Ethical Motivation and Innovation as Antecedents of Responsible Entrepreneurship in Pakistani SMEs: A PLS-SEM Investigation

Abstract

This research explores the key antecedents influencing responsible entrepreneurial intention (REI) among owner-managers of Small and Medium-sized Enterprises (SMEs) operating in Pakistan. Drawing upon an extended framework of the Theory of Planned Behavior (TPB), this research examines how ethical motivation, innovation capability, and regulatory support influence the intention to pursue responsible business practices. A quantitative, cross-sectional survey was conducted, 488 valid responses from SME owner/managers across Pakistan. The data was analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM), as it is well-suited for testing complex models with multiple constructs and relationships, particularly in predictive and exploratory research contexts. The findings reveal that the intention to engage in responsible entrepreneurship is strongly and positively influenced by two key pathways. The first is a personal conviction pathway, where ethical motivation significantly strengthens an entrepreneur's positive attitude, which in turn drives REI. The second is a capability pathway, where a firm's innovation capability enhances the entrepreneur's perceived behavioral control, which also positively predicts REI. However, the study uncovers a paradoxical finding within the institutional pathway: perceived regulatory support has a significant ‘negative’ effect on subjective norms (SN), and SN subsequently have no significant effect on REI. This suggests that in the Pakistani context, formal government support may foster cynicism rather than positive social pressure among entrepreneurs. The study contributes to the TPB by demonstrating how institutional context can alter its social mechanisms and offers critical implications for policymakers, highlighting that building trust and creating a genuinely enabling environment are more crucial than simply providing top-down regulatory support.