Nexus between regulatory pressure, eco-friendly product demand and sustainable competitive advantage of manufacturing small and medium-sized enterprises: the mediating role of eco-innovation

Although previous research endeavours have extensively explored the environmental pressure-performance relationship, their findings have been inclusive. Therefore, this paper examines the direct and indirect (through the mediating role of eco-innovation) impact of regulatory pressure and eco-friendly product demand on sustainable competitive advantage. The research model was examined using Structural Equation Modeling methodology, analyzing data gathered from 183 senior managers within Egyptian SMEs. Several findings have been yielded, which are: (1) eco-innovation is positively motivated by regulatory pressure and eco-friendly product demand; (2) the direct link between environmental pressures (regulatory pressure, eco-friendly product demand) and sustainable competitive advantages is not statistically significant; and (3) eco-innovation acts as a mediator in the relationship between these environmental pressures and sustainable competitive advantage. This research theoretically contributes to the institutional theory of the firm and competitive advantages theory. Particularly, the findings of this research theoretically emphasize that eco-innovation plays a prominent role in alleviating and translating environmental pressures exerted on manufacturing SMEs into sustainable competitive advantages. Furthermore, the research provides practical implications, policy recommendations, limitations, and further research avenues.