The Effect of Green Innovation on Smes' Competitive Advantage: Exploring The Mediating Effect of Green Organizational Capabilities
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Date
2024-03-04
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AAU
Abstract
Environmental damage is a crucial challenge that businesses, especially Small and Mediumsized
Enterprises (SMEs) in developing countries like Ethiopia, face today. However, green
innovation is emerging as a promising solution to address the public's concerns about global
environmental issues. This innovation has also become a critical aspect of quality
manufacturing SMEs development. Despite this, SMEs usually prioritize economic performance
over environmental concerns. To enhance their competitive advantage, SMEs need to
implement green innovation as a intentional move. This study aims to comprehensively identify
the factors that influence the outcomes of implementing green innovation in SMEs to enhance
their competitive advantage. The study also looks at the role of green organizational
capabilities as a mediator between green innovation and SMEs' green competitive advantage.
The research used a quantitative approach to test the hypotheses, and SmartPLS 4.4 software
was utilized for data analysis. Random sampling was used for data collection, and a survey was
administered to 294 manufacturing SMEs in Addis Ababa, Ethiopia. Over two months, 350
questionnaires were distributed to these SMEs' general managers, heads of departments,
operational employees, and others, and 294 were returned for analysis. The findings confirm
that green innovation positively contributes to SME competitive advantage, and green dynamic
capability is a mediating variable between green innovation and SMEs' competitive advantage.
Additionally, all organizational capabilities, including green human capital, green market
orientation, green dynamic capability, and operational capability, positively and significantly
contribute to green innovation. Therefore, adopting green innovation encourages
entrepreneurs to not only fulfil their social and environmental responsibilities but also pursue
economic benefits for their SMEs.