Absorptive capacity and green innovation adoption in SMEs: The mediating effects of sustainable organisational capabilities

This study builds on knowledge capability research and the natural resource-based view of the firm (NRBV) to examine the effect of absorptive capacity on green innovation adoption. It also investigates the mediating role of three sustainable capabilities, namely, sustainable orientation, sustainable human capital and sustainable collaboration. By means of partial least squares-based structural equation modelling method, the study validated and analysed the responses of 193 owners and managers of small and medium-sized enterprises (SMEs) in an emerging economy context. Data analysis has revealed that absorptive capacity is a strong predictor of sustainable capabilities and green innovation adoption. Moreover, sustainable orientation and collaboration capabilities have emerged as powerful determinants of green innovation adoption and mediators of the effect of absorptive capacity on green innovation adoption. Surprisingly, sustainable human capital shows no significant impact on green innovation adoption. This study offers a key departure from past studies through linking absorptive capacity to sustainable capabilities and green innovation adoption in the SMEs context. It also extends our knowledge concerning the role of NRBV and relational theory in green innovation adaption.