Innovation Capability, Green Innovation, and Property Business Performance: The Mediating Role of Competitive Advantage

Abstract

The property industry is increasingly pressured to convert innovation and sustainability practices into measurable business outcomes, yet evidence on how this conversion occurs in regional markets remains scarce. This study examines the effects of innovation capability and green innovation on business performance through competitive advantage in the property industry of the Special Region of Yogyakarta (DIY). A quantitative explanatory design was applied using 141 project-level responses from active landed housing projects, analyzed with Partial Least Squares Structural Equation Modeling (PLS-SEM). The results show that innovation capability has a strong positive effect on competitive advantage (β = 0.835, p < 0.001), and competitive advantage positively affects business performance (β = 0.591, p < 0.001). Competitive advantage demonstrates indirect-only mediation between innovation capability and business performance (β = 0.493, p < 0.001). In contrast, green innovation does not significantly affect competitive advantage or business performance. These findings confirm the Resource-Based View (RBV) by showing that internal resources must be converted into a competitive advantage to improve performance, and they also expose how green innovation underperforms in a cost-sensitive regional market.