The Impact of Lean Management Practices and Sustainably‐Oriented Innovation on Sustainability Performance of Small and Medium‐Sized Enterprises: Empirical Evidence from the UK

TLDR

Lean management practices improve SME efficiency, while sustainability‑oriented innovation supports environmental and social practices, yet little is known about their combined impact on overall sustainability performance and the mediating role of corporate social responsibility. This study investigates how lean management practices, sustainability‑oriented innovation, and CSR practices jointly influence sustainability and economic performance in UK SMEs. Using structural equation modeling on data from 119 manufacturing SMEs in the Midlands, the authors test hypotheses about the direct and mediated effects of LMP, SOI, and CSR on sustainability and economic performance. Results show that LMP and SOI both enhance sustainability and economic performance, with SOI mediating the LMP–sustainability link, while CSR mediates LMP but only marginally mediates SOI.

Abstract

Abstract While lean management practices (LMP) help small and medium‐sized enterprises (SMEs) to be efficient, sustainability‐oriented innovation (SOI) facilitates adopting environmental and social practices. Although prior research looks into the effect of LMP on the economic performance (EP) of SMEs, less is known about the effect of LMP on sustainability (economic, environmental and social) performance. Studies on the effect of SOI on sustainability and economic performance are also scant. Additionally, examining the mediating effect of corporate social responsibility (CSR) practices (environmental and social practices) on both LMP and SOI achieving sustainability performance (SP) is rare. This research bridges these knowledge gaps by answering the question of how LMP, SOI, CSR practices, sustainability and economic performance are correlated. Through hypothesis testing using structural equation modelling, this study reveals the impact of LMP, SOI, CSR (environmental and social) practices on sustainability and economic performance. The study uses data from 119 SMEs within manufacturing industries in the Midlands, UK. The analysis reveals that LMP and SOI facilitate achieving both sustainability and economic performance, and SOI mediates LMP to achieve sustainability performance. Additionally, although CSR practices mediate LMP to achieve sustainability performance, they only borderline mediate SOI to achieve sustainability performance.