Exploring the impact of firm performance on the link between green innovation and firm sustainability performance: an emerging country evidence

Purpose The research aims to investigate the mediating role of firm performance (FP) in improving green innovation on firm sustainability performance, using evidence from an emerging country. Indonesia is a member of the Paris Agreement and one of the largest contributors to global gas emissions; hence, sustainability is a significant issue. Design/methodology/approach This study is based on a simple mediation model 4 by Hayes Process Macro regression-based approach using R. This study employs non-banking and finance sector data of 518 companies listed on the Indonesia Stock Exchange from 2017 to 2021. Findings The research found that green innovation significantly and positively impacts FP, as demonstrated by a mediation test with a 95% bootstrapping confidence interval based on 5,000 bootstrapping samples. The relationship between FP and firm sustainability performance is also positive and significant. However, the effect of green innovation on firm sustainability performance is insignificant. Therefore, our main finding revealed that FP plays an important and positive role in mediating the effect of green innovation practices on sustainability performance, which is known as full mediation. Research limitations/implications This study is limited to using only a single Indonesian as a representative of emerging countries. Further research could potentially apply to multiple countries or provide a comparative study across countries, thereby accelerating emerging countries’ commitments to the sustainability agenda. Other factors might apply to sustainability-related studies. Practical implications This study provides valuable insights to the government, enabling them to implement incentives, policies or campaigns aimed at promoting the use of online media to enhance industry disclosure on sustainability and green innovation practices worldwide. Additionally, it highlights that financial practices are not limited to publicly listed companies but extend to non-public listed companies. Social implications This research aims to raise industry awareness of firms’ sustainability practices, enhancing their reputation. Originality/value This study addresses a gap in the literature by exploring the mediation role of FP in the effect of green innovation practices on firm sustainability performance from the perspective of media agenda setting theory.