemayor 3, * , Ali Raza 1
and Julio Cesar Castanon Rodriguez 2
1 Department of Business Administration, Sukkur IBA University, Sukkur 65200, Pakistan

2 Faculty of Business, Autonomous University of Tamaulipas, Cd. Victoria, Tamaulipas 87000, Mexico
3 Quest University, Squamish, BC V8B 0N8, Canada
* Correspondence: msanchel@gmail.com (M.L.S.L.); haliav@hotmail.com (H.M.V.M.)
Abstract: There are approximately 3.2 million SMEs in Pakistan. It is believed that more than 90%
of the economic establishments are SMEs. They contribute 40% of the economic growth and create
70% of Pakistan’s overall employment opportunities. Despite substantial presence and contribution,
95% of SMEs fail within the first five years. Out of the remaining 5%, 25% of the SMEs survive
up to four more years, adversely impacting economic growth, employment, and living standards.
Previous studies indicated SMEs’ low performance as a significant cause and provoked entrepreneurs
to shut down their businesses. Therefore, this study aims to examine the performance of SMEs in
Pakistan. Based on the problem, the study contextualized the research model that investigates the
relationship between financial capital availability (FCA) and innovative work behavior (IWB), which
is believed to be crucial for enhancing small and medium-sized businesses’ performance through
accelerated strategic change (SC). In addition, the moderating role of Government support (GS)
on SMEs’ performance was also considered. The quantitative, cross-sectional research design was
considered appropriate for this research. Data was collected through a structured questionnaire
to 340 SMEs in the Pakistan manufacturing sector. The hypothesized relationships were tested
through structural equation modeling (SEM) using Smart-PLS 4. Results showed a positive link
Citation: Matloob, S.; Limón, M.L.S.; between FCA, IWB, and SMEs’ performance. Furthermore, FCA and IWB are the key drivers to
Montemayor, H.M.V.; Raza, A.; achieving an optimum level of SME performance, which translates the SC process within the SMEs in
Rodriguez, J.C.C. Does Strategic Pakistan. Additionally, this research discovered that SC partially mediates the relationship between
Change Enhance the Relationship FCA and IWB on SMEs’ performance. Moreover, GS strengthens the relationship between SC and
between Firms’ Resources and SMEs SMEs’ performance. The present findings offer valuable insight to SME owners, policymakers, and
Performance in Pakistan?
first-line managers to understand the radical change in the process. The study also outlined policy
Sustainability 2023, 15, 1808. https://
interventions to uplift the diminishing SMEs’ performance.
doi.org/10.3390/su15031808
Academic Editors: Vítor Braga and Keywords: SMEs’ performance; financial capital availability; strategic change; innovative work
Aidin Salamzadeh behavior; government support
Received: 23 November 2022
Revised: 21 December 2022
Accepted: 28 December 2022
Published: 17 January 2023 1. Introduction
The performance gap of small and medium-sized enterprises (SMEs) is the primary
cause of their high failure rate and diminishing contribution. Therefore, the poor perfor-
mance of SMEs ultimately causes business owners to close their doors and discourages
Copyright: © 2023 by the authors.
new businesses from entering the market [1,2]. Several studies show that Pakistani SMEs
Licensee MDPI, Basel, Switzerland.
face numerous obstacles that directly or indirectly affect their performance adversely, such
This article is an open access article
as a lack of entrepreneurial skills, poor adaptability to change, a lack of innovation, com-
distributed under the terms and
plex systems of borrowing, a lack of direct foreign investments, political instability, and
conditions of the Creative Commons
inflation, all of which contribute to the closure of numerous companies in Pakistan [2,3].
Attribution (CC BY) license (https://
The United Nations 2030 Agenda for Sustainable Development also emphasizes promoting
creativecommons.org/licenses/by/
4.0/).
Sustainability 2023, 15, 1808. https://doi.org/10.3390/su15031808 https://www.mdpi.com/journal/sustainability

Sustainability 2023, 15, 1808 2 of 20
the sustainable use of natural resources to prevent depletion [4]. In addition, Competi-
tive advantage can be achieved through sustainable business processes, which leads to a
sustainable business environment [5].
Concerning SMEs, literature such as OECD [6], Rodriguez-Espindola et al. [7], and
Khoja et al. [8] found that SMEs have a worldwide impact on the environment. Henceforth,
it is essential to investigate those strategies that encourage SMEs to engage in efficient and
less harmful operations [8,9]. It is revealed in emerging economies where small business
owners have insufficient financial resources, lack innovative leadership, and are reluctant
to change processes [5,10]. To successfully support their change toward sustainability, it is
essential to examine their peculiarities and environment [9]. Moreover, sustainability might
contribute to their market competitiveness [11]. Despite SMEs’ undeniable importance and
contribution to the world’s economies, the failure rate of SMEs remains the prominent bone
of contention among entrepreneurs, tycoons, and state policymakers [12–14].
The World Bank [15] has indicated the massive contribution of SMEs to world economies
which is 90 percent and generates 60 percent of employment. However, SMEs struggle
to survive in the competitive environment for the long term to gain a competitive edge
and benefits at large [16–18]. SMEs’ failure is considered severe distress for emerging
and developed economies [19]. In Pakistan, 3.3 million SMEs comprise approximately
99 percent of total enterprises and generate 99 percent of the country’s employment,
with 90 percent from the industrial sector and 78 percent from the non-agriculture labor
force [20,21]. Moreover, SMEs contribute to 40 percent to the GDP and 30 percent to export
shares and have proved to be a lifeline in worse economic situations [22–24]. However,
the contribution of SMEs to the Pakistani economy is relatively less in comparison to a
neighboring country like China, which contributes to 64 percent of national income, versus
only 40 percent for Pakistan’s SMEs [20,25]. Pakistan and China had almost the exact same
percentages of SMEs, but there is a massive difference in the contribution of SMEs to GDP
and the social sector. In this context, there is a dire need to investigate the low-performance
phenomena in Pakistan’s SMEs, as there is an enormous gap in the contribution to GDP
among both countries [26,27].
The low performance of SMEs is considered a significant cause of the high failure
rate and diminishing contribution of SMEs in Pakistan. Thus, the low performance of
SMEs ultimately provokes entrepreneurs to shut down their businesses and discourage
newcomers from entering the market [1]. The struggling state of the SME sector is also
reflected in Pakistan’s business environment. For example, the World Bank [15] report on
ease of doing business ranking as well as the World Economic Forum [19] global competitive
index, where Pakistan ranks 108 among 190 and 110 among 141 countries, respectively.
These indicators show that Pakistan, as an emerging economy, faces the dilemma of
unfavorable business environments that lead to lower success rates for SMEs [24,28,29].
Keeping the massive influence of SMEs on prosperity and the overall growth in the economy
of the country, previous researchers underlined the importance of SMEs, but there is less
consideration in studying the factors influencing SMEs’ performance [18,30,31]. Thus,
continuously diminishing performance of SMEs, sudden shutdowns, and weakening
growth rates [32] show an alarming situation which triggered scholars to conduct more
research to explore the primary reasons which may create the hindrance to gaining the
optimum level of performance.
In this context, many researchers have studied various issues that could be the causes
of SMEs’ failure [33,34]. However, research did not precisely outline the specific reasons
due to different internal and external factors influenced by different settings and geo-
graphical conditions. Thus, the notion becomes complex to understand. In contemporary
research on SMEs’ performance, innovation seems to be the most crucial component in
business for accelerating the optimum level of performance [31,35]. The research shows
that large organizations are investing more in innovation training and adaptability of tech-
nology, leading to higher yield and better working conditions than SMEs [1]. According to
Raza et al. [2], this productivity gap results in a low-income generation, informality, and
that large organizations are investing more in innovation training and adaptabi
technology, leading to higher yield and better working conditions than SMEs [1]. A
Sustainability 2023, 15, 1808
ing to Raza, Ashraf, Shahzad, Sultan, Miyazaki, Usman, Shamshiri, 3 of 20
Zhou
AhmadRaza, Ashraf [2], this productivity gap results in a low-income generation,
mality, and poor SME growth performance. To fill this void, researchers must ident
problems and challenges faced by SMEs from both the employer’s and employee’
poor SME growth performance.
spectives. To fill
Therefore, SMEsthisemphasize
void, researchers
IWB inmust identifyand
the owners the frontline
problemsmanager
and challengesproactively
faced by SMEs from both the employer’s and employee’s perspectives.
and efficiently manage limited resources to ensure their long-term su
Therefore, SMEs emphasize IWB in the owners and frontline managers who proactively
[36].
and efficiently manage limited resources to ensure their long-term survival [36].
In relation to innovation, little access to credit availability impedes innovatio
In relation to innovation, little access to credit availability impedes innovation and
lack of awareness regarding the SC in the existing setups [37,38] which ultimate
lack of awareness regarding the SC in the existing setups [37,38] which ultimately adversely
versely influences performance. Very few studies focus on SC, particularly as a me
influences performance. Very few studies focus on SC, particularly as a mediator and GS
and GS as a moderator, which intervenes and interacts between the SC and SMEs’ p
as a moderator, which intervenes and interacts between the SC and SMEs’ performance.
mance. To address this gap, this study examines how FCA and IWB influence the p
To address this gap, this study examines how FCA and IWB influence the performance
mance of SMEs through the mediating and moderating role of SC and GS, respec
of SMEs through the mediating and moderating role of SC and GS, respectively. Figure 1
Figure 1 presents the conceptual framework and addresses the following research
presents the conceptual framework and addresses the following research questions:
tions:
1. Do financial capital availability and innovative work behavior impact strategic change
and SMEs’1. Performance?
Do financial capital availability and innovative work behavior impact str
2. To what extentchange
is the and SMEs’capital
financial Performance?
availability and innovative work behavior—
2. To what extent is
performance relationship mediated by the financial capital
strategic availability and innovative work behav
change?
3. Does government support strengthens the relationship betweenchange?
performance relationship mediated by strategic strategic change and
3. Does government support strengthens the relationship between strategic chang
SME performance?
SME performance?
Figure 1. Conceptual Framework.

Figure 1. Conceptual Framework.
The present study contributes distinctly. First, it contributes the body of knowledge in
the existing literature on FCA, IWB, SC, GS, and SMEs’ performance. As a result, it’s an
essential inquiry since SC has been highlighted as a critical factor in SMEs’ success [3,39,40].
Theinfluence
Second, it explores the present of study
IWBcontributes distinctly.
on the performance ofFirst,
SMEs;itto contributes the body of know
the best knowledge
in the
of the researcher, thisexisting
is a rareliterature on FCA, IWB,
find to investigate SC, GS, andbetween
a relationship SMEs’ performance.
IWB with SME As a result,
performance. Lastly, the theory of Resource-based view (RBV) asserts that business requiresSMEs’ su
essential inquiry since SC has been highlighted as a critical factor in
[3,39,40].
the competencies, Second,
resources, andittechnology
explores theto influence
adopt a new of IWB on the
creative performance
strategy of SMEs; to th
that is tricky
for competitors to imitate and enables SMEs to have sustainable competitive advantages between
knowledge of the researcher, this is a rare find to investigate a relationship
withperformance
and enhance their SME performance. [41–43].Lastly, the theory
To undertake ofresearch
this Resource-based
the first view
section(RBV) asserts tha
of this
research articleness requires
examines thethe competencies,
appropriate resources,
literature and technology
on SMEs’ performance. to adopt a new
It shows the creative
evidence that SCegyand
thatGSis tricky
support forhave
competitors
superiortovalue
imitatein and enablesthe
describing SMEs to have sustainable
intervening and co
itive advantages and enhance their performance [41–43].
interacting role among variables. The second section thoroughly discusses the methodology To undertake this resear
and data collection approaches. Finally, this study delineates the SMEs’ performance with
the relationship between SC and GS.
2. Literature Review
2.1. Theoretical Background
The current study adds new insights to the body of knowledge by introducing dis-
tinct and inimitable resources FCA and IWB and their relationship to SME performance
with the mediating effect of SC and buffering effects of GS with the help of a conceptual
framework (Figure 1). Sustainable performance with the disclosure of innovation, dynamic
change, and strategic development practices are essential to reach the optimum level of
growth in SMEs [25,44]. In previous studies, SC was recurrently examined as a predictor
to investigate firm performance [45–47]. Hence, based on RBV, this study evaluated how
SC can reinforce the relationship between firm resources FCA and IWB and organizational
competitive advantage. In this way, RBV provides the foundation of this research model
in the framework of firm resources. SC and GS are deemed internal and external orga-
nizational capabilities to show positive performance and survival for the long term. For
understanding the theoretical context, Table 1 shows the most recent studies pertaining to
the present study variables.
Table 1. Recent Studies on Investigated Variables.
Variables (Hypothesis) Article Name Authors Name

Financial Capital Benefiting from economic crisis? Strategic orientation effects, trade-offs, and
1. Beliaeva et al. [48]
Availability configurations with resource availability on SME performance.
Employability and innovative work behavior in small and medium-sized
2. Innovative Work Behavior Stoffers et al. [49]
enterprises.
Do new ventures benefit from strategic change or persistence? A behavioral
3. Strategic Change Batra [50]
perspective.
Impact of network structure on sustainable competitive performance
4. Government Support among Pakistani small and medium enterprises: does government Khan et al. [51]
financial support matter?
Aftab, Veneziani, Sarwar
Entrepreneurial orientation, entrepreneurial competencies, innovation, and
5. SMEs’ Performance and IshaqAftab,
performances in SMEs of Pakistan: Moderating role of social ties.
Veneziani [3]
2.2. Hypothesis Development

2.2.1. Financial Capital Availability and Strategic Change and SMEs’ Performance
FCA refers to the firm’s most pivotal and flexible resource, which can be gratifying
in times of crisis. Finance reflects a liquid current asset, which can be easily modified into
other forms of resources and guards against resource constraints in critical operational
areas. Wiklund and Shepherd [52] stated that financial capital could, to an extent, accelerate
business operations along with strong support to expand the business’s operations. Memon,
Yong An and Memon [44] have argued that SMEs still believe in informal sources to arrange
the finance for business operations because commercial banks have high-security concerns
for long-term loans and require time-taking procedures. These prerequisites discourage
SME owners from borrowing money from the bank. The second most crucial discouraging
factor is the interest rate which restricts the business owner from opting for financing from
commercial banks and financial institutions [53,54]. Therefore, SMEs have just confined
the overdraft facilities, short-term financing, and letters of credit. Many researchers have
found that limited access to financial resources is the primary constraint for SMEs growth
and may become the reason for failure [2,44,55].
Similarly, Mishra and Yadav [56] observed that products have a short life span to
survive in the competitive market in the current business environment. Consequently,
SMEs are not solely relying on the future profits of existing operations, and business needs
to search for new opportunities continuously for long-term survival. Therefore, SMEs may
utilize the SC in the firm to get a competitive edge over competitors. Zhang [57] explained
the SC as an overall change in the firm based on a 360-degree level, which includes resource
allocation in multiple key strategic aspects that cover all the business unit’s central areas. SC
is predominant because it entitles footing in their advantages to achieve firm performance.

SC instigates new innovative ideas which have the desired results to reach SMEs’ optimum
level of performance [39].
Moreover, the strategy can be found as an action plan to achieve the firm’s goals [58].
SMEs are more financially constrained than large firms because they are opaque [59].
Therefore, having access to financial resources facilitates the pursuit of strategic goals in
times of economic crisis, and firms with adequate financial capital may be able to strengthen
their strategic orientations [48].
Some empirical studies identified that financial capital could easily acquire tangible
and intangible assets to exploit new opportunities in the firm. It ultimately leads toward
an SC, such as product line extension and new cost-effective methods, which provide
the desirable outcome from the innovative strategies [60,61]. A scarcity of research can
be observed in examining the relationship between FCA and SC in the context of SMEs.
Therefore, the absence of research encourages scholars to investigate the relationship further.
Thus, this study hypothesizes that FCA has a positive influence on SC.
Scholars have analyzed the effect of resource flexibility on performance, such as
financial and innovation performance. Performance can be achieved when firms exploit
new opportunities such as corporate diversification, product innovation, or enter new
international markets, which are the specified dimensions of SC [17,62,63].
A significant conclusion is that resource flexibility increases performance. For example,
resource flexibility has been argued to enhance the firm’s ability to transform resources
effortlessly, respond quickly to the changing environment, and exploit the change in the
firm [64]. Indeed, when resource flexibility and access to finances are improved, firms
will be more able to adopt the change in production methods, marketing strategies, and
innovation to promote a unique set of capabilities [65,66]. Therefore, firms can enhance their
performance with the increase in SC. Hence, this study suggests the following hypothesis.
Hypothesis 1a (H1a). Financial capital availability positively raises strategic change.
Hypothesis 1b (H1b). Strategic change mediates the relationship between financial capi-
tal availability and SMEs’ performance.
2.2.2. Innovative Work Behavior and Strategic Change and SMEs’ Performance
IWB can be defined as an individual act (within a work role, group, and organization)
that aims to explore new innovative ideas, procedures, and production methods [67,68].
Janssen [69] delineated IWB as “initiatives and application of new ideas within a work role,
with peers and colleagues in the organization, to benefit role performance, the group, or
the organization” (p. 288). IWB has a broader definition that can be used to create, promote,
and implement new ideas that benefit the firm’s overall performance. Innovation deals
with all employees of the firm rather than with the ones who are confined to innovative or
innovation-oriented positions. Moreover, Fayolle and Basso [70] revealed that innovation
has a significant role in SMEs to accelerate the core skills and transform these into optimum
levels of performance outcomes.
As there is a non-availability of literature regarding IWB and SC relationships in the
SME sector of Pakistan, this study investigates the relationship between IWB and SC in
SMEs. In the literature, researchers have extensively investigated that innovative products
positively correlate with strategic change. Ultimately it influences the SMEs’ capabilities
to survive in the dynamic market, which enhances the overall SMEs’ performance and
survival in the long term [71–73]. Shanker, Bhanugopan, van der Heijden and Farrell [72]
discuss that creative and innovative behavior toward work supported this belief in their
research and asserted that cognitive and creative behavior is endorsed when personality
traits are combined with work settings, leading contributors to boost the firm to renew their
strategy policies. An empirical study has found that IWB attempts to promote strategic
renewal after seeking the crises in the local market of emerging countries [74].
Furthermore, innovation directly or indirectly influences small firms’ values [45,75]

via strategic changes in the operation level of SMEs. In the same way, ref. [72] argued that
IWB among owners and managers of the firm is critical for improved firm performance.
Rothwell, Hohne and King [40] identify that focus on SC will effortlessly achieve the firm’s
targets and goals, indicating that necessity translates to a greater need for continuous
innovation of products and internal processes and behaviors. The RBV theory also asserts
that businesses require talent, funds, and technology to develop a new innovative strategy
that will be impossible for competitors to imitate and that empowers SMEs to obtain
superior performance and long-term competitive advantages [41–43,76]. Therefore, the
direct hypothesis proposed between IWB and SC. Besides, the relationship between IWB,
SC, and SMEs’ performance is still largely unexplored; subsequently, the mediating role of
SC between IWB and SMEs’ performance can be studied.
Hypothesis 2a (H2a). Innovative work behavior positively raises strategic change.
Hypothesis 2b (H2b). Strategic change mediates the relationship between innovative

work behavior and SMEs’ performance.
2.2.3. Strategic Change and SMEs Performance

Zhang [57] stated that strategic change systematically leads to firms’ performance.
Few past empirical studies argued that strategic change could be processed if the firm
has financial resources [77,78]. Instead, Haveman [79] focused that strategic change can
be a solid reason for the firm’s long-term survival. Similarly, Hambrick and Schecter [80]
revealed that the changes in the firms and enhanced financial performance were contingent
on the type of change and the industrial environment. Consequently, changes are a com-
pulsory requirement for SMEs to stay long-term in the competitive environment, such as
the availability of new technology [81] the emergence of new innovative ideas [39], and the
introduction of new methods of production [82].
In the literature mentioned above, SC may be necessary to enhance business perfor-
mance when technology-based new ventures grow their international presence. Precisely
what those SC should be will inevitably depend on unique firm technologies, markets
entered, and current strategies [83]. In strategic management, conceptual literature assumes
that environmental changes lead SMEs to change their overall strategy. Similarly, SMEs’
performance is denoted by the success and increase in the firm performance. Moreover,
SMEs’ performance has different parameters to quantify the SMEs’ survival and growth.
Arshad and Arshad [31] stated, “The value creation of the firm in terms of sales, revenue,
employee growth comparison with last three-year performance and expectation of the
owner after putting his all efforts to achieve an optimum level of performance”. Hence,
we argue that through mediation, strategic change directly affects SMEs’ performance
and indirectly influences FCA, IWB, and SMEs’ performance. Therefore, this study can be
hypothesized that:
Hypothesis 3 (H3). Strategic change positively raises SMEs’ performance.
2.2.4. Moderating the Role of Government Support between Strategic Change and
SMEs’ Performance
The study anticipated that GS could be considered a robust phenomenon that helps
SMEs exploit SC to enhance the firm’s performance. SMEs should be trained and sup-
ported by SMEDA (Small Medium Enterprise Development Authority) and the Chamber of
Commerce, working under the umbrella of government [21]. Literature has focused on the
various types of government schemes which can be taken as an external factor in providing
sufficient training to entrepreneurs regarding technology and infrastructure, which is es-
sential to grasp innovation to meet future expectations [84]. Cerulli and Poti [85] described
a positive relationship between GS schemes and business performance by conducting
empirical research on Asian countries.
Literature also supports that SMEs are self-driven. They bear risks due to less access
to finance, dependency on their savings, and fewer clients. Due to fewer records of
financial statements, banks are reluctant to give loans without collateral. The interest
rates of financial institutions are too high to be paid by any small- and medium-sized
firm. However, governments support SMEs with financial incentives and assistance to
cultivate strategic change to increase performance of the SMEs. Furthermore, SMEs using
updated technology as demanded by the public can get a competitive edge in the fiercely
competitive environment. Successful government intervention is tricky to make effective at
realistic costs–benefit ratios [86]. Thus, it is impossible to suggest that any type of GS is
better than any other type of GS for SMEs.
The statement above points out the positive moderating effect of GS on the relationship
between the practice of SC and SMEs’ performance. Therefore, the ability of GS to moderate
the relationship between SC and SMEs’ performance can be predicted.
Hypothesis 4 (H4). Government support strengthens the relationship between strategic

change and SMEs’ performance among Pakistani manufacturing firms.
3. Methods and Materials

3.1. Sample and Data Collection Process
A quantitative cross-sectional research design was deemed appropriate for this study [87].
The population consists of Pakistan’s manufacturing SMEs. This sector was chosen due
to its significant contribution to the GDP of a country, employment creation, and poverty
alleviation. Due to the absence of a sampling frame, the study relied on purposive sampling.
Purposive sampling was considered appropriate for the present study due to adequate
alignment with research objectives. It also enhances the findings validity and rigorous-
ness [88]. In a recent study on Pakistani SMEs, i.e., He [89] also found purposive sampling
as a suitable technique to deliver authenticity in the data results. The SMEs were chosen on
inclusive criteria [90]. The study’s inclusion criteria are: participants should have owner-
ship or frontline managers of the SMEs who currently own or have been working in SMEs
for at least three years. As this study also investigates the SC, the sample was selected to
consider Kirtley and Mahony’s analysis [39]. They stated that small firms usually take six
to twelve months to exploit change within the firm. Henceforth, data was gathered from
the owner and respective business managers directly involved in the strategic actions using
a structured questionnaires [91].
Moreover, the current research adopts a survey technique to collect the data from two
provinces of Pakistan, i.e., Punjab and Sindh- also known as the most densely populated
manufacturing-based SMEs [20]. Punjab has approximately 399,152 (68.4%) and Sindh has
80,804 (13.9%) together represent 82.3% of all SMEs in Pakistan [92]. To access these SMEs,
SMEDA Pakistan was contacted. SMEDA has documented various SMEs and characterized
their facilities [21]. Official permission was obtained from SMEDA Pakistan before the
data collection process started. Once permission was granted, researchers with SMEDA’s
officials assistance collected data. They also used their personal contacts to access the SMEs
(see Figure 2 for data collection process).
Table 2 shows the complete data collection process which formally starts with the
obtaining permission of SMEDA. Once the official permission granted the rest of the process
was intensively carried out. The data was collected from seven different cities Faisalabad,
Gujrat, Sialkot, Gujranwala, Sukkur, Khairpur and Hyderabad. Written consent was also
obtained from SMEs to ensure confidentiality and satisfy ethical perspectives for research.
A total of 465 structured questionnaires were distributed, and among them, 340 were found
usable and included to conclude the results.
Sindh has 80,804 (13.9%) together represent 82.3% of all SMEs in Pakistan [90]. To access
these SMEs, SMEDA Pakistan was contacted. SMEDA has documented various SMEs and
characterized their facilities [21]. Official permission was obtained from SMEDA Pakistan
before the data collection process started. Once permission was granted, researchers with
SMEDA’s officials assistance collected data. They also used their personal contacts to ac-
cess the SMEs (see Figure 2 for data collection process).
Figure 2.
Figure Data Collection
2. Data Collection Process.
Process.
Table 2. Profile of the firms.

Table 2 shows the complete data collection process which formally starts with the
obtaining Description
permission of SMEDA. Once the official permission grantedPercentage
Frequency the rest of the pro-
cess wasName
intensively carried
of industry out. The data was collected from seven different cities Faisal-
abad, Gujrat,Textile
Sialkot, Gujranwala, Sukkur, Khairpur
104
and Hyderabad. Written
30.6
consent was
also obtained from SMEs to ensure confidentiality and satisfy ethical perspectives for re-
Sports 101 29.7
search. A total of 465 structured questionnaires were distributed, and among them, 340
Pharmaceuticals 85 25.0
were found usable and included to conclude the results.
Leather and Cotton 30 8.80
3.2. Marbles & Ceramics

Participants information 20 5.9
Educational
The sample background
shows 104 (30.6 percent) SMEs fall in the textile sector, and almost 29.7
Intermediate
percent are from andthe less 95
sports sector. Next, 25 percent, 8.80 percent, and 5.9 28.0
percent of SMEs
were from pharmaceuticals,
Bachelor leather/cotton, 139
and Marble & Ceramics. Likewise,
40.9 the partic-
ipants’ profile shows
Master that 31.1 percent hold
106 a master’s degree while the majority
31.1 (40.9
percent) possess a bachelor’s degree. Concerning SMEs size in terms of employees, 46.8
Firms size
percent of
20–50 employees20–50 employees, 28 percent
SMEs had 159 had 51–100 employees, 46.8
13.2 percent had
101–150 employees, and the remaining 9.1 percent and 3 percent of participating SMEs
51–100 employees 95 28.0
had 151–200 and 201–250 employees, respectively (see Table 2).
101–150 employees 45 13.2
Table 2. 151–200
Profile employee
of the firms. 31 9.11
201–250 employees 10 3.0
Description Frequency Percentage
Firms age
Name of industry
Ten years and less 178 52.35
Textile 104 30.6
11–20 years 90 26.5
Sports 101 29.7
21–30 years 35 10.3
31–40 years 20 5.9
41 and above 16 4.7
Total (n) 340 100
3.2. Participants Information

The sample shows 104 (30.6 percent) SMEs fall in the textile sector, and almost 29.7 per-
cent are from the sports sector. Next, 25 percent, 8.80 percent, and 5.9 percent of SMEs were
from pharmaceuticals, leather/cotton, and Marble & Ceramics. Likewise, the participants’
profile shows that 31.1 percent hold a master’s degree while the majority (40.9 percent)
possess a bachelor’s degree. Concerning SMEs size in terms of employees, 46.8 per-
cent of SMEs had 20–50 employees, 28 percent had 51–100 employees, 13.2 percent had
101–150 employees, and the remaining 9.1 percent and 3 percent of participating SMEs had
151–200 and 201–250 employees, respectively (see Table 2).
3.3. Measurement Instruments of the Study

A survey instrument was employed for data collection. The participants were asked
to rate a series of items on a 7-point Likert scale ranging from 1 = “strongly disagree”
to 7 = “strongly agree”. All the scale items in this study were adapted from previous
research. Four items from Wiklund and Shepherd [52] were chosen to assess FCA. Scott and
Bruce’s [67] seven items scale was used to evaluate IWB. SC was assessed using 13 items
proposed by Zhang [57]. Ahmad [93] assessed GS using a five-item scale, while Wiklund
and Shepherd [94] five-item scale was used to evaluate the performance of SMEs (see
Appendix A for survey items).
3.4. Data Analytical Tool and Common Method Bias

3.4.1. Data Analytical Tool
The data were analyzed using the path modeling approach of partial least square
structural equation modeling (PLS-SEM) with SmartPLS 4.0 software Becker et al. [95]
to anticipate the associations between variables. The extensive use of the PLS-SEM tech-
nique in social and management science makes it a holistic approach to variance-based
SEM [96,97]. It permits the assessment of unobservable variables using indicators and does
not need normalcy [95]. In addition, a larger sample size is not required to run the program.
PLS-SEM is preferable to regression analysis when a mediation and moderation test are
required, as in the present study [98,99].
3.4.2. Common Method Bias

To ensure the absence of common method bias (CMB) in the data, the variance inflation
factor (VIF) test is recommended [97]. Using Smart-PLS 4.0, the VIF values for this study
were determined to be between 1.166 to 1.771, below the acceptable criterion of 3 (See
Table 2) [100–102]. In addition, the study followed Henseler [103] who indicated that CMB
is possible “if the correlation between the constructs is more than 0.90”. However, none
of the constructions had a value greater than 0.90 (the permissible level). In addition,
following Henseler et al. [104], we used the HTMT to check for non-response bias. The
results indicated no significant difference between early and late participants, confirming
the lack of non-response bias in the data.
4. Result Analysis
Given the exploratory nature of the study, SPSS 25 was employed to assess the SMEs’
profiles, and Smart-PLS version 4.0 was used to test the model’s hypotheses. The ques-
tionnaire’s validity was assessed using the measurement model in the first stage, and the
validity of the hypotheses was tested using the structural model.
4.1. Assessment of Measurement Model

Convergent and discriminant validity are the two most important steps in analyzing
the study’s measurement. According to past conducted studies, all the constructs belong to
reflective-reflective. Beginning with factor loading, Composite Reliability (CR) and Average
Variance Extracts (AVE) are measured through convergent reliability. The factor loadings
in this study must meet a minimum threshold of 0.5, as proposed by Hair et al. [105],
Kock et al. [106], Fan et al. [107] and the AVE threshold value should be 0.5. The AVE of
constructs ranges from 0.81 for SMEs’ performance usage to 0.52 for SC. Table 3 showed
that the CR for the measurement model’s constructs was greater than the threshold value
of 0.700 [106]. Thus, the findings in Table 3 demonstrate that the measurement model has
sufficient convergent validity. The Heterotrait-Monotrait (HTMT) ratio of correlations and
VIF can be used to examine the confirmation of discriminant validity [99]. In addition,
HTMT ratio analysis has also been tested in the systematic examination of its ability to
assess discriminant validity [96,99].
Table 3. Measurement Model.
Latent Variables Items Loadings CR AVE Inner VIF

Financial Capital Availability (FCA) 0.938 0.792 1.166
FCA1 0.882
FCA2 0.896
FCA3 0.899
FCA4 0.883
Innovative Work Behavior (IWB) 0.935 0.674 1.160
IWB1 0.792
IWB2 0.820
IWB3 0.856
IWB4 0.834
IWB5 0.780
IWB6 0.842
IWB7 0.819
Strategic Change (SC) 0.935 0.526 1.52
SC1 0.623
SC10 0.804
SC11 0.804
SC12 0.732
SC13 0.776
SC2 0.700
SC3 0.714
SC4 0.730
SC5 0.515
SC6 0.674
SC7 0.709
SC8 0.762
SC9 0.782
Government Support (GS) 0.937 0.747 1.771
GS1 0.889
GS2 0.881
GS3 0.887
GS4 0.873
GS5 0.787
SC2 0.700
Sustainability 2023, 15, 1808 SC3 0.714 11 of 20
SC4 0.730
SC5 0.515
Table 3. Cont. SC6 0.674
SC7 0.709
Latent Variables Items
SC8 Loadings
0.762 CR AVE Inner VIF
SMEs Performance (P) SC9 0.782 0.955 0.81
Government Support (GS) P1 0.889 0.937 0.747 1.771
P2GS1 0.889
0.900
P3GS2 0.881
0.920
P4
GS3 0.887
0.910
GS4 0.873
P5 0.881
GS5 0.787
SMEs Performance (P) 0.955 0.81
Table 4 shows that the inter-construct correlation was less than any of the HTMT
P1 0.889
criterion standards in terms of specificity HTMT 0.85, HTMT 0.90, or HTMT inference.
P2 0.900
Based on the traditional discriminant analysis and more comprehensive discriminant
analyses, it is claimed that the discriminant validity0.920
P3 is well established. Convergent and
discriminant validity are the most criticalP4steps in assessing
0.910 the measurement model of
the study. P5 0.881
Table4.4.Heterotrait–Monotrait
Table Heterotrait–Monotraitratio
ratioofofcorrelations
correlations(HTMT).
(HTMT).
Variables
Variables 1 1 22 33 44 55
1.1.Financial Capital
Financial Capital Availability
Availability _____
_____
2.2.Government Support
Government Support 0.627
0.627 ____
____
3.3.Innovative Work
Innovative Work Behavior
Behavior 0.416
0.416 0.472
0.472 ____
____
4.4.SMEs Performance
SMEs Performance 0.411
0.411 0.417
0.417 0.328
0.328 _____
_____
5.5.Strategic Chang
Strategic Chang 0.514
0.514 0.546
0.546 0.514
0.514 0.676
0.676 _____
_____
4.2. Assessment
4.2. Assessment ofof Structural
Structural Model
Model
The present study supported hypotheses with
The present study supported hypotheses with aa 1.96
1.96t-value.
t-value. All
All hypotheses
hypotheses with
with aa
valuebelow
value below1.96
1.96were
weredeemed
deemedtotobebeunsupported.
unsupported. FCA
FCA (β(β = 0.340,
= 0.340, t =t 4.657,
= 4.657,
p =p 0.000)
0.000) and
and
IWB(β
IWB (β== 0.354,
0.354,tt== 4.612,
4.612,pp=0.000)
0.000)are
arepositively
positivelyassociated
associated with
with SC
SC based
based onon the
the relevance
relevance
ofthe
of theproposed
proposedpathpathin inthe
thecurrent
currentinvestigation
investigation(Figure
(Figure3)3)
Figure3.3. Representation
Figure Representationof
ofStructural
StructuralModel.
Model.
Consequently, H1a and H2a are supported. Similarly, SC is statistically related to SME
performance (β = 0.521, t = 7.524, p < 0.000). Thus, H1b and H2b is also supported. In terms
of mediation analysis, it is also hypothesized that SC can mediate the positive relationship
between FCA and SME performance (β = 0.201, t = 4.277, p < 0.05). Similarly, the same
Sustainability
Sustainability 2023,
2023, 15,15, 1808
1808 12 of 21 12 of 20
Consequently, H1a and H2a are supported. Similarly, SC is statistically related to

result was found in the relationship between IWB and SME performance via the mediating
SME performance (β = 0.521, t = 7.524, p < 0.000). Thus, H1b and H2b is also supported.
effect of SC (β = 0.208, t = 4.07, p < 0.05) (see Table 5). Thus, both Hypotheses 3 and 4
In terms of mediation analysis, it is also hypothesized that SC can mediate the positive
indicate thatbetween
relationship SC hasFCA
a favorable
and SMEimpact on the(βinternal
performance = 0.201, tresources
= 4.277, p <of0.05).
SMEs.Similarly,
the same result was found in the relationship between IWB and SME performance via the
Table 5. Structural
mediating effect of model
SC (β =results.
0.208, t = 4.07, p < 0.05) (see Table 5). Thus, both Hypotheses 3
and 4 indicate that SC has a favorable impact on the internal resources of SMEs.
Hypotheses Relationship β t-Value p-Value Results
Direct
Table 5. Structural model effect
results.
H1a FCA → SC 0.340 4.657 0.000 Supported
Hypotheses Relationship β t-Value p-Value Results
H2a IWB → SC 0.354 4.612 0.000 Supported
Direct effect
H3 SC → Perf 0.521 7.524 0.000 Supported
H1a FCA  SC 0.340 4.657 0.000 Supported
Indirect effect
H2a IWB  SC 0.354 4.612 0.000 Supported
H1b IWB → SC → Perf 0.208 4.07 0.000 Supported
H3 SC  Perf 0.521 7.524 0.000 Supported
H2b FCA → SC → Perf 0.201 4.277 0.000 Supported
Indirect effect
Moderation effect
H1b IWB  SC  Perf 0.208 4.07 0.000 Supported
H4 SCxS → Perf 0.286 2.170 0.021 Supported
H2b FCA  SC  Perf 0.201 4.277 0.000 Supported
Moderation effect
Considering
H4 theSCxS
measurement
 Perf of the0.286
indirect effect
2.170 of SC0.021
and SMEs’ performance, the
Supported
variance accounted for (VAF) method is being used [105].
Considering the measurement of the indirect effect of SC and SMEs’ performance,
VAF
the variance accounted for (VAF) = Indirect
method effect/Total
is being used [103]. effect
VAF = Indirect effect/Total effect
where, total effect = indirect effect + direct effect. According to Hair et al., (2016) mediation
where,can
effect totalbe
effect = indirect effect
determined + direct
through VAF effect. According
values of no to Hair et al.,<(2016)
mediation 20%,mediation
partial mediation
effect canand
20–80%, be determined through
full mediation VAFrespectively.
> 80%, values of no mediation
The results< 20%, partial
of this study mediation
show an indirect
20–80%,
effect ofand
SC full
andmediation > 80%, respectively.
SMEs performance of 69.8% Theand
results of thisrespectively,
44.4%, study show an indirect
that falls between
effect of SC and SMEs performance of 69.8% and 44.4%, respectively, that
20% and 80%, thus regarded as partial mediation. Intriguingly, the moderation result wasfalls between
20% and 80%, thus regarded as partial mediation. Intriguingly, the moderation result was
also found to be significant in the present study; GS positively moderates the relationship
also found to be significant in the present study; GS positively moderates the relationship
between strategic change and SME performance (β = 0.286, t = 2.170, p < 0.05), such that a
between strategic change and SME performance (β = 0.286, t = 2.170, p < 0.05), such that a
higher
higher GSGSindicates
indicates a stronger
a stronger positive
positive relationship
relationship betweenbetween
SC and SC SME and SME performance
performance in in
manufacturing
manufacturing firmsfirms (see
(see Figure
Figure 4). moderation
4. The The moderation hypothesis
hypothesis H4 is therefore
H4 is therefore supported.supported.
Figure 4.4.Interaction
Figure Interactionplot.
plot.
5. Discussion
The results show that the FCA and IWB significantly influence the SC within SMEs.
These findings are consistent with previous studies by Agarwal et al. [108], Beliaeva,
Shirokova, Wales and Gafforova [48], and Camuffo et al. [109]. These studies indicate
that the sufficient availability of finance for firms with innovative behavior promotes the
strategic change process and practice among manufacturing-based SMEs. In this way, FCA
needs to be merged with the ideal SC that uplifts business development, and SMEs can
attain the strategic objectives by enhancing the SMEs’ overall performance. Similarly, IWB
in the work systems acts as a catalyst to achieve desired performance.
The present study also found strong evidence that SC positively and significantly
influences SMEs’ performance. In addition, the results show that SC can mediate a positive
relationship between FCA and SMEs’ performance. Likewise, SC also mediates the positive
relationship between IWB and SMEs’ performance. Consequently, the proposed research
model in this study indicates that SC plays a crucial role in translating the effects on the
performance of SMEs. Thus, it is essential to instigate and enhance the process of SC of
SMEs, which can be possible with adequate financial capital alongside the integration of
various forms of IWB [42,110]. In regard to innovation, the competitive business environ-
ment needs more innovation to sustain itself long-term. SMEs need to adopt innovative
operational practices that produce innovative products. In turn, the performance of SMEs
will improve, and SMEs may survive and sustain in the competitive market for the long
term [3,17,25].
In this context, the variable GS significantly modifies the relationship between SC and
SMEs’ performance. This means the SMEs with GS in their business have a significant
positive impact between SC and the performance of SMEs. The findings are also consistent
with the study of Ahmad [93] who revealed that government assistance to SMEs allows a
firm to contribute more to national economies. In addition, the GS may facilitate SMEs’ easy
access to finance, which is necessary for new valuable start-ups, innovation, and expansion
to sustain their business performance [27,34,111].
5.1. Theoretical Implications

The present study undertakes RBV as an underpinning theory. It points out ‘firm
resources’ as a significant driver to gaining a competitive advantage that leads to increased
performance and sustainability in the business environment [112,113]. In addition, RBV
focuses on the firm’s distinctive competencies, especially the unique resources considered
crucial for growth [55,56]. This study focused on FCA and IWB intangible capabilities.
FCA is regarded as an ability that accelerates the new idea-generation process among
owners and frontline managers toward updating technology and markets [31]. Similarly,
the concept of IWB in the RBV postulates that firms can exploit their resources through
their ability to innovate their business operations and also explore other innovative ways
to compete in the industry [17]. Moreover, the role of an entrepreneur is equally vital in
timely decision-making, particularly in the change process within the firms [39,114].
Pertaining to the theoretical contributions, we provide essential evidence on SMEs’
performance. Extensively focusing on exploring factors leading to increased business
performance in SMEs with support to results from previous studies [3,94,115]. Interestingly,
previous studies have mainly focused on the FCA and IWB on SC. However, the mediating
effect of SC on SMEs’ performance is still being explored. Undoubtedly, SC has a significant
favorable influence on the final version. Therefore, the present study’s findings confirmed
that active SC creates an ability for firms to sustain their business. In addition, SC can be
established as a mediator between the FCA, IWB, and SMEs’ performance.
5.2. Practical Implications

The current research drew several implications for the practitioners as each construct
in the research model plays its role and suggests implications. As discussed earlier, FCA
and IWB had a positive and significant relationship with the performance of SMEs with a
mediating effect of SC. In this context, practitioners may develop an innovative workplace
where innovative ideas proposed by SME owners and managers may resolve the daily task
issues and advance the business’s performance.
Similarly, this research draws attention to financial institutions to provide and facili-
tate SMEs in terms of capital. This facility allows them to identify and tap new business
opportunities without hindrance. In this context, GS to SMEs in financial and techno-

logical departments can be a “game-changer”. For example, different financial short- or
long-term loans are provided at minimum markup. Additionally, the government may
provide adequate training on attaining financial capital, innovation, and an emphasis on the
entrepreneurial mindset needed to compete in the market. These activities enable owners
to take bold initiatives for strategic change. In addition, a series of systematic programs can
be added to educate SMEs. For instance, SME development schemes and skills upgrading
programs uplift Pakistan’s overall SME sector.
Lastly, IWB can be seen in practice when a system processes relevant business data. In
this process, competitive and distinct information insights must be utilized to ensure overall
business objectives. The dissemination of such unique information initiates the change and
bridges the structural gaps in the SC to increase the SMEs’ performance. Similarly, the firms
in Pakistan need to focus on innovation creation, delivering to customer needs, and value
proposition, as the findings of this study showed a significant relationship between SC
and firm performance. Firms must fulfill the expressed and latent needs by changing their
business philosophy towards more customer orientation. Without fulfilling the customers’
needs, SMEs have no way of exploring and taking opportunities to create and deliver value
to customers.
5.3. Limitations and Future Avenues of Research

There are inevitable limitations in research. However, significant attempts were made
to mitigate the effects of these limitations on the results. First, the scope of this study
was confined to Pakistani SME manufacturers. This may impede the applicability of
the findings to other sectors. In addition, the research examines the SME population in
selected cities of Pakistan’s two most populous provinces, Punjab and Sindh, due to their
high density of SME establishments. This study was also limited to the experimental
investigation of SME performance by self-administered questionnaires. In addition, the
scope of this study is restricted to understanding the testing and development of FCA
and IWB on the performance of SMEs via the mediating influence of SC. Second, this
quantitative study is based on deductive methods that evaluate the link between factors
to predict the outcome (DV). However, the purpose of this study is not to investigate the
fundamental causes and impacts of SME performance. Despite its limitations, this study
may be expanded in several ways to analyze SME performance in more depth. A future
study might explore services and tertiary SMEs in Pakistan with a greater focus on cities.
To analyze the deteriorating performance of Pakistan’s SMEs, comparisons might also be
made across industries. Through interviews, qualitative research might also be conducted
to examine SME performance and SC. More predictors should be added to the conceptual
framework to understand SMEs’ performance through the SC as a mediator. Additionally,
cultural influences might be incorporated into the conceptual framework of this study. This
study was done within Pakistan, a collectivist country with a strong culture of uncertainty
avoidance, i.e., risk aversion.
6. Conclusions
This study examines the effect of internal resources on the performance of Pakistani
SME manufacturers. In emerging markets, business owners and managers can employ
internal resources to turn into the business’s strength. While examining theoretical contri-
butions raises several issues for manufacturing entrepreneurs and policymakers, it does
so in several ways. Entrepreneurs in the manufacturing sector. This research has added
an element to the puzzle. It is believed that such improvements and developments in
knowledge will inspire other researchers to investigate and practitioners to establish and
sustain comprehensive SC processes for improved SME performance. This study will
contribute to the body of quantitative research on SC and SME performance and enhance
our understanding of the links between the FCA, IWB, and SME performance. Thus, this
study encourages additional research on SC in general and Pakistan’s SME service industry.
Internal resources and SC were utilized to investigate the presented hypothesis considering
RBV theory. Interestingly, all supported hypotheses directly influence the performance
of SMEs.
In contrast, GS enhances the performance link between SC and SMEs, our research,
which is substantially confirmed by Hassan et al. [116]. This study suggested numerous
consequences for the government, senior management, the banking sector, and SMEDA.
Consequently, there are several consequences for the government that urge SME’s top man-
agement and owners to implement the SC process, which finally propels small businesses
to their optimal level.
Author Contributions: Conceptualization, S.M.; Data curation, A.R. and J.C.C.R.; Funding acquisi-
tion, M.L.S.L.; Methodology, S.M.; Resources, H.M.V.M.; Software, A.R. and J.C.C.R.; Supervision,
M.L.S.L.; Validation, H.M.V.M.; Writing—original draft, A.R. All authors have an equal level of
contributions. All authors have read and agreed to the published version of the manuscript.
Funding: This research received no external funding.
Institutional Review Board Statement: This study was carried out following the ethics committee
of Sukkur IBA University, Pakistan.
Informed Consent Statement: The participant’s consent to participate in this study.
Data Availability Statement: Data will be available on the request from the authors.
Conflicts of Interest: The authors declare no conflict of interest.
Appendix A. Survey Items

Financial Capital Availability
Item1. My company has easy access to financial capital to support its business operations.
Item2. When our company need more financial assistance for our business operations, we could easily get it.
Item3. My company has substantial financial resources at the discretion of managers for funding
business initiatives.
Item4. My company can obtain financial resources at short notice to support business operations.
Innovative Work Behavior
Item1. My company searches out new working methods techniques or instruments.
Item2. My company generates ideas on how to optimize knowledge and skills within the department.
Item3. My company generates original solutions for problems.
Item4. My company provides new solutions to old problems.
Item5. My company elaborates appropriate plans for the implementation of new ideas.
Item6. My company develops adequate plans and schedules for the implementation of new ideas.
Item7. My company eliminates obstacles in the process of idea implementation.
Strategic Change
Item1. My company works on conscious staff reduction.
Item2. My company works on major cost reduction.
Item3. My company is cutting down, selling, and closing down ineffective businesses.
Item4. My company is introducing a more sophisticated cost control system.
Item5. My company is starting to do business with a country the company had previously not done
business with.
Item6. My company is starting a business in a new place within Pakistan.
Item7. My company is starting marketing oneself in a new way.
Item8. My company is carrying out a considerable change in the company’s organization.
Item9. My company is carrying out a considerable change in the Company’s internal operation.
Item10. My company is introducing an important new product or service or in any other way substantially
changing offerings to customers.
Item11. My company is commencing the development of a new important product, service or similar, which
has not yet been introduced.
Item12. My company is carrying out measures in advance that the company otherwise would have been
forced to do sooner or later.
Item13. My company is carrying out changes particularly to get ahead of competitors.
Government Support
Item1. In my country, government financial policies (e.g., public procurement) consistently favor new firms.
Item2. In my country, the support for new and growing firms is a high priority for policy at the national
government level.
Item3. In my country, the financial support for new and growing firms is a high priority for policy at the local
government level.
Item4. In my country, new firms can get most of the required permits and licenses in about a week.
Item5. In my country, the amount of taxes is NOT a burden for new and growing firms.
Item6. In my country, taxes and other government regulations are applied to new and growing firms in a
predictable and consistent way.
Item7. In my country, coping with government bureaucracy, regulations, and licensing requirements is not
unduly difficult for new and growing firms.
SMEs Performance
Item1. My company is doing well for the last three years.
Item2. My company sales growth is doing well for the last three years
Item3. My company revenue growth is doing well for the last three years
Item4. My company Growth in the number of employees is doing well for the last three years.
Item5. My company net profit margin is doing well for the last three years.
Item6. My company new product is doing well for the last three years.
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sustainability

1 Department of Business Administration, Sukkur IBA University, Sukkur 65200, Pakistan

Sustainability 2023, 15, 1808. https://doi.org/10.3390/su15031808 https://www.mdpi.com/journal/sustainability

Figure 1. Conceptual Framework.

Table 1. Recent Studies on Investigated Variables.

Variables (Hypothesis) Article Name Authors Name

2.2. Hypothesis Development

is predominant because it entitles footing in their advantages to achieve firm performance.

Hypothesis 1a (H1a). Financial capital availability positively raises strategic change.

Furthermore, innovation directly or indirectly influences small firms’ values [45,75]

Hypothesis 2a (H2a). Innovative work behavior positively raises strategic change.

Hypothesis 2b (H2b). Strategic change mediates the relationship between innovative

2.2.3. Strategic Change and SMEs Performance

Hypothesis 3 (H3). Strategic change positively raises SMEs’ performance.

Hypothesis 4 (H4). Government support strengthens the relationship between strategic

3. Methods and Materials

Table 2. Profile of the firms.

3.2. Marbles & Ceramics

3.2. Participants Information

3.3. Measurement Instruments of the Study

3.4. Data Analytical Tool and Common Method Bias

3.4.2. Common Method Bias

4.1. Assessment of Measurement Model

Table 3. Measurement Model.

Latent Variables Items Loadings CR AVE Inner VIF

Consequently, H1a and H2a are supported. Similarly, SC is statistically related to

5.1. Theoretical Implications

5.2. Practical Implications

opportunities without hindrance. In this context, GS to SMEs in financial and techno-

5.3. Limitations and Future Avenues of Research

Appendix A. Survey Items

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