Macro-environmental forces and sme operational performance: Empirical evidence from Lagos State, Nigeria using PESTLE framework

Abstract

Small and medium enterprises (SMEs) constitute the backbone of Nigeria's economy, yet their operational survival is persistently threatened by volatile macro-environmental forces beyond their direct control. This study examined the influence of macro-environmental factors, operationalised through the PESTLE framework, on the operational performance of SMEs in Lagos State, Nigeria. Adopting a cross-sectional survey research design anchored in Freeman Edward's Stakeholder and Competitive Value Theory, quantitative data were collected from 313 SME operators drawn from a population of 11,663 registered SMEs using Taro Yamane's sampling formula. A structured, validated questionnaire with a five-point Likert scale served as the primary data collection instrument. Multiple regression and Pearson Product Moment Correlation analyses were employed for hypothesis testing at the 0.05 significance level. Findings reveal that   while political, economic, and social factors demonstrate small positive directional associations with SME operational performance, the overall explanatory model does not achieve statistical significance. Conversely, technological, legal, and environmental factors show no statistically significant effect on SME operational performance. The adjusted R-squared value of 0.47 suggests that the PESTLE factors collectively account for a moderate share of variance in SME performance, implying the presence of additional explanatory variables. The study recommends that SME operators adopt flexible, diversified business strategies and embrace digitalisation, while advocating for structured government collaboration with SME stakeholders to reduce macroeconomic risk exposure and strengthen the enabling business environment in Nigeria.