Revitalising Heritage Through Innovation: Traditional Craftsmanship as a Driver of Sustainable Business Growth in Vietnamese Trade Villages

Traditional craft villages in Vietnam face unprecedented challenges in balancing heritage preservation with economic sustainability in an increasingly globalised marketplace. This study investigates the complex relationship between innovation adoption in traditional craftsmanship and sustainable business growth within Vietnamese trade villages. Drawing upon dynamic capabilities theory and institutional theory, the research develops a comprehensive theoretical framework that examines how craft enterprises navigate the tension between tradition and modernity whilst pursuing sustainable growth trajectories. Employing a mixed-methods approach combining structural equation modelling (SEM) using partial least squares (PLS) with fuzzy-set qualitative comparative analysis (fsQCA), the study analysed data from 312 craft enterprises across twelve traditional trade villages in northern Vietnam. The findings reveal that innovation in traditional craftsmanship significantly enhances sustainable business growth through three mediating mechanisms: enhanced product differentiation, improved market positioning, and strengthened cultural authenticity. Furthermore, institutional support and community embeddedness moderate these relationships, suggesting that successful innovation requires careful orchestration of internal capabilities with external institutional arrangements. The research contributes to the literature by conceptualising a novel framework that integrates heritage preservation with innovation-driven growth, offering practical insights for policymakers and craft entrepreneurs seeking to revitalise traditional industries whilst maintaining cultural integrity. These findings have profound implications for sustainable development strategies in emerging economies, particularly regarding the preservation and commercialisation of intangible cultural heritage.