EFFECT OF GREEN INNOVATION AND DIGITAL TRANSFORMATION ON SOLO RAYA SMEs

Abstract

This study is motivated by the low awareness among SMEs in Solo Raya regarding the importance of environmental factors and digitalization for firm performance. Although stakeholder pressure and environmental concerns are increasing, few studies have explored how stakeholder pressure, green dynamic capability, green innovation, and digital transformation jointly influence the performance of SMEs, particularly in developing regions like Solo Raya. The aim of this research is to explore the combined impact of these factors on the performance of SMEs in Solo Raya. This research employs a quantitative approach, collecting data through a survey of 131 respondents from various SMEs in Solo Raya. The data was analyzed using Smart PLS 4. The results indicate that stakeholder pressure, green dynamic capability, green innovation, and digital transformation, all have a positive and significant effect on firm performance. In conclusion, although awareness of these critical factors remains low, SMEs in Solo Raya that respond to stakeholder pressure by enhancing their green dynamic capabilities, implementing green innovations, and adopting digital transformation strategies are better positioned to significantly improve their performance. This highlights that integrating environmental sustainability with digitalization can be a key driver of competitive advantage in the region.