Exploring the path to sustainable firm performance: The role of leadership, learning, and procurement in SMEs

Abstract

This study explores how sustainability leadership influences sustainable firm performance in small and medium-sized enterprises (SMEs), with a particular focus on the mediating roles of sustainable procurement and organizational learning. Anchored in the dynamic capabilities view (DCV), the research proposes leadership, learning, and procurement practices as dynamic capabilities that enable firms to adapt, transform, and thrive amid sustainability-related challenges. Data were collected from 476 SMEs across the United Arab Emirates (UAE), including middle- and senior-level managers, owners, and CEOs. The proposed hypotheses were tested using partial least squares structural equation modeling (PLS-SEM). The findings reveal that the direct effect of sustainability leadership on sustainable firm performance is statistically significant but modest in magnitude. Approximately 90 % of the total effect of leadership is transmitted through the mediating mechanisms of sustainable procurement and organizational learning. Among the tested paths, sustainable procurement and organizational learning exhibit the strongest direct effects on sustainable performance. Theoretically, the study advances the DCV by offering a microfoundational perspective that explains how leadership-driven behaviors and practices translate into operational sustainability capabilities. Practically, it provides actionable insights for SME managers and policymakers.

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