Leadership and Digital Transformation Competency as Catalysts for Green Business Performance: The Mediating Role of Business Innovation in Vietnamese SMEs

This study explored the critical role of leadership and digital transformation competency in enhancing green business performance in small and medium-sized enterprises (SMEs), emphasizing the mediating effect of business innovation.Grounded in Dynamic Capability Theory, the research aimed to address pressing challenges faced by SMEs in aligning sustainability goals with technological advancements and adaptive leadership.A quantitative approach was employed, utilizing data collected from 112 SME managers in Vietnam.The study applied Partial Least Squares Structural Equation Modeling (PLS-SEM) to evaluate the proposed relationships.The findings revealed that leadership and digital transformation competency significantly influence green business performance, with business innovation serving as a substantial mediator.These results provide empirical support for the integration of leadership and technological capabilities into organizational strategies to achieve sustainable growth.The study also highlights the necessity for SMEs to foster innovative practices to bridge the gap between sustainability aspirations and operational realities.This research contributes to the literature on dynamic capabilities and sustainability, offering actionable insights for SME managers and policymakers to enhance business performance through innovation-driven strategies.Future research should expand on these findings by exploring longitudinal designs and cross-industry comparisons.