Mapping the Fashion Entrepreneurship Ecosystem in Saudi Arabia: Impacts on Entrepreneurial Orientation and Business Performance of Micro, Small, and Medium Enterprises

<p dir="ltr">This study investigates the influence of the fashion entrepreneurship ecosystem (FEE) on entrepreneurial orientation (EO) and business performance (BP) within fashion micro, small, and medium enterprises (MSMEs) in Saudi Arabia. Drawing on the Resource-Based View (RBV) theory (Barney, 1991), EO, defined through innovativeness, proactiveness, and risk-taking (Lumpkin & Dess, 2015), is treated as a core intangible resource that mediates the relationship between external ecosystem elements and firm success (Sarsiti, 2024). The FEE is conceptualised as a dynamic interplay of domains, including finance, education, policy, market, culture, and support (Isenberg, 2011), each contributing to entrepreneurial development in line with Saudi Arabia’s Vision 2030 (Nurunnabi, 2017). While prior studies have explored these domains separately or in different sectors (Spigel, 2017), no research has integrated them in the specific context of Saudi fashion MSMEs.</p><p dir="ltr">Saudi fashion enterprises represent a growing but under-researched segment within the creative economy, with the sector projected to grow by 11.6% annually and reach a value of USD 7.57 billion by 2029 (Statista, 2024). These businesses are often led by women and face unique challenges, including limited access to finance, weak entrepreneurial education, and global market barriers (Alshibani et al., 2024; Maghrabi & Abalkail, 2024). This study addresses this critical gap by offering a context-specific analysis of how FEE factors impact EO and BP, thereby supporting policy efforts to diversify the economy and strengthen the creative sector (Almuzel & Anderson, 2020).</p><p dir="ltr">This thesis comprises two sequentially linked studies using a mixed-methods explanatory design (Creswell, 2017). Study 1 employed quantitative analysis (PLS-SEM) to test the direct and mediating effects of FEE on EO and BP. Study 2 involved thematic qualitative interviews with fashion entrepreneurs and ecosystem stakeholders to explain and contextualise these quantitative findings. This integration enables a comprehensive understanding of how systemic factors influence entrepreneurial success, particularly when outcomes diverge from expectations (Dionysus & Arifin, 2020). The findings offer theoretical contributions to the entrepreneurship literature and practical insights into policy reform, ecosystem development, and educational innovation in Saudi Arabia.</p><p dir="ltr"><br></p><p><br></p><p><br></p><p dir="ltr">Study 1</p><p><br></p><p dir="ltr">Participants</p><p dir="ltr">The participants in this study included 223 fashion MSMEs operating in Saudi Arabia. The sample primarily consisted of female participants (91%), with 67.3% holding a bachelor’s degree. Most participants (50.7%) studied fashion, while 36.3% attended business courses. Approximately 44.4% of businesses were established between 2017 and 2020. Most businesses (94.2%) were microenterprises in size.</p><p><br></p><p dir="ltr">Methods</p><p dir="ltr">The survey instrument measured FEE, EO, and BP using validated frameworks. FEE was assessed using the Global Entrepreneurship Monitor (GEM) National Expert Survey (NES), which evaluates core ecosystem factors: finance, policy, market, culture, social norms, entrepreneurial education, talent, and support. EO was measured using Covin and Slevin's (1989) three core components: innovativeness, proactiveness, and risk-taking. BP was assessed using five key indicators: ROI, sales increase, customer satisfaction, employee satisfaction, and overall firm performance. This approach aligns with prior research on performance evaluations (Murphy et al., 1996; Hult et al., 2008). Financial and non-financial metrics provide a comprehensive view of business success (Harter et al., 2002; Wong & Low, 2013).</p><p dir="ltr">Participants were contacted via email and invited to participate in the study. After providing consent, participants accessed the online survey through Qualtrics. The survey questions were compulsory, ensuring that no data points were lost. Data analysis involved several key steps using IBM SPSS and SmartPLS software. Measurement reliability and validity were assessed using Cronbach’s alpha, composite reliability (CR), and average variance extracted (AVE) values. The measurement model was evaluated for internal consistency (Cronbach’s alpha > 0.70), composite reliability (CR > 0.70), and discriminant validity using the Fornell-Larcker criterion and the heterotrait-monotrait (HTMT) ratio. Structural equation modelling was used to assess the direct and indirect effects. Path coefficients, R-squared (R²) values, and bootstrapping methods were used to confirm the significance and model fit.</p><p><br></p><p><br></p><p><br></p><p dir="ltr">Results</p><p dir="ltr">Direct Impact of FEE on EO: Path analysis revealed a significant positive effect of FEE on EO (β = 0.308, t = 4.145, p < 0.001). The R² value for EO was 0.095, indicating that FEE explained 9.5% of the variance in EO. This finding suggests that a supportive entrepreneurial ecosystem positively influences fashion MSMEs’ innovativeness, proactiveness, and risk-taking.</p><p dir="ltr">Direct Impact of FEE on BP: A significant but smaller positive effect of FEE on BP was observed (β = 0.149, t = 2.113, p = 0.035). The R² value for BP was 0.286, indicating that FEE explained 28.6% of the variance in BP. This suggests that the entrepreneurial ecosystem supports business growth and performance, although other factors may also contribute.</p><p dir="ltr">Direct Impact of EO on BP: EO had a strong positive influence on BP (β = 0.469, t = 8.078, p < 0.001). This indicates that higher levels of innovativeness, proactiveness, and risk-taking directly enhance the business performance. This strong relationship confirms that EO is a strategic driver of business success.</p><p dir="ltr">Mediating Role of EO: EO partially mediated the relationship between FEE and BP. The direct effect of FEE on BP was β = 0.149 (p < 0.05), while the indirect effect through EO was β = 0.145 (p < 0.001). The total effect of FEE on BP was β = 0.294 (p < 0.001). This suggests that FEE influences business performance directly and indirectly through EO.</p><p dir="ltr">Model Fit and Predictive Relevance: The model demonstrated moderate predictive relevance for BP (Q² = 0.176) and weak predictive relevance for EO (Q² = 0.045). All constructs demonstrated high factor loadings (>0.70), satisfactory composite reliability (>0.70), and discriminant validity. Path analysis confirmed that the model fit the data well.</p><p>.</p><p dir="ltr">Study 2</p><p dir="ltr">This qualitative study is based on 15 interviews with key stakeholders in the Saudi fashion industry. It focuses on mapping and exploring the current landscape of the Saudi FEE and how each domain influences EO and BP. Based on inductive thematic analysis, Study 2 revealed several influential ecosystem factors shaping EO and BP: most fashion entrepreneurs relied on informal sources, such as personal savings or family loans, due to limited access to venture capital or incubator funding. The Social Development Bank was a key source of accessible loans, but procedural complexities, limited financial literacy, and cultural/institutional biases especially against women restricted access to broader financial support. Access to finance directly enhances innovation, sustainability practices, and risk-taking (Alshibani et al., 2024; Alsaiari, 2022; Adam, 2024).</p><p dir="ltr">While entrepreneurship is culturally encouraged in Saudi Arabia, fashion as a profession faces lingering stigma, particularly tailoring, which is viewed as a low-status profession. Regional and religious values shape design preferences and business models, and fear of failure discourages risk-taking, especially among women, due to societal pressure and a preference for government jobs (Alzahrani et al., 2015, Fridhi, 2020, Elshaer & Sobaih, 2022). The study found a significant mismatch between the available incubators and the specific needs of fashion startups. Most support structures are designed for tech startups and offer irrelevant services, such as software mentorship. Consultants are often competitors, creating trust issues. Entrepreneurs in rural areas also face geographic barriers to support access (Braun & Suoranta, 2024; Kazhenov, 2023; Nana et al., 2021).</p><p dir="ltr">While the government has expanded fashion programs and scholarships, participants reported limited institutional support for starting businesses. Overseas universities offer stronger entrepreneurship support. Local institutions lack practical, fashion-specific business training, structured entrepreneurial curricula, and access to industry professionals (Alshebami, 2022; Raju & Singh, 2023; Lang & Liu, 2019). The evidence from this study supports the idea that variations in entrepreneurial performance in the Saudi fashion sector depend not only on access to resources but also on the entrepreneur's ability to transform these assets into a competitive edge. This transformation aligns with the RBV’s focus on resource deployment as strategic behaviour (Wernerfelt, 1984) and is supported by research highlighting EO as a critical mediator of resource effectiveness (Dionysus & Arifin, 2020; Ferreira et al., 2011).</p>