Islamic Work Ethics and the Performance of Industrial SMEs in Yemen: Evidence from a Conflict-Affected Economy

Abstract

This study examines the direct effect of Islamic Work Ethics (IWE) on the performance of industrial small and medium-sized enterprises (SMEs) in the Republic of Yemen. Although IWE has received increasing attention in organizational and business ethics literature, limited empirical evidence exists regarding its role in improving firm-level performance, particularly in fragile and conflict-affected economies. Drawing on the Resource-Based View (RBV), this study conceptualizes IWE as a strategic intangible resource that can strengthen organizational trust, ethical discipline, employee responsibility, customer relationships, and long-term sustainability. A quantitative research design was adopted, and data were collected through a structured questionnaire administered to owners and managers of industrial SMEs operating in Yemen. A total of 402 valid responses were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings reveal that IWE has a significant positive effect on SME performance. These results highlight the importance of Islamic ethical values in enhancing organizational outcomes in resource-constrained and unstable business environments. The study contributes to the literature by extending IWE research from individual-level work outcomes to firm-level SME performance and by positioning IWE as a strategic intangible resource within the RBV framework.