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A vital component for sustainable economic development is the entrepreneurship regardless of the social, geopolitical, and economic situations. However, it is an intimidating challenge to develop and maintain productive small and medium enterprises (SMEs). This article investigates the role of entrepreneurial self-efficacy (ESE) and institutional environment in entrepreneurial orientation and the development of a successful entrepreneurship-based SME. It integrates the institutional climate, self-efficacy, and theory of planned behavior to address the abovementioned challenge in the context of the Kingdom of Saudi Arabia. This study adopts an instrument to collect data from Saudi SME owners and employs SPSS Amos to analyze the proposed moderated mediation model. The outcomes of this study identify the contribution of ESE and institutional environment in the productiveness of an effective entrepreneurship-based SME.