EXPLAINING SME SUSTAINABILITY PERFORMANCE THROUGH RESPONSIBLE INNOVATION AND GREEN MARKET ORIENTATION

Abstract

Growing societal and regulatory expectations for sustainable business practices have intensified interest in how SMEs embed environmental orientations into their innovation processes. Green market orientation is increasingly viewed as a driver of responsible innovation. Nonetheless, how green market orientation enables responsible innovation and, in turn, enhances sustainability performance remains limited, particularly within SME contexts. Grounded in the resource-based view, this study investigates the influence of green market orientation on responsible innovation and examines responsible innovation as a mechanism shaping SMEs’ sustainability performance. Using data from Malaysian SMEs and analysed via Partial Least Squares Structural Equation Modelling (PLS-SEM), the findings indicate that green market orientation positively influences responsible innovation, which subsequently improves sustainability performance. The study expands practical understanding by showing that SMEs can achieve better environmental and social performance when they actively use green market insights to guide how they design, develop and deliver new products or services. As such, the study provides practical evidence to support localising the Sustainable Development Goals, highlighting how SME-level green orientation and responsible innovation can strengthen SDG-driven transformations, foster inclusive economic participation and contribute to more sustainable communities. Overall, the study offers practical guidance for SMEs seeking to improve their sustainability performance through clearer environmental focus and more responsible innovation.