Exploring the Impact of Green Practices, Green Dynamic Capabilities on Green Innovation: The Mediating Role of Green Value Co-creation in SMES

Abstract

This study explores the relationships among green practices, green dynamic capabilities, green value co-creation, and GI within the context of small- and medium-sized enterprises (SMEs). Using a crosssectional research design, data from 500 SMEs across five South Indian states were analyzed to examine these constructs' direct and indirect effects. The findings reveal that GP significantly and positively influence green innovation, underscoring the importance of sustainable operational strategies for fostering ecofriendly innovation. However, GDC exhibits a negative relationship with green innovation, suggesting potential trade-offs or challenges in leveraging these capabilities effectively. Furthermore, GVC was not found to mediate the relationship between GP and green innovation, nor was GP or dynamic a significant predictor of value co-creation. These results highlight the efficacy of direct strategies, such as adopting green practices, and collaborative approaches, in driving innovation within SMEs. This study contributes to the theoretical understanding of sustainability in SMEs and provides practical insights for managers, emphasizing the need to prioritize internal sustainability initiatives as a pathway to innovation. We then discuss the limitations and avenues for future research to further the dialogue on sustainability-driven innovation, including additional factors, such as government policies and technological advancements, and longitudinal studies.