Entrepreneurial Challenges in the Garments Industry: An Institutional Theory Perspective from Northern Surigao Del Sur, Philippines

Entrepreneurial Challenges in the Garments Industry: An Institutional Theory Perspective from Northern Surigao Del Sur, Philippines

Jops S. Orozco, Gerry B. Estrada

 North Eastern Mindanao State University

DOI: https://dx.doi.org/10.47772/IJRISS.2025.909000284

Received: 22 September 2025; Accepted: 29 September 2025; Published: 08 October 2025

ABSTRACT

The garment industry plays a vital role in employment and trade in developing economies, but micro and small enterprises face institutional barriers that hinder growth. This study applies Institutional Theory (Scott, 1995) to examine entrepreneurial challenges in Northern Surigao del Sur, Philippines. A descriptive survey was conducted with 30 garment entrepreneurs using a validated questionnaire on six categories: regulatory requirements, market competition, labor issues, financial constraints, supply chain disruptions, and technological barriers. Results showed all categories were significant, with supply chain disruptions, market competition, and technological barriers as the most critical. These challenges were found to be mutually reinforcing regulatory burdens worsened financial strain, market pressures discouraged innovation, and technological resistance heightened supply chain risks. The study contributes localized evidence on how regulative, normative, and cultural-cognitive pressures converge to constrain small garment enterprises. It also recommends streamlined regulations, broader financing, workforce training, and digital adoption programs to strengthen resilience and competitiveness.

Keywords: Garments Industry, Entrepreneurial Challenges, Institutional Theory, Labor Issues, Financial Constraints, Supply Chain Disruptions, Technological Barriers.

INTRODUCTION

The garment industry is a major contributor to the global economy, providing employment, generating trade, and supporting industrial growth, particularly in developing countries where micro, small, and medium-sized enterprises (MSMEs) dominate. As a labor-intensive sector, it sustains local communities and offers entrepreneurial opportunities, yet these are often shaped by structural and institutional constraints that affect business survival and growth (Regulating Entrepreneurship Quality and Quantity, 2023).

Scholarly work underscores that the industry faces persistent pressures. Entrepreneurs encounter regulatory burdens, such as compliance with tax, labor, and environmental standards, which impose disproportionate costs on small firms (Regulating Entrepreneurship Quality and Quantity, 2023). Market competition is intensified by globalized supply chains and fast fashion, which privilege large manufacturers and reduce the competitiveness of smaller enterprises (Bhardwaj & Fairhurst, 2021). Additional challenges arise from labor shortages, financial constraints, and supply chain disruptions, particularly during crises such as the COVID-19 pandemic. At the same time, technological barriers, including high costs, limited digital literacy, and resistance to adoption, constrain innovation and adaptation in traditional garment enterprises (Factors influencing the intention of textile and garment SMEs to adopt digital technologies and its impact on performance, 2025). Collectively, these challenges illustrate the role of institutional environments in shaping entrepreneurial capacity.

Despite extensive research on global garment supply chains, gaps remain in understanding how such institutional pressures manifest at the level of small enterprises in developing economies. In the Philippines, SMEs constitute the backbone of the industry but face compounded barriers due to weak institutional support, limited financial access, and inadequate technological integration (Assessing the Status and Challenges of Sole Proprietor Garment Businesses: Insights for Operational Enhancement, 2024; Interwoven Inequalities: Analyzing Labor Issues of Women Garment Workers in the Philippines Through an Intersectional Framework, 2023). Furthermore, technology-driven supply chain management studies highlight adoption challenges for SMEs, particularly in resource-constrained environments (Improving Supply Chain Management: A Comparative Study on Internet of Things Adoption in SMEs of the Philippines and Asian Countries, 2024). However, localized empirical evidence remains scarce, particularly in peripheral regions such as Northern Surigao del Sur, where garment entrepreneurs operate in resource-constrained settings with limited institutional backing. This lack of place-specific investigation creates a critical knowledge gap, as most existing studies focus on national or international perspectives while overlooking how institutional pressures directly shape entrepreneurial challenges at the grassroots level. Addressing this gap is essential to provide evidence-based insights that can inform both theory and policy interventions tailored to the realities of small garment enterprises in underserved regions.

This study addresses this gap by examining the entrepreneurial challenges of garment enterprises in Northern Surigao del Sur through the framework of Institutional Theory (Scott, 1995). By analyzing regulatory challenges, market competition, labor issues, financial constraints, supply chain disruptions, and technological barriers, the research aims to understand how regulative, normative, and cultural-cognitive pressures influence entrepreneurial experiences. In doing so, the study contributes to theoretical debates on institutional constraints and practical strategies for enhancing the resilience and competitiveness of garment SMEs in developing contexts.

Conceptual Framework

This study is grounded in Institutional Theory, which explains how entrepreneurial activity is shaped by regulative, normative, and cultural-cognitive systems (Scott, 1995). In the garments industry, these pressures manifest in concrete challenges: regulatory burdens such as licensing costs and policy instability; normative demands through market competition, labor issues, financial constraints, and supply chain disruptions; and cultural-cognitive pressures in the form of technological barriers. Each of these influences limits the ability of small garment enterprises to adapt, innovate, and compete.

These institutional pressures are not independent but mutually reinforcing. Regulatory costs and unstable policies worsen financial constraints, leaving entrepreneurs less able to meet market expectations or invest in workforce development. Normative pressures for low-cost, efficient production reinforce cultural-cognitive resistance to technology, as entrepreneurs avoid risky or expensive innovations under thin profit margins. The lack of government support for digital upgrading further embeds traditional practices as the default. Supply chain disruptions intensify this cycle, as resource limitations and technological gaps leave entrepreneurs highly vulnerable to external shocks. This framework thus emphasizes entrepreneurial challenges as systemic outcomes of interacting institutional pressures, particularly in peripheral regions such as Northern Surigao del Sur where support structures are weak.

LITERATURE REVIEW

Institutional Theory (Scott, 1995) emphasizes that entrepreneurial behavior is shaped by regulative, normative, and cultural-cognitive pressures, which collectively define business opportunities and constraints. Within the garment industry, these institutional dimensions manifest as specific entrepreneurial challenges that limit growth and resilience. This section reviews relevant literature on six key categories: regulatory challenges, market competition, labor issues, financial constraints, supply chain disruptions, and technological barriers.

Regulatory Challenges

Regulative systems comprise laws, policies, and formal procedures that structure entrepreneurial activity. Garment enterprises often encounter difficulties in business registration, licensing, and compliance with tax and labor requirements. Research shows that such regulatory burdens disproportionately affect SMEs, creating high compliance costs and discouraging formalization (Regulating Entrepreneurship Quality and Quantity, 2023). In developing countries, inconsistent enforcement and frequent policy changes exacerbate uncertainty, generating both financial strain and administrative complexity (Business Regulatory Environment and SME Growth in Developing Economies, 2022).

Market Competition

Normative pressures in the garments industry are strongly tied to market competition. Small enterprises struggle to maintain stable pricing and profitability due to competition with large-scale manufacturers and global fast-fashion brands. Bhardwaj and Fairhurst (2021) emphasized that globalization and consumer demand for rapid production cycles intensify competition, leaving SMEs disadvantaged. Likewise, sustainability and ethical compliance requirements further reduce the competitiveness of SMEs relative to larger firms (Sustainability Pressures and SME Competitiveness in the Textile and Apparel Industry, 2022).

Labor Issues

Labor-related challenges also reflect normative pressures, particularly in the expectation that businesses maintain a skilled and stable workforce. Apparel SMEs across Asia report persistent shortages and high turnover, limiting productivity (Human Resource Challenges in Apparel SMEs, 2021). In the Philippine context, SMEs face additional barriers such as labor migration, wage competition, and inadequate career pathways, which disproportionately affect women workers (Interwoven Inequalities, 2023).

Financial Constraints

Financial fragility is a defining feature of small garment enterprises. Limited access to credit, high operational costs, and fluctuations in raw material prices create structural vulnerabilities. Empirical studies show that weak financial systems and limited institutional support restrict SME growth and innovation (Access to Finance for SMEs in Emerging Markets, 2022; Financial Constraints and Innovation in Textile SMEs, 2021).

Supply Chain Disruptions

Supply chain disruptions represent another critical challenge for garment entrepreneurs. Small firms often depend heavily on external suppliers, making them vulnerable to delays in raw material sourcing and logistical breakdowns. During the COVID-19 pandemic, these vulnerabilities were particularly evident, as global supply chain instability disproportionately affected smaller garment businesses (COVID-19 and Supply Chain Disruption in the Apparel Industry, 2021). Beyond the pandemic, limited supplier networks and weak resilience strategies remain significant risks for SMEs (Supply Chain Resilience in Small Apparel Firms, 2022).

Technological Barriers

Technological barriers fall under the cultural-cognitive dimension, where resistance to change and limited digital literacy restrict innovation. For garment SMEs, high costs of automation, lack of technical expertise, and weak institutional support for digital transformation remain persistent barriers (Factors influencing the intention of textile and garment SMEs to adopt digital technologies, 2025). In the Philippines, comparative evidence shows that while SMEs recognize the potential of IoT and digital tools, adoption is constrained by limited resources and capacity (Improving Supply Chain Management: IoT Adoption in SMEs of Philippines and Asian Countries, 2024).

Synthesis

The reviewed literature shows that garment SMEs globally face a shared set of institutional pressures, yet their intensity and impact diverge in local contexts. Regulatory, financial, and supply chain challenges exist worldwide but are magnified in the Philippines by weak institutional support. Labor and technological barriers are similarly universal but are compounded by migration trends, limited training systems, and digital divides in developing regions. This synthesis demonstrates the importance of analyzing entrepreneurial challenges not only in global terms but also in localized settings such as Northern Surigao del Sur, where institutional weaknesses converge to create distinct entrepreneurial vulnerabilities.

METHODOLOGY

Research Design

This study employed a descriptive research design to systematically assess the entrepreneurial challenges experienced by garment enterprises in Northern Surigao del Sur. The design was appropriate because it enabled the researchers to describe, quantify, and analyze specific barriers in the garments sector namely regulatory challenges, market competition, labor issues, financial constraints, supply chain disruptions, and technological barriers without manipulating the natural business environment.

Research Locale

The research was conducted in Northern Surigao del Sur, a developing urban center in the Caraga Region of the Philippines. The area is characterized by emerging micro and small garment enterprises that contribute to local employment but face structural and institutional challenges typical of peripheral developing regions.

Respondents and Sampling

The study involved 30 garment entrepreneurs, identified through purposive-complete enumeration of all micro and small enterprises operating in the locality. This approach ensured that the entire accessible population of active garment enterprises whether engaged in tailoring, clothing production, textile manufacturing, or fashion retail was included in the study. By focusing on a complete list of enterprises, the method minimized sampling bias and captured the breadth of challenges faced by the sector.

While this approach ensured representativeness within the local context, the small sample size is acknowledged as a limitation, restricting the generalizability of findings beyond the immediate research setting. To strengthen future research, supplementing survey data with qualitative interviews is recommended. Such interviews could provide richer context, illustrative quotes, and nuanced insights into how institutional pressures are experienced by entrepreneurs, thereby deepening the theoretical and practical contributions of the study.

Research Instrument

Data were collected through a validated survey questionnaire designed to measure entrepreneurial challenges across six categories: regulatory challenges, market competition, labor issues, financial constraints, supply chain disruptions, and technological barriers. Each category was assessed through three indicator statements, rated on a five-point Likert scale (1 = Strongly Disagree to 5 = Strongly Agree). The instrument was pilot-tested for clarity and reviewed by field experts to ensure content validity and reliability.

Data Analysis

Survey responses were processed using descriptive statistics, particularly weighted mean scores, to determine the severity of entrepreneurial challenges. Weighted mean interpretation followed the scale: 4.50–5.00 = Strongly Agree, 3.50–4.49 = Agree, 2.50–3.49 = Neutral, 1.50–2.49 = Disagree, and 1.00–1.49 = Strongly Disagree. These values provided the basis for identifying which categories of challenges were most critical for garment entrepreneurs.

Ethical Considerations

Ethical protocols were observed throughout the study. Informed consent was obtained from all respondents, who were assured of confidentiality and voluntary participation. Data were anonymized and used exclusively for academic purposes. The study adhered to institutional ethical standards and protected the rights and welfare of participants.

Scope and Limitation

This study focused on assessing the entrepreneurial challenges of micro and small garment enterprises in Northern Surigao del Sur, Philippines, analyzed through the lens of Institutional Theory. The scope was limited to six categories of challenges—regulatory, market competition, labor, financial, supply chain, and technological barriers—as measured through a validated survey administered to 30 entrepreneurs. While the use of purposive-complete enumeration ensured coverage of all accessible enterprises in the locality, the small sample size limits the generalizability of findings beyond the immediate context. Moreover, the study relied primarily on quantitative survey data, which captured the intensity of challenges but not the nuanced experiences behind them. Future studies may address this limitation by incorporating qualitative interviews to provide deeper insights into how entrepreneurs interpret and navigate institutional pressures.

RESULTS AND DISCUSSION

This study examined six categories of entrepreneurial challenges encountered by garment entrepreneurs in Northern Surigao del Sur. Weighted means across all categories ranged from 4.38 to 4.70, indicating that respondents perceived these barriers as highly significant. Rather than existing in isolation, these challenges reinforce one another, reflecting the interconnected influence of regulative, normative, and cultural-cognitive pressures as described by Institutional Theory (Scott, 1995).

Table 1. Level of Entrepreneurial Challenges in the Garments Industry

Regulatory Challenges

Regulatory challenges were rated at 4.38 (Agree), with costly licensing, compliance requirements, and shifting policies creating financial and administrative strain. Similar findings were observed in developing economies where regulatory burdens discouraged formalization and constrained SME growth (Regulating Entrepreneurship Quality and Quantity, 2023; Business Regulatory Environment and SME Growth, 2022). In this study, regulatory demands did not simply impose compliance obligations but cascaded into financial constraints, reducing entrepreneurs’ ability to invest in labor or technology.

Market Competition

Market competition received the highest overall rating (4.67, Strongly Agree). Entrepreneurs reported that rivalry with large manufacturers and fast-fashion models undermines stable pricing and profitability, echoing evidence that global supply chains and economies of scale disadvantage SMEs (Bhardwaj & Fairhurst, 2021). Sustainability demands and rapid product cycles further exacerbate pressures (Sustainability Pressures and SME Competitiveness, 2022). In Surigao, these pressures interacted with financial and technological barriers: limited resources constrained innovation, while competitive pricing reinforced cultural-cognitive resistance to technology adoption.

Labor Issues

Labor challenges (M = 4.60, Strongly Agree) were especially acute in terms of continuous training and employee retention. This resonates with studies noting persistent skill shortages and labor mobility in labor-intensive industries (Human Resource Challenges in Apparel SMEs, 2021). In the Philippine context, vulnerabilities are compounded by labor migration, wage competition, and gendered inequalities (Interwoven Inequalities, 2023). In Surigao, these constraints were linked to regulative gaps (weak state-led workforce development) and financial strain, which limited SMEs’ ability to provide structured training.

Financial Constraints

Financial barriers (M = 4.57, Strongly Agree) restricted expansion, innovation, and resilience to input price fluctuations. These findings reflect global patterns where limited access to finance undermines SME competitiveness (Access to Finance for SMEs in Emerging Markets, 2022; Financial Constraints and Innovation in Textile SMEs, 2021). In this study, financial fragility was intensified by regulatory costs and market pressures for low-cost production, creating a cycle where thin margins dissuaded entrepreneurs from pursuing technology upgrades or growth strategies.

Supply Chain Disruptions

Supply chain disruptions (M = 4.70, Strongly Agree) ranked among the most severe challenges, particularly delays in raw material sourcing and logistical bottlenecks. These concerns mirror global evidence that SMEs are disproportionately vulnerable due to dependence on a limited set of suppliers (Shen, 2023). The COVID-19 pandemic further exposed these fragilities (COVID-19 and Supply Chain Disruption in the Apparel Industry, 2021; Supply Chain Resilience in Small Apparel Firms, 2022). In Surigao, supply chain instability was worsened by inadequate infrastructure and limited technological adoption, forcing entrepreneurs to rely on narrow, trust-based supplier networks.

Technological Barriers

Technological barriers (M = 4.65, Strongly Agree) reflected high adoption costs, knowledge gaps, and resistance to change. These challenges align with findings that SMEs globally struggle with digital transformation due to capability deficits and cultural hesitations (Chen & Wang, 2023; Factors Influencing the Intention of Textile and Garment SMEs to Adopt Digital Technologies, 2025). In the Philippines, IoT and digital tools remain underutilized due to limited institutional and financial support (Improving Supply Chain Management: IoT Adoption in SMEs, 2024). Here, cultural-cognitive resistance was reinforced by regulative gaps (lack of subsidies or incentives) and normative pressures (low-price competition), which made investment in innovation appear unattainable.

Integrated Analysis

The findings demonstrate that institutional pressures in the garments industry form a mutually reinforcing system of constraints. Regulatory burdens drain financial resources, which weakens entrepreneurs’ ability to invest in training or technology. Normative pressures from competition and supply chain expectations heighten financial and labor challenges, while cultural-cognitive resistance to innovation is both a cause and consequence of limited resources and regulatory neglect. For entrepreneurs in Northern Surigao del Sur, survival strategies are often reactive rather than transformative: relying on informal labor, maintaining minimal technological change, and constraining ambitions to remain financially viable.

This analysis supports Scott’s (1995) assertion that organizational environments are shaped by overlapping institutional pressures. In developing regions where institutional support is weak, these pressures converge into a cycle of vulnerability that undermines resilience and long-term competitiveness.

CONCLUSION AND RECOMMENDATIONS

This study demonstrated that garment entrepreneurs in Northern Surigao del Sur encounter severe and interrelated challenges across regulatory, competitive, labor, financial, supply chain, and technological dimensions. The consistently high ratings (4.38–4.70) confirm that these barriers are not isolated but mutually reinforcing, with regulatory burdens amplifying financial strain, market competition limiting profitability, and technological resistance compounding supply chain and labor vulnerabilities. While the findings are limited to a small, localized sample, they provide valuable evidence on how Institutional Theory’s regulative, normative, and cultural-cognitive pressures converge in a peripheral Philippine context to constrain entrepreneurial resilience.

Targeted interventions are therefore required. At the regulative level, simplifying licensing processes and ensuring policy stability would ease administrative and financial strain. To address normative pressures, programs supporting skills development, labor retention, and affordable financing should be expanded, while local supplier networks must be strengthened to reduce logistical risks. At the cultural-cognitive level, promoting digital literacy, subsidizing technology adoption, and partnering with local training providers can gradually reduce resistance to innovation. By linking reforms to specific institutional pressures, this study underscores that strengthening localized support systems is essential for enhancing the viability of garment SMEs in developing regions.

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