Enhancing SMEs’ Sustainability through Digital Adoption and Green Orientation: The Mediating Role of Green Product Innovation
Nailin Na'imah
Department of Management, Universitas Islam Indonesia, Indonesia.
Anjar Priyono *
Department of Management, Universitas Islam Indonesia, Indonesia.
*Author to whom correspondence should be addressed.
Abstract
Small and Medium Enterprises (SMEs) are increasingly required to integrate sustainability with digital transformation to remain competitive in rapidly evolving markets. However, many SMEs face resource and capability constraints that hinder effective adoption of green strategies. This study investigates how digital technology adoption, green dynamic capabilities, and green market orientation influence sustainable performance, with green product innovation examined as a mediating factor. Drawing on data from 105 SME owners and managers in Indonesia, the study applies Partial Least Squares Structural Equation Modelling (PLS-SEM) to test the proposed model. The results indicate that all three predictors positively and significantly affect green product innovation and sustainable performance, with green dynamic capabilities exerting the strongest influence. Moreover, green product innovation fully mediates the relationship between green market orientation and sustainable performance. These findings extend theoretical insights into sustainable business practices among SMEs by confirming the strategic role of eco-innovation. Practically, the study highlights the importance of capacity-building initiatives that enable SMEs to leverage digital tools, develop adaptive green capabilities, and translate environmental orientation into market-driven, sustainable product innovations.
Keywords: Digital technology adoption, green dynamic capability, green market orientation, green product innovation, sustainable performance