From Environmental Commitment to Green Innovation: The Mediating Role of Green Absorptive Capacity in SMEs

Abstract

Environmental sustainability has become a strategic priority for small and medium-sized enterprises (SMEs) facing increasing ecological pressures and competitive demands. However, the mechanism through which environmental commitment translates into green innovation remains insufficiently understood. Grounded in the Natural Resource-Based View and Dynamic Capability Theory, this study examines the direct effect of environmental commitment on green innovation and investigates the mediating role of green absorptive capacity. Data were collected from 535 managerial-level employees of manufacturing SMEs in Khyber Pakhtunkhwa using a structured questionnaire. The hypotheses were tested using Andrew Hayes’ PROCESS Macro (Model 4) with bootstrapping to assess direct and indirect effects. The findings reveal that environmental commitment significantly and positively influences green innovation. Moreover, environmental commitment enhances green absorptive capacity, which in turn significantly promotes green innovation. The mediation analysis confirms that green absorptive capacity partially mediates the relationship between environmental commitment and green innovation, highlighting its role as a key transformation mechanism. The results emphasize that strategic environmental orientation alone is insufficient unless supported by knowledge-based capabilities that enable firms to absorb and apply environmental knowledge effectively. This study contributes to sustainability and innovation literature by integrating strategic commitment with capability development in the SME context and provides practical implications for managers and policymakers aiming to strengthen green innovation performance.

Keywords: Environmental Commitment, Green Absorptive Capacity, Green Innovation, Natural Resource-Based View, Dynamic Capability Theory