Green Performance in SMEs: The Nexus of Knowledge Management and Cultural Infrastructure under Transformational Leadership

Abstract

Escalating global environmental challenges have intensified pressure on businesses to adopt sustainable practices, particularly within Small and Medium-sized Enterprises (SMEs). While leadership is recognized as a pivotal driver of this transition, the specific internal organizational mechanisms through which leadership influences green outcomes remain underexplored. This study examined the impact of transformational leadership on green business performance in SMEs, focusing specifically on the mediating roles of knowledge management practices and cultural infrastructure. A quantitative research design was employed, utilizing survey data collected from 135 SMEs across diverse manufacturing and service sectors in Southeast Asia. Structural equation modeling was used to test the hypothesized relationships in the study. The findings indicate a significant positive relationship between transformational leadership and green business performance. Crucially, both knowledge management practices and cultural infrastructure were found to mediate this relationship significantly, both individually and in concert. This study underscores the strategic importance of nurturing robust knowledge management systems and a supportive cultural environment to translate transformational leadership initiatives into tangible green outcomes within SME. This study contributes to a more nuanced understanding of the pathways through which leadership fosters sustainability, offering interdisciplinary insights relevant to management, economics, and environmental studies.