How green knowledge-oriented leadership drives green innovation in SMEs: the mediating role of environmental strategy and the moderating role of green AI capability

This study examines how green knowledge-oriented leadership (GKOL) drives green innovation (GI) in manufacturing SMEs, with a focus on the mediating role of environmental strategy (ES) and the moderating effect of green artificial intelligence capability (GAIC). Drawing on the Natural Resource-Based View (NRBV) and Dynamic Capability Theory (DCT), the study developed and empirically tested an integrated framework that captures the interplay between leadership, strategy, and digital capability in promoting sustainable innovation. Data were collected from 219 Malaysian manufacturing SMEs using a structured questionnaire, and structural equation modeling was employed via SmartPLS to evaluate the proposed relationships, with the reliability and validity of the constructs verified through composite reliability, average variance extracted, and discriminant validity. The findings reveal that GKOL significantly enhances ES, which in turn enhances GI, with ES partially mediating this relationship. Additionally, GAIC strengthens the effect of GKOL on GI, underscoring the role of AI-enabled capabilities in amplifying green leadership outcomes. This study contributes to the literature by offering a unified leadership-strategy-technology framework for understanding sustainability transformation in resource-constrained SME settings and provides actionable insights for managers and policymakers on leveraging GKOL and digital transformation for sustainable development.