Green Leadership and Sustainable Business Performance in MSMEs: The Mediating Role of Green Innovation and the Moderating Role of Organizational Culture

Abstract

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.