Empowering sustainable entrepreneurship through data-driven innovation: A pathway to ESG performance in SMEs

As today’s organizations face rampant pressure to counter sustainability challenges, understanding how sustainable entrepreneurial orientation can drive environmental, social, and governance (ESG) outcomes via digital innovation capability and sustainable innovations become significant. Grounded in dynamic capabilities theory (DCT), this research investigates the impact of sustainable entrepreneurial orientation on ESG performance, specifically emphasizing the underlying processes through digital capability and sustainable innovation mediating this association. The research also focuses on the boundary specificity roles of digital innovation culture and digital adoption in amplifying the relationship between digital innovation capability and sustainable innovation. By using a time-lagged design across three waves, and drawing data from manufacturing SMEs, our results reveal a significant positive serial mediation effect of sustainable entrepreneurial orientation on firm ESG performance via digital innovation capability and sustainable innovation. Further, the findings suggest that the digital innovation culture moderates and strengthens the relationship between sustainable entrepreneurial orientation and digital innovation capability while digital adoption amplifies the relationship between digital innovation capability and sustainable innovation. The study provides theoretical implications and practical insights for contemporary organizations aiming to enhance their ESG practices amid the sustainability challenges.