The Role of Environmental and Social Innovations in the Cost Leadership Strategy, Value Creation, and Business Performance: A Comparative Analysis of SMEs and Large Manufacturing Companies

Abstract

The study examines how social and environmental innovations affect cost leadership strategies, value creation, and overall firm/business performance. It has compared how SMEs handle the ever-changing landscape of sustainability-driven business practices with large manufacturing companies. With a cross-sectional design, the study examined 179 manufacturing businesses to test the research framework. A structured questionnaire based on a five-point Likert scale with organization as a unit of analysis was used to collect data. The research’s measurement and structural models were derived from data analysis conducted using Smart PLS. Overall, the research revealed that environmental and social innovations have significant impacts on business performance through cost leadership strategies and value creation in both SMEs and large manufacturing companies. However, a direct relationship was not established between social innovation and value creation in the case of SMEs, but it was significant for large companies. Environmental innovation was found to have direct relationships with cost leadership and value creation in both SMEs and large manufacturing companies. This research shows managers and policymakers how companies of any size can balance cost leadership with environmental and social concerns to maximize resources and efficiency. It encourages sustainable practices that benefit society and the environment while boosting performance and guiding strategic decision-making. The novelty of this study is the comparative analysis of SMEs and large companies that provide empirical evidence of the intricate connection between environmental and social innovations, cost leadership, value creation, and business performance.