Decoding informal networks in small and medium-sized enterprises: the dynamics of wasta

Purpose Wasta, as an informal network perspective, is deeply embedded in Arab culture and well documented for its impact on human resource (HR) decisions. However, most studies have focused on large organizations or the public sector, leaving a significant gap in understanding the role of informal networks within small and medium-sized enterprises (SMEs), particularly within the specific institutional contexts of the broader Middle East and North Africa (MENA) region and, more specifically, in Tunisia. This study investigates the institutional factors that drive SMEs in Tunisia to adopt informal HR practices – wasta – and explores the implications of these practices for organizational performance and employee relations. Design/methodology/approach Drawing on institutional theory and informal network perspectives, this research adopts a qualitative approach, utilizing 25 semi-structured interviews with HR managers and SME owners from 15 Tunisian SMEs. The data were thematically analyzed to uncover patterns and insights across all participating SMEs. Findings The findings reveal that Tunisian SMEs operate under dual pressures: formal institutional constraints, characterized by rigid legal and bureaucratic requirements, and normative cultural expectations that prioritize social obligations and loyalty over merit. These pressures compel organizations to adopt wasta as a practical solution for navigating complex institutional environments, thereby institutionalizing informal HR practices. Recently, this practice has evolved into what can be termed digital-wasta, where online networks, tech communities, and social media platforms are leveraged to sustain culturally embedded practices of using personal connections for business advantages in a virtual setting. While both traditional wasta and digital-wasta facilitate quick decision-making and help SMEs maintain operational efficiency, they also perpetuate nepotism and exclusion, limit workforce diversity and undermine employee motivation and trust. Consequently, reliance on these practices poses significant challenges to the implementation of modern human resource management (HRM) strategies, particularly in resource-constrained environments like Tunisia. Originality/value This paper offers a novel application of institutional theory to explore the enduring presence of wasta within the organizational frameworks of Tunisian SMEs, even amidst economic liberalization and modernization. It offers new insights into how informal networks function in the MENA region and introduces the concept of digital-wasta, highlighting how technological advancements are reshaping traditional practices. It not only advances HRM discourse by examining how wasta interacts with modern management principles, shaping workplace dynamics and employee relations, but also challenges prevailing assumptions about the cultural and institutional forces sustaining wasta, contributing to debates on merit-based HRM. Finally, it offers practical guidance for policymakers, business leaders and expatriates navigating the tension between tradition and modernization.