Digital Capability and Green Innovation as Drivers of Sustainable SME Performance

This study employs a quantitative research design to examine the relationships among Smart Digital Capability, Green Innovation, and Sustainable Performance in small and medium enterprises located in West Java, Indonesia. A survey method was chosen because it enables systematic measurement of latent constructs and testing of structural relationships in digital transformation and sustainability research.
The population consists of SMEs operating in manufacturing, creative industries, food processing, and service sectors in West Java. These sectors were selected due to their significant contribution to the regional economy and increasing exposure to digital transformation and sustainability pressures. Data were collected from SME owners or managers who are directly involved in operational and strategic decision making.
The minimum sample size was determined based on Partial Least Squares Structural Equation Modeling requirements. According to the ten times rule, the minimum sample should be at least ten times the largest number of structural paths directed at a latent construct or ten times the largest number of indicators used to measure a single construct. In this study, the largest construct contains five indicators, and the maximum number of structural paths directed at one endogenous construct is two. Therefore, the minimum required sample size exceeds fifty respondents. To enhance statistical power and robustness of the model estimation, the final sample size was set substantially above this minimum threshold.
All constructs were modeled as reflective constructs and measured using a five point Likert scale ranging from strongly disagree to strongly agree. Smart Digital Capability was measured using five indicators reflecting digital integration, system connectivity, data utilization, process automation, and digital responsiveness, adapted from digital capability and digital transformation literature. Green Innovation was measured using five indicators representing environmentally oriented innovation practices including eco friendly process improvement, energy efficiency, waste reduction, cleaner production, and environmentally oriented product or service development, adapted from eco innovation literature. Sustainable Performance was measured using five indicators reflecting resource efficiency, environmental impact reduction, operational sustainability, long term performance stability, and sustainable competitiveness, based on sustainability and environmental management research