How Green SMEs Combine Resources for Financial Performance and Environmental Action: Multiple Pathways in Weak Institutional Contexts

ABSTRACT This study explores the key determinants of green small‐ and medium‐sized enterprise (SME) performance in economies that have performed inadequately concerning global sustainability goals. Drawing on the dynamic capabilities view (DCV) as a theoretical lens and utilizing qualitative comparative analysis (QCA), we examined which configurations of resources are associated with higher financial performance and environmental action intensity. Our analysis identified financial, technical, human, and institutional resources that combine in complex ways and are associated with high financial performance in four equifinal configurations: (1) a knowledge‐intensive pathway that combines technical know‐how with private sector support, (2) an institutionally supported pathway that leverages technical know‐how with public sector support, (3) a human capital‐centered pathway that emphasizes green workers with financial resources, and (4) a comprehensive pathway that integrates all resource types. For high environmental action intensity, three configurations are sufficient, with public‐ and private‐sector support jointly associated with broad adoption of energy and waste routines even when internal assets are limited. The study advances beyond “why” entrepreneurs pursue green opportunities to examine “how” these configurations are associated with higher financial performance and environmental action intensity. These findings are also significant to policy and SME managers for highlighting strategic sustainability approaches that enable pathways to competitive advantage through environmental performance while strengthening business resilience in resource‐sensitive and competitive environments.