Next Article in Journal
Job Loss in a Group of Older Canadian Workers: Challenges in the Sustainable Labour Market Reintegration Process
Previous Article in Journal
Decarbonization Pathways for International Maritime Transport: A Model-Based Policy Impact Assessment
Order Article Reprints
Font Type:
Arial Georgia Verdana
Font Size:
Aa Aa Aa
Line Spacing:
Column Width:

The Role of Process Innovation between Firm-Specific Capabilities and Sustainable Innovation in SMEs: Empirical Evidence from Indonesia

Politeknik ATI Makassar, South Sulawesi 90152, Indonesia
Faculty of Management, Universiti Teknologi Malaysia (UTM), Skudai Johor 81310, Malaysia
Kaunas Faculty, Vilnius University, Muitines g. 8, Kaunas 44280, Lithuania
Department of Computer Science and Engineering, University of Texas at Arlington, Arlington, TX 76019-0015, USA
Department of Economics, Management, Society and Institutions (EGSI), University of Molise, Via De Sanctis, 86100 Campobasso, Italy
Author to whom correspondence should be addressed.
Sustainability 2018, 10(7), 2244;
Received: 27 May 2018 / Revised: 16 June 2018 / Accepted: 22 June 2018 / Published: 29 June 2018


The importance of sustainable innovation achievement propels firms to consider the economic, social, and environmental dimensions of sustainable development. However, it is important to clarify that not all innovations impact sustainable development. Regardless of the limited circumstances in small and medium-sized enterprises (SMEs), intrapreneurship, stakeholder integration, and absorptive capacity are firm-specific capabilities that could be explored as strategic intentions of management practices in the organization. This paper investigated the mediating role of process innovation in the relationship among the firm-specific capabilities of absorptive capacity, intrapreneurship, and stakeholder integration for sustainable innovation in SMEs. This empirical study examines the manufacturing sector of Indonesian SMEs with a sample size of 190 firms. The study found that practices of process innovation, as a mediator triggered by the firm-specific capabilities of absorptive capacity, intrapreneurship, and stakeholder integration affect sustainable innovation, although at low stages. Finally, implications for the theory and practice of attaining sustainable innovation in SMEs are drawn.

1. Introduction

The last two decades have seen a growing trend toward investigating ways to contribute to sustainable innovation through the remanufacturing of sustainable manufacturing or eco-innovation by small and medium-sized enterprises (SMEs) (e.g., [1,2,3]). This research has shown that SMEs with limited circumstances regarding finances, skills, and experiences are challenged not only to face competitors in the market arena by producing products to satisfy the current demands, but also need to consider the balance regarding the future time required as well as the economic, social, and environmental benefits. On the other hand, sustainable innovation through deploying innovation types as a change method is viewed as a way to follow the efforts being taken to achieving a future of sustainable development [4,5,6,7]. However, effective sustainable innovation in SMEs is problematic for several reasons.
First, change as the result of innovation has either positively or negative effects [8,9,10]; Bos-brouwers [11] argued that all innovations are not certainly impacted by sustainable innovation. Size and region contribute to the progress of sustainable innovation. Compared with large firms, small firms are bounded by a lack of resources that would enable them to invest in technology or human resource capability to anticipate the ecological impact [12,13,14,15], or integrate corporate social responsibility (CSR) into a business strategy as a social issue [16,17]. Thus, SMEs generally prefer to adopt a reactive approach to sustainable innovation [18]. Entrepreneurial development in a developing country differs from that in a developed one. The economic status of entrepreneurs in a developing country is associated with an efficiency-driven approach rather than the innovation-driven approach of developed countries [19]. Arising entrepreneurial activity in a developing country is distinctive regarding the opportunities, financial resources, apprenticeship and human resources compared with a developed country [20]. Business motivations for adopting technology is dependent on the institutional bureaucracy degree of central governments, as well as long-term political support, in countries such as China and Nepal [21,22]. Thus, the institutional frameworks of developing countries need to encourage entrepreneurial motivation [23].
Second, appropriate practices in manufacturing sustainability remain unclear, since manufacturing SMEs regard change as optional and expensive [24,25]. Large studies have emphasized the need for radical innovation in the form of fundamental change in order to achieve sustainable innovation; examples include the development of biorefinery systems [26], solar photovoltaic electricity [27], or green practices [28]. This leads to the view that entrepreneurs ought to pursuing change in this stream of creative destruction [3,7], but previous works have doubted the feasibility of this practice due to incongruence resources in SMEs [29,30]. In the manufacturing strategy literature, change is suggested as part of an incremental approach that considers the needs of employees’ involvement in a flexible process that forms part of a comprehensive framework within an uncertain environment [31,32]. Industrial experts agree more with value-added creation-oriented innovation rather than core production technology for innovation in SMEs [33,34]. Prior studies have approved the existence of continuous change for sustainability that has mostly been conducted in the large firms of developed countries. Examples include a case study of the United States (US) and European Petrochemical industries [35], and an empirical study of Taiwan’s electronics industry [36]. However, a systematic understanding of how the change process contributes to sustainable innovation in SMEs is still lacking.
Despite dealing with barriers in SMEs, flexibility and adaptability are considered ways to undertake innovation [37], alongside reducing bureaucracy, increasing the closeness between owners and customers, developing owner expertise, or streamlining organizational structures [38,39]. Uddin [40] indicated the capability of indigenous knowledge, which has advocated for continuous improvement in small Bangladesh firms. In other words, SMEs have specific capabilities that could be explored as an organizational approach for sustainable innovation; in particular, studies regarding the influence of management practices in the organization are required. Sustainability researchers have largely emphasized the integration of a firm’s internal capacity by identifying and exploiting opportunities, the external factors of stakeholders, and a combination of internal and external initiatives [41,42,43,44,45,46,47,48]; however, they have yet to extensively examine the particular sustainable innovation achievements of SMEs.
As a consequence, the objectives of this paper are to determine the mediating role of process innovation between firm-specific capabilities and sustainable innovation, and whether the specific capabilities of SMEs can activate process innovation for sustainable innovation achievement, particularly in developing countries such as Indonesia. Our article offers several contributions. Regarding best practices, firms can differ from each other in the manufacturing sector. While not all changes contribute to sustainability [11], SMEs’ industrial activities within developed countries can also contribute to the achievement of sustainable development. Hence, our contribution is to clarify the way that the change process in SMEs affects the social, economic, and environmental dimensions of sustainable innovation in an integrated way. Subsequently, it does consider the capabilities (internal, external, and combinations thereof) that extend to the capabilities of intrapreneurship, stakeholder integration, and absorptive capacity. These extend to the degree to which the specific capabilities of the firm, as the key features under a dynamic capability approach, can be utilized to support sustainable innovation achievement. Lastly, we identify the importance interdependences of firm-specific capabilities and process innovation, which indicate that firm-specific capabilities may be the catalyst for process innovation for sustainable innovation achievement in SMEs. Completely, these issues have been pointed out as areas ripe for further study in prior works on sustainable innovation [11,49,50,51].
This paper has the following structure. After this introductory section, the article reviews the relevant literature and illustrates the research hypotheses. This is followed by an outline of the research methodology in the third section. The fourth section presents the results, and we discuss the empirical findings with particular reference to Indonesian SMEs in the manufacturing sector in the fifth section. Finally, a concluding section summarizes the results and outlines theoretical and practical implications. Limitations and suggestions for future research are also addressed in this section.

2. Literature Review

2.1. Sustainable Innovation

In the new global economy, large studies have indicated the importance of sustainable innovation trajectory as a central issue for the survival of firms in the worldwide spread of unlimited business competition [52,53,54,55]. From the microeconomic perspective, sustainable innovation attainment is sometimes called eco-innovation or environmental for its ecological dimension (e.g, [56,57]); other terms consider the social dimension (e.g., [58]), environment–social dimensions (e.g., [59]), or environmental–economic dimensions (e.g., [60]) rather than considering sustainability in an integrated manner as people–planet–profit [61] dimensions that are all engaged in innovation activities, which is a must. However, difficulties arise when an attempt is made to implement sustainability in practice. The balancing effort between monetary benefits, environmentally-friendly benefits, and dimensions of human well-being in sustainable development, alongside the increasing market demands of providing value-added creation of innovation to increase consumer satisfaction, involves lots natural resource exploration and intensive pollution.
For global sustainable consumption and production, a large and growing body of literature has suggested radical technological change in the form of national innovation systems [62,63] or global innovational networks [64] as a way of facilitating international information exchange and collaboration rather than relying on self-governance [65,66]. Nevertheless, this approach has only been applied in countries that already have instrumentation for financing science, creation, and human capital. Meanwhile, others do not [67], such as the Republic of Croatia [68] and Thailand [69], for example.
By focusing on developing countries with businesses dominated by small and medium-sized firms (SMEs) with less successful technology, continuous debate about the best strategies for sustainable innovation achievement within global goals can be achieved only if developing countries are also participating. Some studies have underlined the importance of an intermediary in the creation of a network to force an innovation system [70,71,72]. However, some scholars doubt whether a developing system’s ability to innovate would be any different from the developed one, which is characterized by a learning mechanism and the relations of different actors and flexibility in the organizational structure [65,73,74].
On the management side, behavioral approach and knowledge movement are the keys to figure out before examining the situation from a macro perspective [75,76]. In addition, although small firms may lack economic development, technology, and knowledge-intensive procedures, they may capitalize on the learning and innovation formed by a small-firm owner’s perception [77]. However, far too little attention has been paid in this area, particularly in less developed countries [78]. A much more systematic study could better identify how firm ability and innovation interact, which are believed to be linked to sustainable innovation.

2.2. Firm-specific Capabilities

Over the last 20 years in strategic management, the resource base has been viewed as continuous adaption through firms’ abilities (e.g., [79,80,81]) rather than looking at resource utilization within activities as a static concern (e.g., [82,83,84,85]). This resonates in the context of sustainable innovation; achievements that consider environmental integration require more existing competencies, resources, processes, and infrastructures to improve the ecological benefits, social impacts, and economic values. Moreover, in the manufacturing industry, process innovation within a wide range of activities is determined by changing the technology, work processes, or behavioral routines of the organization. For instance, change processes are associated with either total quality management (TQM) and environmental management such as ISO 14000, ISO 14001, and ISO 9000 systems, or TQM [86,87,88,89,90] as advanced manufacturing practices supported by circumstances of top management commitment, setup, and financial and system benefit awareness. The latter are dominantly carried out within large firms, which are unlike small firms regarding their internal flexibility, external reconfiguration, and integration capabilities as promising capabilities for innovative strategies, as well as learning network capability and resource acquisition, which enable capturing and exploiting opportunities [91].
Large studies that have been focused on small firms suggest stimulating internal initiatives (e.g., a firm’s characteristics and conditions, competency, entrepreneurial vision, and goal orientation) [47,51], external factors associated with the company’s efforts to implement sustainable innovation that may affect and/or are affected by corporate activities (e.g., suppliers, consumers, and competitors) [50,92], or a combination between internal and external initiatives (e.g., [4,41,42,43,44,45,46,47,48]) that are richly covered by a broad scope of abilities and knowledge in a firm. This study combines the seminal theory of dynamic capability of Eisenhardt and Martin [93] and Teece et al. [94], since identifying the effort of the resource dimension is needed. At the same time, combining resources and activities into routines for sustainable innovation achievement particularly relates to the integration of internal and external capacity and the combination of internal and external initiatives following the cognition that developing capabilities cannot be viewed independently, but instead are sequential interdependencies [95,96,97,98].
The dynamic capability approach is popular within established firms, but it can also be applied in SMEs due to the business environment faced by SMEs encouraging them to grow their capabilities in order to survive. These can include searching for opportunities, motivating employees, or managing transformation [99,100,101,102]. Hence, the firm-specific capability is viewed as a driver of sustainable innovation, and is defined as a firm’s ability to create value through a set of resources by matching the changing needs of the environment and gaining future opportunities through cognition and action that is context-specific, dynamic, relational, and humanistic to the particular organizational routines of a firm. A development of this view follows:
First, the development of new and improved products or processes based on internal routines and practices promotes intrapreneurship through specific values in pursuing opportunities [103]. Kuratko and Morris [104] emphasized that dynamic creation needs to be integrated into corporate entrepreneurship in which decisions of resource allocation are organized by managers to capture the future business environment and emphasize the importance of routines and habits for new processes and operating methods. In other words, the combination of a Schumpetarian perception, which includes introducing novelty and seeking opportunity, with an evolutionary perception that promotes and shapes learning endeavors covered within dynamic capability, would enable either an intrapreneur or entrepreneur to seize the coherence of new opportunity and a firm’s resources. Kyläheiko et al. [105] viewed firm-specific capabilities from the perspective of entrepreneurial motives, and encouraged exploiting new opportunities by utilizing resources based on existing capabilities. Antoncic and Hisrich [75] proved the relationship between intrapreneurship role and the growth and profitability of firm performance. Thus, intrapreneurship in SMEs has been believed by some studies as a way to revitalize, reconfigure, and transform resources for the emergence of the dynamic business environment rather than entrepreneurship at the individual level (e.g., [106,107,108]).
Second, there are outside factors that influence firm development. In this study, an outside factor is perceived as stakeholder orientation, which has a different set of expectations, and neglecting stakeholder expectations may create conflict within the firm [109]. Hence, the ability to integrate stakeholders’ expected value into the firm is viewed as representative of the dynamic capability approach. Plaza-Úbeda et al. [110] explicated that integrating stakeholders’ interests as part of the strategic capability of a firm by coordinating and integrating intangible assets (e.g., knowledge) makes it difficult for these assets to be imitated. This capability achievement of a firm leads to distinct managerial and organizational processes of firm-specific capability that reflect dynamic capabilities by utilizing knowledge and learning [49,111]. Some studies have supported this shape through integrating stakeholders’ interests into a set of practices that are linked to organizational activities (e.g., organizational learning) [112]. Black and Härtel [113] developed and tested a model of process integration with stakeholder engagement, and found that social responsiveness has risen from a firm’s social responsibility orientation.
Last, internal and external factors influence innovativeness [114]. Internal factors stem from the firm’s environment, such as suppliers, buyers, and knowledge spillovers, and other factors available from inside a firm, such as for instance, the skill and experience accumulation of workforces [115,116]. The dynamic capability approach refers to combining co-specialized assets and capturing value from creative and routine operations of a firm; this leads to various knowledge-related constructs that have moved into knowledge sharing, integration, and creation at the organizational level [117]. In other words, dynamic capability is not only a matter of capability regarding managing resources or processes, but also changing routines and processes [118]. Foss [76] terms this knowledge capability as absorptive capacity. Wang and Ahmed [119] confirmed this by highlighting the role of absorptive capacity as a combination of external knowledge and absorbing knowledge for internal use.
A large number of scholars have attempted to link the know-how within firm characteristics, but fail to explain the linkages in a coherent way [120]. This study extends the organizational capabilities under dynamic capability as firm-specific capabilities into intrapreneurship, stakeholder integration, and absorptive capacity.
In innovation management, the constructs are presented within a socio-technical approach that combines people and technology for the specified purpose of innovation within the organization. People represent the socio approach, which includes the capabilities regarding an organization’s internal initiative, external linkages, and transformational capacity underpinned by dynamic capability as a driver. Then, in the direction of change, innovation management converts this within the process of innovation as a technical approach to attain the desired performance of sustainable innovation. The change process envisions best practices regarding process innovation in the manufacturing industry. However, the general practices of each firm are not the same, and one practice may succeed in a firm, but not in others. Thus, this study is looking for practices that can be generalized to others, particularly in SMEs, and the practices of Ponsignon et al. [121] are utilized as being effective for other firms. To enable these practices for the desired result, a driver is needed within an organization that can be relied on to activate and deploy resources within the capacity of the firm [122,123]. This merger action is aligned with the economic shocks and assets reallocation of managers, which emerge from technological change as a competitive mechanism [124].
Sustainable innovation is a distinguished concept that lies between innovation and innovation effect, and focuses on the triple bottom line process innovation types in the SMEs of the manufacturing industry. The conceptual framework of sustainable innovation needs to be illuminated. From the evolutionary perspective, sustainable innovation combines the dual theory of dynamic capability and best practices as a ‘body of understanding’ in the firm-specific capabilities toward a ‘body of practice’ in the process improvement of process innovation, which Cohendet and Llerena [125] and Nelson [124] explain as a body linkage under the socio-economic approach for attaining sustainable innovation (Figure 1). This is another approach for sustainability improvement within industries and organizations, besides the utilization of formal decision-making methods [126,127,128].

2.3. Hypotheses

Process innovation includes the modification of tools or equipment, and requires the ability to transform knowledge into skill across the entire process. The role of understanding knowledge to generate capabilities in routines as Cohen and Levinthal [129] exhibited into acquirement, assimilation, transformation, and exploitation, is formed within absorptive capacity. Gray [130] indicated that absorptive capacity has a strong relationship with innovation regarding the existence of informal and experiential learning activities in SMEs. In the dynamic business environment, this resonates with some studies such as Chen et al. [36] and Kostopoulos et al. [131], who found a significant positive association between absorptive capacity and innovation due to the capability of the absorptive capacity of a firm to identify, acquire, and assimilate external knowledge and process it with existing knowledge to internalize and exploit it for innovation benefit. In other words, process innovation is determined by previous investment in knowledge that is either internal or external, and involves choosing the technical activity to exploit opportunities [132]. This is possible due to knowledge, which is an essential factor for sustainable manufacturing systems and problem-solving, and thus for encouraging improvement. Hence:
Hypothesis 1a.
Absorptive capacity has a positive relationship with process innovation.
McFadzean et al. [133] exhibited the missing link of this relationship through the holistic view of previous works of literature that defined intrapreneurship as the individual internalization of entrepreneurial activity stimulus, and innovation as the effort of development with multi-stage processes. This is aligned with Miller and Friesen [134], who argued that resource availability and capability are basically the same in the firms, except for being differentiated by the existence of innovation. Industries require the specific capabilities of such individual entrepreneurs in the organization that may activate innovation. This has confirmed by some studies, which showed that organizational innovation and performance are directly influenced by intrapreneurship [135,136]. Madhoushi et al. [137] empirically found that in organizational behavior and culture, the shape of process and product innovation is caused by the reinforcement and facilitation of ideas within a proper climate of creation. Fostering new ideas and creativity affects the entrepreneurial behavior of a manager’s mindset; this in turn may increase the values and attitudes of an entrepreneurial organization’s culture, which Shepherd et al. [138] called the entrepreneurial spiral. Therefore:
Hypothesis 1b.
Intrapreneurship has the positive relationship with process innovation.
Product and process development such as signing a standalone contract between the principal (customer) and agent (producer) is determined by technology integration [139,140], configuring systems (Davies et al. [141]), and project changes (Kultti and Takalo [142]) due to constant interaction and engagement with each other. This was illuminated by Zhang et al. [143] in a case study of British industries using qualitative data analysis to focus on stages or processes that were specific to the activity level of stakeholder interaction in the process of project development and implementation, which lead to idea generation and effective and efficient process development. This finding was aligned with Holmes and Smart’s [144] case study of non-profit and corporate organizations, in which the dyadic engagement activities of interorganizational collaborations contributed innovation opportunities facilitated by a search and exploration of idea exchange.
Hypothesis 1c.
Stakeholder integration has a positive relationship with process innovation.
A few researchers have explicitly delineated the relationship between process innovation and sustainable innovation [145,146]. Bos-brouwers [11] explored the innovation process associated with sustainable development within SMEs, which is perceived as “part of a step-by-step process of incremental innovation” rather than radical. This resonates with Foster and Green’s argument that “industrial transformation—dismantling, reducing or re-directing modern industry’s environmentally disruptive ‘brown’ products, processes, and systems and replacing them with ‘greener’ alternatives—requires technological innovation” [147]. Meanwhile, Sagar [148] considered technology innovation to be process improvement or technology development into widespread use.
Regarding economic scale and the environment, Porter and van der Linde [149] supported improved capacity and continual innovation as the basis of competitiveness, regardless of the cheapest inputs or largest scales. They viewed that innovation can be sparked by the environmental standard, which compensates for the cost, and termed it “innovation offset”. It is not only lowering the net cost to match the environmental regulation, it also leads to the firm’s absolute advantages in moving the step forward over the competitors who neglect the regulations. Nidumolu, Prahalad, and Rangaswami [150] strengthened this opinion that the firms that are already engaged in this sustainability as their goal can afford to exist in the future due to the competitive advantage already gained. For instance, reducing pollution and improving productivity are done at the same time, utilizing the same resources.
On the social side, innovation is a social construct that Bos-brouwers [11] defined as establishing the effectiveness of process innovation; this requires work environment support, such as for example, safety and valuing individual contributions [151,152]. Hence, it conveys significant change, commercially viability, quality improvement, the employment of innovation types, and profitability yield to sustain a firm in the long term [153]. In addition, another contribution that concerns this social side of innovation includes advantages for protection and extension market shares, efficient operational improvement, reputational improvement, and cost reduction [154,155].
Hypothesis 2.
Process innovation has the positive significant impact on sustainable innovation.
Del Brío and Junquera [156] argued that although “SME peculiarities” include lacking personnel and financial resources, it is also possible to achieve sustainability [157]. In the empirical study of 31 manufacturing SMEs, Williamson et al. [25] revealed that the tension between business performance and considering regulation lead to behavior in which the firm tries to improve the performance by focusing on cost reduction and efficiency, as well as obey the regulations by considering the stakeholders of good practices, which together lead to stakeholder and society attractiveness. This is aligned with Ketata et al. [51], who argued that achieving this stage requires the support of organizational routines and capabilities in processes of experience and learning that are associated with valuable knowledge sources as the absorptive capacity that motivates skilled employees to activate the capacity of a firm. The activation is occurred by an identification function of collecting more information from external environment signals, and then transmitting that information across the organizational boundary into acquiring, transferring, and assimilating new ideas into concrete action [129]. In addition, participation in sustainability, such as choosing a green strategy, indicates a level of absorptive capacity, since determining types of processes requires the support of absorptive capacity to function processes by assimilating technical knowledge from external sources [156,158]. Therefore, absorptive capacity is more likely to be a predictor of performance through innovation [159].
Hypothesis 3a.
Absorptive capacity has a positive significant impact on sustainable innovation.
Hypothesis 3d.
Absorptive capacity has a positive relationship with process innovation for sustainable innovation.
Establishing the innovation of ‘best practices’ as ‘doing what we do better’ and ‘doing different’ by dealing with the capability of sensing and seizing the opportunities as the entrepreneurial effort of individual effort in the organization is required for sustainability [160,161,162]. This is aligned with Coakes et al. [107], who argued that attaining sustainable innovation by way of change in the organization needs the role of intrapreneurship, and idea development of marketable products is directed by innovation. However, the willingness of individuals within the organization to move into sustainable innovation is greatly determined by the legislation of the environmental improvement program and cooling it by adopting a ‘best practices’ techniques [163,164,165].
Hypothesis 3b.
Intrapreneurship has a positive significant impact on sustainable innovation.
Hypothesis 3e.
Intrapreneurship influences the process of innovation to have an impact on sustainability.
The importance of considering stakeholder orientation for sustainable innovation has been emphasized by Cairncross [165] (p. 1005) as “if a firm attempts to differentiate products as ‘green’ or environmentally responsible while continuing to produce high levels of production waste and emissions, it would seem risky because stakeholders (e.g., regulators, environmental groups) could easily expose this anomaly, destroying the firm’s credibility and reputation”. This statement also warns the producers to integrate stakeholders’ expectations within a firm’s production by considering their production related to environmental performance. Hart [166] has implicitly justified the relationship between stakeholder integration, process innovation, and sustainable innovation. This resonates with Ayuso et al. [50], who has captured a direct relationship between internal and external stakeholder engagement and stimulating new ways and approaches to solving problems that contribute to the sustainable innovation orientation.
Hypothesis 3c.
Stakeholder integration has a positive significant impact on sustainable innovation.
Hypothesis 3f.
Stakeholder integration influences process innovation and thus has an impact on sustainable innovation.
According to above discussions, the research framework and hypotheses of this study is presented in the Figure 2.

3. Research Methodology

3.1. Participants and Procedures

In attempts at sustainable development, the economic dimension is more focused on industrial activities, but it also requires contributions to the environmental and social dimensions. Moreover, achievements in the economic dimension are more viewed in macroeconomic terms rather than seeing the economic benefit of environmental protection activities, as emphasized by Porter and van der Linde [149]. In production activities, Indonesian SMEs are struggling with limited internal infrastructure (e.g., money, managerial skill, information) and low-level external institutional support (e.g., universities, private, public research) [167,168]. These pictures are resonating with Indonesia’s rank in the global innovation index 2017 at 87 [169] and in the global competitiveness report 2017–2018 at 36, which was up from 41st in last year’s edition [170]. Specifically, the contribution of the South Sulawesi province of eastern Indonesia to the regional gross domestic product (GDP) in 2017 was high compared with the other provinces, with USD 7.3 billion contributed by agriculture, commerce, hotels and restaurants, services, and manufacturing [171]. Still, it has medium national human development index of 69.76, which is lower than the standard national human development index (70–80) [172]. On the contrary, there is evidence that certain capabilities are able to influence SMEs in Indonesia to be more innovative, such as entrepreneurship orientation [173] and absorptive capacity [174].
This empirical study is conducted in South Sulawesi province, Indonesia. We tested our hypotheses using face-to-face interviews with the manager/owner of SMEs, some of whom were initially contacted by phone. The interviews with respondents took 45–60 min on average, but if they could not take place, then we used a survey, which was dropped off and collected. As there are nearly 1000 SMEs in the manufacturing sector of South Sulawesi province according to the data of the Indonesian Statistics Bureau in 2015, we targeted key respondents of 310 manager/owner based on the approach of Bartlett et al. [175]. The key target respondents were chosen because they directly influence the work behavior of employees (Yukl [176]), act as a change agent (Bass [177]), and have comprehensive knowledge related to the characteristics, strategy, and performance of a firm [178]. Small and medium-sized firms were defined as having five to 99 employees; thus, purposive sampling is used to select the respondents. The list of SMEs was acquired from the Industrial Service and Cooperation and Small and Medium-sized Enterprises of Government Service, and the office of provincial industry in South Sulawesi. The response rate was 61.3%, which is a good response according to Babbie [179], resulting in 220 returned questionnaires, and usable responses from 190 firms.
Table 1 shows the companies that participated in the study and the characteristics of firms regarding the number of employees. The manufacturing firms of this survey that had higher frequencies of response were from the food and drink industry (N = 63), followed by the garment, furniture, and printing industries with the total range number of 25% to 27%. Other types of respondents included those in the homecare, building material, shipbuilding, recycling, and pharmacy industries, which were distributed in the range of 6% to 13%. A total of 190 respondents comprised of small and medium-sized firms were recorded, with 132 categorized as small firms (69.5%), and 58 classified as medium-sized firms (30.5%).

3.2. Method

The questionnaire consists of two sections. The first section described the constructs of firm-specific capabilities, process innovation, and sustainable innovation with 62 total questions using a five-point Likert Scale (e.g., either 1 = strongly disagree, 3 = neither agree nor disagree, or 5 = strongly agree). The second section was the number of employees. Prior validated empirical research was adapted in the study for measurement of the items of proposed constructs. The questionnaire was translated according to the back-translation approach, which involves translating the instruments from English to the Indonesian language, and then translating it back into English [180]. To ensure accuracy, measurements were examined through face validity and content validity. The analysis was performed based on the data collected through the survey by using SmartPLS 2.0 due to the possibility of cause-and-effect relationships in the complex model [181,182], and small sample sizes [183]. Moreover, the results of partial least square structural equation modeling Partial Least Squares Structural Equation Modelling (PLS-SEM) are an attempt to maximize the endogenous latent variables’ explained variance rather than minimize the discrepancy between the estimated and covariance matrices in CB-SEM [184].

3.2.1. Firm-specific Capability

An independent variable of firm-specific capability includes three fundamental constructs. (1) Intrapreneurship was measured via the 15-item scale as the ability to capture and exploit opportunities by creating and improving resources in the concerted action of routines in the organization. It was comprised of proactiveness (five items), risk-taking (five items), and autonomy (five items), following the previous literature of Lumpkin & Dess [135], Venkatraman [185], Covin & Slevin [186], Nasution [187] and Lumpkin et al. [188]. (2) Stakeholder integration via a 16-item scale captures the ability to bring stakeholders’ expectations into the firm as being better than the firm’s view of the stakeholders; it covers knowledge of stakeholder (five items), stakeholder interaction (six items), and behaviors of adaptation (five items), as developed by Plaza-Úbeda et al. [110]. (3) Absorptive capacity was measured via a 14-item scale, which represented the potential and ability within firms and the realized absorptive capacity, which consisted of acquisition (three items), assimilation (four items), transformation (four items), and exploitation (three items), as originally developed by Flatten et al. [189].

3.2.2. Process Innovation

Process innovation as a mediating variable was measured by four items that were adapted from Ponsignon et al. [121] to capture the changing of manufacturing practices or determine whether SMEs conduct process innovation by changing as an inherent added value that is not new in the industry, but new in the firm regarding the improvement of the operational process.

3.2.3. Sustainable Innovation

A dependent variable of sustainable innovation was measured by a 13-item scale to capture the impact of innovation integrally within the performance of sustainable economic (three items), environmental (five) items), and social (five items) development goals in SMEs, as adapted from Ponsignon et al. [121] and Zhu and Sarkis [190].

4. Results

To assess the research model, our study utilized Smart PLS 2.0 as the partial least square structural equation modeling (PLS-SEM). PLS-SEM under the variance-based ordinary least square (OLS) procedure of Hair et al. [185] predicts the relationship between process innovation and sustainable innovation that is activated by a firm-specific capability. To predict the accuracy of the model, PLS is provided with a bootstrap where each sample from the original dataset is replaced until the number of cases is identical to the original sample set. Therefore, a normal distribution of data is not required for the PLS approach, due to the performance of bootstrapping (Chin [191]), Goodhue et al. [192] proved that PLS at a small sample size has a strong efficacious technique and a confidence interval of expected power with the significance testing of the sample below 150 compared with other analysis approaches, such as regression or LISREL program application, and no global goodness-of-fit criterion is needed to evaluate the overall model [193]. At the same time, this application also has the benefit of high-efficiency parameter estimation through statistical power due to the ability to depict the significance of specific relationships that may be significant in the population. This statistical power has the advantage of PLS-SEM compared with the covariance-based SEM (CB-SEM) approach [184]. PLS assess the research model in the two ways: a measurement model, and a structural model.

4.1. Assessment of Measurement Model

Reflective indicators are measured by internal consistency, reliability, and validity. The reliability value among items within a construct is shown in Cronbach’s alpha, and composite reliability should be above the critical threshold of 0.7, as shown in Table 2. Validity is assessed in convergent validity by the value of average variance extracted (AVE) and discriminant validity by examining constructs values of Fornell–Larcker criterion and cross-loadings. The validity study of data analysis yields an AVE of constructs above 0.5, and the Fornell–Larcker criterion of the diagonal value resulted from the square root of AVE is higher than the shared variance of other constructs’ value. The cross-loadings results in Table 3 demonstrated that the indicator’s outer loadings on a construct are higher than all of its cross-loadings with other constructs. These show that the distinction of a construct with other constructs in its items has accomplished the rule of thumb of the validity measurement model [184,193].

4.2. Assessment of Structural Model

The structural model or inner model is evaluated by generating data and drawing the conclusion using the PLS-SEM algorithm and the bootstrapping procedure of repeated processes for about 5000 random sub-samples in Smart PLS 3.0 in order to estimate a new sample. Table 4 demonstrates the algorithm results of beta values, the standard error, and the bootstrapping value of distribution using Student’s t-test and effect size (f2). The effect size calculates the impact of a specific exogenous construct on endogenous construct with an assessed value of 0.02 (small), 0.15 (medium), and 0.35 (large) [184,194].
The direct effects of three hypotheses (H1a, H1b, and H1c) were developed to determine the role of firm-specific capability in activating process innovation. The results, as shown in Table 4, showed positive and significant effects after bootstrapping at t-values above 2.57 (p < 0.01) as expressed by values of 4.631, 4.853, and 4.447, respectively. Further, the effect size (f2) value of absorptive capacity has the smallest effect on process innovation, followed by intrapreneurship and stakeholder integration as the largest effects.

Testing the Mediating Effect of Process Innovation

The mediating analysis of process innovation was conducted within two steps. First, the direct effect of the firm-specific capabilities of absorptive capacity, intrapreneurship, and stakeholder integration on sustainable innovation was examined. Subsequently, the indirect effect of the mediating construct was tested by applying the “bootstrapping the indirect effect” method of Preacher and Hayes [195,196], which is presented in the full structural model.
Direct effect without mediation as a structural model 1 is presented in Figure 3 and Table 5. Before the assessment, a collinearity test of variance inflation factor (VIF) was tested to check the model quality and assess whether the predictors had collinearity on endogenous constructs with a tolerance level lower than five [184]. The (unreported) VIFs of the predictors were below five, indicating the absence of collinearity. Further, the values of R2 and Q2 were examined to ascertain the predictive accuracy of the model. The threshold of the R2 value ranged from 0 to 1, which indicated that a higher level of predictive accuracy could be respectively described as 0.75 (substantial), 0.50 (moderate), and 0.25 (weak) for endogenous latent variables [193,197]. The Q2 value was measured by applying the cross-validated redundancy of the blindfolding option in PLS-SEM, in which the measurement value was categorized as 0.02 (small), 0.15 (medium), and 0.35 (large) with the predictive relevance for a selected endogenous construct [184,193]. The R2 and Q2 values of structural model 1 showed the predictive accuracy of the endogenous construct of sustainable innovation at the moderate stage. The path analysis indicates that the direct effect on sustainable innovation from an absorptive capacity had a positive effect (p < 0.01). Similarly, stakeholder integration exhibited a positive effect (p < 0.01), except for intrapreneurship, which had a statistically non-significant result (β = 0.148, p < 0.10).
Next, the full structural model 2 was measured for process innovation (see Figure 4 and Table 6). The R2 and Q2 values of process innovation showed a substantial level in the predictive relevance model, and had a stronger predictive relevance than sustainable innovation. In addition, the (unreported) VIFs were below five for all of the exogenous constructs. The path relations of all three indirect effects showed positive effects for absorptive capacitive, intrapreneurship, and stakeholder integration on sustainable innovation mediated by process innovation, which were significant with β = 0.165, β = 0.201, and β = 0.226 (p < 0.01) values, respectively. It is important to note that the relationship of absorptive capacity, intrapreneurship, and stakeholder integration on sustainable innovation in steps 1 and 2 yielded different values. Despite intrapreneurship and stakeholder integration significantly changing process innovation, their values changed from non-significant to significant regarding the relationship between intrapreneurship—process innovation. Moreover, process innovation has increased the coefficient of determination (R2) of sustainable innovation. These results indicate that process innovation as a mediating construct may strengthen the effect on sustainable innovation.
To assess the significance of the mediating role, it was presented with its variance accounted for (VAF) [184]. The evidence showed that the relationship between process innovation and absorptive capacity was partially mediated (20% ≤ VAF ≤ 80%) while the effects of intrapreneurship and stakeholder integration on sustainable innovation were fully mediated (VAF ≥ 80%).

5. Discussion

Finding out the effective way for SMEs to achieve sustainable innovation within incremental change orientation, the present study was designed to determine whether the firm-specific capability of absorptive capacity, intrapreneurship, and stakeholder integration is an enabling factor to activate process innovation. This study also was carried out to investigate whether process innovation has a mediating role in the relationship between firm-specific capability and sustainable innovation, which is tested within Indonesian SMEs.
First, the hypotheses regarding the effects of absorptive capacity, intrapreneurship, and stakeholder integration on process innovation in Indonesian SMEs were examined to ascertain their significance. The results show that the three predictor constructs of firm-specific capability yielded positive impacts on process innovation; thus, hypotheses H1a, H1b, and H1c are accepted. Our result suggests that the dynamic capability approach of three firm-specific capabilities: absorptive capacity as obtaining the external knowledge and ingesting it for internal use by combining internal and external knowledge, stakeholder integration as integrating stakeholder expectation into a firm’s operational routine, and intrapreneurship as the way of pursuing opportunities formed by internal routines and individual practices, are enhance the best practices of process innovation. As such, our findings are consistent with the previous studies of process innovation activated by absorptive capacity [174,198,199], intrapreneurship [134,136,173], and stakeholder integration [143,144,146]. An interesting finding was that absorptive capacity has the smallest effect size on process innovation. It may be that a well-developed capability of absorptive capacity is needed to activate the best practices of process innovation, while it is opposite with SMEs, whose capabilities are less documented than the operational firms in the traditional sector [200].
The second hypothesis (H2) proposed that process innovation has a positive impact on sustainable innovation in SMEs. What is surprising is that eliminating non-value-adding tasks and managing exceptions of process innovation not only affects the environmental and social dimensions of sustainable innovation. The study indicates a preference for conventional technology rather than readiness with an automated system for new process development, which resulted in a low sustainable innovation impact in SMEs. This resonates with other studies that have shown that the focus of many firms on sustainability, in particular in Asia, South America, and Australasia, is considered weak (e.g., [25,78,80]). A possible explanation for this might be that firstly, the linkage between the science base and enterprises is weak and caused by a lack of firm’s internal resources and institutional support for SMEs [167,168,169,201]. Secondly, applying sustainable innovation is more accessible for large firms, while it is considered to be optional and require costly practices for a smaller firm, or viewed as a voluntary initiative [25,35]. Thirdly, Indonesian SMEs are more focused on economic activity, and thus on the economic benefits on environmental protection activities. All of this means that sustainable innovation is not yet perceived as an opportunity stage in SMEs. However, the finding is aligned with Andersén & Kask [202] and Zhang et al. [203], who argued that energy efficiency and the betterment of sustainable innovation are derived from improving the process of process innovation.
The third hypothesis (H3a–H3f) proposed the role of process innovation as a mediator between relationships regarding firm-specific capabilities and sustainable innovation. In order to achieve sustainable innovation, past studies have shown that capabilities are needed and innovation types become more focused. However, it is essential to clarify conclusively the role of incremental change in the process of innovation, and how it affect sustainable innovation in relation to the specific capabilities of SMEs. The model showed that the existence of process innovation has an increased coefficient of determination (R2) on sustainable innovation, from 0.454 to 0.576. The results show that the best practices of process innovation have a mediating role supported by three firm-specific capability effects: namely, absorptive capacity, intrapreneurship, and stakeholder integration. The study crystalizes several studies that outline a firm innovation’s predictors [77,204,205]. This result may be explicated by Keizer et al. [206], who realized that absorptive capacity is possible in SMEs due to higher cognition, but more attention capability is needed to apply the practices of the firm rather than merely relying on the potential absorptive capacity for sustainable innovation achievement. The intrapreneurship of capturing and exploiting opportunity by the willingness of entrepreneurial actor is fully mediated by the incremental change of best practices in process innovation. However, this has not been translated well into sustainable innovation, possibly as explained by Gao and Zhang [207] due to the need for policy encouragement to lead to the preference of pursuing desired performance. Process innovation has a suppressor effect between intrapreneurship and sustainable innovation regarding the way that sustainable innovation attainment requires the change effort supported by idea development and the willingness of individuals in the internal organization to adopt “best practices” techniques [107,164,165,208,209]. The full mediating role of process innovation also existed in the relationship between stakeholder integration and sustainable innovation, because stakeholders’ demands such as regulation policy promote the process improvement of process innovation, which in turn improves the sustainability of a firm. It seems possible that this result is due to a two-way dependency relationship of stakeholder demands–organization engagement as determined by the decision-maker in an organization process, which leads to the different level of interest within the network [210]. It is interesting to note that stakeholder integration has the highest significance, although it only affected the social and environmental dimensions of sustainable innovation. Perhaps the cause of this result is that the demands of stakeholders (i.e., end users, suppliers, competitors, or research center) as external factors have a stronger effect within SMEs, since they are more likely to be integrated within the operational organization. This finding further supports the idea of firms’ willingness to be connected to and collaborate with stakeholders by developing and modifying their internal organization to provide better individual needs [211,212,213].

6. Conclusions

This study was designed to evaluate the firm-specific capabilities of absorptive capacity, intrapreneurship, and stakeholder integration toward the existing process improvement of process innovation for the achievement of sustainable innovation in the manufacturing industry of a SMEs’ developing country, such as Indonesian SMEs. The results of this investigation show that practices of process innovation can be driven by firm-specific capabilities of absorptive capacity, intrapreneurship, and stakeholder integration.
The study has several theoretical implications in the areas of sustainable development, particularly in the SMEs of a developing country. Theoretically, the study expands upon previous studies, which captured the role of firm-specific internal capability, external capability, and a combination of internal–external capability into intrapreneurship, stakeholder integration, and absorptive capacity to attain sustainable innovation [36,41,42,43,44,45,46,47,48,214]. In this study, the specific capability of the firm is illuminated empirically into intrapreneurship (internal), stakeholder integration (external), and absorptive capacity (internal–external) as the fundamental strategic initiative. To achieve sustainable innovation, the impact of process innovation is clarified as a mediating role activated by firm-specific capabilities. The study crystallizes the empirical previous study on capabilities of stakeholder orientation by Ayuso et al. [50] and absorptive capacity by Ketata et al. [51] with the mediating effect of process innovation. It also enriches the body of knowledge of best practices of existing process improvements for process innovation for SMEs (Ponsignon et al. [122]). Regarding intrapreneurship is a powerful strategic tool for innovation (Wikstrom [208,209,214,215]); this study categorized and empirically tested firm-specific capability as a part of integrated capabilities to activate process innovation. Hence, in the practical sense, in order to improve sustainable innovation achievement, although such capabilities are currently at a low stage, SMEs are suggested to intensify their internal initiatives regarding intrapreneurship, stakeholder integration, and absorptive capacity in particular, and integrate them with the firm’s operation of process innovation.
However, cross-sectional design at a single point of time was utilized in this study; combining this method with qualitative in-depth interviews will be better for further research in order to capture the long-term effects of the capabilities of change processes for sustainable innovation. The study is only focused on the best practices of process innovation; thus, it would be interesting to assess sustainable innovation achievement by considering environmental practices in process innovation. In addition, in future research, it might be possible to use firm-specific capabilities as a set of the complementary asset for firms.

Author Contributions

Investigation, A.W.-H.; Conceptualization, D.S.; Data analysis, A.M. and A.S.; Project Administration, D.S.; Resources, Editing F.C.


This research received no external funding.


The authors would like to thank the Government of South Sulawesi, Politechnic ATI Makassar of Industrial Ministry, and Ministry of Research, Technology and Higher Education of the Republic of Indonesia for supporting this research.

Conflicts of Interest

The authors declare no conflict of interest.


  1. Fatimah, Y.A.; Biswas, W.; Mazhar, I.; Islam, M.N. Sustainable manufacturing for Indonesian small- and medium-sized enterprises (SMEs): The case of remanufactured alternators. J. Remanuf. 2013, 3, 6. [Google Scholar] [CrossRef][Green Version]
  2. Klewitz, J.; Hansen, E.G. Sustainability-oriented innovation of SMEs: A systematic review. J. Clean. Prod. 2014, 65, 57–75. [Google Scholar] [CrossRef]
  3. De Jesus Pacheco, D.A.; Carla, S.; Jung, C.F.; Ribeiro, J.L.; Navas, H.V.; Cruz-Machado, V.A. Eco-innovation determinants in manufacturing SMEs: Systematic review and research directions. J. Clean. Prod. 2017, 142, 2277–2287. [Google Scholar] [CrossRef]
  4. Ganapathy, S.P.; Natarajan, J.; Gunasekaran, A.; Subramanian, N. Influence of eco-innovation on Indian manufacturing sector sustainable performance. Int. J. Sustain. Dev. World Ecol. 2014, 21, 198–209. [Google Scholar] [CrossRef][Green Version]
  5. Rashid, N.; Jabar, J.; Yahya, S.; Samer, S. State of the Art of Sustainable Development: An Empirical Evidence from Firm’s Resource and Capabilities of Malaysian Automotive Industry. Procedia Soc. Behav. Sci. 2015, 195, 463–472. [Google Scholar] [CrossRef]
  6. Popa, S.; Soto-Acosta, P.; Martinez-Conesa, I. Technological Forecasting & Social Change Antecedents, moderators, and outcomes of innovation climate and open innovation: An empirical study in SMEs. Technol. Forecast. Soc. Chang. 2017, 118, 134–142. [Google Scholar]
  7. Laperche, B.; Picard, F. Environmental constraints, Product-Service Systems development and impacts on innovation management: learning from manufacturing firms in the French context. J. Clean. Product. 2013, 53, 118–128. [Google Scholar] [CrossRef]
  8. Freel, M.S. Patterns of innovation and skills in small firms. Technovation 2005, 25, 123–134. [Google Scholar] [CrossRef]
  9. Mazzarol, S.; Reboud, T. The role of complementary actors in the development of innovation in small firms. Int. J. Innov. Manag. 2008, 12, 223–253. [Google Scholar] [CrossRef]
  10. Dressler, M. Innovation management of German wineries: From activity to capacity—An explorative multi-case survey. Wine Econ. Policy 2013, 2, 19–26. [Google Scholar] [CrossRef]
  11. Bos-Brouwers, H.E.J. Corporate Sustainability and Innovation in SMEs: Evidence of Themes and Activities in Practice. Bus. Strateg. Environ. 2010, 19, 417–435. [Google Scholar] [CrossRef]
  12. Healy, J.; Mavromaras, K.; Sloane, P.J. Adjusting to skill shortages in Australian SMEs. Appl. Econ. 2015, 47, 2470–2487. [Google Scholar] [CrossRef]
  13. Bigliardi, B.; Galati, F. Which factors hinder the adoption of open innovation in SMEs? Technol. Anal. Strateg. Manag. 2016, 28, 869–885. [Google Scholar] [CrossRef]
  14. Strobel, N.; Kratzer, J. Obstacles to Innovation for SMEs: Evidence from Germany. Int. J. Innov. Manag. 2017, 21, 1750030. [Google Scholar] [CrossRef]
  15. Bigliardi, B.; Galati, F. An open innovation model for SMEs. In Researching Open Innovation in SMEs; Frattini, F., Usman, M., Roijakkers, N., Vanhaverbeke, W., Eds.; World Scientific Publishing Co. Pte. Ltd.: Singapore, 2018; pp. 71–113. [Google Scholar]
  16. Burke, S.; Gaughran, W.F. Intelligent environmental management for SMEs in manufacturing. Robot. Comput. Integr. Manuf. 2006, 22, 566–575. [Google Scholar] [CrossRef]
  17. Mendibil, K.; Hernandez, J.; Espinach, X.; Garriga, E.; Macgregor, S. How Can CSR Practices Lead to Successful Innovation in SMEs. Strathclyde, Publication from the RESPONSE Project. 2007, pp. 1–7. Available online: (accessed on 16 June 2018).
  18. Johnson, M.P.; Schaltegger, S. Two Decades of Sustainability Management Tools for SMEs: How Far Have We Come? J. Small Bus. Manag. 2016, 54, 481–505. [Google Scholar] [CrossRef]
  19. Iakovleva, T.; Kolvereid, L.; Stephan, U. Entrepreneurial intentions in developing and developed countries. Educ. Train. 2011, 53, 353–370. [Google Scholar] [CrossRef]
  20. Lingelbach, D.; Asel, P. What’s Distinctive About Growth-Oriented Entrepreneurship in Developing Countries? Paper No. 1; UTSA College of Business Center for Global Entrepreneurship Working: San Antonio, TX, USA, 2005; pp. 1–10. [Google Scholar]
  21. Chen, Y.; Yang, G.; Sweeney, S.; Feng, Y. Household biogas use in rural China: A study of opportunities and constraints. Renew. Sustain. Energy Rev. 2010, 14, 545–549. [Google Scholar] [CrossRef]
  22. Ortiz, W.; Terrapon-Pfaff, J.; Dienst, C. Understanding the diffusion of domestic biogas technologies. Systematic conceptualisation of existing evidence from developing and emerging countries. Renew. Sustain. Energy Rev. 2017, 74, 1287–1299. [Google Scholar] [CrossRef][Green Version]
  23. Paul, J.; Shrivatava, A. Do young managers in a developing country have stronger entrepreneurial intentions? Theory and debate. Int. Bus. Rev. 2016, 25, 1197–1210. [Google Scholar] [CrossRef]
  24. Despeisse, M.; Oates, M.R.; Ball, P.D. Sustainable manufacturing tactics and cross-functional factory modelling. J. Clean. Prod. 2013, 42, 31–41. [Google Scholar] [CrossRef][Green Version]
  25. Williamson, D.; Lynch-Wood, G.; Ramsay, J. Drivers of environmental behaviour in manufacturing SMEs and the implications for CSR. J. Bus. Ethics 2006, 67, 317–330. [Google Scholar] [CrossRef]
  26. Wellisch, M.; Jungmeier, G.; Karbowski, A.; Patel, M.K.; Rogulska, M. Perspective: Jatropha cultivation in southern India: Assessing farmers’ experiences. Biofuels Bioprod. Biorefin. 2010, 4, 275–286. [Google Scholar] [CrossRef]
  27. Smith, A.; Kern, F.; Raven, R.; Verhees, B. Spaces for Sustainable Innovation: Solar Photovoltaic Electricity in the UK. Technol. Forecast. Soc. Chang. 2014, 81, 115–130. [Google Scholar] [CrossRef]
  28. Rezai, G.; Sumin, V.; Mohamed, Z.; Shamsudin, M.N.; Sharifuddin, J. Implementing Green Practices as Sustainable Innovation Among Herbal-Based SME Entrepreneurs. J. Food Prod. Mark. 2016, 22, 1–18. [Google Scholar] [CrossRef]
  29. Prukvilailert, M.; Wangskarn, P. Energy conservation potential in SMEs of Thailand. Energy Procedia 2011, 12, 143–148. [Google Scholar] [CrossRef]
  30. Ghazilla, R.A.R.; Sakundarini, N.; Abdul-Rashid, S.H.; Ayub, N.S.; Olugu, E.U.; Musa, S.N. Drivers and barriers analysis for green manufacturing practices in Malaysian SMEs: A preliminary findings. Procedia CIRP 2015, 26, 658–663. [Google Scholar] [CrossRef]
  31. Quinn, J.B. Strategic Change: Logical Incrementalism. Sloan Manag. Rev. 1978, 20, 7. [Google Scholar]
  32. Löfving, M.; Säfsten, K.; Winroth, M. Manufacturing strategy frameworks suitable for SMEs. J. Manuf. Technol. Manag. 2014, 25, 7–26. [Google Scholar] [CrossRef][Green Version]
  33. Salavou, H.; Lioukas, S. Radical Product Innovations in SMEs: The Dominance of Entrepreneurial Orientation. Creat. Innov. Manag. 2003, 12, 94–108. [Google Scholar] [CrossRef]
  34. Singh, S.; Bhowmick, B. An Exploratory Study for Conceptualization of Rural Innovation in Indian Context. Procedia Soc. Behav. Sci. 2015, 207, 807–815. [Google Scholar] [CrossRef]
  35. Ren, T. Barriers and drivers for process innovation in the petrochemical industry: A case study. J. Eng. Technol. Manag. 2009, 26, 285–304. [Google Scholar] [CrossRef]
  36. Chen, Y.-S.; Chang, C.-H.; Lin, Y.-H. The Determinants of Green Radical and Incremental Innovation Performance: Green Shared Vision, Green Absorptive Capacity, and Green Organizational Ambidexterity. Sustainability 2014, 6, 7787–7806. [Google Scholar] [CrossRef][Green Version]
  37. Freel, M. Regional Development: An External linkages and product innovation in small manufacturing firms External linkages and product innovation in small manufacturing RMS. Entrep. Reg. Dev. 2000, 12, 245–266. [Google Scholar] [CrossRef]
  38. Jenkins, H. Small Business Champions for Corporate Social Responsibility. J. Bus. Ethics 2006, 67, 241–256. [Google Scholar] [CrossRef]
  39. Madrid-Guijarro, A.; Garcia, D.; van Auken, H. Barriers to Innovation among Spanish manufacturing SMEs. J. Small Bus. Manag. 2009, 47, 465–488. [Google Scholar] [CrossRef]
  40. Uddin, M.K. The role of diffusion of innovations for incremental development in small enterprises. Technovation 2006, 26, 274–284. [Google Scholar] [CrossRef]
  41. Schaper, M. The challenge of environmental responsibility and sustainable development: Implications for SME and entrepreneurship academics. In Radical Changes in the World: Will SMEs Soar or Crash? University of St Gallen KMU-HSG: St. Gallen, Switzerland, 2002; pp. 525–534. [Google Scholar]
  42. Pauraj, A. Understanding the Relationships Between Internal Resources and capabilities, sustainable supply management and organizational sustainability. J. Supply Chain Manag. 2011, 47, 19–37. [Google Scholar] [CrossRef]
  43. Boons, F.; Mendoza, A. Constructing sustainable palm oil: How actors define sustainability. J. Clean. Prod. 2010, 18, 1686–1695. [Google Scholar] [CrossRef]
  44. Boons, F.; Lüdeke-Freund, F. Business models for sustainable innovation: State-of-the-art and steps towards a research agenda. J. Clean. Prod. 2013, 45, 9–19. [Google Scholar] [CrossRef]
  45. Matos, S.; Silvestre, B.S. Managing stakeholder relations when developing sustainable business models: The case of the Brazilian energy sector. J. Clean. Prod. 2013, 45, 61–73. [Google Scholar] [CrossRef]
  46. Porter, M.E.; Kramer, M.R. Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility. Harv. Bus. Rev. 2006, 84, 78–92. [Google Scholar] [PubMed]
  47. Schaltegger, S.; Wagner, M. Types of sustainable entrepreneurship and conditions for sustainability innovation: From the administration of a technical challenge to the management of an entrepreneurial opportunity. In Sustainable Innovation and Entrepreneurship; Edward Elgar: Cheltenham, UK, 2008; pp. 27–48. [Google Scholar]
  48. Arnold, M.G.; Hockerts, K. The greening dutchman: Philips’ process of green flagging to drive sustainable innovations. Bus. Strateg. Environ. 2011, 20, 394–407. [Google Scholar] [CrossRef]
  49. Ayuso, S.; Rodríguez, M.Á.; Ricart, J.E. Using stakeholder dialogue as a source for new ideas: A dynamic capability underlying sustainable innovation. Corp. Gov. Int. J. Bus. Soc. 2006, 6, 475–490. [Google Scholar] [CrossRef]
  50. Ayuso, S.; Rodríguez, M.Á.; García-Castro, R.; Ariño, M.Á. Does stakeholder engagement promote sustainable innovation orientation? Ind. Manag. Data Syst. 2011, 111, 1399–1417. [Google Scholar] [CrossRef]
  51. Ketata, I.; Sofka, W.; Grimpe, C. The role of internal capabilities and firms’ environment for sustainable innovation: Evidence for Germany. R D Manag. 2015, 45, 60–75. [Google Scholar] [CrossRef]
  52. Hart, S.L. Innovations in Sustainability; Marcus, A.A., Ed.; Cambridge University Press: Cambridge, UK, 2015; 363p. [Google Scholar]
  53. Boons, F.; Montalvo, C.; Quist, J.; Wagner, M. Sustainable innovation, business models and economic performance: An overview. J. Clean. Prod. 2013, 45, 1–8. [Google Scholar] [CrossRef]
  54. Schaltegger, S.; Lüdeke-Freund, F.; Hansen, E.G. Business cases for sustainability: The role of business model innovation for corporate sustainability. Int. J. Innov. Sustain. Dev. 2012, 6, 95–119. [Google Scholar] [CrossRef]
  55. Schaltegger, S.; Etxeberria, I.Á.; Ortas, E. Innovating Corporate Accounting and Reporting for Sustainability—Attributes and Challenges. Sustain. Dev. 2017, 25, 113–122. [Google Scholar] [CrossRef]
  56. Wong, S.K.S. Environmental Requirements, Knowledge Sharing and Green Innovation: Empirical Evidence from the Electronics Industry in China. Bus. Strateg. Environ. 2013, 22, 321–338. [Google Scholar] [CrossRef]
  57. Ghisetti, C.; Rennings, K. Environmental innovations and profitability: How does it pay to be green? An empirical analysis on the German innovation survey. J. Clean. Prod. 2014, 75, 106–117. [Google Scholar] [CrossRef]
  58. Baumgartner, R.J. Managing Corporate Sustainability and CSR: A Conceptual Framework Combining Values, Strategies and Instruments Contributing to Sustainable Development. Corp. Soc. Responsib. Environ. Manag. 2014, 21, 258–271. [Google Scholar] [CrossRef]
  59. Ardito, L.; Carrillo-Hermosilla, J.; del Río, P.; Pontrandolfo, P. Corporate Social Responsibility and Environmental Management Invites Contributions for a Special Issue on ‘Sustainable Innovation: Processes, Strategies, and Outcomes’. Corp. Soc. Responsib. Environ. Manag. 2018, 25, 106–109. [Google Scholar] [CrossRef]
  60. Przychodzen, J.; Przychodzen, W. Relationships between eco-innovation and financial performance—Evidence from publicly traded companies in Poland and Hungary. J. Clean. Prod. 2015, 90, 253–263. [Google Scholar] [CrossRef]
  61. Elkington, J. Partnerships fromcannibals with forks: The triple bottom line of 21st-century business. Environ. Qual. Manag. 1998, 8, 37–51. [Google Scholar] [CrossRef]
  62. Lyasnikov, N.; Dudin, M.; Sekerin, V.; Veselovsky, M.; Aleksakhina, V. The National Innovation System: The Conditions of its Making and Factors in its Development. Life Sci. J. 2015, 11, 535–538. [Google Scholar]
  63. Tukker, A.; Charter, M.; Vezzoli, C.; Stø, E.; Andersen, M.M. System Innovation for Sustainability 1: Perspectives on Radical Changes to Sustainable Consumption and Production; Routledge: New York, NY, USA, 2017. [Google Scholar]
  64. Dudukalov, E.V.; Rodionova, N.D.; Sivakova, Y.E.; Vyugova, E.; Cheryomushkina, I.V.; Popkova, E.G. Global Innovational Networks: Sense and Role in Development of Global Economy. Contemp. Econ. 2016, 10, 299–310. [Google Scholar] [CrossRef]
  65. Pietrobelli, C.; Rabellotti, R. Global Value Chains Meet Innovation Systems: Are There Learning Opportunities for Developing Countries? World Dev. 2011, 39, 1261–1269. [Google Scholar] [CrossRef][Green Version]
  66. Vermeulen, W.J.V. Self-Governance for Sustainable Global Supply Chains: Can it Deliver the Impacts Needed? Bus. Strateg. Environ. 2013, 24, 73–85. [Google Scholar] [CrossRef]
  67. Gashenko, I.V.; Vokina, S.G.; Romanov, D.G.; Bezrukova, T.L.; Kozenko, Y.А. Theoretical and Methodological Aspects of Innovation Development in Modern Economic Systems. Contemp. Econ. 2016, 10, 363–372. [Google Scholar] [CrossRef]
  68. Raguž, M.J.; Mehičić, N.M. The influence of science–industry collaboration on firms’ innovative performance—Evidence from the Republic of Croatia. Econ. Res. Istraživanja 2017, 30, 992–1002. [Google Scholar] [CrossRef]
  69. Intarakumnerd, P.; Chairatana, P.; Tangchitpiboon, T. National innovation system in less successful developing countries: The case of Thailand. Res. Policy 2002, 31, 1445–1457. [Google Scholar] [CrossRef]
  70. Lundvall, B. National Innovation Systems—Analytical Concept and Development Tool. Ind. Innov. 2007, 14, 95–119. [Google Scholar] [CrossRef]
  71. Watkins, A.; Papaioannou, T.; Mugwagwa, J.; Kale, D. National innovation systems and the intermediary role of industry associations in building institutional capacities for innovation in developing countries: A critical review of the literature. Res. Policy 2015, 44, 1407–1418. [Google Scholar] [CrossRef]
  72. Iturrioz, C.; Aragón, C.; Narvaiza, L. How to foster shared innovation within SMEs’ networks: Social capital and the role of intermediaries. Eur. Manag. J. 2015, 33, 104–115. [Google Scholar] [CrossRef]
  73. Arocena, R.; Sutz, J. Innovation Systems and Developing Countries; DRUID Working Paper No 02-05; Danish Research Unit for Industrial Dynamics (DRUID): Aalborg/København, Denmark, 2015. [Google Scholar]
  74. Chaminade, C.; Lundvall, B.-A. Innovation Policies for Development: Towards a Systemic Experimentation Based Approach. In Proceedings of the 7th Globelics Conference, Dakar, Senegal, 6–8 October 2009; pp. 1–20. [Google Scholar]
  75. Rodrik, D. The New Development Economics: We Shall Experiment, but How Shall We Learn? Paper No. RWP08-055; HKS Working: Cambridge, MA, USA, 2008. [Google Scholar]
  76. Foss, N. Alternative research strategies in the knowledge movement: From macro bias to micro-foundations and multi-level explanation. Eur. Manag. Rev. 2009, 6, 16–28. [Google Scholar] [CrossRef][Green Version]
  77. Ahluwalia, S.; Mahto, R.V.; Walsh, S.T. Innovation in small firms: Does family vs. non-family matter? J. Small Bus. Strateg. 2017, 27, 39–49. [Google Scholar]
  78. Siyanbola, W.; Abiodun, E.; Adebowale, B.A.; Olumuyiwa, O. Innovation Systems and Capabilities in Developing Regions: Concepts, Issues, Cases; Routledge: New York, NY, USA, 2016. [Google Scholar]
  79. Vogel, R.; Güttel, W.H. The dynamic capability view in strategic management: A bibliometric review. Int. J. Manag. Rev. 2013, 15, 426–446. [Google Scholar] [CrossRef]
  80. Mazzero, M.F.; Rosati, F.; Andersen, M.M.; Li-Ying, J. Strategizing for sustainability in a changing world: A dynamic capability approach. In DTU’s Sustain Conference 2015 [G-8]; Technical University of Denmark (DTU): Lyngby, Denmark, 2015. [Google Scholar]
  81. Dangelico, R.M.; Pujari, D.; Pontrandolfo, P. Green Product Innovation in Manufacturing Firms: A Sustainability-Oriented Dynamic Capability Perspective. Bus. Strateg. Environ. 2017, 26, 409–506. [Google Scholar] [CrossRef]
  82. Penrose, E. The Theory of Growth of the Firm; Blackwell: Oxford, UK, 1959. [Google Scholar]
  83. Rubin, P.H. The expansion of firms. J. Political Econ. 1973, 81, 936–949. [Google Scholar] [CrossRef]
  84. Prahalad, C.K.; Hamel, G. The Core Competence of the Corporation. In Knowledge and Strategy; Butterworth Heinemann: Woburn, UK, 1999; pp. 41–59. [Google Scholar]
  85. Barney, J. Firm Resources and Sustained Competitive Adavantage. J. Manag. 1991, 17, 99–120. [Google Scholar]
  86. Bandehnezhad, M.; Zailani, S.; Fernando, Y. An empirical study on the contribution of lean practices to environmental performance of the manufacturing firms in northern region of Malaysia. Int. J. Value Chain Manag. 2012, 6, 144–168. [Google Scholar] [CrossRef]
  87. Zhu, Q.; Cordeiro, J.; Sarkis, J. Institutional pressures, dynamic capabilities and environmental management systems: Investigating the ISO 9000—Environmental management system implementation linkage. J. Environ. Manag. 2013, 114, 232–242. [Google Scholar] [CrossRef] [PubMed]
  88. Chiarini, A. Relationships between total quality management and Six Sigma inside European manufacturing companies: A dedicated survey. Int. J. Product. Qual. Manag. 2013, 11, 179–194. [Google Scholar] [CrossRef]
  89. Rusko, M.; Sablik, J.; Marková, P.; Lach, M.; Riedrich, S. Sustainable development, quality management system and environmental management system in Slovak Republic. Procedia Eng. 2014, 69, 486–491. [Google Scholar] [CrossRef]
  90. Sebastianelli, R.; Tamimi, N.; Iacocca, K. Improving the quality of environmental management: Impact on shareholder value. Int. J. Qual. Reliab. Manag. 2015, 32, 53–80. [Google Scholar] [CrossRef]
  91. Borch, O.J.; Madsen, E.L. Dynamic capabilities facilitating innovative strategies in SMEs. Int. J. Technoentrepreneursh. 2007, 1, 109–125. [Google Scholar] [CrossRef]
  92. Upstill-Goddard, J.; Glass, J.; Dainty, A.; Nicholson, I. Implementing sustainability in small and medium-sized construction firms. Eng. Constr. Archit. Manag. 2016, 23, 407–427. [Google Scholar] [CrossRef][Green Version]
  93. Eisenhardt, K.M.; Martin, J.A. Dynamic capabilities: What are they? Strateg. Manag. J. 2000, 21, 1105–1121. [Google Scholar] [CrossRef]
  94. Teece, D.J.; Pisano, G.; Shuen, A. Dynamic Capabilities and Strategic Management. Strateg. Manag. J. 1997, 18, 509–533. [Google Scholar] [CrossRef]
  95. Tseng, M.-L.; Wang, R.; Chiu, A.S.F.; Geng, Y.; Lin, Y. Improving performance of green innovation practices under uncertainty. J. Clean. Prod. 2013, 40, 71–82. [Google Scholar] [CrossRef]
  96. Denford, J.S. Building knowledge: Developing a knowledge-based dynamic capabilities typology. J. Knowl. Manag. 2013, 17, 175–194. [Google Scholar] [CrossRef]
  97. Nonaka, I.; Kodama, M.; Hirose, A.; Kohlbacher, F. Dynamic fractal organizations for promoting knowledge-based transformation—A new paradigm for organizational theory. Eur. Manag. J. 2014, 32, 137–146. [Google Scholar] [CrossRef]
  98. Lampel, J.; Shamsie, J. Capabilities in motion: New organizational forms and the reshaping of the Hollywood movie industry. J. Manag. Stud. 2003, 40, 2189–2210. [Google Scholar] [CrossRef]
  99. Zahra, S.A.; Sapienza, H.J.; Davidsson, P. Entrepreneurship and Dynamic Capbilities: A Review, Model and Research Agenda. J. Manag. Stud. 2006, 43, 917–955. [Google Scholar] [CrossRef][Green Version]
  100. Villar, C.; Alegre, J.; Pla-Barber, J. Exploring the role of knowledge management practices on exports: A dynamic capabilities view. Int. Bus. Rev. 2014, 23, 38–44. [Google Scholar] [CrossRef]
  101. Weerawardena, J.; Mort, G.S.; Salunke, S.; Knight, G.; Liesch, P.W. The role of the market sub-system and the socio-technical sub-system in innovation and firm performance: A dynamic capabilities approach. J. Acad. Mark. Sci. 2015, 43, 221–239. [Google Scholar] [CrossRef]
  102. North, K.; Bergstermann, M.; Hardwig, T. Learning to Grow: A Methodology to Sustain Growth Capabilities of SMES. In Competitive Strategies for Small and Medium Enterprises; Springer International Publishing: Cham, Switzerland, 2016; pp. 223–235. [Google Scholar]
  103. Stevenson, H.H.; Jarillo, J.C. A paradigm of entrepreneurship: Entrepreneurial management. Strateg. Manag. J. 1990, 11, 17–27. [Google Scholar]
  104. Kuratko, D.F.; Morris, M.H. Corporate Entrepreneurship: the dynamic strategy for 21st century organizations. In Issues in Entrepreneurship; Emerald Group Publishing Limited: Bingley, UK, 2003; pp. 21–46. [Google Scholar]
  105. Kyläheiko, K.; Jantunen, A.; Puumalainen, K.; Saarenketo, S.; Tuppura, A. Innovation and internationalization as growth strategies: The role of technological capabilities and appropriability. Int. Bus. Rev. 2011, 20, 508–520. [Google Scholar] [CrossRef]
  106. Antoncic, B.; Hisrich, R.D. Intrapreneurship: Construct refinement and cross-cultural validation. J. Bus. Ventur. 2001, 16, 495–527. [Google Scholar] [CrossRef]
  107. Coakes, E.W.; Smith, P.A.C.; Alwis, D. Sustainable Innovation and Right to Market. Inf. Syst. Manag. 2011, 28, 30–42. [Google Scholar] [CrossRef]
  108. Jumpponen, J.; Ikävalko, M.; Pihkala, T. Management and change in turbulent times: How do Russian small business managers perceive the development of their business environment? J. Bus. Econ. Manag. 2008, 9, 115–122. [Google Scholar] [CrossRef]
  109. Polonsky, M.J. A Stakeholders Theory Approach to Designing Environmental Marketing Strategy. J. Bus. Ind. Mark. 1995, 10, 29–46. [Google Scholar] [CrossRef]
  110. Plaza-Úbeda, J.A.; de Burgos-Jiménez, J.; Carmona-Moreno, E. Measuring stakeholder integration: Knowledge, interaction and adaptational behavior dimensions. J. Bus. Ethics 2010, 93, 419–442. [Google Scholar] [CrossRef]
  111. Zollo, S.G.; Winter, M. Deliberate Learning and the evolution of dynamic capabilities. Organ. Sci. 2002, 13, 339–351. [Google Scholar] [CrossRef]
  112. Heugens, P.P.M.A.R.; van den Bosch, F.A.J.; van Riel, C.B.M. Stakeholder Integration: Building Mutually Enforcing Relationships. Bus. Soc. 2002, 41, 36–60. [Google Scholar] [CrossRef][Green Version]
  113. Black, L.D.; Härtel, C.E. The five capabilities of socially responsible companies. J. Public Aff. 2004, 4, 125–144. [Google Scholar] [CrossRef]
  114. Indarti, N.; Langenberg, M. Factors affecting business success among SMEs: Empirical evidences from Indonesia. In Proceedings of the Second Bi-Annual European Summer University, Enschede, The Netherlands, 20–21 September 2004; pp. 1–15. [Google Scholar]
  115. Waalkens, J. Building Capabilities in the Construction Sector: Absorptive Capacity of Architectural and Engineering Medium-Sized Enterprises. Ph.D. Dissertation, University of Groningen, Groningen, The Netherlands, 2006. [Google Scholar]
  116. Webster, A. State of the art: Risk, science and policy—Researching the social management of uncertainty. Policy Stud. 2004, 25, 5–18. [Google Scholar] [CrossRef]
  117. Pitelis, C.; Teece, D. The (New) Nature and Essence of the Firm. Eur. Manag. Rev. 2009, 6, 5–15. [Google Scholar] [CrossRef][Green Version]
  118. Iacobucci, D. Dynamic Capabilities and Entrepreneurial Team Development in SMEs; Routledge: London, UK, 2007. [Google Scholar]
  119. Wang, C.L.; Ahmed, P. Dynamic Capabilities: A Review and Research Agenda. Int. J. Manag. Rev. 2007, 9, 31–51. [Google Scholar] [CrossRef]
  120. Benner, M.J.; Veloso, F.M. ISO 9000 practices and financial performance: A technology coherence perspective. J. Oper. Manag. 2008, 26, 611–629. [Google Scholar] [CrossRef]
  121. Ponsignon, F.; Maull, R.S.; Smart, P.A. Four archetypes of process improvement: A Q-methodological study. Int. J. Prod. Res. 2013, 52, 4507–4525. [Google Scholar] [CrossRef][Green Version]
  122. Makadok, R. Toward a synthesis of the resource-based and dynamic-capability views of rent creation. Strateg. Manag. J. 2001, 22, 387–401. [Google Scholar] [CrossRef]
  123. Amit, R.; Schoemaker, P.J.H. Strategic assets and organizational rent. Strateg. Manag. J. 1993, 14, 33–46. [Google Scholar] [CrossRef]
  124. Krolikowski, M.W.; Okoeguale, K. Economic Shocks, Competition and Merger Activity. J. Bus. Account. Financ. Perspect. 2018, pp. 1–54. Available online: (accessed on 16 June 2018).
  125. Cohendet, P.; Llerena, P. A Dual Theory of the Firm Between Transactions and Competences: Conceptual Analysis and Empirical Considerations. Rev. d’Écon. Ind. 2005, 110, 175–198. [Google Scholar] [CrossRef]
  126. Nelson, R.R. The role of firm difference in an evolutionary theory of technical advance. In Evolutionary and Neo-Schumpeterian Approaches to Economics; Magnusson, L., Ed.; Kluwer: Dordrecht, The Netherlands, 1994. [Google Scholar]
  127. Mardani, A.; Jusoh, A.; Zavadskas, E.; Cavallaro, F.; Khalifah, Z. Sustainable and Renewable Energy: An Overview of the Application of Multiple Criteria Decision Making Techniques and Approaches. Sustainability 2015, 7, 13947–13984. [Google Scholar] [CrossRef]
  128. Zavadskas, E.K.; Govindan, K.; Antucheviciene, J.; Turskis, Z. Hybrid multiple criteria decision-making methods: A review of applications for sustainability issues. Econ. Res. Istraživanja 2016, 29, 857–887. [Google Scholar] [CrossRef]
  129. Cohen, W.M.; Levinthal, D.A. Absorptive Capacity: A New Perspective on Learning and Innovation. Adm. Sci. Q. 1990, 35, 128–152. [Google Scholar] [CrossRef]
  130. Gray, C. Absorptive capacity, knowledge management and innovation in entrepreneurial small firms. Int. J. Entrep. Behav. Res. 2006, 12, 345–360. [Google Scholar] [CrossRef]
  131. Kostopoulos, K.; Papalexandris, A.; Papachroni, M.; Ioannou, G. Absorptive capacity, innovation, and financial performance. J. Bus. Res. 2011, 64, 1335–1343. [Google Scholar] [CrossRef]
  132. Bougrain, F.; Haudeville, B. Innovation, collaboration and SMEs Internal Research Capacities. Res. Policy 2002, 31, 735–747. [Google Scholar] [CrossRef]
  133. McFadzean, E.; O’Loughlin, A.; Shaw, E. Corporate entrepreneurship and innovation Part 1: The missing link. Eur. J. Innov. Manag. 2005, 8, 350–372. [Google Scholar] [CrossRef]
  134. Miller, D.; Friesen, P.H. Innovation in conservative and entrepreneurial firms: Two models of strategic momentum. Strateg. Manag. J. 1982, 3, 1–25. [Google Scholar] [CrossRef]
  135. Lumpkin, G.T.; Dess, G.G. Linking two dimensions of entrepreneurial orientation to firm performance: The moderating role of environment and industry life cycle. J. Bus. Ventur. 2001, 16, 429–451. [Google Scholar] [CrossRef]
  136. Hughes, M.; Morgan, R. Deconstructing the relationship between entrepreneurial orientation and business performance at the embryonic stage of firm growth. Ind. Mark. Manag. 2007, 36, 651–661. [Google Scholar] [CrossRef]
  137. Madhoushi, M.; Sadati, A.; Delavari, H.; Mehdivand, M.; Mihandost, R. Entrepreneurial orientation and innovation performance: The mediating role of knowledge management. Asian J. Bus. Manag. 2011, 3, 310–316. [Google Scholar]
  138. Shepherd, D.A.; Patzelt, H.; Haynie, J.M. Entrepreneurial spirals: Deviation-amplifying loops of an entrepreneurial mindset and organizational culture. Entrep. Theory Pract. 2010, 34, 59–82. [Google Scholar] [CrossRef]
  139. Iansiti, M. Technology Integration; Harvard Business School Press: Boston, MA, USA, 1998. [Google Scholar]
  140. Hacklin, F.; Raurich, V.; Marxt, C. Implications of technological convergence on innovation trajectories: The case of ICT industry. Int. J. Innov. Technol. Manag. 2005, 2, 313–330. [Google Scholar] [CrossRef]
  141. Davies, H.; Leung, T.K.; Luk, S.; Wong, Y.H. Guanxi and business practices in the People’s Republic of China. In Chinese Culture, Organizational Behavior, and International Business Management; Alon, I., Ed.; Praeger: Westport, CT, USA, 2003; pp. 41–56. [Google Scholar]
  142. Kultti, K.; Takalo, T. Optimal Number of Intellectual Property Rights; University of Helsinki: Helsinki, Finland, 2003. [Google Scholar]
  143. Zhang, L.; Bryde, D.; Meehan, J. Make-To-Concept: A ‘Solution-Based’ Approach To Complex New Product Development. Int. J. Innov. Manag. 2011, 15, 279–301. [Google Scholar] [CrossRef]
  144. Holmes, S.; Smart, P. Exploring open innovation practice in firm nonprofit engagements: A corporate social responsibility perspective. R D Manag. 2009, 39, 394–409. [Google Scholar] [CrossRef]
  145. Aravind, D.; Damanpour, F.; Devece, C. Environmental Performance: Interplay Between the Roles of Process Innovation Capability and Managerial Innovation Implementation. In Management Innovation; Springer International Publishing: Cham, Switzerland, 2014; pp. 29–43. [Google Scholar]
  146. Moyano-Fuentes, J.; Maqueira-Marín, J.M.; Bruque-Cámara, S. Process innovation and environmental sustainability engagement: An application on technological firms. J. Clean. Prod. 2018, 171, 844–856. [Google Scholar] [CrossRef]
  147. Foster, C.; Green, K. Greening the Innovation Process. Bus. Strateg. Environ. 2000, 9, 287–303. [Google Scholar] [CrossRef]
  148. Sagar, A.D. Technology innovation and energy. In The Encyclopedia of Energy; Cleveland, C., Ed.; Elsevier: Amsterdam, The Netherlands, 2004; Volume 6, pp. 27–43. [Google Scholar]
  149. Porter, M.E.; van der Linde, C. Green and competitive: Ending the stalemate. Long Range Plan. 1995, 28, 128–129. [Google Scholar]
  150. Nidumolu, R.; Prahalad, C.K.; Rangaswami, M.R. Why Sustainability Is Now the Key Driver of Innovation. Harv. Bus. Rev. 2009, 87, 59–64. [Google Scholar]
  151. Edmondson, A. Psycological safety and learning behaviour in work teams. Adm. Sci. Q. 1999, 44, 350–383. [Google Scholar] [CrossRef]
  152. Baer, M.; Frese, M. Innovation is not enough: Climates for initiation and psychological safety, process innocations, and firm performance. J. Organ. Behav. 2003, 24, 45–68. [Google Scholar] [CrossRef]
  153. Guinet, J.; Pilat, D. Promoting Innovation—Does It Matter? Available online: (accessed on 16 June 2018).
  154. Abernathy, W.J.; Clark, K.B. Innovation: Mapping the winds of creative destruction. Res. Policy 1985, 14, 3–22. [Google Scholar] [CrossRef]
  155. Cooke, I.I.E.; Mayes, P. Introduction to Innovation and Technology Transfer; Artech House: Norwood, MA, USA, 1996. [Google Scholar]
  156. Del Brío, J.Á.; Junquera, B. A review of the literature on environmental innovation management in SMEs: Implications for public policies. Technovation 2003, 23, 939–948. [Google Scholar] [CrossRef]
  157. Hansen, E.G.; Klewitz, J. The Role of an SME’s Green Strategy in Public-Private Eco-innovation Initiatives: The Case of Ecoprofit. J. Small Bus. Entrep. 2012, 25, 451–477. [Google Scholar] [CrossRef][Green Version]
  158. Del Río González, P. Analysing the factors influencing clean technology adoption: A study of the Spanish pulp and paper industry. Bus. Strateg. Environ. 2005, 14, 20–37. [Google Scholar] [CrossRef]
  159. Gluch, P.; Gustafsson, M.; Thuvander, L. An absorptive capacity model for green innovation and performance in the construction industry. Constr. Manag. Econ. 2009, 27, 451–464. [Google Scholar] [CrossRef]
  160. Zahra, S.A. Corporate entrepreneurship and financial performance: The case of management leveraged buyouts. J. Bus. Ventur. 1995, 10, 225–247. [Google Scholar] [CrossRef]
  161. Thornberry, N. Corporate entrepreneurship: Antidote or oxymoron? Eur. Maneg. J. 2001, 19, 526–533. [Google Scholar] [CrossRef]
  162. Seebode, D.; Jeanrenaud, S.; Bessant, J. Managing Innovation for Sustainability. R D Manag. 2012, 42, 195–206. [Google Scholar] [CrossRef][Green Version]
  163. Charlesworth, K. Business needs clear policy on green issues. Prof. Manag. 1998, 7, 16–17. [Google Scholar]
  164. Petts, J. Environmental Responsiveness, Individuals and Organisational Learning: SME Experience. J. Environ. Plan. Manag. 1998, 41, 711–731. [Google Scholar] [CrossRef]
  165. Cairncross, F. Costing the Earth: The Challenge for Governments, the Opportunities for Business; Harvard Business School Press: Boston, MA, USA, 1993. [Google Scholar]
  166. Hart, S.L. A Natural-Resource-Based View of the Firm: Fifteen Years After. Acad. Manag. Rev. 1995, 20, 986–1014. [Google Scholar] [CrossRef]
  167. Yoshino, N.; Taghizadeh-Hesary, F. Solutions for Small and Medium-sized Entreprises’ Difficulties in Accessing Finance: Asian Experiences; ADBI Working Paper Series, No. 768; Asian Development Bank Institute (ADBI): Tokyo, Japan, 2017. [Google Scholar]
  168. Matrutty, E.S.; Franksisca, R.; Damayanti, T. SMEs Competitiveness In An Integrated Economy: A Preliminary Study From Indonesia. Oradea J. Bus. Econ. 2018, 2, 7–16. [Google Scholar]
  169. GII. Global Innovation Index. 2017. Available online: (accessed on 16 June 2018).
  170. GCR. Global Competitiveness Report. 2017. Available online: (accessed on 16 June 2018).
  171. Sulawesi, Penyumbang Terbesar Pertumbuhan Ekonomi Indonesia. Available online: (accessed on 2 September 2017).
  172. IPM Sulsel Naik Kelas, Dari Sedang ke Tinggi. Available online: (accessed on 2 September 2017).
  173. Tambunan, D.B.; Hashim, N.B. The Relationship Between Entrepreneurial Orientation and Performance of SMEs in Indonesia. Adv. Sci. Lett. 2018, 24, 3125–3128. [Google Scholar] [CrossRef]
  174. Indarti, N. Impacts of external knowledge and interaction on innovation capability among Indonesian SMEs. Int. J. Bus. Innov. Res. 2017, 13, 430. [Google Scholar] [CrossRef]
  175. Bartlett, J.E.; Kotrlik, J.W.; Higgins, C.C. Organizational Research: Determining Appropriate Sample Size in Survey Research Appropriate Sample Size in Survey Research. Inf. Technol. Learn. Perform. J. 2001, 19, 43–50. [Google Scholar]
  176. Yukl, G. Leadership in Organizations, 5th ed.; Prentice Hall: Englewood Cliffs, NJ, USA, 2002. [Google Scholar]
  177. Bass, B.M. Currents developments in transformational leadershwidieip. Psychol. J. 1999, 3, 5–21. [Google Scholar]
  178. Otero-Neira, C.; Lindman, M.T.; Fernández, M.J. Innovation and performance in SME furniture industries: An international comparative case study. Mark. Intell. Plan. 2009, 27, 216–232. [Google Scholar] [CrossRef]
  179. Babbie, E. Survey Research Methods; Wadsworth: Belmont, CA, USA, 1990. [Google Scholar]
  180. Brislin, R.W. Back-translation for cross-cultural research. J. Cross-Cult. Psychol. 1970, 1, 185–216. [Google Scholar] [CrossRef]
  181. Hair, J.; Hollingsworth, C.L.; Randolph, A.B.; Chong, A.Y.L. An updated and expanded assessment of PLS-SEM in information systems research. Ind. Manag. Data Syst. 2017, 117, 442–458. [Google Scholar] [CrossRef]
  182. Rigdon, E.E. Choosing PLS path modeling as analytical method in European management research: A realist perspective. Eur. Manag. J. 2016, 34, 598–605. [Google Scholar] [CrossRef]
  183. Hair, J.F., Jr.; Sarstedt, M.; Hopkins, L.; Kuppelwieser, V.G. Partial least squares structural equation modeling (PLS-SEM). Eur. Bus. Rev. 2014, 26, 106–121. [Google Scholar] [CrossRef]
  184. Hair, J.F., Jr.; Hult, G.T.M.; Ringle, C.M.; Sarstedt, M. A Primer on Partial Least Squares Structural Equation Modeling (PLS-SEM); Sage: Thousand Oaks, CA, USA, 2013. [Google Scholar]
  185. Venkatraman, N. Strategic Orientation of Business Enterprises: The Construct, Dimensionality, and Measurement. Manag. Sci. 1989, 35, 942–962. [Google Scholar] [CrossRef][Green Version]
  186. Covin, J.G.; Slevin, D.P. Strategic Management of Small Firms in Hostile and Benign Environments. Strateg. Manag. J. 1989, 10, 75–87. [Google Scholar] [CrossRef]
  187. Nasution, H.N.; Mavondo, F.T. Organisational capabilities: Antecedents and implications for customer value. Eur. J. Mark. 2008, 42, 477–501. [Google Scholar] [CrossRef]
  188. Lumpkin, G.T.; Cogliser, C.C.; Schneider, D.R. Understanding and Measuring Autonomy: An Entrepreneurial Orientation Perspective. Entrep. Theory Pract. 2009, 33, 47–69. [Google Scholar] [CrossRef]
  189. Flatten, T.C.; Engelen, A.; Zahra, S.A.; Brettel, M. A measure of absorptive capacity: Scale development and validation. Eur. Manag. J. 2011, 29, 98–116. [Google Scholar] [CrossRef]
  190. Zhu, Q.; Sarkis, J. Relationships between operational practices and performance among early adopters of green supply chain management practices in Chinese manufacturing enterprises. J. Oper. Manag. 2004, 22, 265–289. [Google Scholar] [CrossRef]
  191. Chin, W.W. The partial least squares approach to structural equation modeling. In Modern Methods for Business Research; Marcoulides, G.A., Ed.; Psychology Press: New York, NY, USA, 2013. [Google Scholar]
  192. Goodhue, D.; Lewis, W.; Thompson, R. PLS, Small Sample Size, and Statistical Power in MIS Research. In Proceedings of the 39th Annual Hawaii International Conference on System Sciences, Kauia, HI, USA, 4–7 January 2006; Volume 8, pp. 200–220. [Google Scholar]
  193. Hair, J.F.; Ringle, C.M.; Sarstedt, M. PLS-SEM: Indeed a silver bullet. J. Mark. Theory Pract. 2011, 19, 139–152. [Google Scholar] [CrossRef]
  194. Cohen, J. Statistical Power Analysis for the Behavioural Sciences, 2nd ed.; Erlbaum: Malwah, NJ, USA, 1988. [Google Scholar]
  195. Preacher, K.J.; Hayes, A.F. SPSS and SAS procedures for estimating indirect effects in simple mediation models. Behav. Res. Methods Instrum. Comput. 2004, 36, 717–731. [Google Scholar] [CrossRef] [PubMed][Green Version]
  196. Preacher, K.J.; Hayes, A.F. Asymptotic and resampling strategies for assessing and comparing indirect effects in multiple mediator models. Behav. Res. Methods 2008, 40, 879–891. [Google Scholar] [CrossRef] [PubMed][Green Version]
  197. Henseler, J.; Ringle, C.M.; Sinkovics, R.R. The use of partial least squares path modeling in international marketing. Adv. Int. Mark. 2009, 20, 277–319. [Google Scholar]
  198. Piening, E.P.; Salge, T.O. Understanding the antecedents, contingencies, and performance implications of process innovation: A dynamic capabilities perspective. J. Prod. Innov. Manag. 2015, 32, 80–97. [Google Scholar] [CrossRef]
  199. Spithoven, A.; Clarysse, B.; Knockaert, M. Building absorptive capacity to organise inbound open innovation in traditional industries. Technovation 2010, 30, 130–141. [Google Scholar] [CrossRef]
  200. Collins, E.; Lawrence, S.; Pavlovicha, K.; Ryan, C. Business networks and the uptake of sustainability practices: The case of New Zealand. J. Clean. Prod. 2007, 15, 729–740. [Google Scholar] [CrossRef]
  201. Anbumozhi, V.; Kanda, Y. Greening the Production and Supply Chains in Asia: Is There a Role for Voluntarily Initiatives? KRC Discuss Paper KRC-2005-No. 6E; IGES Kansai Research Centre: Kobe, Janpan, 2005; pp. 1–18. [Google Scholar]
  202. Andersén, J.; Kask, J. Asymmetrically realized absorptive capacity and relationship durability. Manag. Decis. 2012, 50, 43–57. [Google Scholar] [CrossRef]
  203. Zhang, S.; Zhu, D.; Shi, Q.; Cheng, M. Which countries are more ecologically efficient in improving human well-being? An application of the Index of Ecological Well-being Performance. Resour. Conserv. Recycl. 2018, 129, 112–119. [Google Scholar] [CrossRef]
  204. Prange, C.; Pinho, J.C. How personal and organizational drivers impact on SME international performance: The mediating role of organizational innovation. Int. Bus. Rev. 2017, 26, 1114–1123. [Google Scholar] [CrossRef]
  205. Gupta, H.; Barua, M.K. Modelling cause and effect relationship among enablers of innovation in SMEs. Benchmark. Int. J. 2018. accepted. [Google Scholar] [CrossRef]
  206. Keizer, J.A.; Dijkstra, L.; Halman, J.I.M. Explaining innovative efforts of SMEs. An exploratory survey among SMEs in the mechanical and electrical engineering sector in The Netherlands. Technovation 2002, 22, 1–13. [Google Scholar] [CrossRef]
  207. Gao, S.S.; Zhang, J.J. Stakeholder engagement, social auditing and corporate sustainability. Bus. Process Manag. J. 2006, 12, 722–740. [Google Scholar] [CrossRef]
  208. Deprez, J.; Leroy, H.; Euwema, M. Three chronological steps toward encouraging intrapreneurship: Lessons from the Wehkamp case. Bus. Horiz. 2018, 61, 135–145. [Google Scholar] [CrossRef]
  209. Falola, H.O.; Salau, O.P.; Olokundun, M.A.; Oyafunke-Omoniyi, C.O.; Ibidunni, A.S.; Osibanjo, O.A. Employees’ intrapreneurial engagement initiatives and its influence on organisational survival. Bus. Theory Pract. 2018, 19, 9–16. [Google Scholar] [CrossRef]
  210. Von Hippel, E. Democratizing Innovation; The MIT Press: Cambridge, MA, USA, 2005. [Google Scholar]
  211. Quist, J.; Tukker, A. Knowledge collaboration and learning for sustainable innovation and consumption: Introduction to the ERSCP portion of this special volume. J. Clean. Prod. 2013, 48, 167–175. [Google Scholar] [CrossRef]
  212. Hautamäki, A.; Oksanen, K. Sustainable innovation: Solving wicked problems through innovation. In Open Innovation: A Multifaceted Perspective: Part I; World Scientific: Singapore, 2015; pp. 87–110. [Google Scholar]
  213. Hockerts, K.; Wüstenhagen, R. Greening Goliaths versus emerging Davids—Theorizing about the role of incumbents and new entrants in sustainable entrepreneurship. J. Bus. Ventur. 2010, 25, 481–492. [Google Scholar] [CrossRef]
  214. Wikstrom, P.-A. Sustainability and Organizational Activities—Three Approaches. Sustain. Dev. 2010, 18, 99–107. [Google Scholar] [CrossRef]
  215. Widya-Hastuti, A.; Talib, N.B.A.; Wong, K.Y.; Mardani, A. The Role of Intrapreneurship for Sustainable Innovation through Process Innovation in Small and Medium-sized Enterprises: A Conceptual Framework. Int. J. Econ. Financ. Issues 2016, 6, 83–91. [Google Scholar]
Figure 1. Theoretical Framework of Sustainable Innovation.
Figure 1. Theoretical Framework of Sustainable Innovation.
Sustainability 10 02244 g001
Figure 2. The Research Framework.
Figure 2. The Research Framework.
Sustainability 10 02244 g002
Figure 3. Structural Model 1 of Firm-Specific Capability of Sustainable Innovation. * p < 0.10, ** p < 0.05.
Figure 3. Structural Model 1 of Firm-Specific Capability of Sustainable Innovation. * p < 0.10, ** p < 0.05.
Sustainability 10 02244 g003
Figure 4. Full Structural Model 2.
Figure 4. Full Structural Model 2.
Sustainability 10 02244 g004
Table 1. Characteristics of Firms.
Table 1. Characteristics of Firms.
Types of FirmsFrequency%
Food and Drink6333.1
Building material136.8
Over 205830.5
Table 2. Convergent Validity, Reliability, and Discriminant Validity of Fornell–Larcker criterion. AVE: average variance extracted.
Table 2. Convergent Validity, Reliability, and Discriminant Validity of Fornell–Larcker criterion. AVE: average variance extracted.
ConstructsNumber of Initial ItemAVEComposite ReliabilityCronbach AlphaCorrelation between ConstructsNumber of Final Item
1. AC140.730.910.90.854
2. Int150.570.860.80.610.755
3. SInt160.510.830.80.550.540.715
4. PI40.750.850.70.680.700.700.872
5. SI130.590.880.80.700.530.500.730.776
Table 3. Cross-loading of Validity Measurement.
Table 3. Cross-loading of Validity Measurement.
Table 4. Result Correlations between Firm-Specific Capability and Process Innovation.
Table 4. Result Correlations between Firm-Specific Capability and Process Innovation.
HypothesisRelationStd. Beta (β)Standard Errort-Value (Bootstrap)Effect Size (f2)Decision
H1aAC → PI0.2720.0584.631 ***0.127Supported
H1bInt → PI0.3310.0684.853 ***0.194Supported
H1cSInt → PI0.3720.0614.447 ***0.283Supported
H2PI → SI0.6070.0996.100 ***Supported
*** p < 0.01. AC = Absorptive Capacity; Int = Intrapreneurship; StInt = Stakeholder Integration; SI = Sustainable Innovation.
Table 5. Assessment of Structural Model 1.
Table 5. Assessment of Structural Model 1.
Endogenous ConstructR2Q2
RelationStd. Beta (β)Standard Errort-Value (bootstrap)Decision
H3a. AC → SI0.4480.0715.423 ***Supported
H3b. Int → SI0.1700.0731.806 *Supported
H3c. SInt → SI0.1590.0672.037 **Supported
* p < 0.10, ** p < 0.05, *** p < 0.01.
Table 6. Assessment of Full Structural Model 2.
Table 6. Assessment of Full Structural Model 2.
Endogenous ConstructR2Q2
RelationStd. Beta (β)Standard Errort-Value (Bootstrap)VAFDecision
H3d. AC → PI → SI0.1650.0413.995 ***36.7%Supported
H3e. Int → PI → SI0.2010.0543.672 ***119.7%Supported
H3f. SI → PI → SI0.2260.0564.022 ***141.3%Supported
*** p < 0.01.

Share and Cite

MDPI and ACS Style

Widya-Hasuti, A.; Mardani, A.; Streimikiene, D.; Sharifara, A.; Cavallaro, F. The Role of Process Innovation between Firm-Specific Capabilities and Sustainable Innovation in SMEs: Empirical Evidence from Indonesia. Sustainability 2018, 10, 2244.

AMA Style

Widya-Hasuti A, Mardani A, Streimikiene D, Sharifara A, Cavallaro F. The Role of Process Innovation between Firm-Specific Capabilities and Sustainable Innovation in SMEs: Empirical Evidence from Indonesia. Sustainability. 2018; 10(7):2244.

Chicago/Turabian Style

Widya-Hasuti, Afris, Abbas Mardani, Dalia Streimikiene, Ali Sharifara, and Fausto Cavallaro. 2018. "The Role of Process Innovation between Firm-Specific Capabilities and Sustainable Innovation in SMEs: Empirical Evidence from Indonesia" Sustainability 10, no. 7: 2244.

Note that from the first issue of 2016, this journal uses article numbers instead of page numbers. See further details here.

Article Metrics

Back to TopTop