Environmental Responsibility, Network Ties, and Business Model Innovation: Contextualization in Developing Economy SMEs

Abstract

Although the environmental responsibility literature remains an emerging field, there have been limited explanations of its connection to market-level constructs in developing economies, such as business model innovation and intra- and extra-cluster network ties. Thus, this research adopted the social network theory to investigate the direct and indirect effects of network ties on the relationship between environmental responsibility and business model innovation. Our study relied on questionnaire data gathered from 204 SMEs operating in the informal market of a developing economy—Nigeria. The study adopted the partial least squares structural equation modelling (PLSSEM) to capture the direct and indirect relationships between environmental responsibility and business model innovation. We found that while eco-design and waste disposal and management do not have a direct effect on business model innovation, resource management does. Also, while ecodesign and waste disposal and management are directly related to intra-cluster network ties, resource management is not. Our analysis showed a direct relationship between all three environmental responsibility dimensions and extra-cluster network ties. Both intra-cluster network ties and extra-cluster network ties are directly related to business model innovation. The mediating role of extra-cluster network ties on environmental responsibility dimensions and business model innovation was confirmed. However, we did not find a mediating role for intra-cluster network ties in this relationship. By demonstrating the impact of environmental responsibility on business model innovation, we provide a deeper understanding of the need for firms to enhance their business orientation in a broader perspective that connects firm-level sustainability orientation with marketlevel sustainable initiatives.