Purpose The study integrates the conservation of resources (COR) and social embeddedness theories to explain how psychological capital (Psy-Cap) and entrepreneurial ecosystem quality (EEQ) affect the performance of small- and medium-sized enterprises (SMEs) during turbulence periods. Design/methodology/approach The study employes the structural equation modeling on a dataset of 364 Tanzanian SMEs to test both direct effects of Psy-Cap dimensions on firms' performance and the moderating effects of EEQ. Findings The study finds that self-efficacy, resilience and hope significantly enhance SMEs' performance during crises, whereas optimism negatively affects performance during prolonged turbulence. Furthermore, while EEQ significantly strengthens the positive effects of self-efficacy and resilience on performance but does not significantly moderate the relationships involving hope and optimism. The results highlight the nuanced role of psychological capital and entrepreneurial ecosystem quality in shaping firms' outcomes during turbulent times. Originality/value This research contributes to the entrepreneurship literature by integrating psychological capital and the entrepreneurial ecosystem perspectives in a crisis context. It offers novel insights from a developing-country setting, thereby addressing the empirical gap in non-Western economies. Uniquely, the study reveals that excessive optimism may hinder firms' performance, challenging conventional assumptions. It also underscores the critical role of ecosystem quality in enhancing psychological resource utility for SME sustainability during crises.
Kansheba et al. (2026) studied this question.