IDEAS home Printed from https://ideas.repec.org/a/wly/sustdv/v33y2025i5p6639-6658.html

Sustainability Leverage, Customer Orientation and Firm Performance—An Empirical Study of Small Medium Enterprises in Indonesia

Author

Listed:
  • Clare D'Souza
  • Marthin Nanere
  • Malliga Marimuthu
  • Mokhamad Arwani
  • Dung Nguyen
  • Ninh Nguyen

Abstract

This research explores how resource‐based views (RBV) and institutional pressures affect sustainability practices in SMEs and examines the impact of customer orientation on their performance. Evidence linking sustainable practices to enhanced SME performance is limited. A total of 305 SMEs participated in the survey, and the data were analyzed using AMOS—Structural Equation Modeling. Model 1 examines the impact of institutional theory and RBV, showing that barriers impeding sustainability have no significant mediating effect on environmental practices but a negative impact on social practices. To determine the influence of customers on firm performance, Model 2 was conceptualized, showing the mediating effects of social and sustainable practices between motivation and firm performance. The results indicate that environmental practices are unlikely to provide opportunities for increased performance, given their negative mediating effect. This research makes several valuable contributions to SME literature on sustainability in developing countries, which are useful for practitioners.

Suggested Citation

  • Clare D'Souza & Marthin Nanere & Malliga Marimuthu & Mokhamad Arwani & Dung Nguyen & Ninh Nguyen, 2025. "Sustainability Leverage, Customer Orientation and Firm Performance—An Empirical Study of Small Medium Enterprises in Indonesia," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(5), pages 6639-6658, October.
    • Handle: RePEc:wly:sustdv:v:33:y:2025:i:5:p:6639-6658
    DOI: 10.1002/sd.3472
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/sd.3472
    Download Restriction: no
    File URL: https://libkey.io/10.1002/sd.3472?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Reginald Masocha & Olawale Fatoki, 2018. "The Impact of Coercive Pressures on Sustainability Practices of Small Businesses in South Africa," Sustainability, MDPI, vol. 10(9), pages 1-14, August.
    2. Annabelle Mourougane, 2012. "Promoting SME development in Indonesia," OECD Economics Department Working Papers 995, OECD Publishing.
    3. Cowan, Kirsten & Guzman, Francisco, 2020. "How CSR reputation, sustainability signals, and country-of-origin sustainability reputation contribute to corporate brand performance: An exploratory study," Journal of Business Research, Elsevier, vol. 117(C), pages 683-693.
    4. Thomas C. Powell, 1995. "Total quality management as competitive advantage: A review and empirical study," Strategic Management Journal, Wiley Blackwell, vol. 16(1), pages 15-37.
    5. Pfeffer, Jeffrey, 2010. "Building Sustainable Organizations: The Human Factor," Research Papers 2017r, Stanford University, Graduate School of Business.
    6. Beverly K. Brockman & Michael A. Jones & Richard C. Becherer, 2012. "Customer Orientation and Performance in Small Firms: Examining the Moderating Influence of Risk‐Taking, Innovativeness, and Opportunity Focus," Journal of Small Business Management, Taylor & Francis Journals, vol. 50(3), pages 429-446, July.
    7. Maria Santos, 2011. "CSR in SMEs: strategies, practices, motivations and obstacles," Social Responsibility Journal, Emerald Group Publishing Limited, vol. 7(3), pages 490-508, August.
    8. David Gadenne & Jessica Kennedy & Catherine McKeiver, 2009. "An Empirical Study of Environmental Awareness and Practices in SMEs," Journal of Business Ethics, Springer, vol. 84(1), pages 45-63, January.
    9. Sarkis, Joseph & Zhu, Qinghua & Lai, Kee-hung, 2011. "An organizational theoretic review of green supply chain management literature," International Journal of Production Economics, Elsevier, vol. 130(1), pages 1-15, March.
    10. Desislava Tsvetkova & Emma Bengtsson & Susanne Durst, 2020. "Maintaining Sustainable Practices in SMEs: Insights from Sweden," Sustainability, MDPI, vol. 12(24), pages 1-26, December.
    11. Arora, Punit & De, Prabal, 2020. "Environmental sustainability practices and exports: The interplay of strategy and institutions in Latin America," Journal of World Business, Elsevier, vol. 55(4).
    12. Menozzi, Davide & Fioravanzi, Martina & Donati, Michele, 2015. "Farmer’s motivation to adopt sustainable agricultural practices," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 4(2), pages 1-23, August.
    13. K. T. Shibin & Rameshwar Dubey & Angappa Gunasekaran & Benjamin Hazen & David Roubaud & Shivam Gupta & Cyril Foropon, 2020. "Examining sustainable supply chain management of SMEs using resource based view and institutional theory," Annals of Operations Research, Springer, vol. 290(1), pages 301-326, July.
    14. Hernita Hernita & Batara Surya & Iwan Perwira & Herminawaty Abubakar & Muhammad Idris, 2021. "Economic Business Sustainability and Strengthening Human Resource Capacity Based on Increasing the Productivity of Small and Medium Enterprises (SMEs) in Makassar City, Indonesia," Sustainability, MDPI, vol. 13(6), pages 1-36, March.
    15. David Aristei & Manuela Gallo, 2021. "The Role of External Support on the Implementation of Resource Efficiency Actions: Evidence from European Manufacturing Firms," Sustainability, MDPI, vol. 13(17), pages 1-21, August.
    16. Brooksbank, Roger & Kirby, David A & Wright, Gillian, 1992. "Marketing and Company Performance: An Examination of Medium Sized Manufacturing Firms in Britain," Small Business Economics, Springer, vol. 4(3), pages 221-236, September.
    17. Hüseyin Doluca & Marcus Wagner & Jörn Block, 2018. "Sustainability and Environmental Behaviour in Family Firms: A Longitudinal Analysis of Environment‐Related Activities, Innovation and Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 27(1), pages 152-172, January.
    18. Sidney G. Winter, 2000. "The Satisficing Principle in Capability Learning," Strategic Management Journal, Wiley Blackwell, vol. 21(10‐11), pages 981-996, October.
    19. Christine Oliver, 1997. "Sustainable competitive advantage: combining institutional and resource‐based views," Strategic Management Journal, Wiley Blackwell, vol. 18(9), pages 697-713, October.
    20. S. R. Lawrence & E. Collins & K. Pavlovich & M. Arunachalam, 2006. "Sustainability practices of SMEs: the case of NZ," Business Strategy and the Environment, Wiley Blackwell, vol. 15(4), pages 242-257, July.
    21. Asem Alkahtani & Norfarah Nordin & Rizwan Ullah Khan, 2020. "Does government support enhance the relation between networking structure and sustainable competitive performance among SMEs?," Journal of Innovation and Entrepreneurship, Springer, vol. 9(1), pages 1-16, December.
    22. David Murillo & Josep Lozano, 2006. "SMEs and CSR: An Approach to CSR in their Own Words," Journal of Business Ethics, Springer, vol. 67(3), pages 227-240, September.
    23. Maria Santos, 2011. "CSR in SMEs: strategies, practices, motivations and obstacles," Social Responsibility Journal, Emerald Group Publishing Limited, vol. 7(3), pages 490-508, August.
    24. Joel Marcus & Heather MacDonald & Lorne Sulsky, 2015. "Do Personal Values Influence the Propensity for Sustainability Actions? A Policy-Capturing Study," Journal of Business Ethics, Springer, vol. 127(2), pages 459-478, March.
    25. Robert G. Eccles & Ioannis Ioannou & George Serafeim, 2014. "The Impact of Corporate Sustainability on Organizational Processes and Performance," Management Science, INFORMS, vol. 60(11), pages 2835-2857, November.
    26. Eva Collins & Juliet Roper & Stewart Lawrence, 2010. "Sustainability practices: trends in New Zealand businesses," Business Strategy and the Environment, Wiley Blackwell, vol. 19(8), pages 479-494, December.
    27. Heledd Jenkins, 2006. "Small Business Champions for Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 67(3), pages 241-256, September.
    28. repec:eme:srjpps:v:6:y:2010:i:2:p:490-508 is not listed on IDEAS
    29. Yang Chen & Guiyao Tang & Jiafei Jin & Ji Li & Pascal Paillé, 2015. "Linking Market Orientation and Environmental Performance: The Influence of Environmental Strategy, Employee’s Environmental Involvement, and Environmental Product Quality," Journal of Business Ethics, Springer, vol. 127(2), pages 479-500, March.
    30. Sanja Pekovic & Sylvie Rolland & Hubert Gatignon, 2016. "Customer orientation and organizational innovation : the case of environmental management practices," Post-Print hal-01450933, HAL.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andrea Stübner & Svenja Jarchow, 2023. "Family oblige: the link between CSR and succession intention in small and medium family firms," Journal of Business Economics, Springer, vol. 93(3), pages 389-431, April.
    2. Laura Broccardo & Elisa Truant & Lèo‐Paul Dana, 2023. "The sustainability orientation in the wine industry: An analysis based on age as a driver," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(3), pages 1300-1313, May.
    3. Dongsoo Kim & Jongseon Lee & Nami Kim, 2023. "Engaging CSR in SMEs by exporting: The critical factors of CEOs and markets," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(4), pages 1953-1964, July.
    4. Maria Jesus Bonilla‐Priego & Juan‐José Nájera‐Sánchez & Xavier Font, 2022. "Beyond ethics: The transformational power of overlapping motivations in implementing strategic sustainability actions," Business Strategy and the Environment, Wiley Blackwell, vol. 31(3), pages 685-697, March.
    5. Richik Maity & Khai Loon Lee, 2026. "Understanding corporate social responsibility in small and medium enterprises: a bibliometric analysis of key themes and insights," SN Business & Economics, Springer, vol. 6(5), pages 1-24, May.
    6. Nurul Islam & Faruk Bhuiyan & Shamsul Karim, 2026. "Sustainability Practices in SMEs: An Explorative Study on Ethnic Minority–Owned SMEs in the United Kingdom," Business Strategy and the Environment, Wiley Blackwell, vol. 35(3), pages 4189-4209, March.
    7. Jean-Marie Courrent & Sonia Chassé & Waleed Omri, 2018. "Do Entrepreneurial SMEs Perform Better Because They are More Responsible?," Journal of Business Ethics, Springer, vol. 153(2), pages 317-336, December.
    8. Čater, Tomaž & Čater, Barbara & Milić, Patricia & Žabkar, Vesna, 2023. "Drivers of corporate environmental and social responsibility practices: A comparison of two moderated mediation models," Journal of Business Research, Elsevier, vol. 159(C).
    9. Hazem Ali & Ting Chen & Yunhong Hao, 2021. "Sustainable Manufacturing Practices, Competitive Capabilities, and Sustainable Performance: Moderating Role of Environmental Regulations," Sustainability, MDPI, vol. 13(18), pages 1-19, September.
    10. Parisa Salimzadeh & Jerry Courvisanos, 2015. "A Conceptual Framework for Assessing Sustainable Development in Regional SMEs," Journal of Environmental Assessment Policy and Management (JEAPM), World Scientific Publishing Co. Pte. Ltd., vol. 17(04), pages 1-17, December.
    11. Gilberto Cassoli de Oliveira Junior & Jefferson de Souza Pinto & Izabela Simon Rampasso & Walter Leal Filho & Milena Pavan Serafim & Rosley Anholon, 2021. "Insertion of Sustainable Practices in Small and Medium-Sized Companies: Analysis of the Main Barriers in the Brazilian Metalworking Sector," Sustainability, MDPI, vol. 13(20), pages 1-10, October.
    12. Bang-Ning Hwang & Chi-Yo Huang & Chih-Hsiung Wu, 2016. "A TOE Approach to Establish a Green Supply Chain Adoption Decision Model in the Semiconductor Industry," Sustainability, MDPI, vol. 8(2), pages 1-30, February.
    13. Rodríguez-Espíndola, Oscar & Cuevas-Romo, Ana & Chowdhury, Soumyadeb & Díaz-Acevedo, Natalie & Albores, Pavel & Despoudi, Stella & Malesios, Chrisovalantis & Dey, Prasanta, 2022. "The role of circular economy principles and sustainable-oriented innovation to enhance social, economic and environmental performance: Evidence from Mexican SMEs," International Journal of Production Economics, Elsevier, vol. 248(C).
    14. Deepak Datta Nirmal & K. Nageswara Reddy & Amrik S. Sohal & Minakshi Kumari, 2025. "Development of a framework for adopting Industry 4.0 integrated sustainable supply chain practices: ISM–MICMAC approach," Annals of Operations Research, Springer, vol. 348(3), pages 1387-1455, May.
    15. Leon Guillén & Afcha Sergio & Chu Manuel, 2022. "Research on social responsibility of small and medium enterprises: a bibliometric analysis," Management Review Quarterly, Springer, vol. 72(3), pages 857-909, September.
    16. Stephen Brammer & Stefan Hoejmose & Kerry Marchant, 2012. "Environmental Management in SMEs in the UK: Practices, Pressures and Perceived Benefits," Business Strategy and the Environment, Wiley Blackwell, vol. 21(7), pages 423-434, November.
    17. Hernita Hernita & Batara Surya & Iwan Perwira & Herminawaty Abubakar & Muhammad Idris, 2021. "Economic Business Sustainability and Strengthening Human Resource Capacity Based on Increasing the Productivity of Small and Medium Enterprises (SMEs) in Makassar City, Indonesia," Sustainability, MDPI, vol. 13(6), pages 1-36, March.
    18. Denise Baden & Swarna Prasad, 2016. "Applying Behavioural Theory to the Challenge of Sustainable Development: Using Hairdressers as Diffusers of More Sustainable Hair-Care Practices," Journal of Business Ethics, Springer, vol. 133(2), pages 335-349, January.
    19. Ki‐Hoon Lee & David M. Herold & Ae‐Li Yu, 2016. "Small and Medium Enterprises and Corporate Social Responsibility Practice: A Swedish Perspective," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 23(2), pages 88-99, March.
    20. Kerem Dalgali & Victor Tiberius & Alexander Brem, 2026. "Sustainability in Small and Medium‐Sized Enterprises (SME): Integrated Research Framework and Future Research Agenda," Sustainable Development, John Wiley & Sons, Ltd., vol. 34(S2), pages 437-451, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:sustdv:v:33:y:2025:i:5:p:6639-6658. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-1719 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.