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Article

The Moderating Role of Entrepreneurial Networking between Entrepreneurial Alertness and the Success of Entrepreneurial Firms

by
Mir Satar
1,
Sager Alharthi
1,
Muzaffar Asad
2,*,
Amer Alenazy
1 and
Muhammad Uzair Asif
3
1
College of Administrative and Financial Sciences, Saudi Electronic University, P.O. Box 93499, Riyadh 11673, Saudi Arabia
2
Business School, Tecnológico de Monterrey, Monterrey 64849, Mexico
3
School of Business Management, University Utara Malaysia, Sintok 06010, Malaysia
*
Author to whom correspondence should be addressed.
Sustainability 2024, 16(11), 4535; https://doi.org/10.3390/su16114535
Submission received: 5 May 2024 / Revised: 20 May 2024 / Accepted: 23 May 2024 / Published: 27 May 2024
(This article belongs to the Section Economic and Business Aspects of Sustainability)
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Abstract

:
Entrepreneurial firms’ success is significantly influenced by their capacity to seize market opportunities. At the same time, little is known about when and how entrepreneurs’ alertness to the potential for business opportunities and how it influences their success. To fill this vacuum in the literature on entrepreneurship, the current study focused on identifying the impact that fluctuations in the degree of entrepreneurial networking cause on the relationship between three pertinent dimensions of entrepreneurial attentiveness and the success of entrepreneurial firms. Based on primary data collected from 384 entrepreneurial firms that are operating in Pakistan, using an adapted questionnaire, this study discovered that improvements in dimensions of entrepreneurial alertness have a beneficial impact on the success of entrepreneurial firms. Moreover, the moderating role of entrepreneurial networking has proved significant in the relationships. The effect size of the moderator is also significant and large. This study is also important for the sustainability of entrepreneurial firms because the more they are successful in their mission, the more they will be sustainable. Moreover, the moderating role of entrepreneurial networking that helps them in times of crisis also improves their sustainability. This study also revealed how entrepreneurial alertness works as a driver of entrepreneurial business success and how success is magnified in the presence of a higher degree of entrepreneurial networking. The theoretical, managerial, and policy ramifications of the study are explained at the end, along with limitations and recommendations for future researchers.

1. Introduction

Scholarly research on the function of entrepreneurial alertness in identifying entrepreneurial opportunities has steadily increased over the past three decades [1]. Alertness is a crucial entrepreneurial trait that helps entrepreneurs recognize opportunities [2]. An “ability to notice, without search, opportunities that have hitherto been overlooked” by others is entrepreneurial alertness. One argument is that being sensitive to opportunities ahead of others shows an entrepreneurial mindset [3].
Three crucial gaps in the concept of entrepreneurial alertness which the prior scholarly efforts have hardly filled. Prior research on entrepreneurial alertness has shown positive [4] and negative [5] impacts on success. First, there is a lack of consistency in the theoretical explanation of how entrepreneurial alertness affects success [1]. Crucially, research connecting the distinction between the perception and exploitation of opportunities has not been made clear by entrepreneurial alertness to success [4,6].
Despite the conceptual distinction between the two concepts being clearly stated in the entrepreneurship literature [7], there is a need to evaluate the other factors that give inconsistent findings for entrepreneurial alertness and success.
However, entrepreneurial action must be taken for entrepreneurial alertness [8], the capacity to spot an opportunity before others [9], to materially affect success [10].
Entrepreneurial action is the embodiment of an entrepreneur’s ability to act to seize a recognized opportunity [11]. There are several theories regarding entrepreneurial intentions, and, likewise, there are several theories catering to success; however, the absence of a theory of the entrepreneurial action mechanism linking entrepreneurial alertness to success is one of the primary issues with the literature in that it has hardly been conducted, especially catering to the importance of entrepreneurial networking.
Thus far in demonstrating a causal relationship between entrepreneurial alertness and success, there is a need for empirical studies. Second, hardly any studies have found an empirical association between entrepreneurial alertness and entrepreneurial firm success, despite the authors’ attempts to establish the nomological validity of the alertness construct by linking alertness to success. Third, the effects of entrepreneurial alertness from the perspective of developing economies are not well studied. We contend that context plays a significant role in the formation of entrepreneurship theory; as such, it is critical to investigate the relationship from the standpoint of a less developed economy to expand the scholarly community’s understanding of the awareness notion.
Thus, this study contributes three new concepts to the body of knowledge on entrepreneurship. This study first cross-fertilizes academic studies on entrepreneurial activity with the literature on entrepreneurial alertness to explain the connection between the success of entrepreneurial businesses and entrepreneurial attentiveness. Academics claim that for an entrepreneur to expand their firm, they need to grab a known opportunity that is worthwhile. We find that a higher level of alertness based on the ability to act on an opportunity before others is likely to lead to entrepreneurial firm success given the likelihood of variances in entrepreneurs’ ability to act on a recognized opportunity.
The research on opportunities for entrepreneurship states that the establishment and expansion of an entrepreneurial firm include a social process wherein entrepreneurs utilize their networks to gather and allocate resources to take advantage of a recognized opportunity [12]. Therefore, entrepreneurial networking is most likely to be a prerequisite for awareness [13]. The capacity of an entrepreneur to act and to take advantage of a chance to establish can move an entrepreneurial firm toward success. Previous research has ignored how business people use networking events to seize opportunities for their enterprise, despite the potential conditioning roles of their networking behavior. Instead, it has concentrated on the structural and relational entrepreneurial networks while linking them with entrepreneurial orientation [14].
This research adds to the body of knowledge on entrepreneurship by utilizing resource-based theory to support the claim that success is more likely to result from an entrepreneur’s ability rather than merely having access to them, in order to take advantage of entrepreneurial opportunities, to mobilize and deploy these network resources. Third, the links provided in the paper are analyzed from the perspective of emerging economies, i.e., less developed formal supporting institutions lead to networking being a powerful source of opportunity for entrepreneurship. Furthermore, from a sustainability point of view, as the life span of most entrepreneurial firms is considered to be less than five years [15], the major reason behind these closures is a lack of support during tough times. However, due to support from the entrepreneurial network, the sustainability of the firms may be improved.
Exploiting an entrepreneurial opportunity is fraught with uncertainty, institutional flaws, and real prospects of failure in less developed cultures. Authors contend that in such a situation, informal network governance mechanisms can assist in giving entrepreneurs structural support to counteract inadequate official institutional support [16,17]. Accordingly, several writers have demonstrated that in developing and underdeveloped countries, networking ability is a significant predictor of venture success [18]. Accordingly, this research indicates that entrepreneurial networking is essential for helping vigilant business owners in developing nations take advantage of chances to expand their enterprises.

2. Literature, Theory, Framework, and Hypotheses

The concept of entrepreneurial attentiveness is not new [1]. Businesses throughout the world are pursuing new opportunities [16,17]. However, firms in underdeveloped nations are hesitant to embrace change due to the expenses associated with market-driven innovation [18].
The current research focuses on the success of entrepreneurial firms since they are more dynamic and willing to make risky decisions [19]. The success of entrepreneurs has gained significant attention from researchers; however, the success of entrepreneurial firms is hardly addressed, even though it is highly linked with the performance of entrepreneurial firms [20]. Success and performance are two similar contexts, but the difference is that in the achievement of aims and goals, the mission of the entrepreneurial firm determines the success of the firm, and, if it is achieved, the firm is supposed to be successful. As the entrepreneurial firm is created by identifying the gap in the market, therefore, the aim of the firm is to fulfill that gap; hence, the success of the entrepreneurial firm is highly dependent on the alertness of the entrepreneur [21]. Entrepreneurial alertness serves as a valuable resource for businesses [22]. Entrepreneurial alertness necessitates activities that may result in a competitive advantage for entrepreneurial firms [23].
Thus, entrepreneurial attentiveness is a valuable and scarce resource among competitors. Therefore, the Resource-based View (RBV) validates the assertions made in this study that entrepreneurial awareness, as a competitive resource, can assist entrepreneurial enterprises achieve superior success. The RBV provides justification for any kind of resource that is variable, rare, imitable nonreplaceable [15]. Furthermore, to reinforce the theoretical foundations, resource dependency theory has been utilized. Resource dependency theory was introduced by Pfeffer and Salancik (1978) [24]. According to RDT, for the success of the organization, external support is required [25].
The literature on the association between entrepreneurial awareness and the success of entrepreneurial firms is inconclusive and inconsistent [1,2,17]. Some believe it increases profitability [2,6], while others argue that it is simply a cost for small businesses because of experimentation and will end up in losses [4,8]. Furthermore, researchers in the field of entrepreneurship discuss and highlight the importance of open innovation, which is based on the market input; similarly, Portuguez-Castro identified the same for co-creation in entrepreneurship by conducting a systematic review in which the author reviewed 53 scientific articles and also identified the same concept [20].
In addition to that, Portuguez Castro, Scheede, and Zermeño, who conducted their research using the Delphi method on 26 participants, identified the similar skills of entrepreneurs that have been analyzed in the current research [26]. The authors concluded that perseverance and attitude to achieve objectives, which can be reflected in linking the dots toward the achievements of goals, along with the ability to identify opportunities and motivation, which is reflected in scanning and evaluating opportunities, are those critical constructs that are studied and evaluated over empirical data.
Furthermore, studies on entrepreneurial awareness have mostly focused on the theoretical support of dynamic skills, but essential theoretical foundations of resource dependency theory have received limited attention, particularly in the context of Pakistani entrepreneurial enterprises. Thus, to fill the contextual vacuum in Pakistani settings and the theoretical gap in the form of contradictions in the current literature, it is preferable to identify the moderator who is disrupting this relationship [27,28].
While reviewing the literature, numerous researchers examined entrepreneurial networking as a moderator [24] because it provides external resources that firms do not have [29]. However, entrepreneurial alertness has received comparatively little attention in developing countries. Thus, the current study aims to contribute to the body of entrepreneurial research in developing countries by identifying the moderating impact of entrepreneurial networking on the relationship between entrepreneurial alertness and entrepreneurial business success.
Therefore, based on the above discussion and to support the theoretical underpinning of RBV, with the help of RDT, the following framework has been developed in Figure 1.

2.1. Entrepreneurial Alertness and Success of Entrepreneurial Firms

According to earlier studies on entrepreneurial alertness, people who are alert can spot opportunities before others can [2]. The kind of dealings that are entered in upcoming market cycles may be influenced by alertness [5]. Scholarly research has long maintained that the ability to process information [30], identify patterns in the environment [31], process past knowledge and experiences [12], and social participation [32] are components of alertness.
Alert entrepreneurs are uniquely equipped and ready to spot an opportunity before their peers [3]. As a result, a clear understanding of how entrepreneurial alertness affects entrepreneurial enterprises’ success has been severely constrained. Senior entrepreneurs are more likely to make fresh discoveries and expand their businesses’ inventions [33]. Nonetheless, an entrepreneur’s possession of a resource (alertness) may not guarantee the success of their firm. Its impact on success will probably depend on how well an entrepreneur can seize an opportunity before others do [22].
Researchers have studied the idea of entrepreneurs’ attentiveness and its possible effects in the entrepreneurship literature [34].
Based on an official definition of alertness in the entrepreneurship context, the ability to connect disparate pieces of information [35], look through new information through a different lens [36], and determine whether a fresh piece of knowledge offers a chance [37] are the three behavioral components of entrepreneurial alertness. Therefore, it is better to divide entrepreneurial alertness into entrepreneurial alertness for scanning opportunities, entrepreneurial alertness in linking dots, and entrepreneurial alertness in evaluating opportunities.

2.1.1. Entrepreneurial Alertness in Scanning Opportunities

The procedures of noticing changes and transitions in an environment and determining if the dynamics create a business opportunity are included in the evaluation and judgment component [38]. It is believed that high-alert business people are more likely to scan for shifts in the industry landscape to spot and grab an opportunity [19]. Being conscious of alterations, transitions, chances, and missed opportunities can help entrepreneurs see and seize opportunities, which can bring significant value to their business [39].
Gaining an understanding from studies on the entrepreneurial opportunity process is one approach to progressing the field’s understanding of the effects of entrepreneurial alertness on success [40]. Although there are many different ways to conceptualize an entrepreneurial opportunity in the literature [41,42], hardly one prevalent theory holds a cognitive process that involves the act of identifying and then seizing an opportunity. Research has demonstrated that entrepreneurs can create opportunities or objectively find them [43,44]. From a discovery perspective, it would be right to claim that while entrepreneurs may identify opportunities in the market, success (i.e., entrepreneurial business success) cannot occur until the entrepreneur takes action to seize the opportunity before competitors do [45]. Hence, the following hypothesis is developed:
H1. 
Entrepreneurial alertness in scanning opportunities significantly influences the success of entrepreneurial firms.

2.1.2. Entrepreneurial Alertness in Linking the Dots

Even if entrepreneurial alertness may have an impact on the success of entrepreneurial firms, the majority of research on the topic has concentrated on defining the traits of attentive entrepreneurs and the conceptual parameters of the idea [22,46,47]. Additionally, several organizational outcome characteristics and entrepreneurial attentiveness have been connected in recent studies [2,48,49,50]. Considering the result of organizational success, attentive entrepreneurs move swiftly and nimbly when making decisions [51]; hence, their firm is more likely to obtain a competitive edge. This is why entrepreneurial alertness can have an impact on the success of entrepreneurial firms.
The connection between performance and entrepreneurial alertness has not yet been fully specified theoretically, despite scholarly efforts to increase knowledge in this area [34]. According to this theoretical viewpoint, when alert people take advantage of possibilities, alertness turns into an entrepreneurial tendency, which leads to success. It gives business owners the ability to apply their creative thinking to identify and analyze data in a variety of knowledge areas linked to the creation of new prospects [52]. Thus, the following hypothesis is made:
H2. 
Entrepreneurial alertness in linking the dots significantly influences the success of entrepreneurial firms.

2.1.3. Entrepreneurial Alertness in Evaluating Opportunities

Furthermore, a tendency to grasp a fresh product–market opportunity is a necessary component of entrepreneurial activity [46]. Successful entrepreneurs are best at judging the opportunities about their outcomes. This core act of entrepreneurship can be the introduction of a new product via internal corporate venturing or through an already-existing firm [37]. Essentially, finding new possibilities and acting on them are the two main components of entrepreneurship [53]. Although several research frameworks used a resource-based view and offered a more thorough account of how alertness influences the success of entrepreneurial firms than any other theory, they have hardly identified the need and importance of networking in exploiting how alertness impacts success of the entrepreneurial firms. According to the resource-based approach, resources are assets that business owners can utilize to identify and seize market opportunities [15]. It is believed that these resources are dispersed differently across business owners and could even be particular to oneself [36]. One of the main tenets is that success variance is not caused by entrepreneurial resources per se, but rather by the intentional efforts of entrepreneurs to develop, expand, and alter entrepreneurial resources [8].
Because alert entrepreneurs are more likely to act quickly to seize opportunities in the market before others do, it is reasonable to assume that a rise in entrepreneurial alertness will result in the success of entrepreneurial firms [43]. According to research, highly vigilant entrepreneurs can take advantage of expanding market segments [54] before their rivals because they can better observe market trends and changes [35] and can react to them sooner than their rivals. Therefore, a cunning entrepreneur can start a profitable new business before other entrepreneurs by acting to exploit a new market value proposition from a recognized opportunity [55]. Consequently, the following hypothesis is developed:
H3. 
Entrepreneurial alertness in evaluating opportunity significantly influences the success of entrepreneurial firms.

2.2. Moderating Role of Entrepreneurial Networking

Growing an entrepreneurial firm is a social process that involves efforts by entrepreneurs to harness their networks to mobilize and deploy resources to exploit an opportunity [13]. Most research on the topic has focused on the structural and relational networks that entrepreneurs are involved in and their outcomes, although entrepreneurial networking has significant implications for the success of entrepreneurial firms and has the potential to shed new light on the conditions under which opportunity exploitation affects the success of entrepreneurial firms [56]. More relational linkages, structural gaps, and network diversity enable entrepreneurs to obtain a variety of network-based resources that improve the success of their entrepreneurial firms [57]. The idea that all entrepreneurs can use network resources to achieve desired entrepreneurial business success is implicit [58].
Researchers studying entrepreneurial networks, however, contend that success in entrepreneurial firms may not be significantly impacted by network resource availability in and of itself; rather, success is more likely to result from entrepreneurs’ capacity to take advantage of opportunities before others do by using their networks to mobilize resources [59]. This suggests that the capacity of entrepreneurs to leverage resources contained in networks to seize entrepreneurial opportunities and attain entrepreneurial firm success outcomes may vary [60]. However, only a few prior studies have concentrated on elucidating how business owners apply their networking activities to support the advantages they learn from their endeavors [13,61,62]. To fill this vacuum in the literature on entrepreneurship, we integrate resource dependency theory with resource-based theory in this study. We investigate whether degrees of entrepreneurial networking influence the connection between entrepreneurial alertness and the success of entrepreneurial firms.
Entrepreneurial networking is the ability of an entrepreneur to mobilize resources available within an entrepreneurial network structure. This notion aligns with the academic discourse surrounding the creation and utilization of resources by entrepreneurs that are inherent in their network relationships [63,64,65]. Accordingly, the current study sees entrepreneurial networking as a means for business owners to gather and integrate various resources and information for a desired purpose by taking advantage of their ties to local social peers and community leaders [66].
Furthermore, personal information might reach entrepreneurs through the channels that entrepreneurial networking offers [67]. To the extent that an awareness of how skillfully an entrepreneur uses pertinent market data during the exploitation phase will determine their capacity to take advantage of an entrepreneurial opportunity [68,69]. Since entrepreneurship entails a great deal of risk-taking and uncertainty, information is a vital tool for reducing uncertainty [70,71]. This argument is predicated on the knowledge that an entrepreneur’s capacity to use logic to select entrepreneurial networks can improve opportunities.
An increased impact of opportunity exploitation on new venture success results from the expansion of rationality’s bounds, which also improves the entrepreneur’s ability to screen and evaluate new venture ideas, possibilities, and possible sources of competitive advantages [72]. Furthermore, an entrepreneur would likely rely on a variety of information to make decisions when pursuing an opportunity because they are exposed to new and varied business ideas, viewpoints from around the world, and a broader frame of reference through networking with social peers [73]. Quality knowledge about entrepreneurial prospects is difficult to come by in less developed societies like Pakistan [31] because it is typically held informally by important non-market actors like local market leaders.
However, these societies also heavily rely on kinship ties and collectivistic cultures [74]. Entrepreneurs can use familial affinities to their advantage by using them as a source of information on significant factors that contribute to market success [75,76]. An entrepreneur can also leverage the sympathies formed in these types of networks to create unofficial rules that will keep trading partners from acting opportunistically and increase the chances of a venture’s success [77].
Formal or informal contacts between suppliers and customers, for instance, are also considered to be the elements of entrepreneurial networking [63]. The ability of an entrepreneur to build connections with important suppliers, competitors, and customers within a given industry is defined as entrepreneurial networking in this study, which is based on the body of existing literature on managerial linkages [78]. Entrepreneurial networks give business owners access to resources and knowledge about the market that may not be available in the open market [79]. Entrepreneurs can gain from a multidivisional structure that lowers transaction costs and offers economies of scale and breadth with the aid of entrepreneurial networking [80].
Underdeveloped factor markets make it more difficult for entrepreneurs in developing nations like Pakistan to effectively purchase resources. Entrepreneurs can interact with banks, suppliers, distributors, buyers, and customers through entrepreneurial networking, which also helps them to overcome institutional barriers [58]. In developing economies, entrepreneurs often face barriers to entry when trying to access vital markets [45]. Within this setting, entrepreneurial networks serve to bridge gaps in the institution and promote the sharing of resources needed to start and expand profitable new businesses [81].
To take advantage of business prospects in a local market, astute entrepreneurs need to have local business expertise, which is what entrepreneurial networking offers [82]. The empirical research provides some insights into how entrepreneurial networking might enhance the success benefits of entrepreneurial firms [13,14,61,65]. We contend that the advantages (such as lower transaction costs) resulting from entrepreneurial networks [80], the lowering of institutional barriers [58], and the lowered risks and uncertainties [70] associated with entrepreneurship brought about by having close relationships with industry leaders may increase the likelihood of seizing an opening for the success of an entrepreneurial firm.
One important realization is that networking with other entrepreneurs can help entrepreneurs learn about upcoming and present business prospects as well as industry trends, which can improve the quality of information that new entrepreneurs have access to when looking to take advantage of new chances [61]. An entrepreneur may find it easier to begin a new business with improved insights into potential industry trends if they rely on high-quality market data [83]. Entrepreneurs with connections in the entrepreneurial community have access to resources, guidance, and problem-solving abilities [84]. With less time and effort required, entrepreneurs can develop an entrepreneurial opportunity by utilizing such an external network resource, as suggested by RDT. Thus, we propose the following three hypotheses:
H4. 
The entrepreneurial network moderates the positive relationship between entrepreneurial alertness in scanning opportunities and the success of entrepreneurial firms.
H5. 
The entrepreneurial network moderates the positive relationship between entrepreneurial alertness in linking the dots and the success of entrepreneurial firms.
H6. 
The entrepreneurial network moderates the positive relationship between entrepreneurial alertness in evaluating opportunities and the success of entrepreneurial firms.

3. Research Methods

We utilized the Sialkot Chamber of Commerce and Industry to create the study’s sampling frame. To encourage participation in this study, a sample of 1000 firms registered with the Sialkot Chamber of Commerce and Industry was chosen at random. Entrepreneurs made up the responders. The sample consists of businesses that were privately held, launched between 2000 and 2003, and employed less than 100 people throughout 2023. In November and December, we gathered data. In-person approaches with questionnaires were made to the business owners of the chosen companies. The entrepreneurs or owner-managers of the 384 firms that were chosen had the most in-depth understanding of the businesses’ operations because these companies were mostly entrepreneurial. We requested reports from each respondent on three different aspects of informant competency: (1) understanding problems under study; (2) correctness of the data provided; and (3) confidence in the responses to the questions, using a seven-point Likert scale (1 being “strongly disagree” and 7 being “strongly agree”). For the study, we received 384 valid replies, or 38.4% of the total.
Given that common method bias typically originates from cross-sectional studies, a follow-up survey was carried out (As a result, we also carried out a test for common technique bias. In comparison, the participating businesses were more enterprising. With an average of 50 full-time workers and an average yearly revenue of MYR 50 million, the companies appear to be small to medium-sized enterprises. Since the manufacturing sector has historically been more entrepreneurial and is the primary focus of the Sialkot Chamber of Commerce and Industry, the participating businesses were from the manufacturing industry. We contrasted early and late responders to evaluate non-response bias, and we discovered no discernible change in the research constructs.

3.1. Instrumentation of Entrepreneurial Alertness

Abu-Rumman, Shraah, Al-Madi, and Alfalah (2021) [13] designed a 13-item, triad-factor scale to measure entrepreneurial awareness. However, the scale was divided into three dimensions for better understanding, with scanning opportunities having six items, linking dots having three items, and evaluating opportunities having four items. All the dimensions have been measured separately. Entrepreneurial alertness is measured through three aspects: entrepreneurial alertness in scanning opportunities, entrepreneurial alertness in linking the dots, and entrepreneurial alertness in evaluating opportunities. The questions used for measuring entrepreneurial alertness in scanning the opportunities cover the elements of exploring the nature of the entrepreneurs, like acquiring new information through the market, the internet, and every possible source from where the opportunity can be seen. Moreover, the questions measuring entrepreneurial alertness in linking the dots are measured by exploring the entrepreneurs’ capabilities in developing connections in their available resources and market opportunities. The final element of entrepreneurial alertness, which is the evaluation of opportunities, is also dependent on the skill of the entrepreneur in evaluating the benefits that can be achieved in the short run, as well as in the long run.

3.2. Instrumentation of Entrepreneurial Networking

To evaluate entrepreneurial networking, including the utilization of social and business contacts, Asad and Sharfff (2016) [31] provided measures. The construct was measured using eight items. This variable is measured by asking those questions that cover the elements like obtaining those resources that an entrepreneurial firm lacks through the external network of the entrepreneur.

3.3. Instrumentation of Success of Entrepreneurial Firm

We employed self-reported success metrics for three reasons when assessing the success of entrepreneurial firms. First, objective financial data from entrepreneurial firms in Pakistan are rarely made public, and even when they are, they are rarely regarded as trustworthy. Additionally, entrepreneurs are frequently unwilling to share this information, particularly in an institutionally weak setting where trust can be quite low. Second, the literature indicates that previous studies on the success of SMEs and entrepreneurial firms have frequently employed subjective success indicators. Third, to circumvent the issues that arise with objective success measurements in developing nations, subjective success metrics were employed. As a result, we used five questions that were modified from earlier research to measure the success of the entrepreneurial firm construct. Therefore, the instrument was adapted from prior literature [15] containing 5 items. The questions asked show the attainment of the gap that the entrepreneur has filled in the market, which is reflected in terms of their profitability and growth in sales and customers.

3.4. Data Analysis

The researchers collected the data using the questionnaire that has been mentioned above. In order to improve the generalizability of the findings initially, the collected data were tested for normality. After ensuring that the data are free of any kind of bias, and are normally distributed, the outer model was analyzed to ensure that the instrument is reliable and valid. Afterwards, the inner model was analyzed using Smart PLS-3. Structural Equation Modeling (SEM) was applied using a bootstrapping sample of 5000, to test the significance of the relationships and the interaction term which was used to test the moderating impact [85].

4. Results

Smart PLS-3 structural equation modeling has been used to assess the study’s hypothesis. Despite being a non-parametric test, descriptive and normality analysis of the data was conducted to guarantee that the results could be applied to a wider population. Only the standard deviation and descriptive mean are computed as shown in Table 1. To verify that the gathered data are normal, skewness and Kurtosis are computed. According to Hair et al. (2010), [86] the cut-off values for kurtosis are less than 8 and for skewness are fewer than 3.
The computed data from the above table have a normal distribution, and because there is no bias in the data, the results can be applied generally. The first stage in structural equation modeling is then to confirm the validity and reliability, which are the two primary standards by which PLS-SEM analysis assesses the outer model. Examining item loadings is the first stage in evaluating the outer model; Cronbach’s alpha, composite reliability, and Average Variance Extracted (AVE) come next. Item loading has a threshold level of greater than 0.70, Cronbach’s alpha has a threshold level of greater than 0.7, and composite reliability has a threshold level of greater than 0.5. Table 2 lists the assessed values for the tests.
The assessed values in Table 2 attest to the fact that the instrument’s constituent parts have enough loadings and ought to remain in the model. Moreover, the instrument’s validity and reliability are determined by the computed values of AVE, composite reliability, and Cronbach’s alpha.
Verifying that the items used to measure one construct are different from the items used to evaluate another is another important metric to determine. Consequently, discriminant validity is computed, demonstrating the scale’s ability to measure the single construct that it is intended to measure. The Fornell–Larcker Criterion states that a construct’s square root of AVE must be greater than its correlation with any other construct. Table 3 lists the assessed values for the discriminant validity.
It was confirmed by Table 3 that there is a significant difference between the items used to measure the two constructs. In order to remove any doubts, HTMT criteria have been adopted as well to ensure discriminant validity [87,88,89]. Mostly the Fornell–Larcker Criterion is used, but we also analyzed the Heterotrait Monotrait Ratio (HTMT) to confirm the discriminant validity of the items as an independent variable has three dimensions which were similar [90]. HTMT close to 1 shows a lack of discriminant validity. The threshold for HTMT is that the estimated value should be below 0.85 [91]. The findings for HTMT criteria are mentioned in Table 4.
The validity and reliability of the outer model have been established, and then the inner model has been examined. The model was first limited to independent and dependent variables, and an analysis was conducted on their direct effects correlations. Table 5 mentions the findings.
The results shown in Table 5 demonstrated that the success of entrepreneurial firms is strongly influenced by entrepreneurial alertness in linking the dots. The computed values verified the significance of each direct association. However, entrepreneurial alertness has shown an insignificant impact on the success of entrepreneurial firms at a 5% level of significance, but it is significant at a 10% level of significance. The next step was to identify the moderating role of entrepreneurial networking, if any. To verify the moderating effects, the moderating variable entrepreneurial networking was then added to the model, along with interaction terms. Table 6 lists the results of the moderating impacts of entrepreneurial networking.
It is confirmed that entrepreneurial networking affects the success of entrepreneurial firms by the considerable estimated value for the direct effect of entrepreneurial networking. Similarly, the moderating effects were shown to be significant upon the introduction of the interaction term. Furthermore, the significance of the complete concept may be seen in the table described above.
Effect size has been assessed to verify the significance of intervening variables and to further corroborate the findings. The calculation of effect size involves analyzing changes in r2 and evaluating the model both with and without the variable. Effect size has been assessed using Chin et al. (2003)’s formula [89]. A modest effect is shown by a computed f2 value of 0.02; a moderate effect is shown by a value of 0.15; and a significant effect is shown by a value of 0.35 or higher. Table 6 lists the results for the mediator and moderator effects sizes.
The moderator has a huge effect, as it is within the range of a large effect, according to the values computed above. The moderator is exhibiting a significant impact, given that the computed value exceeds 0.35. Lastly, to assess the model’s predictive relevance. Using Stone–Geisser’s Q2 test, creating cross-validated redundancy has been used to apply the blindfolding procedure. The predictive relevance of the model is absent if the computed value of Q2 is less than zero.
The estimated value of Stone–Geisser’s Q2, which is shown in Table 7, attests to the model’s strong predictive relevance and applicability in a variety of contexts (Table 8).

5. Discussion and Implications

In this study, the moderating effects of entrepreneurial networking over the relationship between four dimensions of entrepreneurial alertness and the success of entrepreneurial firms were investigated. This study’s conclusions demonstrate that variations in entrepreneurial awareness account for notable changes in the success of entrepreneurial firms. Furthermore, the research revealed a positive impact of higher levels of entrepreneurial networking over the link between the dimensions of entrepreneurial alertness and success in entrepreneurial firms. The findings are consistent with the prior literature where it is confirmed that opportunity recognition and success of the firms are interrelated [2]. Entrepreneurial alertness gains strength because of networking because whatever opportunity the entrepreneurs seek, they need resources, which at times they lack, and acquire them through their network. Thus, the findings are aligned with the prior studies, thus confirming the findings; however, the current study enriched the literature by merging the scattered work into one single framework. In summary, this study revealed that stronger entrepreneurial success is achieved when a vigilant entrepreneur takes action to seize an opportunity and tries to employ entrepreneurial networking to mobilize resources to seize the chance. The findings of this study have several contributions, which have been categorized into theoretical and practical contributions.

5.1. Theoretical Contributions

First, although earlier studies have shown that the three aspects of entrepreneurial alertness are significant factors in determining the identification of entrepreneurial opportunities, the theoretical framework and empirical analysis of the relationship between entrepreneurial alertness and entrepreneurial firm success are still lacking in the context of developing countries. By incorporating resource-based theory to conceive vigilance as a tool for entrepreneurs that can help, when an entrepreneur recognizes an opportunity, they seize it. This study closes a large gap in the entrepreneurial literature by identifying the moderating role of entrepreneurial networking. According to this study, an entrepreneur’s propensity to respond quickly to take advantage of a chance determines how vigilance, as a cognitive entrepreneurial resource, affects an entrepreneurial firm’s success [92]. Since not all entrepreneurs have the same capacity to seize opportunities, there will certainly be differences in the ability to move to take advantage of them. Some may act quickly, while others may act later. The linking of the two theories, i.e., RBV and RDT, is supposed to be a new dimension for the entrepreneurial firms which are dynamic in nature and are key sources behind the development of any economy. Because of this, this study anticipated a relationship between variations in alertness and differences in the success of entrepreneurial firms, with alertness being based on the ability of an entrepreneur to act and seize an opportunity [93]. The results of a study on Pakistani entrepreneurial firms indicated that the success of entrepreneurial firms is significantly impacted by entrepreneurial alertness. One important implication for Pakistan’s developing economy is that, although there are challenges in managing commercial exchanges due to a lack of institutional support, entrepreneurs who are more adept at spotting and acting upon new business possibilities are more likely to build prosperous firms.
Second, research on entrepreneurship suggests that the process of seizing an opportunity through networking is a social phenomenon that captures the efforts of entrepreneurs to organize and allocate funds to take advantage of an opportunity. Nevertheless, the extent to which entrepreneurial networking activities strengthen or reduce the success consequences of opportunity exploitation for entrepreneurial firms has not been thoroughly investigated in prior research. By combining the resource dependency theory and the RBV to investigate the moderating effects of entrepreneurial networking on the link between dimensions of entrepreneurial alertness and entrepreneurial firm success, this study adds to the body of knowledge on entrepreneurship. Furthermore, linking the dots also strengthens the proposition of the orchestration theory along with strengthening the resource dependency theory.
This study makes the case that, while seizing an opportunity could help entrepreneurs expand a profitable business, the influence of such an endeavor on the success of an entrepreneurial organization may vary depending on the networking of the entrepreneurs. The results of this study demonstrate that when entrepreneurial networking is high, as measured by their capacity to mobilize resources from it, the impact of entrepreneurial awareness on entrepreneurial business success is amplified [94]. Since entrepreneurs in developing nations are frequently subjected to weak institutional environments and higher levels of market volatility and uncertainty, this result is especially significant for them. Exploiting an entrepreneurial opportunity comes with a lot of risks and uncertainty in emerging societies like Pakistan. The ability of entrepreneurs to safeguard their commercial interests from dysfunctional marketplaces is compromised by weaknesses in formal institutions.
Within this framework, researchers have suggested that unofficial sanctioning systems included in entrepreneurial networking offer entrepreneurs structural reinforcements to counteract inadequate formal institutional supports during the entrepreneurial opportunity process. Our research lends credence to this argument: an entrepreneur’s capacity to use entrepreneurial networking to mobilize and deploy essential resources enhances their ability to take advantage of an opportunity and improve the success of their entrepreneurial firm.

5.2. Practical Implications

In addition to its theoretical contribution, this study offers significant implications for entrepreneurs and policymakers tasked with creating entrepreneurship policies in emerging societies. Regarding the study’s practical applications, entrepreneurs in developing nations like Pakistan can benefit from its findings by understanding the importance of entrepreneurial networking and attentiveness to enhance their businesses’ success. This study’s findings indicate that, in Pakistani contexts, high levels of opportunity awareness play a significant role in the success of entrepreneurial firms.
Despite the potential benefits of entrepreneurial awareness for entrepreneurs in Pakistan, the level of awareness about entrepreneurship is typically low relative to entrepreneurs in other developing countries perhaps due to the low level of education of the entrepreneurs in Pakistan. Entrepreneurs in Pakistan appear to be exploiting interests in short-term efficiency benefits while simultaneously pursuing entrepreneurial prospects. This realization is especially applicable to two kinds of real-life scenarios. First, business owners are recommended to be especially careful when recruiting executives who must possess a high entrepreneurial alertness score. Second, by adapting questions that are used to collect the data for entrepreneurial alertness in the Pakistani context, a firm could, in a pre-job offer assessment, look into a candidate’s entrepreneurial alertness in an effort to increase the level of entrepreneurial mindset among its staff.
The notion that a firm’s ability to recognize new business possibilities is strongly linked to its success when the number of entrepreneurs in the network is high should particularly concern policymakers in Pakistan and other similar economies who seek to provide platforms where networking among entrepreneurs may develop. The results presented in this study offer two crucial policy takeaways. Initially, it appears that Pakistani entrepreneurs are generally not as vigilant to new opportunities in the country, which makes it harder for them to exploit these opportunities. This means that more public entrepreneurship education is required to emphasize the need to find, contact, and assess information on potentially lucrative business opportunities. Making entrepreneurship a focal point of school curricula is one approach to do this, allowing people to develop an early entrepreneurial opportunity exploitation mindset.
Second, numerous empirical studies have shown that countries with well-functioning formal institutions that regulate economic transactions see a flourishing of entrepreneurship. Regretfully, Pakistan’s institutions are too frail to carry out their governing functions. To bridge this gap and safeguard their economic interests, entrepreneurs rely on informal governance systems provided by their networks. The effectiveness of informal governance mechanisms embedded in networks in promoting the success of entrepreneurial firms has been demonstrated. Consequently, it may be necessary for entrepreneurship policymakers to figure out how to incorporate these unofficial governance tools into official business exchange norms of conduct.
Finally, the linking of the internal resources with the external resources is critical for the success of entrepreneurial firms. Entrepreneurs mostly focus on internal resources and depend more on acquiring resources; however, the current study highlights the importance of networking and the resources that entrepreneurs can gain through their networks. It suggests building a more diversified network for acquiring diversified skills and for the achievement of success in terms of meeting the market gap. Additionally, entrepreneurial networking helps the sustainability of the firms because of the provision of rescue at times of crisis and by providing them with the resources they need for growth and catering the market opportunities.

6. Conclusions, Limitations, and Recommendations

This study has significant implications for the management and expansion of entrepreneurial enterprises, notwithstanding its limitations. First, the results imply that being alert to chances in a difficult economic climate requires an entrepreneurial mindset. It follows that entrepreneurial businesses should seek out competent managers and leaders with strong opportunity recognition skills, such as scanning and search, association and connection, evaluation, and judgment. Systems that support and foster attentiveness will be beneficial to entrepreneurial businesses since these skills and habits are essential for spotting opportunities and forming relationships.

Limitations and Future Directions

Numerous limitations in this study’s conclusions present opportunities for further investigation. First, there is a problem with the study’s dependence on subjective indicators of entrepreneurial firm success. While this is a sensible strategy in the context of this study’s developing economy, where there is no access to trustworthy, objective secondary data on the success of new ventures, the value of the insights gained from examining the behavior of entrepreneurial firms surpasses this drawback. It has been suggested that managerial decisions are more motivated when a founder-respondent views their entrepreneurial endeavor as successful or unsuccessful in comparison to competitors. It is possible to view an entrepreneur’s assessment of their success as a significant independent variable. Future research may, therefore, evaluate the success of new ventures using objective data, if accessible.
Second, the results need to be analyzed within the framework of Pakistani society, as this study was carried out inside the actual environment of entrepreneurial businesses in that country. Pakistan, however, provides a fertile framework. Seeing that it has many characteristics in common with other emerging economies, it is appropriate to assess the implications of entrepreneurial awareness theories from the perspective of developing economies. Despite the similarities, it is crucial to recognize that many developing nations have distinctive cultural traits of their own that enable the creation of new theories and further insights. For instance, there is currently a dearth of knowledge regarding the potential influence of entrepreneurial training or strategic orientation on the nature and results of entrepreneurial alertness initiatives. Similarly, research efforts should be directed toward examining the impact of cultural components on the success of entrepreneurial alertness across several developing economy nations to add more variables that differ at the national level to alertness theory. Future studies may examine the connection between entrepreneurial alertness and networking in developing and developed economies to determine the value of networking among entrepreneurs in different circumstances, including resource availability.

Author Contributions

Conceptualization, M.A. and M.S.; methodology, M.A.; software, M.A.; validation, S.A., A.A. and M.U.A.; formal analysis, M.A.; investigation, M.U.A.; resources, A.A.; data curation, M.S.; writing—original draft preparation, M.A.; writing—review and editing, S.A.; supervision, M.A.; project administration, M.S. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

The data presented in this study are available on request from the corresponding author.

Conflicts of Interest

The authors declare no conflicts of interest.

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Sustainability 16 04535 g001
Figure 1. Research framework.
Figure 1. Research framework.
Sustainability 16 04535 g001
Table 1. Descriptive statistics.
Table 1. Descriptive statistics.
VariablesMeanStandard DeviationSkewnessKurtosis
Success of Entrepreneurial Firms4.341.451.1273.34
Entrepreneurial Alertness in Scanning Opportunities3.971.291.4542.56
Entrepreneurial Alertness in Linking the Dots4.831.331.4253.84
Entrepreneurial Alertness in Evaluating Opportunities4.871.341.4933.52
Entrepreneurial Networking4.021.841.1653.75
Table 2. Reliability and validity.
Table 2. Reliability and validity.
VariablesItemsLoadings ValuesCronbach’s AlphaComposite ReliabilityAverage Variance Extracted
Entrepreneurial Alertness in Scanning OpportunitiesAESO10.7010.8520.8890.573
AESO20.799
AESO30.799
AESO40.791
AESO50.785
AESO60.758
Success of Entrepreneurial FirmsSEF10.7890.8570.7970.637
SEF20.759
SEF30.785
SEF40.830
SEF50.825
Entrepreneurial Alertness in Linking the DotsEALD10.9230.9180.7480.659
EALD20.900
EALD30.957
Entrepreneurial Alertness in Evaluating OpportunitiesEAEO10.8750.8030.7680.623
EAEO20.776
EAEO30.713
EAEO40.785
Entrepreneurial NetworkingEN10.9000.9310.7430.677
EN20.710
EN30.853
EN40.863
EN50.841
EN60.768
EN70.866
EN80.786
Table 3. Discriminant validity using Fornell–Larcker Criterion.
Table 3. Discriminant validity using Fornell–Larcker Criterion.
Variables12345
1. Entrepreneurial Alertness in Evaluating Opportunities0.890
2. Entrepreneurial Alertness in Linking the Dots0.6180.927
3. Entrepreneurial Alertness in Scanning Opportunities0.4400.4850.757
4. Entrepreneurial Networking0.7550.6930.3690.823
5. Success of Entrepreneurial Firms0.5610.5990.5470.5520.798
Table 4. Discriminant validity using HTMT criterion.
Table 4. Discriminant validity using HTMT criterion.
Variables12345
1. Entrepreneurial Alertness in Evaluating Opportunities
2. Entrepreneurial Alertness in Linking the Dots0.717
3. Entrepreneurial Alertness in Scanning Opportunities0.4990.538
4. Entrepreneurial Networking0.5880.7450.4080.408
5. Success of Entrepreneurial Firms0.6400.6600.6210.607
Table 5. Direct effects.
Table 5. Direct effects.
PathsOriginal Sample (O)Sample Mean (M)Standard Deviation (STDEV)T Statistics (O/STDEV)p Values
Entrepreneurial Alertness in Scanning Opportunities → Success of Entrepreneurial Firms0.2420.2350.1331.8190.069
Entrepreneurial Alertness in Linking the Dots → Success of Entrepreneurial Firms0.3080.3030.1232.5050.012
Entrepreneurial Alertness in Evaluating Opportunities → Success of Entrepreneurial Firms0.2920.3180.1102.6440.008
Table 6. Moderating effects.
Table 6. Moderating effects.
PathsOriginal Sample (O)Sample Mean (M)Standard Deviation (STDEV)T Statistics (O/STDEV)p Values
Entrepreneurial Alertness in Scanning Opportunities → Success of Entrepreneurial Firms0.4100.4500.1403.0100.000
Entrepreneurial Alertness in Linking the Dots → Success of Entrepreneurial Firms0.2620.2390.1242.1050.036
Entrepreneurial Alertness in Evaluating Opportunities → Success of Entrepreneurial Firms0.2290.2400.1002.2920.022
Entrepreneurial Alertness in Scanning Opportunities × Entrepreneurial Networking → Success of Entrepreneurial Firms0.4180.4410.1243.3790.001
Entrepreneurial Alertness in Linking the Dots × Entrepreneurial Networking → Success of Entrepreneurial Firms0.6600.6550.1155.7470.000
Entrepreneurial Alertness in Evaluating Opportunities × Entrepreneurial Networking → Success of Entrepreneurial Firms0.2900.2800.1302.1700.030
Table 7. Effect size.
Table 7. Effect size.
EffectR2 IncludedR2 ExcludedF2
Moderator0.5440.3470.423
Table 8. Predictive relevance.
Table 8. Predictive relevance.
SSOSSEQ2 (= 1 − SSE/SSO)
Success of Entrepreneurial Firms500.000354.5420.291
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Satar, M.; Alharthi, S.; Asad, M.; Alenazy, A.; Asif, M.U. The Moderating Role of Entrepreneurial Networking between Entrepreneurial Alertness and the Success of Entrepreneurial Firms. Sustainability 2024, 16, 4535. https://doi.org/10.3390/su16114535

AMA Style

Satar M, Alharthi S, Asad M, Alenazy A, Asif MU. The Moderating Role of Entrepreneurial Networking between Entrepreneurial Alertness and the Success of Entrepreneurial Firms. Sustainability. 2024; 16(11):4535. https://doi.org/10.3390/su16114535

Chicago/Turabian Style

Satar, Mir, Sager Alharthi, Muzaffar Asad, Amer Alenazy, and Muhammad Uzair Asif. 2024. "The Moderating Role of Entrepreneurial Networking between Entrepreneurial Alertness and the Success of Entrepreneurial Firms" Sustainability 16, no. 11: 4535. https://doi.org/10.3390/su16114535

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