Bridging Competitive Advantage and Sustainable Development: The Moderating Role of Value Creation for Stakeholders in Ethiopian SMEs

Abstract

The pursuit of sustainable development has become a crucial priority for businesses globally. Small and Medium Enterprises (SMEs), which form the backbone of many economies, are essential in driving this agenda. However, the challenge of balancing economic growth with environmental stewardship and social responsibility is particularly pronounced for SMEs in developing countries like Ethiopia. This study explores the complex interplay between competitive advantage, sustainable development, and the moderating role of value creation for stakeholders in Ethiopian SMEs. By investigating how SMEs can generate value for various stakeholders while simultaneously strengthening their competitive edge and promoting sustainable development, the research seeks to provide strategic insights for long-term success. Utilizing a mixed-methods approach, data were gathered from 387 SME employees in the Oromia Regional State via a self-administered Likert-scale questionnaire. The analysis, conducted through structural equation modeling, indicates that competitive advantage positively affects sustainable development. Additionally, the study highlights that value creation for stakeholders significantly moderates this relationship, amplifying the positive influence of competitive advantage on sustainable development. These findings emphasize the importance of prioritizing stakeholder engagement in fostering sustainable business practices. The research contributes to understanding SME sustainability by offering actionable recommendations for policymakers, industry leaders, and academics committed to building competitive and sustainable SMEs in Ethiopia.