Impact of dynamic capabilities and green HR on sustainable performance in SMEs

The purpose of this study is to explore how internal and external dynamic capabilities and green human resource (HR) practices enhance sustainable outcomes in SMEs. Data were collected using a survey methodology targeting employees of SMEs located in the northern region of Bangladesh and West Bengal, India. A total of 327 employees participated in the survey conducted between May and June 2024. A five-point Likert scale was employed to assess the responses, and regression analysis was used to test the study’s hypotheses. The analysis was conducted at a 5% significance level, and the data were analyzed using the SPSS software package to ensure accuracy and reliability. The results indicate that internal and external dynamic capabilities, as well as green HR practices, play a significant role in shaping the sustainable performance of SMEs. External dynamic capabilities (β = 0.498, p < 0.05**) have the highest effect on the sustainable performance of SMEs, and internal capability (β = 0.384, p < 0.05**) has the second highest effect on SME performance. Additionally, a significant positive correlation (r = 0.498) was found between green HR practices and the overall performance of SMEs. This study contributes to the growing body of literature by providing empirical evidence on the critical factors driving sustainable performance in SMEs. It highlights the importance of integrating dynamic capabilities and environmentally conscious HR practices to achieve long-term sustainability in the SME sector, particularly in the context of developing countries like Bangladesh and India.