Dynamic capabilities and environmental performance of high-tech SMEs in Pakistan – the role of Eco-innovation and female executives

Background/Purpose: This study examines the relationship between dynamic capabilities (DCs) and environmental performance (EP) in high-tech SMEs in Pakistan, focusing on the key dimensions of sensing, seizing, and reconfiguration. Additionally, it explores the mediating role of environmental innovation (EI) and the moderating effect of female leadership on this relationship. Methods: A quantitative research approach was employed, using a structured questionnaire distributed among male and female Chief Executive Officers (CEOs), senior management personnel, and executives in high-tech SMEs. Data were analysed using structural equation modelling (SEM) to assess the relationships between DCs, environmental innovation, and environmental performance. Results: The findings indicate that seizing capabilities significantly enhances environmental performance, with a one-point increase leading to a 0.282-point improvement. Similarly, reconfiguration contributes positively, with a one-point increase resulting in a 0.227-point improvement. Both process innovation (path coefficient = 0.384, p = 0.001) and product innovation (path coefficient = 0.157, p = 0.043) positively influence environmental performance. However, female leadership did not exhibit a significant direct effect on environmental performance. Notably, female moderators negatively impacted the relationship between process innovation and environmental performance (-0.328), suggesting that in lower hierarchical positions, female inclusion may reduce the effectiveness of process innovation in achieving sustainability goals. Conclusions: The study provides empirical evidence on the role of dynamic capabilities and environmental innovation in enhancing sustainability in high-tech SMEs. It highlights the need for firms to strengthen their seizing and reconfiguration capabilities to improve environmental performance. Additionally, eco-innovation should be encouraged, and gender diversity in leadership should be strategically considered when designing innovation and sustainability strategies. These findings offer valuable insights for policymakers and industry practitioners aiming to foster sustainable business practices in high-tech SMEs in Pakistan.