The influence of institutional context in the relationship between green management, perceived barriers to sustainability and innovation performance in SMEs

Purpose: This study examines the relationships between green management, perceived barriers to sustainability and innovation performance in Latin American SMEs and how formal and informal institutional factors influence these relationships. Design/methodology/approach: The study used a dataset collected by Iberoamerican small and medium-sized enterprises (SMEs) Observatory in 2022 and included 15 country-specific indicators for Latin American countries published in international data sources to address the formal and informal institutional contexts. Accordingly, the final sample comprises 11,319 SME observations from 16 countries. The analysis involved three phases. First, an R-Type Exploratory Factor Analysis (EFA). Second, a cluster analysis. Third, a testing of the mediation theoretical model between the groups identified in the second study. To this purpose, the analysis included a multigroup analysis for covariance structure by three-stage procedures conducting structural equation modeling (SEM). Findings: The results revealed that both formal institutions (such as government policies and regulations) and informal institutions (such as social norms and cultural values) have a positive impact of green management practices on innovative outcomes in SMEs. However, the magnitude of this impact varies depending on the level of country-specific performance of the context. Additionally, the perceived barriers to sustainability do not play an intermediary role in this relationship within both institutional contexts. However, the effect of perceived barriers to sustainability on SMEs' innovation performance is diminished in the informal institutional context. Originality/value: These conclusions provide valuable insights for policymakers seeking to promote sustainable development in Latin America, highlighting the importance of institutional support in fostering SMEs' adoption of ecological practices.