Fostering sustainability in industrial SMEs in developing countries: the mediation role of strategic flexibility

Purpose The primary objective of this study is to examine the direct impact of independent variables – systematic strategic planning, strategic business innovation (SBI) and competent human capital (CHC) – on the sustainable performance (SP) of Palestinian industrial small- and medium-sized enterprises (SMEs). Additionally, the study aims to investigate the indirect mediation effect of strategic flexibility (SF) between these independent variables and SP. Design/methodology/approach Administering personally delivered questionnaires allowed researchers to test the study’s hypotheses. Data were obtained from 235 valid survey owners and directors from industrial SMEs operating in Palestine via a random sampling technique. The analysis of results applied the partial least squares structural equation modeling approach. Findings The study found a significant and favorable impact of systematic strategic planning (SSP), SBI and CHC on the SP of SMEs in Palestinian industrial industries. Furthermore, the results also revealed a mediating influence of SF between SBI, SSP and SP. However, SF does not mediate the relationship between CHC and SP. Research limitations/implications Despite its significant theoretical and practical contributions, this study is limited to industrial SMEs in Palestine. As an exploratory study, it aims to produce results applicable to a broader context. Therefore, future research should seek to validate or contradict these findings in different sectors and business settings. Practical implications The research findings hold significant value for practitioners, policymakers and researchers, emphasizing the importance of CHC, SBI and SSP for SP. It also highlights the significance of SF, particularly in the unstable political and economic environment. The study recommends that government policies support SMEs’ growth by creating enabling environments fostering innovation and flexible strategic planning to cope with turbulent business environments. Originality/value This study fulfills an acknowledged need to explore the mediation effect of SF between strategic enablers and SP of SMEs working in a dynamic business ecosystem.