How does corporate sustainability increase financial performance for small-and medium-sized fashion companies: Roles of organizational values and business model innovation

Abstract

The objective of this study was to examine how corporate sustainability can raise the level of corporate financial performance of small-and medium-sized enterprises (SMEs) in the fashion industry by considering the roles of organizational values and business model innovation in forming corporate sustainability. It is meaningful to explore the role of corporate sustainability in SMEs as well as fashion companies considering the recent growth of SMEs in the fashion industry. Practitioners (N = 218) working for SMEs located in South Korea participated in an online survey. Exploratory factor analysis resulted in three organizational values of SMEs: flexibility value, rational value, and hierarchical value. While flexibility has contributed to forming business model innovation and sustainability, having a rational value has impacted business model innovation and financial performance. A hierarchical value affected only corporate sustainability. However, business model innovation did not show any significant impact on corporate sustainability or financial performance. Finally, corporate sustainability positively influenced financial performance only for SMEs that had experience practicing at least three sustainable activities. These results have implications for how SMEs manage sustainability to enhance financial performance.