Influence of Entrepreneurial Agility on SME Projects Performance: The Mediating role of Effectuation and the Moderating role of Environmental Dynamics

Abstract

This study examines the influence of entrepreneurial agility on firm performance, with effectuation serving as a mediating mechanism and environmental dynamics. This study examines the influence of entrepreneurial agility on SME project performance, emphasizing the mediating role of effectuation and the moderating role of environmental dynamics. Drawing on dynamic capabilities and effectuation theories, the research proposes that entrepreneurial agility enhances project outcomes by enabling SMEs to rapidly respond to changing conditions, while effectuation processes serve as a mechanism through which agile decision-making translates into improved performance. A quantitative, cross-sectional survey was conducted among SME projects in Pakistan, with responses analyzed using structural equation modeling (SEM) to test direct, indirect, and interactive effects. Results show that EA positively influences both FP (β = 0.334, p = .038) and EF (β = 0.628, p = .000). EF also enhances FP (β = 0.372, p = .030) and partially mediates the EA and FP relationship. However, ED did not significantly moderate these effects, possibly due to measurement limitations and contextual factors. Managers should prioritize agility and effective decision-making to improve performance, particularly in uncertain environments, without relying on environmental dynamism as the primary driver of success. This study advances entrepreneurship literature by integrating agility and effectuation within a moderated mediation model, while also offering practical insights for SME project competitiveness in emerging markets. The study offers theoretical insights into how can leverage agility and effectuation under dynamic conditions and provides practical implications for managers aiming to optimize project success in uncertain environments.