The role of green innovation between green market orientation and business performance: its implication for open innovation

Abstract

The focus of this research was to investigate the effect of green market orientation on business performance. For that purpose, this research tested that green market orientation has a direct effect on business performance, that green market orientation affects green innovation, and that green innovation affects business performance. As a quantitative research, partial least squares structural equation modeling (PLS–SEM) was used to test the hypotheses. Data were collected by using both online and offline questionnaires from owners/managers of the manufacturing micro, small-and medium-sized enterprises (MSMEs) in the East Java Province of Indonesia. A total of 175 respondents participated in this study. The results show that green market orientation has a positive and direct effect on business performance. The results empirically support the theory of sustainability and entrepreneurship in the research setting of Indonesian MSMEs. The results also imply that the owners/managers of MSMEs need to balance economic, environmental, and social issues in their business. In the era of sustainable development and environmental awareness, manufacturing MSMEs need to adopt a green market orientation and carry out green innovation in their business processes to obtain a better business performance.