Institutional Voids and Entrepreneurial Agency: A Quantitative Study of Transgender-Led SMEs in Pakistan

48 Publisher : EDUCATION GENIUS SOLUTIONS Review Type: Double Blind Peer Review Muhammad Saim Imran Independent Researcher, Email: [email protected] Dr. Arif Ul Haq (Corresponding Author) Department of Management Sciences, Islamia College, Peshawar Email: [email protected] Dr. Samina Rooh Department of Management Sciences, University of Buner [email protected] [email protected] Vol. 3 No.1 2025 Institutional Voids and Entrepreneurial Agency: A Quantitative Study of Transgender-Led SMEs in Pakistan Research Consortium Archive P(ISSN) : 3007-0031 E(ISSN) : 3007-004X https://rc-archive.com/index.php/Journal/about 616 Entrepreneurship is a pathway to economic empowerment, yet significant barriers often exclude marginalized communities from full participation. This study examines the entrepreneurial motivations and problems faced by transpreneurs in Pakistan, a developing economy characterized by substantial institutional constraints. Based on a time lagged, two waves survey data from 250 transgender entrepreneurs, we employ structural equation modeling to test a conceptual framework that incorporates formal and informal institutional voids as moderating variables. The findings indicate that entrepreneurial motivation is a significant positive predictor of entrepreneurial behavior. Surprisingly, the direct effect of challenges on behavior was not significant. The analysis also reveals that both formal and informal institutional voids significantly moderate the relationship between motivation and behavior, illustrating how external environmental factors shape the translation of intent into action. This research advances the literature on minority entrepreneurship and institutional theory by providing empirical evidence from a critically marginalized community in a South Asian context. The results suggest the need for targeted policy interventions to address financial discrimination and social stigma to build inclusive entrepreneurial ecosystem to empower transgender entrepreneurs. Keywords: Transgender Entrepreneurship, Institutional Voids, Entrepreneurial Motivations, Pakistan, SME Development 1.Introduction Entrepreneurship is recognized as a powerful driver of economic empowerment, job creation, and individual empowerment (Autio et al., 2013; Bruton, Ahlstrom, & Li, 2010;), which enable individuals to create sustainable livelihoods and achieve selfdetermination. However, marginalized communities like transgender individuals, often face systemic barriers that limit their access to entrepreneurial opportunities (Gender and Economy, 2024; Jennings & Brush, 2013; Marlow & McAdam, 2013). Transgender people face extreme social exclusion, violence, and discrimination, often relegating them to sex work or begging (Gender and Economy, 2024; Grant et al., 2011; Civicus, 2021; United Nations Development Programme [UNDP], 2022; The Dawn, 2023; Deutsche Welle, 2023). While entrepreneurship is rarely associated with the transgender community, it can serve as both an economic necessity and a means of resistance, self-expression, and identity building (Davidson, 2016; Schilt, 2010). In Pakistan, the 2018 Transgender Persons (Protection of Rights) Act legally recognizes transgender identity and prohibits discrimination in employment and public spaces (National Assembly of Pakistan, 2018). Despite this, deep rooted cultural and social norms perpetuate stigma and violence (Muhammad, Aqeel, & Zohra, 2023). Although official census data recorded over 10,000 transgender individuals, activists estimate the actual number to be in the hundreds of thousands, with most living on the economic margins (Pakistan Bureau of Statistics, 2017). Despite these challenges, a growing group of transgender entrepreneurs is emerging. They face not only universal entrepreneurial hurdles but also the compounded obstacles of transphobia and institutional neglect. These entrepreneurs operate in "institutional voids," where gaps in regulatory systems and societal prejudice inhibit their ventures (Khanna & Palepu, 1997; Mair & Martí, 2009). These voids are formal (e.g., ABSTRACT 617 discriminatory banking practices) and informal (i.e., exclusion from networks and family rejection) (North, 1990). While literature on women’s entrepreneurship in developing economies is expanding (Bruton et al., 2013; Hechavarría & Ingram, 2019), research on transgender entrepreneurship, particularly in South Asia, remains limited. Previous studies have explored entrepreneurial motivations and challenges (Kirkwood, 2009; Segal, Borgia, & Schoenfeld, 2005; Singh, 2019), but few address how transgender individuals’ motivations interact with the institutional voids they face. This study aims to fill this gap by examining: 1) how entrepreneurial motivations affect transgender entrepreneurship in Pakistan, 2) the impact of unique challenges on entrepreneurial behavior, and 3) the moderating role of institutional voids. Based on survey data from 250 transgender entrepreneurs in three Pakistani cities, this study employs structural equation modelling (SEM) to test a framework that positions institutional voids as active moderating factors between entrepreneurial intention and action. The findings of this research contribute to minority entrepreneurship, institutional theory, and gender studies and also offer practical insights for policymakers, development agencies, and transgender communities to devise more inclusive and equitable entrepreneurial ecosystems. 2. Literature Review This review synthesizes literature across four domains to construct our theoretical framework i.e., the emergent field of transgender entrepreneurship, theories of entrepreneurial motivation and behavior, the distinct challenges facing marginalized entrepreneurs, and the role of institutional environments. Integrating these streams allows us to develop a model that explains not only the drivers of transgender entrepreneurship in Pakistan but also how the institutional context actively shapes them. Transgender Entrepreneurship: An Emergent Field of Study Globally, research on underdog entrepreneurship is expanding, yet it remains disproportionately focused populations in Western, educated, industrialized, rich, and democratic (WEIRD) contexts (Gender and Economy, 2024; Schlagel & Koenig, 2014). Scholarship specifically addressing transgender entrepreneurs is exceptionally scarce which render this community largely invisible within mainstream entrepreneurship literature (Qadir & Chaudhry, 2024). This absence bolsters the erroneous assumption that transgender individuals lack entrepreneurial capacity or ambition, thereby reinforcing their economic marginalization. The limited extant research suggests that transgender entrepreneurs, akin to other minority groups, are often driven by a confluence of "push" and "pull" factors. "Push" factors include pronounced employment discrimination, workplace harassment, and societal rejection, which can force individuals into entrepreneurship as a mechanism for survival (Davidson, 2016). "Pull" factors encompass the desire for autonomy, the need to create a safe and affirming work environment, and the pursuit of economic selfdetermination free from prejudice (Qadir & Chaudhry, 2024; Schilt, 2010). In many developing economies, push factors are frequently so overwhelming that they dominate the entrepreneurial calculus (Kirkwood, 2009). This dynamic is likely amplified in Pakistan where traditional societal structures offer scant legitimate economic opportunities for transgender people, creating a potent impetus for venture creation as a means of securing basic subsistence and dignity (Murad & Rambely, 2024). 618 Entrepreneurial Motivations and Behavior The psychological construct of motivation is central to understanding why individuals embark on the uncertain path of entrepreneurship (Shane, Locke, & Collins, 2003). While early theories emphasized personality traits (McClelland, 1961), contemporary research has shifted toward understanding cognitive processes and intentions (Bird, 1988; Krueger, Reilly, & Carsrud, 2000). TPB) (Ajzen, 1991) has become a dominant framework, positing that entrepreneurial behavior is predicated on intention, which is itself shaped by attitudes toward the behavior, subjective norms, and perceived behavioral control. Motivations are typically categorized as either opportunity-based (pull) or necessitybased (push) (Acs, 2006; Block & Wagner, 2010). Pull motivations align with positive aspirations like independence, wealth creation, and self-actualization. Push motivations, conversely, are reactive, driven by job dissatisfaction, unemployment, or a lack of alternative career options (Amit & Muller, 1995). For marginalized groups, this dichotomy is often overly simplistic; their motivations can represent a complex amalgam of necessity and the opportunity to build a life of respect and identity affirmation (Jennings & Brush, 2013). Entrepreneurial behavior, consequently, is the manifestation of these motivations through concrete actions: opportunity recognition, resource acquisition, and venture launch (Gartner, 1988). The Landscape of Challenges for Transgender Entrepreneurs Transgender entrepreneurs navigate a gauntlet of challenges extending far beyond typical market risks. These can be understood through an intersectional lens (Crenshaw, 1989), which recognizes that overlapping identities of gender non-conformity and economic marginalization create a unique, compounded experience of discrimination. The challenges are multifaceted. First, discriminatory lending practices by formal financial institutions pose a significant barrier. Studies in contexts like Ethiopia have shown transgender applicants denied credit despite superior credit ratings (Sindh & Belwal, 2008), forcing reliance on exploitative informal lenders. Secondly, societal stigma and violence where pervasive transphobia manifests in the shape of customer bias, supplier discrimination, and physical violence, jeopardizing both personal safety and business viability (Grant et al., 2011). Third one is the limited human and social capital. Family rejection and social ostracization can truncate education and restrict access to professional networks crucial for business success (Davidson, 2016). This deficiency constitutes a significant "informal institutional void." Last key challenge is legal and administrative hurdles. Despite protective laws, bureaucratic processes often remain gendered and discriminatory which create obstacles in business registration, licensing, and accessing public services (Muhammad, Aqeel, & Zohra, 2023). These challenges form a formidable barrier, potentially suppressing entrepreneurial behavior even when motivation is high. Institutional Theory and the Concept of Voids Institutional theory provides a powerful lens for analyzing the environment in which entrepreneurs operate. Institutions are the "rules of the game" (North, 1990, p. 3)—the formal rules (laws, regulations) and informal constraints (norms, ideologies) that structure socio-economic interactions. 619 In developed economies, these institutions are typically robust, providing stability and reducing uncertainty. In many developing economies, however, these structures are weak or absent, creating institutional voids—gaps that make market transactions more difficult, risky, and costly (Khanna & Palepu, 1997). Entrepreneurship in such contexts often involves creatively navigating or building alternatives to missing institutions (Mair & Martí, 2009). We differentiate between:  Formal Institutional Voids: Deficiencies in the legal and regulatory framework. In Pakistan, this includes weak enforcement of anti-discrimination laws, a lack of government support programs for transgender-owned businesses, and a discriminatory financial infrastructure (Shepherd, Williams, & Zhao, 2021).  Informal Institutional Voids: The absence of supportive social norms and networks. This encompasses pervasive societal prejudice, a lack of trusted business associations for marginalized groups, and cultural norms that deny the legitimacy of transgender people as economic actors (Webb, Bruton, Tihanyi, & Ireland, 2013). These informal voids can be profoundly debilitating. Hypothesis Development Integrating the literature, our model proposes that transgender entrepreneurial behavior (TEB) is directly influenced by their motivations (EM) and the challenges they face (PFTE). Crucially, we argue that the strength of these relationships is moderated by the extent of formal (FIV) and informal (IFIV) institutional voids. H1: Entrepreneurial motivation has a positive and significant relationship with transgender entrepreneurial behavior. Based on TPB and motivation literature (Ajzen, 1991; Shane et al., 2003), we expect that stronger motivations will lead to a higher likelihood of entrepreneurial action. The necessity-driven context suggests this relationship may be particularly potent. H2: Problems faced by transgender entrepreneurs have a negative and significant relationship with their entrepreneurial behavior. Drawing from literature on barriers to minority entrepreneurship (Jennings & Brush, 2013; Singh, 2019), we hypothesize that the severe challenges outlined will inhibit the translation of motivation into behavior, constraining venture development and growth. H3: Formal institutional voids moderate the relationship between entrepreneurial motivations and entrepreneurial behavior. We posit that strong formal voids (e.g., no access to justice or capital) will condition the motivation-behavior link. While motivation may be high, the absence of formal support structures weakens an entrepreneur's ability to act, as perceived behavioral control is diminished (Estrin, Mickiewicz, & Stephan, 2016). H4: Informal institutional voids moderate the relationship between entrepreneurial motivations and entrepreneurial behavior. Similarly, we argue that strong informal voids (e.g., extreme social ostracism, lack of community support) will weaken the motivation-behavior relationship by increasing the social and psychological costs of venture creation and eroding self-efficacy. H5: Formal institutional voids moderate the relationship between problems faced by transgender entrepreneurs and their entrepreneurial behavior. We suggest that strong formal voids will exacerbate the negative effect of challenges. For instance, the problem of financial discrimination is magnified where no alternative 620 credit mechanisms or legal recourse exists (Khanna & Palepu, 1997). H6: Informal institutional voids moderate the relationship between problems faced by transgender entrepreneurs and their entrepreneurial behavior. We propose that strong informal voids (e.g., societal norms condoning discrimination) will intensify the negative impact of problems, making each challenge appear more insurmountable and isolating the entrepreneur (Webb et al., 2013). 3. Methodology Research Design and Context This study employed quantitative survey research to examine the relationships among the hypothesized constructs. A survey strategy was selected as the most appropriate for collecting data from a sufficiently large sample of hard-to-reach population, thereby enabling statistical generalization and the application of structural equation modeling (SEM) (Malhotra, Nunan, & Birks, 2017). While this design efficiently captures a snapshot of the phenomena under investigation, its limitations for inferring causality are acknowledged. The research was conducted in Pakistan across three urban centers: Islamabad (the federal capital), Lahore (a major cultural and economic hub in Punjab), and Multan (a large city in South Punjab). These locations were chosen to capture a sample having diverse geographic and socio-economic levels of participants, incorporating experiences from a capital territory, a metropolitan commercial center, and a large city in a more traditional region. Participants and Sampling Procedure The target population consisted of transgender individuals in Pakistan who were actively engaged in entrepreneurship, operationally defined as owning and managing a business that provided a primary or significant source of income. Given the absence of a reliable sampling frame for this marginalized and hidden population, a non-probability purposive sampling technique was utilized. This approach is recognized as a necessary and valid strategy for accessing groups where traditional probability sampling is infeasible (Babbie, 2020). Access to participants was facilitated through collaboration with trusted non-governmental organizations (NGOs) and key community leaders (gurus) within the transgender community in each city. These gatekeepers were instrumental in identifying potential respondents who met the eligibility criteria and in establishing the trust necessary for participation. Ethical Considerations The research adhered to the ethical principles outlined in the APA Code of Conduct regarding research with human participants. Informed consent was sought from all respondents before the survey administration. The consent process involved verbally explaining purpose of the study, procedures, and potential risks and benefits. Further, they were assured of their right to withdraw without penalty. Given the sensitive nature of the population and the potential risks associated with breach of confidentiality, written consent was deemed inappropriate. Instead, verbal consent was meticulously documented by the research team for each participant. To ensure safety and confidentiality, all surveys were conducted in private settings agreed upon with community leaders. No personally identifiable information was collected on the survey instruments. Data were anonymized immediately after collection, and all digital files were stored on a password-protected secure server. These measures were explicitly communicated to participants to alleviate concerns and 621 encourage candid responses. Measures and Instrument Development The survey instrument was designed to measure the five latent constructs in the theoretical model. All multi-item scales were adapted from established scales in entrepreneurship and institutional theory literature to ensure construct validity. Items were carefully reworded to fit the specific context of transgender entrepreneurs in Pakistan. All constructs were measured on a seven points Likert scale (1 denoting strong disagreement and 7 denoting strong Agreement).  Entrepreneurial Motivations (EM): A 4-item scale was adapted from studies on push-pull motivations (Kirkwood, 2009; Robichaud, LeBrasseur, & Nagarajan, 2010). A sample item is: “I started my business to achieve greater independence.”  Problems Faced by Transgender Entrepreneurs (PFTE): A 4-item scale was developed based on qualitative insights from literature on minority entrepreneurship barriers (Jennings & Brush, 2013) and contextualized for Pakistan. A representative item is: “I face difficulties in accessing bank loans because of my gender identity.”  Formal Institutional Voids (FIV): A 3-item scale was adapted from the work of Khanna & Palepu (1997) and Webb et al. (2009). A sample item is: “The government does not provide specific support programs for entrepreneurs like me.”  Informal Institutional Voids (IFIV): A 4-item scale was adapted from North (1990) and Peng & Khoury (2008), focusing on social norms and acceptance. A sample item is: “Society does not accept people like me as legitimate business owners.”  Transgender Entrepreneurial Behavior (TEB): A 4-item scale was adapted from entrepreneurial behavior and implementation intention scales (Gartner, 1988; Krueger et al., 2000). A sample item is: “I am actively investing resources to grow my business.” The questionnaire was drafted in English, translated into the national language Urdu, by a professional translator, and then retranslated into English by a second independent translator to ensure conceptual equivalence and accuracy. It was pre-tested with a small group of five transgender entrepreneurs and two academic experts to assess clarity, relevance, and cultural appropriateness. Their feedback was used to refine the wording of several items. Data Collection Procedure Data were collected via a self-administered questionnaire. To accommodate varying literacy levels and ensure consistency, research assistants trained in the ethical conduct and sensitivity level of the participants, were present to read the questions aloud for participants who could not read well or preferred to record their answers. This procedure helped prevent missing data and ensured the questions were understood as intended. A total of 265 questionnaires were distributed. After data screening, 250 622 complete and usable responses were retained for analysis. Data Analysis Strategy The data analysis was conducted in a phased approach using SPSS 26 and AMOS 26 software. The data were screened for missing values and univariate and multivariate outliers. Normality was assessed through skewness and kurtosis statistics. Descriptive statistics were computed for all items and constructs. Cronbach’s alpha was used for assessment of the internal consistency of the scales. A CFA was conducted for validation of the measurement model with convergent validity (AVE > 0.5), and established discriminant validity using the Fornell-Larcker method. The hypothesized structural model was tested using the maximum likelihood estimation method. This included testing the direct effects (H1, H2) and the moderating effects (H3-H6). Moderation was tested using the latent moderated structural equations (LMS) approach within AMOS, which is robust for testing interactions between latent variables (Little, 2013). The sample of 250 is deemed robust for SEM analysis, exceeding the minimum requirement of 10 observations per estimated parameter (Kline, 2015). 4. Results Preliminary Analysis and Measurement Model The initial dataset consisted of 265 responses. A rigorous screening process was conducted to ensure data quality and meet the assumptions of multivariate analysis. Fifteen cases with excessive missing data (>10 values) were removed. The remaining 250 cases had minimal missing data, which was addressed using the mode substitution method for individual items to preserve the sample size and minimize distribution impact (Hair et al., 2019). Univariate and multivariate outliers were identified using Mahalanobis distance. A small number of outliers were replaced with the mean value of their respective items to reduce undue influence on parameter estimates. Posttreatment, all items demonstrated skewness and kurtosis within the acceptable range of ±2, fulfilling the assumption of normality for maximum likelihood estimation (Kline, 2015). Composite scores for each latent construct were calculated by averaging the scores of their respective measurement items. The descriptive statistics for these composite variables are presented in Table 1. The high mean scores indicate strong consensus among respondents regarding the presence of motivations, challenges, and institutional voids. The standard deviations suggest a moderate degree of variation in responses, particularly for the perception of institutional voids. Construct No. of Items M SD Skewness Kurtosis 1. Entrepreneurial Motivations. (EM) 4 6.11 0.66 -0.92 1.18 2. Problems Faced by Transgenders Entrepreneurs. (PFTE) 4 6.12 0.63 -0.87 1.45 3. Formal Institutional Voids. (FIV) 3 5.99 0.78 -0.87 0.76 4. Informal Institutional Voids. (IFIV) 4 6.05 0.71 -0.94 1.42 5. Entrepreneurial Behavior. (TEB) 4 6.03 0.66 -0.86 1.54 Note: N = 250. Composite scores are calculated as the means of all items for each construct. The measurement model was assessed via CFA. All constructs showed reliability 623 (Cronbach's α and composite reliability (CR) exceeding 0.70. Average variance extracted values > 0.50, which confirmed convergent validity. To establish discriminant validity, the Fornell Larcker method was employed. The square root of each construct's AVE was greater than its correlations with other constructs (see Table 2). The fivefactor model showed an acceptable fit to the data: χ²/df = 2.81, CFI = .92, TLI = .91, RMSEA = .065 (90% CI: .055, .075). All standardized factor loadings were statistically significant (p < .001) and were found > 0.50. Table 2: Validity, Reliability, and Discriminant Validity Construct α CR AVE 1 2 3 4 5 1. EM 0.8 0.87 0.63 0.79 2. PFTE 0.75 0.84 0.57 0.42 0.76 3. FIV 0.75 0.84 0.56 0.39 0.54 0.75 4. IFIV 0.84 0.89 0.68 0.36 0.5 0.61 0.82 5. TEB 0.86 0.9 0.69 0.49 0.32 0.29 0.27 0.83 Note: Diagonal elements (in boldened font) are the square root of the AVE. Hypothesis Testing: Direct Effects The structural model was analyzed to test the direct hypotheses. The model fit indices were satisfactory (χ²/df = 2.95, CFI = .91, TLI = .90, RMSEA = .068). The pathcoefficients are presented in Table 3. The results supported H1, indicating that entrepreneurial motivation (EM) had a positive and statistically significant effect on entrepreneurial behavior (TEB) (β = .075, p = .005). Conversely, the path from problems faced (PFTE) to TEB was negative but not statistically significant (β = -.028, p = .357). Therefore, H2 was not supported. Table 3: Hypothesis Testing for Direct Effects Hypothesis Path β p Result H1 TEB ← EM 0.08 0.01 Supported H2 TEB ← PFTE -0 0.36 Not Supported Hypothesis Testing: Moderating Effects The moderating hypotheses were tested using latent moderated structural equations (LMS). The results are presented in Table 4. Table 4: Hypothesis Testing for Moderating Effects Hypothesis Interaction β p Result H3 TEB ← EM × FIV 0.113 0.014 Supported H4 TEB ← EM × IFIV 0.098 0.026 Supported H5 TEB ← PFTE × FIV 0.023 0.702 Not Supported H6 TEB ← PFTE × IFIV 0.095 0.127 Not Supported The interaction effect of entrepreneurial motivations with formal institutional voids (EM × FIV) on behavior was positive and statistically significant (β = .113, p = .014), supporting H3. Similarly, the interaction of motivations with informal institutional voids (EM × IFIV) was also positive and significant (β = .098, p = .026), supporting H4. Probing of these significant interactions revealed that the positive relationship 630 Development Programme. United Nations Development Programme. (2022, May 17). Promoting inclusion and protection: Pakistan’s national strategic framework for transgender persons. 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