Moderating effect of external environment on performance of SMEs in Pakistan

This study aimed to investigate the moderating effect of external environment (EE) on the relationships between Total Quality Management (TQM), Entrepreneurial Orientation (EO), Market orientation (MO) and performance (P). The study was greatly motivated by the inconsistent findings and the gaps indicated in the
contemporary literature regarding those relationships. First there were contradictory
findings between TQM and Performance, EO and Performance and MO and Performance relationships. Second, the three strategies; TQM, EO and MO were not investigated together within the context of Small and Medium Enterprises (SMEs), and third, in the relevant literature, many theories have emphasized the necessity to establish the fit between external environment and intended strategies as the key
success factor. Therefore, this study integrated EE as an important moderating
variable for the purpose of strategy implementation. Data were collected from SMEs
operating in the Punjab Province, Pakistan by using questionnaire survey, and a random sampling was used for sample selection. 500 questionnaires were distributed to SME owner/managers but only 384 of them were returned, giving a response rate of 77 percent. However, only 367 useable questionnaires were used for further analysis. The high response rate was achieved due to the survey instrument being personally distributed and emailed by the researcher to the SMEs. The findings revealed that TQM and MO were significant predictors of performance, while EO was found insignificant to the performance. Meanwhile mixed results were found upon investigating the moderating effect of EE on the relationships between TQM, EO, MO and performance. The findings of this study provided significant insights for both
managers and researchers to further understand the effects of implemented strategies on performance. Finally, limitations of study and necessary recommendations for future research were discussed