Green intellectual capital-sustainability performance relationship: Do green entrepreneurial orientation and green innovation capacity matter?

Purpose This study aims to examine the direct impact of green intellectual capital (GIC) on the sustainability performance of Indonesian MSMEs, focusing on the fashion and craft sectors in East Java. It also investigates the mediating roles of green entrepreneurial orientation (GEO) and green innovation capacity (GRIN). Despite extensive research on GIC in large enterprises, limited studies have explored its impact on MSMEs, particularly in emerging markets. This study addresses this gap by analyzing how MSMEs leverage GIC to drive sustainability performance in resource-constrained environments. Design/methodology/approach This study employs a quantitative research design using a survey method to collect data from MSME owners and managers. A total of 814 questionnaires were distributed, yielding 161 valid responses for further analysis. The hypotheses were tested using the partial least square-structural equation modeling (PLS-SEM) approach, applying a mediation research framework. Findings The results reveal that GIC has a significant positive effect on sustainability performance (ß = 0.62, p < 0.01). GEO (ß = 0.34, p < 0.01) and GRIN (ß = 0.13, p < 0.1) partially mediate this relationship. The model exhibits strong explanatory power, with R2 values of 0.50 for GEO, 0.77 for GRIN, and 0.48 for sustainability performance. These findings support the resource-based view (RBV) by demonstrating that distinctive internal resources play a key role in driving sustainability performance. Originality/value This study contributes to the literature by examining the impact of GIC on MSMEs’ sustainability, highlighting the importance of mediation through GEO and GRIN. It provides insights into how MSMEs in emerging markets navigate sustainability challenges with limited resources, offering valuable implications for both theory and practice.