SMEs' response to green intellectual capital and environmental regulations: a pathway to competitive advantage using a hybrid approach of SEM-fsQCA

Purpose The paper aims to focus on reflective-formative disjoint two stages to investigate the relationship between green core competencies (GCC) and green intellectual capital (GIC), mediated by green absorptive capacity (GAC) and moderated by environmental regulation (ER), on green innovation performance (GIP) to examine the firm competitive advantage (FCA). Design/methodology/approach The paper uses partial least squares structural equation modeling and fuzzy set qualitative comparative analysis to analyze symmetric and asymmetric data. It integrates the natural resource-based view (NRBV) and institutional theory (IT) to enhance understanding of how organizations leverage their resource endowments and respond to external institutional pressures to drive green innovation and achieve FCA. Findings The results underscore the significance of GCC, GIC and GAC in enhancing GIP and shaping the FCA of SMEs in the manufacturing sector. The study also highlights the role of the ER in influencing the relationship between GCC, GIC and GIP. Practical implications For managers, this research highlights the importance of developing GCC and intellectual capital while aligning with environmental regulations. By integrating green capabilities into their strategic frameworks, SMEs can not only ensure regulatory compliance but also leverage these regulations to enhance innovation and competitive advantage. Originality/value This research is novel in its integration of NRBV and IT to explore complex interactions between GCC, GIC, GAC and GIP. It provides new insights into how SMEs can strategically integrate green competencies and respond to environmental regulations to secure a competitive advantage.