The Role of Green Business Strategy in Mediating the Relationship between Environmental Orientation and SME Performance, Moderated by Environmental Performance

Abstract

Purpose: SMEs are very important to the economies of developing countries, especially Indonesia. However, This study seeks to investigate the mediating function of green business strategies in the correlation between environmental orientation and SME performance, with environmental performance acting as a moderating variable.Design/methodology/approach: The study population was the SME representatives that participated in the survey, with a sample of 151 responses. The number of participants was established based on the SMEs registered in East Java Province, Indonesia. The present study was conducted utilising a quantitative approach by means of questionnaires given online and in person. Data analysis was carried out using the SEM-PLS technique supported by SmartPLS software. Data investigation comprised predictive relevance (Q²), common method bias, structural path coefficients via bootstrapping, confirmatory factor analysis, correlation analysis, multicollinearity assessment, and construct reliability measurement.Findings: The results reveal that environmental orientation positively effects green business strategies and SME performance. Environmental performance also strongly affects the performance of SMEs. Green business strategies also considerably affect the performance of SMEs. The indirect effect of environmental orientation on SME performance via green business practices is also significant. However, the moderating influence of environmental performance in the link between environmental orientation and SME performance is statistically insignificant. The results demonstrate the significant significance of green business strategies in facilitating the relationship between environmental orientation and SME performance.Originality/value: This study provides novelty by confirming the mediation of green business strategy between environmental orientation and SME performance. Furthermore, it contributes to the literature by studying the moderating influence of environmental performance in the Indonesian SME setting, thereby offering a more particular understanding of the relationship between sustainability and company performance.