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Article

Environmental Challenges and Green Innovation Strategy: A Vigorous Development of Greener Dynamics

by
Abdullah F. Alnaim
1,
Nadia Abdelhamid Abdelmegeed Abdelwahed
1,* and
Bahadur Ali Soomro
2,*
1
Department of Management, College of Business, King Faisal University, P.O. Box 400, Al-Ahsa 31982, Saudi Arabia
2
Faculty of Applied and Human Sciences (FSGM), Universiti Malaysia Perlis (UniMAP), Kangar 01000, Perlis, Malaysia
*
Authors to whom correspondence should be addressed.
Sustainability 2022, 14(15), 9709; https://doi.org/10.3390/su14159709
Submission received: 30 June 2022 / Revised: 3 August 2022 / Accepted: 4 August 2022 / Published: 7 August 2022
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Abstract

:
This study investigated the strengths of internal and external environmental challenges to the Green Innovation Strategy (GIS). This study tried, also, to observe GBIS’ predictive power of on Green Organizational Identity (GOI), Green Innovation (GI) and Green Creativity (GC). The researchers gathered the cross-sectional data from the top managers of Saudi Arabia’s manufacturing industries. We employed a Structural Equation Model (SEM) to obtain the outcomes to form the data. This study’s findings demonstrate that external pressures, such as Policy Pressure (PP) and Market Pressure (MP) and internal driving forces such as Innovation Resources (IR) and Innovation Capability (IC), have a positive and significant effect on GIS. This study’s findings demonstrate, also, that GIS has a positive and significant effect on GOI, GI and GC. Finally, this study’s findings show that GOI is a considerable predictor of GI and GC. This study’s findings provide the path for policymakers to formulate Environmental Regulations (ER) and laws regarding pressure and incentive regulations. Finally, and more particularly in the context of Gulf countries, this study’s findings contribute to the literature on green management, innovation and Environmental Management (EM).

1. Introduction and Literature Review

In the present era, GIS has made an outstanding contribution to enterprises’ Sustainable Development (SD) [1,2]. This strategy has reduced firms’ adverse environmental effects, has ensured smooth business practices and has incorporated environmental responsibility into firms’ strategic development [3]. The high investment costs and the increased risk of EM have led to enterprises being less inclined to carry out GI [4,5]. Henceforth, to solve among enterprises such a challenge of inconsistency, we assume that GIS is one of GI’s core concerns. The existing literature offers primarily GIS’ persuading variables from two aspects: Firstly, based on two theories, namely, institutional theory and stakeholder theory [6], we investigated predominantly within an external environment investigated the GIS’ affecting constructs. According to Medvedeva et al. [7], it is possible through the significant stakeholders, financial institutions and employees to adopt a leading environmental protection strategy. Likewise, stakeholder theory claims that SMEs with more vital stakeholder assimilation capacity can improve positive environmental strategies [8,9].
Similarly, the various customers and stakeholders, competitors and suppliers have substantial effects on SMEs’ GI activities [10,11]. The GBIS mechanism through the theory of natural resources suggests that background features, such as age, size and nature of the SME and location of the industry, can influence the SME’s environmental innovation. Internal knowledge resources improve the sharing of green knowledge and green dynamic capability [1,2,12]. In consequence, this promotes enterprises to adopt green service innovation. Zhang et al. [11] suggest that internal sources, such as culture, environmental leadership and IC, can improve Proactive Green Innovations (PGI). Managers reflect environmental concerns, threats and opportunities that significantly influence the enterprises’ GIS choices [13]. He et al.’s [14] findings indicate that, pro when managers identify natural environment concerns as accidental, it is most probable to proceed with a proactive environmental strategy that can expand firms’ financial and environmental performance. Consequently, from the GIS perspective, the available existing literature has some limitations: First, while exploring the GIS’ direct effect, it has failed to carry out a comprehensive investigation with the integration of GC, GOI and GI. Second, while the existing literature considers the managers to be an internal construct in the firm, it ignores GIS’s top management role. Finally, the existing literature has focused mainly on developed countries and provides scarce evidence from the contexts of developing countries.
This study’s findings help to recognize GIS’ role as a driving force towards GOI, GI and GC. Moreover, by bringing together SD and sustainable competitive advantages the findings are valuable to fragile organizations. Therefore, we try to fill the existing gap in the literature by integrating GIS with GOI, GI and GC among the Saudi Arabian manufacturing firms’ top managers.
The structure of this paper is as follows. Section 1 is the Introduction is and the Literature Review. Section 2 is the development of the hypotheses and the methods used in this study. Section 3 is the analysis of the findings. Section 4 is the discussion of the findings and conclusions Section 5 is the implications of this study its limitations and the directions of future research.

2. Development of the Hypotheses and Methods

Currently, GIS, GI, GOI and GC are essential factors in achieving SD among the enterprises [1,2]. Therefore, numerous scholars have examined and contributed to the various factors. Among new Chinese green firms, GIS has helped them to gain Sustainable Competitive Advantages (SCA) In the strategy implementation process, enterprises must select suitable approaches to overcoming certain degrees of diverse Environmental Uncertainty (EU). In minimal EU, dynamic capabilities make a meaningful contribution and play a full mediation role in developing the relationship between GIS and SCA [1,2]. In Romania, Ceptureanu et al. [15] conducted an empirical study of Romanian Small and Medium-sized Enterprises (SMEs). The survey findings underline the formation of eco-innovation capability as the significant catalyst of sustainability-driven innovation practices. In top automotive firms, GIS significantly reduces the idiosyncratic risk for all firms. Such an association reinforces the upsurges in the firms’ competitive actions [16]. According to empirical evidence from [17], GOI has a positive effect on the development of green shared vision and green products. Among Jordan’s academic participants, there is a strong and positive association between GOI and Environmental Commitment (EC). However, the significant antecedents of GOI and EC mean that demographic constructs are not observed [18]. Similarly, Liu and Zhao’s [19] study findings demonstrates that GI, environmental protection policies and SD are the unavoidable choices for enterprise development. In the study outcomes, ethical leadership is the direct protagonist and mediatory predictor of employee green innovation behaviors and GOI. Galindo-Martín et al.’s [20] study findings show that traditional and social entrepreneurships have significant effect on GI and innovations. Further, all these aspects of responsibly bring SD to the institutions. In Chinese enterprises, corporate green entrepreneurial orientation has a significant effect on green incremental innovation [21]. Similarly, the findings of [22]’s study confirm that both customers and green suppliers have a positive impact on the association between green products and process innovation. Such findings stress the connotation of learning from supply chain partners for SD and the firms’ capabilities to adjust to external technological circumstances in executing their environmental practices. The dramatic climate change brings greater awareness to government, SMEs and civil society [23,24], and the resultant environmental problems automatically change societies’ attitudes towards events that favor the sustainability of the ecosystems.
Concerning GC, Chen et al.’s [25] seminal work highlights that there is a positive and significant correlation between GC and PGI. However, in mediation, GC develops the association between green product development performance and PGI. Consequently, this indicates that the companies must develop PGI to enhance the GC, GI and performance in product development. GC and Green Intrinsic Motivation (GIM) can predict green transformational leadership in China’s information technology industry. These predictions are necessary requirements for workforces to produce green and clean products.
On the other hand, GIM works as a moderator and somewhat weakens the GIM for green creative behaviors [26]. Bhutto et al.’s [27] findings demonstrate that in both service and manufacturing sectors GC contributes to GI and green sustainability. Further, the investigation confirms the significant association of green, inclusive leadership with a green related work environment and psychological climate. In a Thai manufacturing firm (sports industry), GC plays a mediating role between reactive GI and PGI [28].
Consequently, the literature offers various predictors, such as leadership, green psychological climate, green work engagement, green sustainability, awareness, green incremental innovation, supply chain learning and green creative behaviors, with GIS, GC, GI and GOI [21,22,26,28]. In addition, [6] provides an empirical investigation which, through the moderation of environmental awareness on the firm’s top management, investigates the role of PP, MP, IR and IC towards GIS. Recently, Alsughayer’s [29] findings highlight the challenges faced by Saudi Arabia’s manufacturing and service sectors. This study provides, also, evidence of the relationship between the green work environment, inclusive leadership and the green psychological climate. However, more particularly in respect of Saudi Arabia’s manufacturing firms, the literature continues to ignore the direct effect of PP, MP, GR and IC with GIS and simultaneously with GOI, GI and GC [19,22,29]. Based on these gaps, we developed the following model (see Figure 1) to investigate Saudi Arabia’s manufacturing firms. This model comprises three sections. The first section consists of predictors such as external pressure (policy and market pressure), internal driving forces (innovation resources and innovation capability) and criterion variables such as GIS. In the second section, we use GIS to assess the GOI. Likewise, the model’s final section shows GOI’s and GIS’s predictive powers on GI and GC.
PP comes mostly from government regulations. The dearth of enterprises due to GI’s “dual externality” characteristics has a negative effect on the creativity to carry out IG [4,5]. Therefore, the Government frames and gears ER to impact GIS opportunities for innovation [9,11]. In contrast, compulsory environmental law depends largely on its intimidating power to enforce ventures to select GIS [30]. ER compel enterprise behaviors through restrictive pollutant emissions and production technology. The Government can work out the strength of punishment by imposing laws and regulations relating to the environment and by enhancing the environmental defilement costs of being innovative. However, several SMEs use GI to evade economic disadvantages and to improve cost compensations [31]. On the contrary, market incentive ER depends on its possible returns to persuade enterprises to assume GIS. The Government offers incentives in terms of preferential procurement, financial subsidies and tax. To some extent, these can recompense for the cost rises caused by GI [32]. Moreover, through incentive-based plans to diminish GI’s ambiguity, the Government directs GI skills, knowledge and capital in the industry. The significant pillar of GI is PP from environmental protocols is. According to [31], the Government’s ER is the most enthusiastic enterprise to assume GIS. From Frondel et al.’s perception [33], market incentive regulations have had a robust effect on GI when compared to mandatory rules.
In the market mechanism, competitors, suppliers and consumers are closely associated with enterprises’ management and production. However, their apprehension about green protection is the protagonist cause of market pressure [10,11]. The enterprises’ GIS is affected mainly by the consumers’ rights to choose products. With the increasing consciousness, of environmental protection the consumers wish to select Environmentally Friendly Products (EFP) [34]. The firms take GI, i.e., seeking a low quantity of carbon environment products and tumbling consumption of raw materials to attain market prospects. Such an activity meets the consumers’ requirements and generates an excellent green image.
In contrast, consumer demand for green products or services may remove enterprises’ uncertainties about the market and assist them in increasing their eagerness for GI. A broader assortment of supplier networks may offer enterprises acquaintances and resources beneficial to GI [6]. The firms mostly feel environmental pressures arising from their rivals’ creative development of assets and marketplaces. The competitors offer GI products to secure more government resources and consumers’ favors. Moreover, a conducive and more competitive environment enables enterprises to shift GI technologies and acquaintances to enhance their revenues by reducing the innovations’ external overheads. In the market, a cause of pressure is that, through executing GIS, enterprises can gain potential economic returns and competitive advantages. According to Fernando and Wah [35], when enterprises embrace GI practices, they must consider the ER constraints and market-oriented issues.
Similarly, paying attention to the MP is a significant resource for enterprises to acquire market knowledge, to respond timely and to gain competitive advantages [36]. Cao and Chen’s [6] findings demonstrate that the coercive policy has a reversed U-shaped effect on GIS. Moreover, the incentive policy and the MP have positive and significant effects on GIS. Consequently, the literature provides either direct investigations of PP and MP with GIS or in the presence of the moderating variable, i.e., environmental awareness of top management [6,29,34]. However, these investigations do not provide evidence between PP and MP and GIS, GI, GC and GOI. Contextually, these effects remain to be confirmed in Saudi Arabia. Therefore, in view of the existing gaps in the literature, we formulated the following hypotheses:
H1a. 
PP has a positive and significant effect on GIS.
H1b. 
MP has a positive and significant effect on GIS.
The resource-based theory explains that the firm’s organizational capabilities and heterogeneous resources are the significant causes of refining competitive advantages and corporate performance [37]. GIS has a high risk and external spillover. The more affluent assets offer a platform for enterprises to select GIS. Henceforth, in devising an enterprise’s strategy, it is essential to consider and evaluate its capabilities and resources.
An enterprise’s innovation capabilities regulate if it can carry out GIS efficiently. The IR is the vital precondition in selecting a green strategy among enterprises [38]. In contrast, GIS is maintained informally when IR are plentiful. In cases of resource deficiency, enterprises choose schemes that may make an immediate benefit on investment and may have a rapid ability in improving production. The prosperous IR allows enterprises to have sophisticated autonomy in an assortment of strategies which emphasize the GI [39]. The diverse resources, such as financial, human and information resources, impact on enterprises’ adoption of GIS. They play a substantial role in the GI’s investment stage of and treatment of pollution and production by obtaining knowledge and skills to make GI and EFP practices that are used in developing effective products to meet the market’s demands and requirements, and to capture the GI market opportunities [40].
There are prominent increases in environmental concerns. Therefore, to obtain sustainable competitive advantages, the enterprises concentrate in a meaningful way on the resources relating to the environment to obtain sustainable competitive advantages. Firstly, IC can offer a capability base for the GIS. IR can compete for technologies and materials in the standing development phase. It achieves compulsory innovation; whilst, in the dynamic phase, IC can captivate fundamental knowledge and reconfigure and assimilate resources to develop the amalgamation of GI skills; acclimatize to the fluctuating environment; obtain sustainable survival [41]. In a second way, the IC can enhance the possibility of victory in the GIS. In addition, IC can reduce the risk of GI. The stronger the enterprise’s IC, the more capable it is to endure this risk.
In contrast, IC can abolish knowledge barriers for GI [42]. Aragon-Correa and Sharma [43] consider that the enterprise’s IC plays a crucial role in innovating innovation to obtain competitive advantages. Similarly, an environmental capability is helpful to the enterprise in achieving GI and EM and has a substantial role in the combative and proactive GI [25]. According to Cao and Chen [6], IC is a significant GIS analyst. On the other hand, IR is not found to be a considerable predictor of GIS.
The inadequate resources can assist enterprises only in accepting the lowest level of environmental strategy [7]. Consequently, numerous investigations have established the association between IR and GIS. For instance, [44] demonstrates that IR is beneficial to developing IC and endorsing the choice of GIS. Moreover, the emphasis of [6]’s study remains on IC towards GIS. [42] contributes to the IC by acquiring information and integrating resources. However, there have been no examinations of the links between IR, IC and GIS combined with GI, GOI and GC [6,7]. Therefore, we formulated the following hypotheses:
H2a. 
IR has a positive and significant effect on GIS.
H2b. 
IC has a positive and significant effect on GIS.
GI is an essential winning element in the epoch of environmental unease. Several factors have been recognized as GI’s significant drivers. These factors are: namely, resources and capabilities; absorptive capacity; executive compensation; societal expectations [45,46]. Firms require policies to confront environmental concerns to achieve future victory in the markets with EFP. Therefore, GIS is the best and most vital strategy in securing environmental awareness. However, some researchers have concentrated their empirical investigations on developing firms and the performance of their environmental strategies, innovation and generating green products to gain competitive advantage and better performance [25,47]. As soon as a firm shapes a strategy to secure the environment, ultimately it must design and implement a GIS.
A GIS pushes firms’ lower, middle and top management to assimilate the organizational resources to alleviate the risks of the hazardous effects of manufacturing modes and outputs on the environment. Henceforth, such behaviors further reinforce the organization’s identity [47]. According to Sharma et al. [48], if a firm has a robust EC, the management does not neglect the harmful effects of its operating activities on the environment. Such environmental associated concerns are a part of a firm’s identity and, nowadays, famous for GOI [49]. The firm’s identity can impact on the employees’ actions and can offer an appropriate reference when considering the surrounding issues relating to GIS [50]. Whilst dealing with environmental problems is an essential part of the firm’s identity, these problems can represent optimistic tasks to motivate employees to contribute to the firm’s environmental activities [51]. A GIS can assist employees in recognizing that their firm’s leaders pay great attention to environmental issues that, in turn, can lead to the development of green beliefs and core values. These beliefs and values may be able to drive the firm’s behaviors. Moreover, these increase further the GOI’s capacity to deal with environmental pressures. Song and Yu’s [47] findings demonstrate a significant and positive correlation between GIS and GOI.
Environmental harm is a threat to all living creatures [52]. Therefore, firms need to design strategies which can execute innovations that reduce the negative impacts of their actions on the environment. GI mentions several innovations that can reduce nasty effects on the environment. GI provides the firm with a massive opportunity to achieve its environmental goals and profits [11]. A strategy sets out a firm’s opportunity to fulfil its stakeholders’ market requirements and expectations in the long run. In the interim, GI is an innovation that emphasizes the reduction in the prevention of pollution and effective execution of EM [3]. Henceforth, a GIS is a firm’s strategy to implement GI. Accordingly, the firm obtains a competitive advantage and fulfils its stakeholders’ hopes by satisfying the demands of the market. Song and Yu’s [47] findings powerfully demonstrate that firms must improve their GIS to encourage GI.
The organization identity theory underlines that GID is a joint cognitive plan of business which can impact all the firm’s employees [53]. Henceforth, the firm’s top management develop the GID to shape the firm’s beliefs and core values which, in turn, drive the organizational behaviors [54]. Sharma et al.’s [48] findings underline that attention to the environment represents an integral constituent of a firm’s organizational identity. It turns out to be difficult for the firm to overlook the environmental effects of its actions. A sagacity of environmental responsibility is reasonable as an essential part of the firm’s identity. In a similar vein, [49] has tried to establish a new notion called GOI. Such group identity contains a revelatory structure of protection of the firm’s management whereby the members mutually create a vision offer significance to their behaviors. A GIS can improve the development of the firm’s products and make the essential internal changes to reduce emissions. Consequently, when a firm implements a GIS, its managers move towards assimilating its organizational resources and employees’ behaviors to reduce its environmental impact. All these reinforce the firm’s GOI. Likewise, a GIS empowers a firm to confront environmental pressure to generate a milieu to engage in environmental innovation [3]. To achieve environmental innovation, the firm must concentrate on its product and process innovation responsibilities. Managers must realize their employees have to make great efforts in GI. Consequently, in the context of developing countries, there have been insufficient investigations of the concept of GIS and, more particularly, with GOI, GI and GC [6,11,17,50]. These are despite GIS obtaining the environmental and organizational legitimacy and better green innovation performance [50]. Therefore, we formulated the following hypotheses:
H3a. 
GIS has a positive and significant effect on GOI.
H3b. 
GIS has a positive and significant effect on GI.
H3c. 
GIS has a positive and significant effect on GC.
GOI outlines how a firm assesses its management and needs to be perceived by investors, stakeholders and consumers. According to the new concept of [49], GOI is an interpretive arrangement of EM and defend that associates jointly constructs to offer connotations to their behaviors. Globally, in the face of growing environmental issues raised by their investors, firms have endorsed the growth of green products investors [11]. The GOI firms are confident in generating environmentally friendly innovations to enhance their accomplishments. One example is the execution of an EM system that utilizes energy-saving software and hardware which can reduce pollution and waste made from the firm’s operations. Moreover, firms with environmental issues need to defend the environment and, consequently, they imitate their problems through arrangements. As soon as environmental concerns become a core aim of OI, it prompts the firm’s employees to contribute more to protecting the environment [13]. GI underlines a solution to giving greater prominence to new ideas regarding green products and practices. It can encompass problem-solving in diverse areas, such as green product design, waste recycling, pollution prevention, corporate EM and energy-saving [51]. More specifically, firms assume GI to achieve their goals to protect the environment. Accordingly, GOI contributes to such a process by merging different skills and expertise to enable innovation in the firm [55]. Using such knowledge, a firm can encourage innovation to generate new ideas that may be appealing to investors [55].
Balmer and Podnar’s [56] findings emphasize organizational identity’s positive role in dealing with mutual interpretations of problems and making the necessary responses. It is not easy to evade environmentally responsible challenges when environmental concerns become an essential part of the firm’s identity s [11,49]. Therefore, such a firm’s employees may be inspired by their common sense to eagerly determine innovative ideas to meet consumers’ requirements [55]. Generally, when firms face pressures from government strategies, those, which recognize the social responsibilities about environmental safety, pursue means to increase GI and such a commitment becomes a significant part of the firm’s organizational identity. GOI can stimulate a firm to assume EM to grow its green credentials as an accountable green enterprise [55]. Therefore, GOI can organize employees’ behaviors to make greater efforts to yield new ideas and approaches to their work. Over time, such procedures or processes to work on green products can lead to green creativity. Currently, modern corporations are confronted by several environmental pressures and challenges. Firms’ managers have grasped that GI is a significant factor in SD and can provide them with a competitive advantage.
Consequently, the literature demonstrates GOI’s positive role in GI and GC [13,47,55]. However, we have been unable to find any previous studies that may show GOI’s effect on GI and GC in the presence of GIS, GOI, PP and MP [6,17,29,49,50] and, more particularly, in Saudi Arabia. Therefore, we formulated the following hypotheses:
H4a. 
GOI has a positive and significant effect on GI.
H4b. 
GOI has a positive and significant effect on GC.

2.1. Approach and Respondents

The quantitative approach systematically captures the universe’s facts [57]. We decided to select the top managers of Saudi Arabia’s manufacturing industries. The top managers are the leading personalities who play a significant role in resolving employees’ fears [58]. They are aware, also, of each enterprise’s progress. More particularly in SEMs, because of their active and leading role in developing the country’s economy [59,60], Saudi Arabia’s SMEs play a substantial role in establishing stability to and accelerating the country’s economic growth and, in turn, creating sustainable employment. Currently, the Saudi Arabian Government fully encourages the SMEs to drive the Saudi economy. This is, also, a significant step toward in achieving Saudi Arabia’s 2030 Vision [29].
Nevertheless, the SMEs’ top management have confronted severe obstacles and problems in achieving their firms’ profits. They face, also, the environmental issues of GI, GIS and GC and their firms’ creativity in meeting such challenges. Consequently, to reduce the adverse environmental effects of their actions these firms need to intensify their existing practices by developing GIS, GC and GI.

2.2. Data Collection Modes and Size of the Respondents’ Size

In this study, we employed a survey questionnaire due to its suitability and practical ability in providing social science analysis. The best and fairest most stress-free strategy is a random sampling technique [61]. This respondent tracing process provides an equal chance of representation and is helpful in generalizing population. We took care of the respondents’ rights and provided them with clear-cut guidelines about this study’s aim and objectives. We assured them that we would not share their responses with anyone other than those involved in this study.
Further, we guaranteed the respondents that we would keep their demographic information secrete and confidential [62]. We distributed 300 survey forms among Saudi Arabia’s various manufacturing companies. In return, we received 192 which represented a 64% response rate. To create the best possible respondent size, we applied the G*power software [63] based on six predictors exploring the effect of GIS, GOI, GI and GC. We pursued the recommendations of [64], bearing in mind as constructs the effect size (f 2) = 0.15, the probability of error (α) = 0.05 and a power (possibility of error 1 − β) = 0.80. Therefore, the test advises the need to have a total of 74 responses and we managed to achieve this for SEM analysis.

2.3. Non-Response Bias

We reduced the response bias by confirming the collection of evidence from the study’s respondents. Frequently, the respondents compromise uncertain refusal (ineligibility) to lessen the pattern dimension. However, this distorts the validity of the pattern to specify the overall population [65]. The findings are biased if the procedure no longer signifies the entire data [66]. The postulation of non-response bias occurs when respondents vary emphatically from non-respondents [65]. To reduce such a fear, we conducted a Mann–Whitney-U-test to distinguish between early and late respondents with intensifying overall constructs [65]. The first fifty surveys are perceived as early respondents, whereas the last fifty are late respondents. Consequently, insignificant (>0.05) values warranted an absence of non-response bias (see Table 1).

2.4. Measures

Green Innovation Strategy (GIS)—GIS is about the adjustment of the firm’s business practices or operations to reduce the maximum damage to the environment [44]. GIS is measured on seven items adapted from [44]. Its calculation is based on enterprise behavior as measured by [6]. The sample item is: “The enterprise adjusts its business practices or operations to reduce the damage to the ecological environment”.
Green Organizational Identity (GOI)—GOI ensures through significant knowledge the compliance of environmental management, protection and the firm’s environmental tradition and culture [49]. GOI is assessed on six items. The items are adopted from the study of [49]. The sample item is: “Is proud of the firm’s history about environmental management and protection?”
Green Innovation (GI)—GI focuses on utilizing firms’ product development or design and the manufacturing of raw materials to effectively reduce the emission of hazardous substances or waste [67]. GI factor is evaluated on five items adopted from [67]. The sample item is “The Company uses the fewest amounts of materials to comprise the product for conducting the product development or design”.
Green Creativity (GC)—GC is concerned with generating new green ideas in the development projects to improve environmental performance [55]. GC is assessed with six items. These items are adopted from well-known scholars such as [55,68]. The sample item is “Members of the green product development project propose new green ideas to improve environmental performance”.
External Pressure—External pressure comes through both policy and the market. Policy pressure (PP) is derived from the investigations of [69,70] that are based on four items. PP is divided into two types: Coercive Policy (CP) and Incentive Policy (IP). CP includes the relevant regulations and laws in pre-event, process-event and post-event are. Moreover, IP includes the dimensions such as finance and finance and taxation. The sample item is “Relevant laws, regulations or rules stipulate strict pollutant discharge standards (such as concentration or the total amount of the pollutant discharge)”. Likewise, Market Pressure (MP) comes from customers and suppliers of the green products and the firm’s green innovation behaviors. MP is assessed on six items adopted from [71,72]. The sample item is “Most customers of the enterprise have high demand for green products”.
Internal diving force (IDF)—IDF’s measurement is based on two factors, namely, R and IC. IR is measured on four items adapted from [40,44]. Likewise, IC is evaluated on four items adopted from [73,74]. The sample item is “The investment of scientific research in the enterprise is at the leading level in the industry”. All the items are measured on a five-point Liker scale (strongly agree = 1; agree = 2; neutral = 3; disagree = 4; strongly disagree = 5). There are several reasons for selecting a five-point Likert scale. First, it is simple to understand and takes less time and effort to complete than higher-point scales. Second, respondents have choices without becoming overwhelmed. Finally, it increases the response rate and quality and resources respondents’ “frustration level” [75,76]. The Appendix A below gives full details of all the items.

2.5. Measurement Model

We applied the Structural Equation Modelling (SEM) through AMOS version 26.0 for Windows to inspect the data. SEM is the best solution to judge the validity of statistical facts [64]. The practice enables the researchers, also, to discover and verify the associations among several variables. A massive number of latent constructs through SEM reduce an error in the model [77]. We applied the measurement model to assess the associations between latent constructs and their measures. First, we took the recommendations regarding reliability and validity through the measurement model that were considered by renowned scholars such as [77]. For the rest of the constructs, we observed the scores of loadings as being greater than 0.70 (>0.70) (see Table 2). On the other hand, some items, for example, mp3, goi5 and gis6, did not load the above-recommended scores (>0.70) [77] and, therefore, we excluded them from further consideration. Likewise, we observed the Composite Reliability (CR) of the rest of the constructs to be greater than 0.70 (>0.70); this ensured good reliability [78]. Moreover, the internal consistency among the items appeared within excellent scores (>0.70). To provide further, the Average Variance Extracted (AVE), we confirmed, also, the remarkable internal consistency (see Table 2) was greater than (>0.70) [77]. This mostly fulfilled the acceptable criteria (for example, >0.50) [77] (see Table 2). In the end, the diagonal values of the Discriminant Validity (DV) matrix signified that all constructs had reached their acceptance criteria and were greater than the non-diagonal values [77] (see Table 3).

3. Hypotheses Assessment/Structural Model

We observed Chi-square (CMIN/χ2) statistic through AMOS before assessing the hypothesized paths. The insignificant score of χ2 (2.728) (p > 0.005) confirmed the initial fitness of the model with the existing data [77] (see Figure 2). Furthermore, other model indices, i.e., GFI = 0.920; AGFI = 0.909; NFI = 0.922; CFI = 0.936 and RMSEA = 0.036 seemed to the greater than the cutoff value (0.08) [77] (see Figure 2), and ensured the very good fitness of the model.
Moreover, to check the suggested effects, we observed that PP and MP had a positive and significant effect on GIS (H1a = SE = 0.043; CR = 5.405 ***; H1b = SE = 0.088; CR = 4.994 ***; p ≤ 0.01). The results mean that hypotheses H1a and H1b are accepted (see Table 4 and Figure 2). In a similar way, we confirmed that IR and IC had a positive and significant effect of on GIS (H2a = SE = 0.049; CR = 6.882 ***; H2b = SE = 0.054; CR = 6.112 ***; p ≤ 0.01). Therefore, hypotheses H2a and H2b are accepted. Moreover, we noted that GIS had a positive and significant effect on GOI, GI and GC (H3a = SE = 0.064; CR = 7.558 ***; H3b = SE = 0.023; CR = 5.229 ***; H3c = SE = 0.080; CR = 5.001 ***; p ≤ 0.01). Therefore, hypotheses H3a, H3b and H3c are accepted. Finally, we noted that GOI was a positive and significant predictor of GI and GC (H4a = SE = 0.069; CR = 7.146 ***; H4b = SE = 0.049; CR = 5.669 ***; p ≤ 0.01) (see Figure 2 and Table 4). Consequently, H4a and H4b are both accepted.

4. Discussion and Conclusions

In this study, we explored the internal and external environmental challenges to GIS. We observed, also, the link between GIS and GI and GC. We developed a conceptual model and, based on the existing literature, we formulated some hypotheses. Turning to hypotheses H1a and H1b, SEM analysis supports the expected positive effect of external factors (PP and MP) on GIS (therefore hypotheses H1a and H1b are accepted). The findings are reinforced by various researchers such as [6,34] whose findings indicated the significant effects of PP and MP on GIS. This study’s findings reflect that the relevant laws and rules specify strict pollutant discharge standards. The rules and regulations put pressure on firms to control pollution and, therefore, the firms may be required to take steps to stop manufacturing some products. In respect of GI firms, their environmental protection departments should frame comprehensive environmental plans and wide-ranging tax incentive structures to meet such needs. The local government has provided firms, also, with the necessary subsidized funds and discounted loans. It is a challenging environmental problem to reconcile sustainable growth with minimum pollution. Henceforth, to confirm sustainable development, it is essential that firms reduced their pollution to survivable levels [79]. Without government involvement, the industries would not undertake innovations to use appropriate technologies.
Furthermore, this study’s respondents considered that firms need to make maximum efforts to meet their customers’ needs for green products. However, some customers are eager to match the firm’s green innovation behaviors. The firm’s providers regard GI as an essential gauge to assessing corporate status. Most investors in firms pay great attention to how they use GI in their set-ups. In the long run, these environmental policies may affect the firm’s economic growth. The vertical innovation may improve the intermediate goods and be a source of pollution. The imposition of environmental taxation on the final production of goods would discourage such production. On the other hand, environmental policies, which aim to reduce pollution, result in less final outputs in the short run. These encourage the use of relevant technologies on several activities for and eventually improve the economy’s overall productivity [80].
Moreover, we noted that IR and IC had a significant effect on GIS. This meant that hypotheses H2a and H2b were accepted. These findings are consistent with the existing outcomes literature, i.e., [6,11,41,42]. This study’s findings demonstrate that firms make use of huge levels of funding and high levels of technology. They have sufficient assets, and their human resources systems are effective along with the high quality of their scientific analysis and timely innovative schemes. At the industry’s top level, the firms invest considerable amounts in scientific research in the enterprise. The firms inspire their employees to develop creativity and to use resources wisely. Accordingly, these steps enhance the possibility of the GIS being successful in. The development of IC can reduce the level of risk and IC is a favorable tool to the firm achieving GI and EM [11].
Moreover, our findings provide evidence about GIS’ positive effects on GOI, GI and GC (therefore, hypotheses H3a, H3b and H3c are accepted). These findings are consistent with those of previous studies by such as [6,49,50]. The findings suggest that the respondents considered that their firms complied with the regulations relating to environmental protection and EM. In this respect, the support of environmental missions helps each firm maintains its tradition and culture with. Each firm regulates its commercial activities or actions to reduce waste and emissions to the environment. GIS’ effect on GI and GC highlights that the firms use the fewest materials to encompass the artefacts used in product development. The permitted allocation and reduction in productivity for carbon emissions affect the firm’s rate of growth, foreign direct investment, location choices and pollution [81]. The firm’s use of raw materials and its manufacturing process reduces efficiently the emission of waste or hazardous substances and raw material usage. The projects associated with green projects are creative in resolving environmental problems. They generate green ideas to maintain green products. These steps bring technological change by improving the production and efficiency of a particular product [82]. Therefore, the production can be used either for consumption purposes or to reduce pollution. Therefore, it is essential that firms apply resource-saving and abatement-enhancement technologies. More specifically, when the innovative capacity in the resource-saving sector is appropriately high, the authorities allocate more funds to improve only the resource-saving technology, self-sufficiently of the state of the technologies and the environment. Consequently, the ideal allocation may be to invest in the initial level of the pollution stock or technologies that nonetheless will be absorbed ultimately in advancing the abatement technology.
Finally, this study’s findings show the GOI’s predictive power on GI and GC (therefore, hypotheses H4a and H4b are accepted). Likewise, these findings are in the main consistent with the findings of [6,47,50,52]. These findings underline that the individuals deal with mutual interpretations of problems and take the necessary actions. The firm’s employees are eager to generate innovative ideas to meet their customers’ needs. Accordingly, through GOI. The firm’s top management organize employees’ behaviors to make greater efforts to yield new approaches, actions and thoughts. These initiatives to make green products lead to developing greater creativity to the firm’s practices or processes. The firms’ managers use GI to achieve SD and competitive advantage.
In conclusion, our study’s findings underline that the external pressures (PP and MP) have a positive and significant effect on GIS and on internal driving forces (GI and IR). This study’s findings have established, also, that GIS has a positive and significant effect on GOI, GI and GC. Finally, these findings demonstrate that among the top managers of Saudi Arabian manufacturing industries GOI has a predictive power on both GI and GC.

5. Implications, Limitations and Directions of Future Research

We restricted this study to cross-sectional data collected from Saudi Arabian manufacturing firms in. Firms in different phases of their development may be confronted by various internal and external driving forces. In this study, the respondents were only the Saudi Arabian manufacturing firms’ top managers. A suitable theory does not underpin the conceptual model. We applied the random sample strategy to identify the respondents. We collected the data through a single source, namely a survey questionnaire. Finally, we based this study’s conclusions on 192 samples.
This study’s findings offer a theoretical contribution since we integrated GOI, GI and GC with GIS. Previously, the researchers had conducted most investigations from a single viewpoint of the internal organizational structure and the associated external institutional pressures. Therefore, we added PP and MP to GIS in the presence of GOI, GI and GC among the top managers. We tried to contribute to the strategic choice theory. Accordingly, this study’s findings shed light on the GIS’ driving mechanism in the context of Saudi Arabia’s SMEs, which can fully use their internal IR and IC to convert their external policies and MP to opportunities for GIS. This study’s findings provide guidance to policymakers in formulating ER and laws regarding pressures and incentive regulations. By making use of this study’s findings, the Saudi Arabian Government may improve the assistance given to SMES for GI that may encourage greater consumption and the use of green products. Further, the findings may inspire the SMEs’ management to make reasonable use of IR and IC. We recommend that the SMEs’ managers pay greater attention to consumers’ green orientations, the national environmental protection policies and the underlying needs for suppliers to adjust their methods to conform to the environmental protection policies. Finally, and more particularly in the context of Gulf and Middle Eastern countries, this study’s findings contribute to the literature on green management, green innovation and EM.
Turning to future research, we recommend that more longitudinal studies be conducted to examine further variations in the outcomes. Vertical data tracking can investigate the variances in SMES’ choosing GIS in their various phases of development [6]. We recommend also, that the mixed-method approach, namely qualitative and quantitative studies, be used to consider validity in both senses. In addition, we recommend that future studies be extended to other participants, such as accountants and ordinary employees, and that factors such as environmental CSR and human resources practices be included in the conceptual framework [28].

Author Contributions

Conceptualization, A.F.A. and N.A.A.A.; methodology, B.A.S.; software, B.A.S.; validation, N.A.A.A. and A.F.A.; formal analysis, B.A.S.; investigation, A.F.A. and N.A.A.A. All authors have read and agreed to the published version of the manuscript.

Funding

This work was supported by the Deanship of Scientific Research, Vice Presidency for Graduate Studies and Scientific Research, King Faisal University, Saudi Arabia [Project No. GRANT1147].

Institutional Review Board Statement

Not applicable.

Data Availability Statement

Not applicable.

Conflicts of Interest

The authors declare no conflict of interest.

Appendix A

Table
FactorItem DescriptionSource
Coercion policy1. Relevant laws, regulations or rules stipulate strict pollutant discharge standards (such as concentration or total amount of the pollutant discharge). [5,70]
2. Relevant laws, regulations or rules stipulate strict production technical standards.
3. For enterprises that fail to meet the environmental standards, the relevant laws, regulations or rules stipulate strict pollution control period, charge the rectification within a time limit or adopt compulsory measures such as closing and stopping production.
4. The environmental protection department formulates detailed environmental plans according to relevant laws, regulations or rules.
Incentive policy1. The local government establishes a complete tax incentive system for green innovative enterprises (tax reduction or return). [5,70]
2. The local government provides special fund subsidies for green innovation projects.
3. The local government provides project loan interest discounts or loan concessions for green innovative enterprises.
4. The local government adopts a sewage charging system.
Market pressure1. Most customers of the enterprise have high demand for green products. [71,72]
2. Most customers of the enterprise are very concerned about the enterprise’s green innovation behaviors.
3. Most suppliers of the enterprise have high green requirements.
4. Most suppliers of the enterprise regard green innovation as an important indicator for evaluating corporate reputation.
5. Most competitors of the enterprise have a high degree of focus on the green innovation strategy.
6. Most competitors of the enterprise pay great attention to green innovation in their operations.
Innovation resources1. Compared with other enterprises in the same industry, the funds owned by the enterprise is at a high level. [40,44]
2. Compared with other enterprises in the same industry, the technology owned by the enterprise is at a high level.
3. Compared with other enterprises in the same industry, the fixed assets and technical equipment owned by the enterprise are at a high level.
4. Compared with other enterprises in the same industry, the human resources owned by the company have high scientific research quality and can usually complete innovative projects with high quality.
Innovation capability 1. The investment of scientific research in the enterprise is at the leading level in the industry. [73,74]
2. The number of patent applications in the enterprise is at the leading level in the industry
3. Encourages employees to think creatively.
4. Makes resources available as possible.
Green organizational identity 1. Is proud of the firm’s history about environmental management and protection. [49]
2. Has a sense of pride about firm’s environmental objectives and missions.
3. Feels that the firm complies with respect to environmental management and protection.
4. Has developed well-defined environmental missions.
5. Has enough knowledge about the firm’s environmental tradition and culture.
6. Verifies that the firm pay attention to environmental management and protection.
Green innovation strategy1. The enterprise adjusts its business practices or operations to reduce the damage to the ecological environment. [44]
2. Although the government does not require, the enterprise still takes environmental remedial actions.
3. The enterprise adjusts its business practices or operations to reduce wastes and emissions.
4. The enterprise adjusts its business practices or operations to recycle non-renewable raw materials, chemicals and components.
5. The enterprise reduces the use of traditional fuels by the substitution of some less polluted energy sources.
6. The enterprise adjusts its business practices or operations to reduce energy consumption.
7. The enterprise adjusts its business practices or operations to reduce the environmental impacts of its products.
Green innovation1. The company uses the fewest amounts of materials to comprise the product for conducting the product development or design. [67]
2. The company would circumspectly deliberate whether the product is easy to recycle, reuse and decompose for conducting the product development or design.
3. The manufacturing process of the company effectively reduces the emission of hazardous substances or waste.
4. The manufacturing process of the company reduces the consumption of water, electricity, coal or oil.
5. The manufacturing process of the company reduces the use of raw materials.
Green creativity 1. Members of the green product development project propose new green ideas to improve environmental performance. [55,68]
2. Members of the green product development project suggest new ways to achieve environmental goals.
3. Members of the green product development project promote and champion new green ideas to others.
4. Members of the green product development project develop adequate plans for the implementation of new green ideas.
5. Members of the green product development project would rethink new green ideas.
6. Members of the green product development project would find out creative solutions to environmental problems.

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Figure 1. This study’s conceptual model. Source: Developed by the researchers.
Figure 1. This study’s conceptual model. Source: Developed by the researchers.
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Figure 2. Structural equation model. Note(s): PP = policy pressure; MP = market pressure; IR = innovation resources; IC = innovation capability; GOI = green organizational identity; GIS = green innovation strategy; GI = green innovation; GC = green creativity. Source: Conducted by the researchers. *** p < 0.05.
Figure 2. Structural equation model. Note(s): PP = policy pressure; MP = market pressure; IR = innovation resources; IC = innovation capability; GOI = green organizational identity; GIS = green innovation strategy; GI = green innovation; GC = green creativity. Source: Conducted by the researchers. *** p < 0.05.
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Table
Table 1. Mann–Whitney-U-test detecting non-response bias.
Table 1. Mann–Whitney-U-test detecting non-response bias.
Test Statisticsa
PPMPIRICGOIGISGIGC
Mann–Whitney U1,001,3201,319,5001,283,0001,022,0001,324,0001,022,1701,112,1001,276,000
Wilcoxon W2,148,3202,700,5004,432,0002,144,0002,023,0002,270,1702,113,1002,823,000
Z−1.200−0.085−2.834−1.189−0.873−1.222−0.054−2.119
Asymp. Sig. (2-tailed)0.2770.9080.2340.3980.4840.2780.9300.244
Grouping variable: Respondent (1 = early, 2 = late). Note(s): PP = policy pressure; MP = market pressure; IR = innovation resources; IC = innovation capability; GOI = green organizational identity; GIS = green innovation strategy; GI = green innovation; GC = green creativity. Source: Conducted by the researchers.
Table
Table 2. Measurement model.
Table 2. Measurement model.
ConstructItemsLoadingsCRAVEα
GISgis10.8890.8830.8320.884
gis20.886
gis30.865
gis40.845
gis50.822
gis70.806
GOIgoi60.8760.8780.8440.868
goi10.860
goi20.843
goi40.800
goi30.793
GIgi10.8760.8570.7990.849
gi20.865
gi40.820
gi30.812
gi50.809
GCgc10.8980.8430.8080.863
gc20.876
gc30.862
gc40.839
gc60.798
gc50.765
PPpp10.8870.8720.8270.873
pp30.864
pp20.823
pp40.809
IRir10.8970.8540.8260.883
ir20.865
ir30.798
ir40.776
ICic10.8790.8150.7860.890
ic40.865
ic20.845
ic30.821
MPmp10.8840.8930.8740.789
mp20.863
mp60.852
mp40.833
mp50.806
Notes: AVE = summation of the square of the factor loadings. CR = square of the summation of the factor loadings. α = Cronbach’s alpha. Source: Conducted by the researchers.
Table
Table 3. Discriminant validity.
Table 3. Discriminant validity.
ConstructsPPMPIRICGOIGISGIGC
PP0.878
MP0.2860.869
IR0.3000.1510.837
IC0.3360.1380.1380.890
GOI0.3710.2770.2820.3390.865
GIS0.2980.3270.2760.2980.3220.828
GI0.3190.2630.2560.3460.2870.2340.803
GC0.2870.3020.2820.3970.3150.2820.3330.825
Note: Diagonals represent the square root of the AVE while the other entries represent the correlations. Note(s): PP = policy pressure; MP = market pressure; IR = innovation resources; IC = innovation capability; GOI = green organizational identity; GIS = green innovation strategy; GI = green innovation; GC = green creativity. Source: Conducted by the researchers.
Table
Table 4. SEM estimations.
Table 4. SEM estimations.
H.No.Independent VariablesPathDependent VariablesEstimateSECRPResult
H1aPP→GIS0.3280.0435.405***Accepted
H1bMP→GIS0.2490.0884.994***Accepted
H2aIR→GIS0.3100.0496.882***Accepted
H2bIC→GIS0.3840.0546.112***Accepted
H3aGIS→GOI0.2980.0647.558***Accepted
H3bGIS→GI0.3490.0235.229***Accepted
H3cGIS→GC0.2100.0805.001***Accepted
H4aGOI→GI0.3960.0697.146***Accepted
H4bGOI→GC0.3030.0495.669***Accepted
Note: CR = critical ratio; SE = standard error; *** p < 0.05. PP = policy pressure; MP = market pressure; IR = innovation resources; IC = innovation capability; GOI = green organizational identity; GIS = green innovation strategy; GI = green innovation; GC = green creativity. Source: Estimated by the researchers.
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Alnaim, A.F.; Abdelwahed, N.A.A.; Soomro, B.A. Environmental Challenges and Green Innovation Strategy: A Vigorous Development of Greener Dynamics. Sustainability 2022, 14, 9709. https://doi.org/10.3390/su14159709

AMA Style

Alnaim AF, Abdelwahed NAA, Soomro BA. Environmental Challenges and Green Innovation Strategy: A Vigorous Development of Greener Dynamics. Sustainability. 2022; 14(15):9709. https://doi.org/10.3390/su14159709

Chicago/Turabian Style

Alnaim, Abdullah F., Nadia Abdelhamid Abdelmegeed Abdelwahed, and Bahadur Ali Soomro. 2022. "Environmental Challenges and Green Innovation Strategy: A Vigorous Development of Greener Dynamics" Sustainability 14, no. 15: 9709. https://doi.org/10.3390/su14159709

APA Style

Alnaim, A. F., Abdelwahed, N. A. A., & Soomro, B. A. (2022). Environmental Challenges and Green Innovation Strategy: A Vigorous Development of Greener Dynamics. Sustainability, 14(15), 9709. https://doi.org/10.3390/su14159709

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