STARTUP FAILURE AND SUSTAINABILITY IN PAKISTAN: A COMPARATIVE QUALITATIVE ANALYSIS OF ENTREPRENEURIAL ADAPTATIONIN EMERGING MARKETS

Abstract

Over the past decade, the startup scene in Pakistan has grown at a rapid pace, fostering hope among entrepreneurs, growing VC investing, and driving digital innovation in a variety of industries. At the same time, startups have been failing, operations collapsing, funding problems have increased and scaling has become unsustainable in the ecosystem! Prior research on startups focuses on failure as it happens in developed economies, and tends to focus on individual startups' shortcomings without fully acknowledging how the characteristics of the institutional context and the volatility of such circumstances impact startup success. This study is aimed at filling this gap by comparing the internal and external factors affecting the startups failure and sustainability in Pakistan.

The study is based on the qualitative multi-case research approach using three theories, Resource Based View (RBV), Dynamic Capabilities Theory and Effectuation Theory, to explore different startup trajectories in the entrepreneurial ecosystem of Pakistan. Thematic analysis of secondary qualitative data, ecosystem reports, founder narratives, industry documentation, and comparative startup cases of Airlift, Finja, Savyour, KraveMart, Easypaisa and SadaPay are the methods used in the research. The results show that startup failure in emerging markets is very rarely due to a single reason, but rather a result of the combination of immature operations, hypergrowth, fragile unit economics, regulatory uncertainty, dependence on investors, and low adaptive capacity.

The study also shows a difference between startups that are relatively sustainable and those that focus on a more aggressive valuation-driven growth strategy on the aspects of operational discipline, strategic flexibility, localized adaptation, gradual scaling, and ecosystem integration. The results contradict the accepted myth of startup growth that quick fundraising and surges of growth can make an organization more fragile when it lacks sustainable business fundamentals.

In terms of theory, the research adds to the literature of entrepreneurial adaptation and sustainability theories and failure studies in start-ups in the emerging markets. In terms of methodology, it contributes to the field of comparative qualitative startup research in developing economies which has not been thoroughly studied. The study suggests practical recommendations for the entrepreneurs, investors, incubators, and policymakers who aim to enhance sustainable entrepreneurial ecosystems in the emerging markets like Pakistan