IMPACT OF INNOVATION ON PAKISTAN'S GDP: THE MEDIATING ROLE OF SME GROWTH

Pakistan can attain economic growth comparable to that of China, Malaysia, and Thailand thanks to its advantageous position, sizable market, and developments in productivity and innovation. With 38.5% of the workforce employed and 19.2% of the country's GDP coming from agriculture, Pakistan's economy depends heavily on this sector. The study analyzed economic indicators in Pakistan, focusing on GDP, Research and Development Expenditures (RDE), High Technology Exports (HTE), and the role of Small and Medium Enterprises (SMEs). Using secondary data from the World Development Indicators (WDI) 2024 and Pakistan Economic Survey (2000–2021), the analysis employed E-Views 12, SPSS 29 and Amos 29 to examine SME growth as a mediator. The study revealed significant direct effects of RDE on SME growth, while HTE's effect was not significant. Indirect effects showed that RDE positively impacted SMEs, but HTE's impact was not significant. A strong correlation between SMEs, RDE, and GDP highlighted SMEs' critical role in GDP growth. Policymakers are advised to promote R&D and high-tech exports to foster SME growth and economic development.