Sustainability Within Italian SMEs and Its Effect on Their Financial Stability

Introduction

The growth of the global population and the continuous development of the economy is causing increased consumption of resources. Therefore, the materials utilized to support the production of assets increase the emissions produced while also causing a burden to the environment. Due to the aspects above, entities, institutions, and, more broadly, stakeholders are pressuring firms to respond to these challenges and deal with environmental degradation (El-Kassar et al., 2019). Businesses are increasingly under pressure from different stakeholders to be more sustainable while maintaining a high degree of competitiveness due to the new challenges highlighted by globalization and technological advancements (Ikram et al., 2021). However, external pressure motivates organizations and firms globally to innovate their business to reduce their environmental impact (Le and Ikram, 2022). Part of the literature supporting the revisionist approach to sustainability innovation believes that it can aid and support businesses in improving their competitive advantages (Zefeng et al., 2018). However, previous studies that have examined the effects of sustainability innovation on firm performance and competitiveness usually target and focus on a single relationship and rarely investigate multiple effects within a single search model (Le and Ikram, 2022; Gurlek and Tuna, 2018).

Moreover, most studies concerning the impact of sustainability innovation examine and focus on data produced by the companies within a short and set period (Ikram et al., 2019; Maletič et al., 2021). Therefore, studies which utilize more qualitative data and investigate the lived experiences of key personnel within firms are necessary (Thanh et al., 2021). Qualitative data obtained from individuals directly correlated to a firm's development and innovation permit the gathering of longitudinal data to critically observe the real effects of sustainability innovation on firms’ performance (Doluca et al., 2018; Ikram et al., 2021). Therefore, the lived experiences of employees and entrepreneurs who have worked within the same context enable the collection and analysis of data which grants the assessment of the real impact of sustainable innovation (Kusi-Sarpong et al., 2019). The elements mentioned above highlight the existence of a gap in the literature that can be further researched and developed. This study analyzes small and medium-sized enterprises (SMEs) that have introduced a new business process that focuses on improving the firm’s environmental performance. The selected SMEs operate in Italy.

Moreover, the sample under study operates within the farming and agricultural sector. Three SMEs agreed to participate in the study. Thus, the gathered data reflect the experiences of said three firms. To gather the necessary data, the authors have adopted a qualitative approach. Semi-structured interviews were conducted with the key personnel of the various firms to gather the necessary data.

Moreover, the firms allowed the researchers to analyze reports, charts, and various other forms of documents produced over numerous periods. The authors also utilized their personal observations on the effects and effectiveness of sustainability innovation. By doing so, the researchers could triangulate data to strengthen the validity of the proposed findings (Yin, 2018). A set of research questions are developed using multiple theoretical approaches that combine stakeholder theory, sustainability vision theory, resourced-based innovation theory, and integrated innovation theory.

Thus, this study addresses the previously reported gap by answering the following research questions:

• RQ1: Do sustainability innovation boost firm competitiveness and firm performance of SMEs?

• RQ2: Does sustainability innovation improve the financial stability of SMEs?