The Moderating Role of Innovation in the Relationship Between Business Sustainability and Organizational Performance in Companies of an Emerging Economy

Throughout the world, the implementation of innovative strategies to improves organizational performance is widely accepted. Therefore, it is becoming more and more common for companies, especially in developed countries, to implement such practices as opposed to emerging economies where their implementation is very uncommon. To understand this phenomenon, the objective of this paper is to analyze the role of innovation in the relationship between business sustainability and organizational performance in the context of an emerging economy. To achieve this goal, the study conducted a 73 items online questionnaire survey aimed at Colombian company managers, which was designed on a Likert scale from 1 to 7 and was open from March to October 2021. A total of 293 managers from an equal number of medium and large companies from different economic sectors in Colombia were surveyed using non-probability sampling techniques. The information was then analyzed using a Structural Equation Model. The results show that innovation plays a very limited positive role in the relationship between business sustainability and the companies organizational performance. Likewise, the results also indicate that companies give little or no importance to the circular economy practices as an innovation strategy that contributes to environmental care and better organizational performance. Relationship between innovation, business sustainability, and organisational performance in companiesThis paper analyses the role of innovation in the relationship between business sustainability and organizational performance in the context of an emerging economy. To achieve this goal, the study conducted a survey aimed at Colombian company managers. In total, 293 managers from an equal number of medium and large companies in Colombia were surveyed using non-probability sampling techniques. The data were analyzed using a Structural Equation Model. In general, it was found that: (i) innovation and business sustainability have a positive impact on firm performance, (ii) firms that use innovation to create value for their stakeholders achieve better competitive and sustainability capabilities, (iii) the proposed model showed that business sustainability has a greater direct relevance on organizational performance than innovation, and (iv) companies implement few circular economy practices as a strategy to contribute to the sustainability principles. The findings of this study could be used by academics, entrepreneurs, and public policy makers, to develop strategies to stimulate innovation practices in companies given that many of the innovation practices identified are widely used by companies in developed economies due to the significant impact they have on the environment, their organizational performance, and their competitive capacity. Although the research included only medium and large companies from different sectors in Colombia which is an economy that over the last 15 years has been characterized by its recognized stability in the Latin American context. Therefore, the findings may not apply to a wider context.