Green Leadership and Sustainable Business Performance in MSMEs: The Mediating Role of Green Innovation and the Moderating Role of Organizational Culture
DOI:
https://doi.org/10.38035/dijefa.v7i4.7367Keywords:
Green Leadership, Green Innovation, Organizational Culture, Sustainable Business Performance, MSMEsAbstract
This study aims to analyze the effect of Green Leadership on Sustainable Business Performance in micro, small, and medium-sized enterprises (MSMEs), with Green Innovation serving as a mediating mechanism and Organizational Culture as a moderating variable. The study adopts a quantitative explanatory research design involving 100 respondents consisting of MSME owners/managers and employees. Data were analyzed using Structural Equation Modeling–Partial Least Squares (SEM-PLS) with the assistance of SmartPLS 4.0. The results indicate that Green Leadership has a positive and significant effect on Green Innovation (β = 0.656; p < 0.001) and Sustainable Business Performance (β = 0.487; p < 0.001). Green Innovation also has a positive and significant effect on Sustainable Business Performance (β = 0.276; p = 0.004). Meanwhile, Green Leadership does not have a significant effect on Organizational Culture (β = 0.166; p = 0.118), and Organizational Culture does not significantly affect Sustainable Business Performance (β = −0.085; p = 0.308). Organizational Culture has a positive and significant direct effect on Green Innovation (β = 0.147; p = 0.048), but does not moderate either the Green Leadership–Green Innovation relationship or the Green Innovation–Sustainable Business Performance relationship. These findings highlight the importance of Green Leadership and Green Innovation in enhancing sustainable business performance among MSMEs.
References
Al-Hakimi, M. A., Al-Swidi, A. K., Gelaidan, H. M., & Mohammed, A. (2022). The influence of green manufacturing practices on the corporate sustainable performance of SMEs under the effect of green organizational culture: A moderated mediation analysis. Journal of Cleaner Production, 376, 134346. https://doi.org/10.1016/j.jclepro.2022.134346
Alraja, M. N., Imran, R., Khashab, B. M., & Shah, M. (2022). Technological innovation, sustainable green practices and SMEs sustainable performance in times of crisis (COVID-19 pandemic). Information Systems Frontiers, 24, 1081–1105.
Awan, F. H., Dunnan, L., Jamil, K., & Gul, R. F. (2023). Stimulating environmental performance via green human resource management, green transformational leadership, and green innovation: A mediation-moderation model. Environmental Science and Pollution Research, 30(2), 2958–2976. https://doi.org/10.1007/s11356-022-22424-y
Baeshen, Y. A., Soomro, Y. A., & Bhutto, M. Y. (2021). Determinants of green innovation to achieve sustainable business performance: Evidence from SMEs. Frontiers in Psychology, 12, 767968. https://doi.org/10.3389/fpsyg.2021.767968
Begum, S., Ashfaq, M., Xia, E., & Awan, U. (2022). Does green transformational leadership lead to green innovation? The role of green thinking and creative process engagement. Business Strategy and the Environment, 31(1), 580–597. https://doi.org/10.1002/bse.2911
Chen, X., Chen, Y., & Zhang, X. (2023). Green transformational leadership and green innovation: Is green knowledge sharing a missing link? Engineering, Construction and Architectural Management. https://doi.org/10.1108/ECAM-02-2023-0117
Duong, C. H. (2026). Green transformational leadership and its prediction of sustainable performance: The mediating role of green innovation. Ho Chi Minh City Open University Journal of Science–Economics and Business Administration, 17(2). https://doi.org/10.46223/HCMCOUJS.econ.en.17.2.4859.2027
Forcadell, F. J., Úbeda, F., & Aracil, E. (2021). Effects of environmental corporate social responsibility on innovativeness of Spanish industrial SMEs. Technological Forecasting and Social Change, 162, 120355. https://doi.org/10.1016/j.techfore.2020.120355
Ibarra-Cisneros, M. A., Vela-Reyna, J. B., & Hernández-Perlines, F. (2024). Green transformational leadership as a foundation for implementing green strategic orientations and the development of green innovation and green performance. Entrepreneurial Business and Economics Review, 12(4), 43–58. https://doi.org/10.15678/EBER.2024.120403
Imran, M., & Jingzu, G. (2022). Green organizational culture, organizational performance, green innovation, environmental performance: A mediation-moderation model. Journal of Asia-Pacific Business, 23(2), 161–182. https://doi.org/10.1080/10599231.2022.2072493
Indrawati, H., Caska, C., Hermita, N., Sumarno, S., & Syahza, A. (2023). Green innovation adoption of SMEs in Indonesia: What factors determine it? International Journal of Innovation Science. https://doi.org/10.1108/IJIS-02-2023-0047
Khan, N. R., Ameer, F., Bouncken, R. B., & Covin, J. G. (2023). Corporate sustainability entrepreneurship: The role of green entrepreneurial orientation and organizational resilience capacity for green innovation. Journal of Business Research, 163, 114296. https://doi.org/10.1016/j.jbusres.2023.114296
Le, T. T. (2024). How green transformational leadership drives environmental performance and firm performance? Empirical evidence from an emerging economy. Corporate Social Responsibility and Environmental Management. https://doi.org/10.1002/csr.2872
Le, T. T., & Gia, L. L. C. (2025). How green innovation and green corporate social responsibility transform green transformational leadership into sustainable performance? Evidence from an emerging economy. Corporate Social Responsibility and Environmental Management, 32(2), 2527–2541. https://doi.org/10.1002/csr.3077
Le, T. T., Vo, X. V., & Venkatesh, V. G. (2022). Role of green innovation and supply chain management in driving sustainable corporate performance. Journal of Cleaner Production, 374, 133875. https://doi.org/10.1016/j.jclepro.2022.133875
Lestari, S. D., et al. (2023). Fostering green innovation in achieving sustainable performance. Natural Resources Forum. https://doi.org/10.1111/1477-8947.12293
Lutfi, A., Alqudah, H., Alrawad, M., et al. (2023). Green environmental management system to support environmental performance: What factors influence SMEs to adopt green innovations? Sustainability, 15(13), 10645. https://doi.org/10.3390/su151310645
Makumbe, W., & Lisita, T. (2026). The mediating role of green knowledge sharing on the relationship between green transformational leadership and green innovation. International Journal of Organizational Analysis, 34(12), 330–350. https://doi.org/10.1108/IJOA-01-2026-6477
Oktrivina, A., Sumail, L. O., Hendryadi, Effendi, S., Budiantoro, H., & Astuti, S. B. (2025). Green transformational leadership and financial performance in micro and small enterprises: The interplay of circular economy practices and environmental uncertainty. Frontiers in Sustainability, 6. https://doi.org/10.3389/frsus.2025.1684185
Rahman, et al. (2026). Power of green capabilities and artificial intelligence (AI): Understanding how and when green innovation promotes sustainability. Business Strategy and the Environment. https://doi.org/10.1002/bse.70252
Rustiarini, N. W., Bhegawati, D. A. S., & Mendra, N. P. Y. (2022). Does green innovation improve SME performance? Economies, 10(12), 316. https://doi.org/10.3390/economies10120316
Satriadi, Agusven, T., Marhalinda, Ilyas, I., & Zami, A. (2025). Green transformational leadership, green human resource management, and environmental performance: A mediation model. EKUITAS: Jurnal Ekonomi dan Keuangan, 9(1), 97–109. https://doi.org/10.24034/j25485024.y2025.v9.i1.6908
Singh, S. K., Del Giudice, M., Chiappetta Jabbour, C. J., Latan, H., & Sohal, A. S. (2022). Stakeholder pressure, green innovation, and performance in small and medium-sized enterprises: The role of green dynamic capabilities. Business Strategy and the Environment, 31(1), 500–514. https://doi.org/10.1002/bse.2906
Singh, S. K., Del Giudice, M., Chierici, R., & Graziano, D. (2020). Green innovation and environmental performance: The role of green transformational leadership and green human resource management. Technological Forecasting and Social Change, 150, 119762. https://doi.org/10.1016/j.techfore.2019.119762
Yuliza, Y., & Musa, H. (2025). Building green performance through green HRM and green transformational leadership: The mediation role of green innovation. Asian Management and Business Review, 5(2). https://doi.org/10.20885/AMBR.vol5.iss2.art1
Zhang, Z., Zhu, H., Zhou, Z., & Zou, K. (2022). How does innovation matter for sustainable performance? Evidence from small and medium-sized enterprises. Journal of Business Research. https://doi.org/10.1016/j.jbusres.2022.08.034
Zhou, J., Sawyer, L., & Safi, A. (2021). Institutional pressure and green product success: The role of green transformational leadership, green innovation, and green brand image. Frontiers in Psychology, 12, 704855. https://doi.org/10.3389/fpsyg.2021.704855
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Lukman Hakim, Sabil Sabil, Amin Setio Lestiningsih, Dwiyatmoko Puji Widodo, Sugiyah, Devy Sofyanty
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish their manuscripts in this journal agree to the following conditions:
- The copyright on each article belongs to the author(s).
- The author acknowledges that the Dinasti International Journal of Economics, Finance & Accounting (DIJEFA) has the right to be the first to publish with a Creative Commons Attribution 4.0 International license (Attribution 4.0 International (CC BY 4.0).
- Authors can submit articles separately, arrange for the non-exclusive distribution of manuscripts that have been published in this journal into other versions (e.g., sent to the author's institutional repository, publication into books, etc.), by acknowledging that the manuscript has been published for the first time in the Dinasti International Journal of Economics, Finance & Accounting (DIJEFA).
