Understanding the Growth Behaviour and Available Support for Small to Medium Sized Manufacturing Firms in a Conflict and Poor Infrastructure Environment: The Perspective of Entrepreneurs in Swat Valley, Pakistan

Entrepreneurship and small firms are regarded by policy makers and academics alike as being an important catalyst for economic growth. However, a perennial question is why firms do, or do not, grow. Therefore, much research has been undertaken over many decades capturing different environments to answer this complex phenomenon. Nevertheless, after the ‘9/11 attacks’, a new environment has emerged which many people call ‘the conflict environment’. To date, little research has been conducted and no rich empirical data is present in the entrepreneurship and small firm literature. To investigate small firms operation in a conflict environment and an associated poor infrastructure (which itself may pre-date the actual conflict) this study examines how a sample of firms grow and/or struggle in the province of Khyber Pakthunkawa, Pakistan.

Two broad objectives were set for this study. The first and primary objective was to understand the growth behaviours of SME manufacturing firms and how they grow and struggle in a conflict and poor infrastructure environment. This was captured by examining their existing resources; entrepreneurial orientation behaviour; the impact of the conflict environment on their entrepreneurial activities; how the conflict and poor infrastructure environment was handled; and, lastly, business barriers they identified and their impact. The second objective was to consider available support and their perception on the effectiveness of such support.

One hundred and ten manufacturing SMEs in the Swat Valley that met the selection criteria were studied and a mixed method was used. An initial survey was administered and respondents categorized themselves as either growing (30 firms) or struggling (80 firms). The thirty ‘High entrepreneurial’ firms stated that they have achieved and maintained growth despite the conflict and poor infrastructure environment, whilst the eighty ‘Low entrepreneurial’ firms stated that they are struggling. To gain further insight, sixteen semi-structured interviews were conducted from within this sample in order to elaborate the quantitative findings. Furthermore, four support organizations who were most mentioned by the participants were interviewed, thus allowing a consideration of the nature of any perceived gap between them and the SMEs.

This research provides empirical evidence that as the conflict has developed in the Swat region, a few businesses have grown whilst the majority are struggling - but in their own way they are all ‘survivors’. It is argued that both growing and struggling firms show enterprise and entrepreneurship in this conflict zone. However, growing firms develop and exploit features which enable them to realise more entrepreneurial intentions as compared to struggling firms. These might be their access to human and non-human resources, and strong networks would be one of them. The conflict environment has created immense difficulties for both growing and struggling firms but paradoxically it has also benefited firms in the region. One positive consequence was that employees were prepared to help the entrepreneurs to overcome problems. This was seen through an increase in the autonomy dimension of entrepreneurial orientation. Another positive consequence was the spotting of new opportunities by the entrepreneurs in this harsh and changed environment. However, some entrepreneurs see opportunities whilst some see threats.

Furthermore, both growing and struggling firms showed dissatisfaction with the existing business support but made useful suggestions as to how this could be improved. This would facilitate growing firms to grow faster and struggling firms to achieve growth which will help to enhance employment opportunities in the region and better contribute towards peace. Entrepreneurs were also keen to increase their business activities because they were optimistic that by creating new entrepreneurial opportunities in the region it will be harder for the terrorists and insurgents to succeed. Such groups target the deprivation arising from unemployment.