Green Innovation, Financial Access, and Sustainable Performance of SMEs in Indonesia

¹ Universitas Lancang Kuning, Department of Management, 28261 Pekanbaru, Indonesia
² Sekolah Tinggi Ilmu Ekonomi Riau, Department of Management, 28293 Pekanbaru, Indonesia
³ IAI Diniyah Pekanbaru, Department of Management, 28121 Pekanbaru, Indonesia

Abstract

This study investigates the effect of green innovation on the sustainable performance of SMEs in Indonesia by incorporating the mediating role of access to sustainable finance. Using a sample of 90 SME managers, data were analyzed using Partial Least Squares-Structural Equation Modeling (PLS-SEM) with SmartPLS 4. The model demonstrates strong explanatory power, with R² values of 0.766 for sustainable performance and 0.549 for access to sustainable finance. The empirical results indicate that green innovation significantly influences sustainable performance (t = 5.147; p = 0.000) and access to sustainable finance (t = 8.432; p = 0.000). Access to sustainable finance also shows a significant direct effect on sustainable performance (t = 7.025; p = 0.000). The mediation analysis confirms that financial access significantly mediates the relationship between green innovation and sustainable performance (t = 4.827; p = 0.000), correcting previous inconsistencies between narrative and statistical findings. These results highlight the central role of financial access in converting green innovation efforts into measurable sustainability outcomes. Practically, the study emphasizes the need for policymakers and financial institutions to expand green financing schemes and strengthen incentive structures so that SMEs can adopt clean technologies and enhance resource efficiency. Strengthened integration between innovation capacity and sustainable financing is critical to accelerating SMEs' transition toward resilient, environmentally responsible business models.