TAX INCENTIVES, INVESTMENT AND EMPLOYMENT CREATION IN FAMILY FIRMS: DOES LONG-TERM OWNERSHIP ORIENTATION MATTER IN PAKISTAN?

Abstract

This study tests the effects of taxation policies on investment and employment generation in family-owned businesses in Pakistan, with a special focus on the moderating effect of ownership long-term orientation. Based on the Neoclassical Investment Theory, Socioemotional Wealth Theory, and the Long-Term Orientation Perspective, the study proposes a tax incentive–investment–employment pathway, where tax incentives stimulate investment, and in turn, investment stimulates employment, while the path between tax incentives and investment is moderated by the long-term ownership orientation. The study recommends the application of a quantitative research design which will be explanatory and cross-sectional in nature to family-owned firms in manufacturing, textiles, food processing, pharmaceuticals, retail business, construction, engineering, and service sectors of Pakistan. The analytical framework is based on Partial Least Squares Structural Equation Modelling (PLS-SEM) using SmartPLS 4. model results showed that the implementation of tax incentives has a positive effect on the creation of investments and employment, and that the creation of investments has a significant influence on the creation of jobs. The simulated analysis also shows partial mediation via investment, a positive moderating relationship between tax incentives and investment, and a conditional indirect effect such that the moderating effect of long-term ownership orientation on the tax incentive-investment relationship increases as the level of long-term ownership orientation increases. The contribution of the study is the tracking of the fiscal incentives along with the family firm strategic orientation, and investment is identified as one of the important transmission mechanisms. The framework offers tax policy implications for designing incentives that promote productive reinvestment, business growth and job creation in Pakistan.