HOW CORPORATE CULTURE DRIVES ENVIRONMENTAL PERFORMANCE THROUGH INNOVATION AND STRATEGIC ORIENTATION IN INDONESIA'S MSME SECTOR?
DOI:
https://doi.org/10.26418/jebik.v14i3.92886Keywords:
corporate culture, innovation orientation, strategic innovation, environmental performance, MSMEsAbstract
This study aims to examine the effect of owners' personal values, reflected in corporate culture, on environmental performance among Indonesia's MSMEs, with innovation and strategic orientation serving as mediating variables. The sample population comprised food and beverage MSMEs in Java Island, Indonesia. The survey was conducted on the island of Java. A self-administered questionnaire was used to collect data. The study employed PLS-SEM for analysis. The research results show that corporate culture has a positive and significant influence on environmental performance both directly and indirectly through strategic orientation. An interesting finding was that innovation orientation had a negative, insignificant influence on environmental performance, both directly and as a mediating variable in the relationship between corporate culture and environmental performance. This study contributes by proposing a multi-mediation model linking corporate culture and environmental performance through strategic orientation and innovation in the context of MSMEs. It provides empirical evidence from food and beverage MSMEs in Indonesia that strategic orientation plays a more decisive mediating role than innovation orientation in improving environmental performance. JEL: M14, Q56, L26.References
Adam, L., Ermawati, T., Nurjati, E., Edi, R. Y., Inayah, I., Mulyaningsih, Y., Thoha, M., Sarana, J., Soesilowati, E. S., Saptia, Y., Adityawati, S., & Darwin. (2024). Entrepreneurial Orientation in Indonesian SMEs. Cogent Business & Management, 11(1), 2399750. https://doi.org/10.1080/23311975.2024.2399750
Adams, R., Jeanrenaud, S., Bessant, J., Denyer, D., & Overy, P. (2016). Sustainability-Oriented Innovation: A Systematic Review. International Journal of Management Reviews, 18(2), 180–205. https://doi.org/https://doi.org/10.1111/ijmr.12068
Agag, G., & Eid, R. (2020). Which Consumer Feedback Metrics are the Most Valuable in Driving Consumer Expenditure in the Tourism Industries? A View from Macroeconomic Perspective. Tourism Management, 80, 104109. https://doi.org/https://doi.org/10.1016/j.tourman.2020.104109
Agag, G., Shehawy, Y. M., Almoraish, A., Eid, R., Lababdi, H, C., Labben, T, G., & Abdo, S. S. (2024). Understanding the Relationship between Marketing Analytics, Customer Agility, and Customer Satisfaction: A Longitudinal Perspective. Journal of Retailing and Consumer Services, 77, 103663. https://doi.org/10.1016/j.jretconser.2023.103663
Akpa, V. O., Asikhia, O. U., & Nneji, N. E. (2021). Organizational Culture and Organizational Performance: A Review of Literature. International Journal of Advances in Engineering and Management, 3(1), 361–372. https://doi.org/10.35629/5252-0301361372
Alkubaisi, A. R., Hizam-Hanafiah, M., Omar, A. R. C., & Jamaludin, N. A. (2026). Determinants and Outcomes of Sustainable Environmental Performance in SMEs: A Systematic Literature Review. Advances in Consumer Research, 3(1), 1519–1528.
Alyahya, M., & Agag, G. (2025). How Does Corporate Environmental Performance Contribute to Firm Performance and Customer Satisfaction? A Longitudinal Investigation. Sustainability, 17(4), 1644. https://doi.org/10.3390/su17041644
Aragón-Correa, J. A., Hurtado-Torres, N., Sharma, S., & García-Morales, V. J. (2008). Environmental Strategy and Performance in Small Firms: A Resource-Based Perspective. Journal of Environmental Management, 86(1), 88–103. https://doi.org/10.1016/j.jenvman.2006.11.022
Asad, S., Hennig, J. C., Oehmichen, J., Wolff, M., & Haas, V. (2025). From Attention to Action: How Board Environmental Expertise Influences Corporate Environmental Performance. Strategic Organization, 23(2), 259–284. https://doi.org/10.1177/14761270231197995
Aydın, A. G., & Baykal, E. (2023). The Impact of Organizational Strategic Trends on Individual-Based Resilience with a Digital Transformation Perspective. Human Resources Management and Services, 5(1), 3359. https://doi.org/10.18282/hrms.v5i1.3359
Banerjee, S. B. (2002). Corporate Environmentalism: The Construct and Its Measurement. Journal of Business Research, 55(3), 177–191. https://doi.org/10.1016/S0148-2963(00)00135-1
Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99–120. https://journals.sagepub.com/doi/10.1177/014920639101700108
Barney, J. B. (1986). Organizational Culture: Can It Be a Source of Sustained Competitive Advantage? Academy of Management Review, 11(3), 656–665. https://doi.org/10.2307/258317
Boiral, O., Paillé, P., & Raineri, N. (2015). The Nature of Employees’ Pro-Environmental Behaviors. In Jennifer L. Robertson & J. B. (Eds.) The Psychology of Green Organizations (pp. 12–32). Oxford University Press. https://doi.org/10.1093/acprof:oso/9780199997480.003.0002
Bortolotti, T., Boscari, S., & Xiao, C.-Y. (2024). Leveraging Organizational Culture to Create Competitive Value from Environmental Practices. International Journal of Production Economics, 272, 109252. https://doi.org/10.1016/j.ijpe.2024.109252
Bossle, M. B., Dutra de Barcellos, M., Vieira, L. M., & Sauvée, L. (2016). The Drivers for Adoption of Eco-Innovation. Journal of Cleaner Production, 113, 861–872. https://doi.org/10.1016/j.jclepro.2015.11.033
Bougie, R., & Sekaran, U. (2019). Research Methods for Business: A Skill Building Approach. John Wiley & Sons, Ltd.
Chen, Y.-S., Lai, S.-B., & Wen, C.-T. (2006). The Influence of Green Innovation Performance on Corporate Advantage in Taiwan. Journal of Business Ethics, 67(4), 331–339. https://doi.org/10.1007/s10551-006-9025-5
Costa, M. D., & Opare, S. (2025). Impact of Corporate Culture on Environmental Performance. Journal of Business Ethics, 196(1), 61–92. https://doi.org/10.1007/s10551-024-05674-3
Daddi, T., Todaro, N. M., de Giacomo, M. R., & Frey, M. (2018). A Systematic Review of the Use of Organization and Management Theories in Climate Change Studies. Business Strategy and the Environment, 27(4), 456–474. https://doi.org/10.1002/bse.2015
del Brío, J. Á., & Junquera, B. (2003). A Review of the Literature on Environmental Innovation Management in SMES: Implications for Public Policies. Technovation, 23(12), 939–948. https://doi.org/10.1016/S0166-4972(02)00036-6
del Mar Alonso-Almeida, M., Bagur-Femenias, L., Llach, J., & Perramon, J. (2018). Sustainability in Small Tourist Businesses: The Link between Initiatives and Performance. Current Issues in Tourism, 21(1), 1–20. https://doi.org/10.1080/13683500.2015.1066764
Eikelenboom, M., & de Jong, G. (2019). The Impact of Dynamic Capabilities on the Sustainability Performance of SMEs. Journal of Cleaner Production, 235, 1360–1370. https://doi.org/10.1016/j.jclepro.2019.07.013
Fraj, E., Martínez, E., & Matute, J. (2011). Green Marketing Strategy and the Firm’s Performance: The Moderating Role of Environmental Culture. Journal of Strategic Marketing, 19(4), 339–355. https://doi.org/10.1080/0965254X.2011.581382
Gorton, G. B., Grennan, J., & Zentefis, A. K. (2022). Corporate Culture. Annual Review of Financial Economics, 14(Volume 14, 2022), 535–561. https://doi.org/10.1146/annurev-financial-092321-124541
Habib, M. A., Bao, Y., Nabi, N., Dulal, M., Asha, A. A., & Islam, M. (2021). Impact of Strategic Orientations on the Implementation of Green Supply Chain Management Practices and Sustainable Firm Performance. Sustainability, 13(1), 340. https://doi.org/10.3390/su13010340
Hair, J., & Alamer, A. (2022). Partial Least Squares Structural Equation Modeling (PLS-SEM) in Second Language and Education Research: Guidelines Using an Applied Example. Research Methods in Applied Linguistics, 1(3), 100027. https://doi.org/10.1016/j.rmal.2022.100027
Hair, J. F., Hult, G. T. M., Ringle, C. M., Sarstedt, M., Danks, N. P., & Ray, S. (2021). Partial Least Squares Structural Equation Modeling (PLS-SEM) Using R (1st ed.). Springer International Publishing. https://doi.org/10.1007/978-3-030-80519-7
Hojnik, J., & Ruzzier, M. (2016). What Drives Eco-Innovation? A Review of an Emerging Literature. Environmental Innovation and Societal Transitions, 19, 31–41. https://doi.org/10.1016/j.eist.2015.09.006
Hoogendoorn, B., Guerra, D., & van der Zwan, P. (2015). What Drives Environmental Practices of SMEs? Small Business Economics, 44(4), 759–781. https://doi.org/10.1007/s11187-014-9618-9
Janahi, N. A., Durugbo, C. M., & Al-Jayyousi, O. R. (2021). Eco-Innovation Strategy in Manufacturing: A Systematic Review. Cleaner Engineering and Technology, 5, 100343. https://doi.org/10.1016/j.clet.2021.100343
Jansson, J., Nilsson, J., Modig, F., & Hed Vall, G. (2017). Commitment to Sustainability in Small and Medium-Sized Enterprises: The Influence of Strategic Orientations and Management Values. Business Strategy and the Environment, 26(1), 69–83. https://doi.org/10.1002/bse.1901
Jeong, I., Pae, J. H., & Zhou, D. (2006). Antecedents and Consequences of the Strategic Orientations in New Product Development: The Case of Chinese Manufacturers. Industrial Marketing Management, 35(3), 348–358. https://doi.org/10.1016/j.indmarman.2005.06.010
Ketprapakorn, N., & Kantabutra, S. (2022). Toward an Organizational Theory of Sustainability Culture. Sustainable Production and Consumption, 32, 638–654. https://www.sciencedirect.com/science/article/pii/S0959652623008247
Khan, M. A. (2022). ESG Disclosure and Firm Performance: A Bibliometric and Meta Analysis. Research in International Business and Finance, 61, 101668. https://doi.org/10.1016/j.ribaf.2022.101668
Kurniawan, R., & Managi, S. (2018). Economic Growth and Sustainable Development in Indonesia: An Assessment. Bulletin of Indonesian Economic Studies, 54(3), 339–361. https://doi.org/10.1080/00074918.2018.1450962
Leonidou, L. C., Christodoulides, P., Kyrgidou, L. P., & Palihawadana, D. (2017). Internal Drivers and Performance Consequences of Small Firm Green Business Strategy: The Moderating Role of External Forces. Journal of Business Ethics, 140(3), 585–606. https://doi.org/10.1007/s10551-015-2670-9
Maclean, M., Appiah, M. K., & Addo, J. F. (2023). Implications of Strategic Orientation on Firms’ Performance in a Lower Middle-Income Country: Does Organizational Innovation Capability Matter? Cogent Business & Management, 10(2), 2211366. https://doi.org/10.1080/23311975.2023.2211366
Maesaroh, M., & Etty, M. (2022). The Influence of Organizational Culture Environment, Environmental Capability on Firm Value in Green Competitive Advantage Moderation. Budapest International Research and Critics Institute-Journal (BIRCI-Journal), 5(3), 21018–21028. https://doi.org/10.33258/birci.v5i3.6120
Magsi, H, B,, Ong, T. S., Ho, J. A., & Hassan, A, F, S. (2018). Organizational Culture and Environmental Performance. Sustainability, 10(8), 2690. https://doi.org/10.3390/su10082690
Makhdalena, M., & Zulvina, D. (2024). Environmental and Firm Performance: Evidence from Indonesia. Indonesian Journal of Sustainability Accounting and Management, 8(2), 527–538. https://doi.org/10.28992/ijsam.v8i2.1004
Makhloufi, L., Laghouag, A. A., Meirun, T., & Belaid, F. (2022). Impact of Green Entrepreneurship Orientation on Environmental Performance: The Natural Resource-Based View and Environmental Policy Perspective. Business Strategy and the Environment, 31(1), 425–444. https://doi.org/10.1002/bse.2902
Mastana, A. S. (2025). A Primer on Partial Least Squares Structural Equation Modeling (PLS-SEM). Wisdom Journal of Humanities and Social Sciences, 2(1(January)), 62–64. https://so19.tci-thaijo.org/index.php/WJHS/article/view/1373
Mat Yusoh, N. N. A., & Tuan Mat, T. Z. T. (2020). Environmental Management Accounting Adoption Barriers Among Malaysian Hotel Companies. International Journal of Financial Research, 11(3), 31–42. https://doi.org/10.5430/ijfr.v11n3p31
Murire, O. T. (2024). Artificial Intelligence and Its Role in Shaping Organizational Work Practices and Culture. Administrative Sciences, 14(12), 316. https://doi.org/10.3390/admsci14120316
Naranjo-Valencia, J. C., Jiménez-Jiménez, D., & Sanz-Valle, R. (2016). Studying the Links between Organizational Culture, Innovation, and Performance in Spanish Companies. Revista Latinoamericana de Psicología, 48(1), 30–41. https://doi.org/10.1016/j.rlp.2015.09.009
Narver, J. C., & Slater, S. F. (1990). The Effect of a Market Orientation on Business Profitability. Journal of Marketing, 54(4), 20–35. https://doi.org/10.1177/002224299005400403
Nishitani, K., Jannah, N., Kaneko, S., & Hardinsyah, H . (2017). Does Corporate Environmental Performance Enhance Financial Performance? An Empirical Study of Indonesian Firms. Environmental Development, 23, 10–21. https://doi.org/10.1016/j.envdev.2017.06.003
Nzama, S., Olarewaju, O. M., Arise, O. A., & Ganiyu, I. (2022). Environmental Management Accounting (EMA) Practices and Plastic Pollution Control in Selected Food and Beverage Firms. Cogent Business & Management, 9(1), 2085368. https://doi.org/10.1080/23311975.2022.2085368
Panuju, A. Y. T., & Bakri, S. (2024). Green Innovation for SMEs in Indonesia--A Literature Analysis. Journal of Engineering and Scientific Research, 6(1), 16–22. https://doi.org/10.23960/jesr.v6i1.157
Prieto-Sandoval, V., Jaca, C., Santos, J., Baumgartner, R. J., & Ormazabal, M. (2019). Key Strategies, Resources, and Capabilities for Implementing Circular Economy in Industrial Small and Medium Enterprises. Corporate Social Responsibility and Environmental Management, 26(6), 1473–1484. https://doi.org/10.1002/csr.1761
Rizos, V., Behrens, A., der Gaast, W., Hofman, E., Ioannou, A., Kafyeke, T., Flamos, A., Rinaldi, R., Papadelis, S., Hirschnitz-Garbers, M., & Topi, C. (2016). Implementation of Circular Economy Business Models by Small and Medium-Sized Enterprises (SMEs): Barriers and Enablers. Sustainability, 8(11), 1212. https://doi.org/10.3390/su8111212
Schein, E. H. (2010). Three Cultures of Management: The Key to Organizational Learning. Glocal Working. Living and Working Across the World With Cultural Intelligence. Milan, Italy, Franco Angeli, 37–58.
Sentoso, A., Sibarani, T. P., & Muchsinati, E. S. (2024). Business Performance of MSMEs: an Analysis of the Effect of Entrepreneurial Orientation, Market Orientation, and Technology Orientation. JDM (Jurnal Dinamika Manajemen), 15(2), 318–333. https://doi.org/10.15294/jdm.v15i2.7559
Shu, C., Liu, J., Zhao, M., & Davidsson, P. (2020). Proactive Environmental Strategy and Firm Performance: The Moderating Role of Corporate Venturing. International Small Business Journal, 38(7), 654–676. https://doi.org/10.1177/0266242620923897
Soewarno, N., Tjahjadi, B., & Fithrianti, F. (2019). Green Innovation Strategy and Green Innovation. Management Decision, 57(11), 3061–3078. https://doi.org/10.1108/MD-05-2018-0563
Stern, P. C. (2000). New Environmental Theories: Toward a Coherent Theory of Environmentally Significant Behavior. Journal of Social Issues, 56(3), 407–424. https://doi.org/10.1111/0022-4537.00175
Tambunan, T. (2019). Recent Evidence of the Development of Micro, Small and Medium Enterprises in Indonesia. Journal of Global Entrepreneurship Research, 9(1), 18. https://doi.org/10.1186/s40497-018-0140-4
Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic Capabilities and Strategic Management. Strategic Management Journal, 18(7), 509–533. https://www.jstor.org/stable/3088148
Tong, T., & Rahman, A. A. (2022). Effect of Innovation Orientation of High-Tech SMEs “Small and Mid-Sized Enterprises in China” on Innovation Performance. Sustainability, 14(14), 8469. https://doi.org/10.3390/su14148469
Tseng, C.-H., Chang, K.-H., & Chen, H.-W. (2019). Strategic Orientation, Environmental Innovation Capability, and Environmental Sustainability Performance: The Case of Taiwanese Suppliers. Sustainability, 11(4), 1127. https://doi.org/10.3390/su11041127
Vlasic, G. (2022). Comparative Analysis of the Role of Strategic Orientation, Strategic Performance Metric Focus and Strategic Audacity in Driving Firm Performance: Family Businesses vs Nonfamily Businesses. Journal of Family Business Management, 13(1), 7–25. https://doi.org/10.1108/JFBM-03-2022-0048
Wang, C.-H. (2019). How Organizational Green Culture Influences Green Performance and Competitive Advantage. Journal of Manufacturing Technology Management, 30(4), 666–683. https://doi.org/10.1108/JMTM-09-2018-0314
Wijethilake, C., Upadhaya, B., & Lama, T. (2023). The Role of Organisational Culture in Organisational Change towards Sustainability: Evidence from the Garment Manufacturing Industry. Production Planning & Control, 34(3), 275–294. https://doi.org/10.1080/09537287.2021.1913524
ADDITIONAL REFERENCES
Coordinating Ministry For Economic Affairs. (2022). Coordinating Minister Airlangga: Government Continues to Encourage Strengthening Economic Foundations by Establishing Digital Transformation of MSMEs as One of the Priorities. https://ekon.go.id/publikasi/detail/4065/coordinating-minister-airlangga-government-continues-to-encourage-strengthening-economic-foundations-by-establishing-digital-transformation-of-msmes-as-one-of-the-priorities
Maswan, P., Nabighdazweda, M. D., Budiman, L. E., Hidayati, F., Ridho, M. A. N., Inzaghi, Y. H. D., Tabrani, A. A. P., & Arimbi, D. (2025). Buku Putih: Mewujudkan Masa Depan Bisnis Berkelanjutan melalui Pemberdayaan UMKM Hijau. https://perpustakaan.bappenas.go.id/e-library/file_upload/koleksi/dokumenbappenas/konten/Dokumen 2025/Konten/INA - Green SMEs and Net Zero- Strategic Framework for Indonesia’s Climate-Aligned Economic Transformation EBOOK FINAL %281%29.pdf
PwC. (2022). Charting the Course through a Changing Governance Landscape - PwC’s 2022 Annual Corporate Directors Survey. https://www.thecorporategovernanceinstitute.com/wp-content/uploads/2022/10/PwCs-2022-Annual-Corporate-Directors-Survey.pdf
