ESP-4402

Published

2026-01-13

Issue

Vol. 11 No. 1 (2026): Publishing

Section

Research Articles

License

Copyright (c) 2026 Sari Laelatul Qodriah*, Ali Jufri and Ahmad Johan

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

The journal adopts the Attribution-NonCommercial 4.0 International (CC BY-NC 4.0), which means that anyone can reuse and redistribute the materials for non-commercial purposes as long as you follow the license terms and the original source is properly cited.

Author(s) shall retain the copyright of their work and grant the Journal/Publisher rights for the first publication with the work concurrently licensed since 2023 Vol.8 No.2.

Under this license, author(s) will allow third parties to download, reuse, reprint, modify, distribute and/or copy the content under the condition that the authors are given credit. No permission is required from the authors or the publisher.

This broad license intends to facilitate free access, as well as the unrestricted use of original works of all types. This ensures that the published work is freely and openly available in perpetuity.

By providing open access, the following benefits are brought about:

  • Higher Visibility, Availability and Citations-free and unlimited accessibility of the publication over the internet without any restrictions increases citation of the article.
  • Ease of search-publications are easily searchable in search engines and indexing databases.
  • Rapid Publication – accepted papers are immediately published online.
  • Available for free download immediately after publication at https://esp.as-pub.com/index.php/ESP

 

Copyright Statement

1.The authors certify that the submitted manuscripts are original works, do not infringe the rights of others, are free from academic misconduct and confidentiality issues, and that there are no disputes over the authorship scheme of the collaborative articles. In case of infringement, academic misconduct and confidentiality issues, as well as disputes over the authorship scheme, all responsibilities will be borne by the authors.

2. The author agrees to grant the Editorial Office of Environment and Social Psychology a licence to use the reproduction right, distribution right, information network dissemination right, performance right, translation right, and compilation right of the submitted manuscript, including the work as a whole, as well as the diagrams, tables, abstracts, and any other parts that can be extracted from the work and used in accordance with the characteristics of the journal. The Editorial Board of Environment and Social Psychology has the right to use and sub-licence the above mentioned works for wide dissemination in print, electronic and online versions, and, in accordance with the characteristics of the periodical, for the period of legal protection of the property right of the copyright in the work, and for the territorial scope of the work throughout the world.

3. The authors are entitled to the copyright of their works under the relevant laws of Singapore, provided that they do not exercise their rights in a manner prejudicial to the interests of the Journal.

About Licence

Environment and Social Psychology is an open access journal and all published work is available under the Creative Commons Licence, Authors shall retain copyright of their work and grant the journal/publisher the right of first publication, and their work shall be licensed under the Attribution-NonCommercial 4.0 International (CC BY-NC 4.0).

Under this licence, the author grants permission to third parties to download, reuse, reprint, modify, distribute and/or copy the content with attribution to the author. No permission from the author or publisher is required.

This broad licence is intended to facilitate free access to and unrestricted use of original works of all kinds. This ensures that published works remain free and accessible in perpetuity. Submitted manuscripts, once accepted, are immediately available to the public and permanently accessible free of charge on the journal’s official website (https://esp.as-pub.com/index.php/ESP). Allowing users to read, download, copy, print, search for or link to the full text of the article, or use it for other legal purposes. However, the use of the work must retain the author's signature, be limited to non-commercial purposes, and not be interpretative.

Click to download <Agreement on the Licence for the Use of Copyright on Environmental and Social Psychology>.

How to Cite

Qodriah, S. L., Jufri, A., & Johan, A. (2026). Digital Innovation Model for Eco-Friendly Business: SMEs Strategy to Face Market Disruption. Environment and Social Psychology, 11(1), ESP-4402. https://doi.org/10.59429/esp.v11i1.4402

Digital Innovation Model for Eco-Friendly Business: SMEs Strategy to Face Market Disruption

Sari Laelatul Qodriah

Department of Management, Faculty of Economics and Business, Universitas Muhammadiyah Cirebon, Cirebon, Indonesia

Ali Jufri

Department of Management, Faculty of Economics and Business, Universitas Muhammadiyah Cirebon, Cirebon, Indonesia

Ahmad Johan

Department of Management, Faculty of Economics and Business, Universitas Langlangbuana, Bandung, Indonesia


DOI: https://doi.org/10.59429/esp.v11i1.4402


Keywords: Government support; green absorptive capacity; digital green innovation performance; business model innovation, Indonesia SMEs

Abstract

Small and medium enterprises (SMEs) face increasing pressure to remain competitive amid digital transformation and growing environmental concerns. Digital green innovation has become a strategic pathway for SMEs to achieve both sustainability and resilience in disruptive markets. This study investigates how government support and green absorptive capacity (GAC) influence digital green innovation performance (DGI) in SMEs. It further examines the mediating role of efficient and integrated business model innovation in strengthening this relationship. The study focuses on SMEs in the culinary and fashion sectors in Bandung and Cirebon, Indonesia, given their significant contributions to the regional economy and their ongoing challenges in digital and green transformation. A quantitative, exploratory design was employed. Data were collected through structured surveys and interviews with 200 SME owners and managers. The data were analyzed using Structural Equation Modeling (SEM) with a Partial Least Squares (PLS) approach. Both government support and GAC significantly enhance DGI performance. GAC demonstrates a stronger direct effect compared to government support. In addition, efficient and integrated business model innovations partially mediate these relationships. It highlights that external and internal resources must be translated into concrete business practices to generate substantial impact. The combination of government support, green absorptive capacity, and business model innovation provides an effective strategy for SMEs to sustain competitiveness in dynamic markets.

References

[1]. 1.Hart, “A Natural-Resource-Based View of the Firm,” The Academy of Management Review, vol. 20, no. 4, pp. 986–1014, 1995.

[2]. 2.M. Bashir, “The influence of strategic flexibility on SME performance: is business model innovation the missing link?,” International Journal of Innovation Science, vol. 15, no. 5, 2023, doi: 10.1108/IJIS-06-2021-0110.

[3]. 3.S. Zang, H. Wang, and J. Zhou, “Impact of eco-embeddedness and strategic flexibility on innovation performance of non-core firms: The perspective of ecological legitimacy,” Journal of Innovation and Knowledge, vol. 7, no. 4, 2022, doi: 10.1016/j.jik.2022.100266.

[4]. 4.M. A. Hitt, B. W. Keats, and S. M. DeMarie, “Navigating in the new competitive landscape: Building strategic flexibility and competitive advantage in the 21st century,” Academy of Management Executive, vol. 12, no. 4, 1998, doi: 10.5465/ame.1998.1333922.

[5]. 5.S. Lamperti, A. Cavallo, and C. Sassanelli, “Digital Servitization and Business Model Innovation in SMEs: A Model to Escape From Market Disruption,” IEEE Trans Eng Manag, vol. 71, 2024, doi: 10.1109/TEM.2022.3233132.

[6]. 6.N. Omrani, N. Rejeb, A. Maalaoui, M. Dabic, and S. Kraus, “Drivers of Digital Transformation in SMEs,” IEEE Trans Eng Manag, vol. 71, 2024, doi: 10.1109/TEM.2022.3215727.

[7]. 7.M. Skare, M. de las Mercedes de Obesso, and S. Ribeiro-Navarrete, “Digital transformation and European small and medium enterprises (SMEs): A comparative study using digital economy and society index data,” Int J Inf Manage, vol. 68, 2023, doi: 10.1016/j.ijinfomgt.2022.102594.

[8]. 8.N. Utami and M. L. Sitanggang, “The Effect of Fintech Implementation on The Performance of SMEs,” Journal of International Conference Proceedings, vol. 4, no. 3, 2021, doi: 10.32535/jicp.v4i3.1342.

[9]. 9.H. Jing, Y. Zhang, and J. Ma, “Influence of digital ambidextrous capabilities on SMEs’ transformation performance: The mediating effect of business model innovation,” Heliyon, vol. 9, no. 11, 2023, doi: 10.1016/j.heliyon.2023.e21020.

[10]. 10.A. Ghezzi and A. Cavallo, “Agile Business Model Innovation in Digital Entrepreneurship: Lean Startup Approaches,” J Bus Res, vol. 110, 2020, doi: 10.1016/j.jbusres.2018.06.013.

[11]. 11. S. Wu, Y. Luo, H. Zhang, and P. Cheng, “Entrepreneurial bricolage and entrepreneurial performance: The role of business model innovation and market orientation,” Heliyon, vol. 10, no. 4, 2024, doi: 10.1016/j.heliyon.2024.e26600.

[12]. 12.J. Andersén, “A relational natural-resource-based view on product innovation: The influence of green product innovation and green suppliers on differentiation advantage in small manufacturing firms,” Technovation, vol. 104, 2021, doi: 10.1016/j.technovation.2021.102254.

[13]. 13.Nabaa Latif, Marwan Salah Noaman, Nahla Qasim Mohammed Ismail, Hameed Salim Alkabi, Thamer Kadum Yousif Al Hilfi, and Anastasiia Khlaponina, “The role of organizational culture in driving environmental digital transformation,” Environment and Social Psychology, vol. 10, no. 11, Nov. 2025, doi: 10.59429/esp.v10i11.3971.

[14]. 14.J. Benitez, J. Llorens, and J. Braojos, “How information technology influences opportunity exploration and exploitation firm’s capabilities,” Information and Management, vol. 55, no. 4, 2018, doi: 10.1016/j.im.2018.03.001.

[15]. 15.P. Mikalef, A. Pateli, and R. van de Wetering, “IT architecture flexibility and IT governance decentralisation as drivers of IT-enabled dynamic capabilities and competitive performance: The moderating effect of the external environment,” European Journal of Information Systems, vol. 30, no. 5, 2021, doi: 10.1080/0960085X.2020.1808541.

[16]. 16.C. Grönroos, “A service perspective on business relationships: The value creation, interaction and marketing interface,” Industrial Marketing Management, vol. 40, no. 2, 2011, doi: 10.1016/j.indmarman.2010.06.036.

[17]. 17.T. Dong, S. Yin, and N. Zhang, “New Energy-Driven Construction Industry: Digital Green Innovation Investment Project Selection of Photovoltaic Building Materials Enterprises Using an Integrated Fuzzy Decision Approach,” Systems, vol. 11, no. 1, 2023, doi: 10.3390/systems11010011.

[18]. 18.L. Xue, Q. Zhang, X. Zhang, and C. Li, “Can Digital Transformation Promote Green Technology Innovation?,” Sustainability (Switzerland), vol. 14, no. 12, 2022, doi: 10.3390/su14127497.

[19]. 19.Z. Hutabarat and M. Pandin, “Absorptive Capacity of Business Incubator for SME’s Rural Community Located in Indonesia’s Village,” Procedia Soc Behav Sci, vol. 115, 2014, doi: 10.1016/j.sbspro.2014.02.443.

[20]. 20.A. Malik, N. Khan, S. Faisal, S. Javed, and M. R. Faridi, “An investigation on leadership styles for the business productivity and sustainability of small medium enterprises (Sme’s),” International Journal of Entrepreneurship, vol. 24, no. 5, 2020.

[21]. 21.N. V. Feranita, A. Nugraha, and S. A. Sukoco, “THE ROLE OF GOVERNMENT SUPPORT FOR INNOVATION AND PERFORMANCE OF SMEs,” POLITICO, vol. 19, no. 2, pp. 124–136, Sep. 2020, doi: 10.32528/politico.v19i2.2932.

[22]. 22.R. D. A. Parmitasari and Rusnawati, “Sustainability and Performance of Small and Medium Business: the Role of Financial Literature,” International Journal of Professional Business Review, vol. 8, no. 5, 2023, doi: 10.26668/businessreview/2023.v8i5.1048.

[23]. 23.H. Ahmad, M. Yaqub, and S. H. Lee, “Environmental-, social-, and governance-related factors for business investment and sustainability: a scientometric review of global trends,” 2024. doi: 10.1007/s10668-023-02921-x.

[24]. 24.A. Adel, J. A. Al-Jomaily, D. K. I. Ahmed, R. A. A. Aldargazaly, and K. Salman, “Corporate social responsibility and its impact on environmental sustainability,” Environment and Social Psychology, vol. 10, no. 10, 2025, doi: 10.59429/esp.v10i10.3962.

[25]. 25.J. Elkington, “Partnerships from cannibals with forks: The triple bottom line of 21st-century business,” Environmental Quality Management, vol. 8, no. 1, 1998, doi: 10.1002/tqem.3310080106.

[26]. 26.S. Yin, Y. Yu, and N. Zhang, “The Effect of Digital Green Strategic Orientation On Digital Green Innovation Performance: From the Perspective of Digital Green Business Model Innovation,” Sage Open, vol. 14, no. 2, 2024, doi: 10.1177/21582440241261130.

[27]. 27.K. L. Wang, B. Zhao, L. L. Ding, and Z. Miao, “Government intervention, market development, and pollution emission efficiency: Evidence from China,” Science of the Total Environment, vol. 757, 2021, doi: 10.1016/j.scitotenv.2020.143738.

[28]. 28.R. E. Freeman, “Divergent stakeholder theory,” Academy of Management Review, vol. 24, no. 2, 1999, doi: 10.5465/AMR.1999.1893932.

[29]. 29.P. Demirel and E. Kesidou, “Sustainability-oriented capabilities for eco-innovation: Meeting the regulatory, technology, and market demands,” Bus Strategy Environ, vol. 28, no. 5, 2019, doi: 10.1002/bse.2286.

[30]. 30.R. Y. K. Chan, “Does the natural-resource-based view of the firm apply in an emerging economy? A survey of foreign invested enterprises in China,” Journal of Management Studies, vol. 42, no. 3, 2005, doi: 10.1111/j.1467-6486.2005.00511.x.

[31]. 31.M. Muafi, I. Salsabil, A. Johan, and F. A. Zahra, “A Framework for Environmental Performance: Integrating Stakeholder Theory and Natural Resource-Based View,” in Lecture Notes in Networks and Systems, 2024. doi: 10.1007/978-3-031-53998-5_20.

[32]. 32.K. Weidner, C. Nakata, and Z. Zhu, “Sustainable innovation and the triple bottom-line: a market-based capabilities and stakeholder perspective,” Journal of Marketing Theory and Practice, vol. 29, no. 2, 2021, doi: 10.1080/10696679.2020.1798253.

[33]. 33.A. Bouguerra, M. Hughes, M. S. Cakir, and E. Tatoglu, “Linking Entrepreneurial Orientation to Environmental Collaboration: A Stakeholder Theory and Evidence from Multinational Companies in an Emerging Market,” British Journal of Management, vol. 34, no. 1, 2023, doi: 10.1111/1467-8551.12590.

[34]. 34.J. Khuntia, T. Saldanha, A. Kathuria, and M. R. Tanniru, “Digital service flexibility: a conceptual framework and roadmap for digital business transformation,” European Journal of Information Systems, vol. 33, no. 1, 2024, doi: 10.1080/0960085X.2022.2115410.

[35]. 35.Y. Zhang and E. Y. Ayele, “Factors Affecting Small and Micro Enterprise Performance with the Mediating Effect of Government Support: Evidence from the Amhara Region Ethiopia,” Sustainability (Switzerland), vol. 14, no. 11, 2022, doi: 10.3390/su14116846.

[36]. 36. R. N. Lussier and H. Sherman, BUSINESS, SOCIETY AND GOVERNMENT ESSENTIALS: Strategy and Applied Ethics, 3rd Edition. 2022. doi: 10.4324/9781003181552.

[37]. 37. S. Doh and B. Kim, “Government support for SME innovations in the regional industries: The case of government financial support program in South Korea,” Res Policy, vol. 43, no. 9, 2014, doi: 10.1016/j.respol.2014.05.001.

[38]. 38.W. M. Cohen and D. A. Levinthal, “Absorptive Capacity: A New Perspective on Learning and Innovation,” Adm Sci Q, vol. 35, no. 1, 1990, doi: 10.2307/2393553.

[39]. 39.B. T. T. Truong and P. V. Nguyen, “Driving business performance through intellectual capital, absorptive capacity, and innovation: The mediating influence of environmental compliance and innovation,” Asia Pacific Management Review, vol. 29, no. 1, 2024, doi: 10.1016/j.apmrv.2023.06.004.

[40]. 40.A. Fosfuri and J. A. Tribó, “Exploring the antecedents of potential absorptive capacity and its impact on innovation performance,” Omega (Westport), vol. 36, no. 2, 2008, doi: 10.1016/j.omega.2006.06.012.

[41]. 41. X. Wang, Y. Gan, S. Zhou, and X. Wang, “Digital technology adoption, absorptive capacity, CEO green experience and the quality of green innovation: Evidence from China,” Financ Res Lett, vol. 63, 2024, doi: 10.1016/j.frl.2024.105271.

[42]. 42.A. Hurtado-Palomino, B. De la Gala-Velásquez, and J. Ccorisapra-Quintana, “The interactive effect of innovation capability and potential absorptive capacity on innovation performance,” Journal of Innovation and Knowledge, vol. 7, no. 4, 2022, doi: 10.1016/j.jik.2022.100259.

[43]. 43.O. Carrasco-Carvajal, D. García-Pérez-de-Lema, and M. Castillo-Vergara, “Impact of innovation strategy, absorptive capacity, and open innovation on SME performance: A Chilean case study,” Journal of Open Innovation: Technology, Market, and Complexity, vol. 9, no. 2, 2023, doi: 10.1016/j.joitmc.2023.100065.

[44]. 44.C. Y. Chang, K. H. Tsai, and B. Sung, “Can market knowledge lead to radical product innovation performance? The double-edged sword effect of absorptive capacity,” European Journal of Innovation Management, vol. 27, no. 2, 2024, doi: 10.1108/EJIM-01-2022-0058.

[45]. 45.J. Xie, T. Zhang, and J. Zhao, “Research on the mechanism of digital transformation to improve enterprise environmental performance,” Industrial Management and Data Systems, vol. 123, no. 12, 2023, doi: 10.1108/IMDS-03-2023-0187.

[46]. 46.N. Wang, J. Zhang, X. Zhang, and W. Wang, “How to Improve Green Innovation Performance: A Conditional Process Analysis,” Sustainability (Switzerland), vol. 14, no. 5, 2022, doi: 10.3390/su14052938.

[47]. 47.H. Gao, X. H. Ding, and S. Wu, “Impact of knowledge search on product and process innovation: mediating role of absorptive capacity and moderating role of IT capability,” European Journal of Innovation Management, vol. 25, no. 2, 2022, doi: 10.1108/EJIM-12-2019-0350.

[48]. 48. I. J. Ismail, “The role of technological absorption capacity, enviropreneurial orientation, and green marketing in enhancing business’ sustainability: evidence from fast-moving consumer goods in Tanzania,” Technological Sustainability, vol. 2, no. 2, 2023, doi: 10.1108/TECHS-04-2022-0018.

[49]. 49.D. Andreini, C. Bettinelli, N. J. Foss, and M. Mismetti, “Business model innovation: a review of the process-based literature,” Journal of Management and Governance, vol. 26, no. 4, 2022, doi: 10.1007/s10997-021-09590-w.

[50]. 50.C. Ancillai, L. Marinelli, and F. Pascucci, “Digital-Driven Business Model Innovation: The Role of Data in Changing Companies’ Value Logic,” in Digitalization and Firm Performance: Examining the Strategic Impact, 2021. doi: 10.1007/978-3-030-83360-2_4.

[51]. 51.J. M. Müller, “Business model innovation in small- and medium-sized enterprises: Strategies for industry 4.0 providers and users,” Journal of Manufacturing Technology Management, vol. 30, no. 8, 2019, doi: 10.1108/JMTM-01-2018-0008.

[52]. 52.F. C. Ma, F. Khan, K. U. Khan, and S. XiangYun, “Investigating the Impact of Information Technology, Absorptive Capacity, and Dynamic Capabilities on Firm Performance: An Empirical Study,” Sage Open, vol. 11, no. 4, 2021, doi: 10.1177/21582440211061388.

[53]. 53.T. C. Flatten, G. I. Greve, and M. Brettel, “Absorptive capacity and firm performance in SMEs: The mediating influence of strategic alliances,” European Management Review, vol. 8, no. 3, 2011, doi: 10.1111/j.1740-4762.2011.01015.x.

[54]. 54.G. George, R. K. Merrill, and S. J. D. Schillebeeckx, “Digital Sustainability and Entrepreneurship: How Digital Innovations Are Helping Tackle Climate Change and Sustainable Development,” Entrepreneurship: Theory and Practice, vol. 45, no. 5, 2021, doi: 10.1177/1042258719899425.

[55]. 55.P. Tinits and C. F. Fey, “The Effects of Timing and Order of Government Support Mechanisms for SME Exports,” Management International Review, vol. 62, no. 2, 2022, doi: 10.1007/s11575-022-00465-2.

[56]. 56.A. A. Sultan and H. A. Riyadh, “Assessing digital transformation in SMEs: using the canvas model in China and Indonesia,” International Journal of Organizational Analysis, 2025, doi: 10.1108/IJOA-08-2024-4757.

[57].



21 Woodlands Close #02-10, Primz Bizhub,Postal 737854, Singapore

Email:editorial_office@as-pub.com