The impact of sustainable manufacturing practices and innovation performance on economic sustainability

The emergence of the concept of sustainability reflects a decisive change in global thinking, thus forcing firms to reconsider the approach in conducting their business operations.With an aim to boost economic development, firms need to re-establish their corporate strategy by introducing and implementing more integrated sustainable practices.Prior researchers believe that sustainable manufacturing practice (SMP),defined as a firm’s intra- and inter organizational practices that integrate environmental, economic and social aspects into operational and business activities, would lead to better firm performance.The research reported in this paper aims to analyze the effect of SMP on economic sustainability (ES) and the mediated effect of SMP on ES through innovation performance (IP).Using survey data collected from 150 Malaysian manufacturers, this paper empirically examines the relationships that exist among SMP (internal and external SMP), IP (product, process,organizational and marketing), and ES.Adopting PLS-SEM technique, the study found that internal SMP has a positive effect on ES and process innovation partially mediates this internal SMP-ES link.Surprisingly, although the relationship between external SMP and ES is not significant, incorporating product and process innovations into this link have changed the significance of the relationship.In general, the results have empirically proven the role of SMP and IP in influencing the economic performance.Thus, it is suggested that instead of acting on well intentioned impulses or reacting to external pressure, firms should clearly defined and grasp economic opportunities gained from being environmentally friendly and socially responsible