Criminal law, legal governance, and strategic capability development: The role of government loan guarantees in Jordanian manufacturing SMEs

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Abstract

This paper examines the role of government loan guarantees (GLGs) as legal-financial tools influencing the strategic investment behavior and dynamic capabilities of manufacturing small and medium-sized enterprises (SMEs) in Jordan, uncovering the underlying dimensions and aspects of these dynamics and capabilities. With a quantitative and cross-sectional approach, this study aims to gather data from 283 manufacturing SMEs who currently use national guarantee schemes, applying these data to a partial least squares structural equation model (PLS-SEM) for analysis. Results show that the use of these GLGs has a significant effect on strategic investment intensity and dynamic capabilities, with strategic orientation being a partial mediator, moderated by firm size, which benefits most from these effects among the medium-sized firms. This shows that, besides being financial facilitation instruments, these instruments can be used for governance purposes in order to manage investment behaviors, manage regulatory requirements, and manage capabilities within organizations. With the effectiveness of these instruments being dependent on combining financial accessibility, strategic readiness, and strong regulatory management, this paper provides valuable information for policymakers who must efficiently manage guarantee schemes and manage risks, including misuse, fraud, and lack of regulatory compliance among these financial instruments used by manufacturing SMEs within the Jordanian economy.

Keywords: Legal Governance, Loan Guarantees, SMEs, Strategic Investment, Regulatory Frameworks, Jordan

Authors’ individual contribution: Conceptualization — M.A. and A.M.; Methodology — A.M.; Formal Analysis — A.M.; Investigation — M.A., H.A., and I.A.-H.; Resources — A. A.-A. and M.T.A.; Data Curation — A.M.; Writing — Original Draft — M.A. and A.M.; Writing — Review & Editing — H.A., I.A.-H., and A.A.-A.; Visualization — A.M.; Supervision — A.M.; Project Administration — M.A.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G21, K22, L26

Received: 11.08.2025
Revised: 20.11.2025; 03.12.2025
Accepted: 29.12.2025
Published online: 30.12.2025

How to cite this paper: Airout, M., Morshed, A., Alnsour, H., Al-Halameh, I., Al-Akayleh, A., & Alflaieh, M. T. (2025). Criminal law, legal governance, and strategic capability development: The role of government loan guarantees in Jordanian manufacturing SMEs. Corporate Law & Governance Review, 7(4), 99–109. https://doi.org/10.22495/clgrv7i4p10