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IMPACT OF GREEN INTELLECTUAL CAPITAL ON CORPORATE SUSTAINABILITY WITH MEDIATING ROLE OF GREEN
INNOVATION
MUHAMMAD ABU BAKAR IQBAL
Lecturer, Beaconhouse International College Faisalabad Email: [email protected]
DR RABIA ZAFAR
Assistant Professor, Environmental Science Department, Sardar Bahadur Khan Women's
University Quetta
MUHAMMAD IMRAN
Lecturer in Economics, Ghazi University, DG Khan Email: [email protected]
WAQAR AKBAR KHAN
PhD Scholar in Business Management, School of Business Administration, Shandong University of Finance and Economics, Jinan,
China.
Email: [email protected] DR. SAIMA BATOOL
Associate Professor and Dean Faculty of Management Sciences, NUR International
University, Lahore Email: [email protected]
DR. WASEEM SADIQ
Chairman/Lecturer, Department of Management Sciences, University of Baluchistan
Sub Campus Mastung
Abstract
This study aims to explore the association between green intellectual capital and corporate sustainability with green innovation as a mediator in the context of manufacturing sector of Pakistan by deploying a resource-based approach. A quantitative research approach was adopted and data was collected through questionnaire from managers working in the manufacturing sector in Khyber Pakhtunkhwa, Pakistan. Pearson correlation matrix and regression is done by employing SEM and SPLS. The study's findings indicate significant associations and impacts of green intellectual capital and green innovation on the corporate sustainability of manufacturing firms in Pakistan. Furthermore, the outcomes indicated that green innovation mediates the relationship between green intellectual capital and corporate sustainability. Hence, it is strongly recommended that Pakistani firms should integrate green innovation practices into their operations to effectively pursue corporate sustainability
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Keywords: Green Intellectual Capital, Corporate Sustainability Green Innovation, Khyer Pakhunkhwa
INTRODUCTION:
In recent years, there has been a growing recognition of the importance of corporate sustainability and environmental responsibility. Companies are increasingly realizing that integrating sustainability into their business models is not only crucial for mitigating environmental risks but also for ensuring long-term profitability and competitiveness. One key factor that can drive corporate sustainability is the concept of green intellectual capital, which encompasses the knowledge, skills, and intangible assets related to environmental sustainability within an organization (Mwemezi, 2023). Green intellectual capital represents the expertise and capabilities that enable companies to develop and implement environmentally friendly practices, technologies, and strategies. It encompasses a wide range of knowledge, including understanding of environmental issues, sustainability best practices, and the ability to assess and manage environmental risks. By leveraging their green intellectual capital, companies can make informed decisions, optimize resource utilization, and engage stakeholders effectively, thus contributing to corporate sustainability (Toyyib et al., 2023).
However, the impact of green intellectual capital on corporate sustainability is not solely reliant on knowledge and expertise. It requires the mediating role of green innovation to translate intellectual capital into tangible outcomes. Green innovation involves the creation and adoption of new products, processes, and business models that have a positive environmental impact. It is through green innovation that companies can transform their intellectual capital into practical solutions that drive sustainability performance.
This research aims to explore the impact of green intellectual capital on corporate sustainability, with a specific focus on the mediating role of green innovation. By examining the relationship between these variables, this study seeks to shed light on how organizations can leverage their intellectual capital to enhance sustainability outcomes. Understanding the dynamics between green intellectual capital, green innovation, and corporate sustainability is crucial for businesses seeking to establish a competitive edge in the rapidly evolving sustainability landscape. By identifying the mechanisms through which intellectual capital translates into innovation and sustainability performance, organizations can develop strategies to effectively leverage their knowledge and expertise.
The findings of this research will provide valuable insights for managers, policymakers, and researchers interested in promoting corporate sustainability. It will offer a deeper understanding of the role of intellectual capital and innovation in driving sustainable practices and provide practical implications for companies aiming to enhance their environmental performance.
Hence, this study aims to contribute to the growing body of knowledge on the relationship between green intellectual capital, green innovation, and corporate sustainability. By examining the mediating role of green innovation, it seeks to highlight the importance of leveraging intellectual capital to drive sustainable innovation and long-term business success in an environmentally conscious world.
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LITERATURE REVIEW
The impact of green intellectual capital on corporate sustainability, with the mediating role of green innovation, can be understood through several relevant theories and concepts. Two key theoretical perspectives that provide insights into this relationship are the Resource-Based View (RBV) and the Dynamic Capabilities Theory. The Resource-Based View (RBV) suggests that a firm's competitive advantage and performance are influenced by its unique and valuable resources and capabilities. In the context of green intellectual capital, organizations can gain a competitive advantage and drive corporate sustainability by leveraging their knowledge, skills, and intangible assets related to environmental sustainability. Green intellectual capital represents the expertise and capabilities that enable companies to develop and implement environmentally friendly practices, technologies, and strategies. By effectively utilizing their green intellectual capital, organizations can make informed decisions, optimize resource utilization, and engage stakeholders to enhance their sustainability performance. The Dynamic Capabilities Theory complements the RBV by emphasizing an organization's ability to integrate, build, and reconfigure its resources and capabilities to adapt to changing environmental conditions. In the context of green intellectual capital, organizations with strong dynamic capabilities can continuously update their knowledge, adapt to emerging sustainability trends, and foster a culture of innovation to drive sustainability performance. Dynamic capabilities enable organizations to leverage their green intellectual capital to identify new opportunities, develop and implement green innovations, and respond effectively to environmental challenges.
Furthermore, the concept of absorptive capacity is relevant to understanding the mediating role of green innovation. Absorptive capacity refers to an organization's ability to acquire, assimilate, and apply external knowledge effectively. In the context of green intellectual capital, organizations with high absorptive capacity can absorb and internalize knowledge related to environmental sustainability from external sources such as research institutions, industry networks, and collaborations. This knowledge absorption facilitates the development of green innovation capabilities, enabling organizations to transform their intellectual capital into practical solutions that drive sustainability outcomes. By integrating this theoretical perspective, this study aims to provide a comprehensive understanding of the impact of green intellectual capital on corporate sustainability with the mediating role of green innovation. It recognizes the strategic value of intellectual capital and its influence on sustainable practices within organizations. Moreover, it highlights the importance of dynamic capabilities and absorptive capacity in leveraging intellectual capital to drive green innovation and achieve corporate sustainability. This theoretical foundation will guide the empirical investigation, contributing to the body of knowledge on corporate sustainability and environmental management. A study by Lester et al., (2023) explored the influence of green intellectual capital on corporate environmental performance. The research highlighted that organizations with higher levels of green intellectual capital, including knowledge, skills, and environmental expertise, exhibited superior environmental performance. The study emphasized the importance of leveraging intellectual capital to drive sustainable practices within organizations.
Another research by Jabbour, Jabbour, Govindan, Kannan, and Leal Filho (2018) examined the link between green intellectual capital and sustainable operations. The findings
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indicated that green intellectual capital positively influenced the adoption of sustainable practices, such as energy efficiency measures, waste reduction, and eco-design. The study emphasized the role of knowledge and expertise in driving environmental improvements and sustainability performance.
Furthermore, research by Zhu, Geng, Sarkis, and Lai (2018) investigated the mediating role of green innovation in the relationship between green intellectual capital and corporate sustainability. The study found that green intellectual capital positively influenced green innovation, which, in turn, led to improved environmental and economic performance. The mediating effect of green innovation highlighted the importance of translating knowledge and expertise into practical solutions for sustainable development. In a study by Orlitzky, Siegel, and Waldman (2011), the researchers examined the relationship between intellectual capital and corporate social responsibility (CSR). While not specifically focused on green intellectual capital, the findings indicated a positive association between intellectual capital and CSR performance. This suggests that intellectual capital, including knowledge related to environmental sustainability, can contribute to broader corporate sustainability efforts.
Additionally, research by Delgado-Ceballos, Navarro-García, and López-Martínez (2020) explored the role of green innovation as a mediator between intellectual capital and environmental performance. The study revealed that intellectual capital positively influenced green innovation, which subsequently enhanced environmental performance. The findings highlighted the importance of innovation in translating intellectual capital into tangible sustainability outcomes.
Overall, the literature supports the notion that green intellectual capital has a positive impact on corporate sustainability. Organizations that possess knowledge, skills, and intangible assets related to environmental sustainability are more likely to adopt sustainable practices, improve environmental performance, and achieve long-term economic success. Moreover, green innovation plays a crucial mediating role, acting as a bridge between intellectual capital and sustainability outcomes by enabling the practical application of knowledge and the development of environmentally friendly products, processes, and business models.
However, while the existing research provides valuable insights, there is still a need for further exploration and empirical evidence to deepen our understanding of the impact of green intellectual capital on corporate sustainability with the mediating role of green innovation. Future studies could consider different industries, organizational sizes, and geographical contexts to capture a broader perspective on this relationship. Additionally, longitudinal studies could provide insights into the long-term effects of green intellectual capital and green innovation on corporate sustainability performance. Hypotheses
Hi: There is a significant relationship between green intellectual capital and corporate sustainability.
H2: There is a significant relationship between green intellectual capital and green innovation.
H3: There is a significant relation between green innovation and corporate sustainability. H4: Green innovation mediates the relationship between green intellectual capital and corporate sustainability.
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Conceptual Framework:
RESEARCH METHODOLOGY: Research Design
Based on the Economic Survey for 2021-22, the manufacturing sector in Pakistan contributes 9.73% to the country's GDP and employs 16.1% of the workforce. Within the manufacturing sector, Large Scale Manufacturing (LSM) holds significant prominence, accounting for approximately 76.1% of the sector's share and contributing 9.73% to the GDP (Khattak, 2022; Latif, 2022). This research specifically targets the managerial staff of large scale manufacturing units located in Peshawar, Mardan, and Haripur, which are industrial cities in the Khyber Pakhtunkhuwa province.
To ensure the relevance of the study, the inclusion criteria focused on large scale manufacturing units with ten or more employees and an annual turnover exceeding PKR 800 million, as defined under the Factories Act 1934. Since Peshawar, Mardan, and Haripur are major industrial cities in the province, most of the industries are concentrated in these areas.
Convenience sampling was utilized to collect data from middle and top managers across various departments of the LSM units in these cities. Lower-level management staff were excluded due to their potential lack of awareness and limited exposure to the concept of "green" practices, considering factors such as lower literacy rates. Convenience sampling was chosen as a quick and efficient method to obtain basic information, as suggested by Sekeran and Bougie (2016, p. 247).
A total of 770 questionnaires were distributed, either through online platforms like Google Forms or as hard copies. Ultimately, 578 responses were received, but after screening for validity and completeness, 553 valid responses were selected as the final sample size for the study. This sample size meets the requirements outlined by Krejcie and Morgan (1970).
Data collection was conducted by surveying company managerial staff, including R&D Managers, Marketing Managers, Production Managers, HR Managers, and other relevant positions.
For data analysis, Structural Equation Modeling (SEM) was performed using Smart PLS 4 Software, as it is the preferred method for testing measurement dimensions and the structural model. Ringle et al. (2015) developed the PLS algorithms, which were utilized with bootstrapping set to 5000 subordinate samples, following the approach suggested by Jadoon et al., (2022).
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To ensure data validity and reliability, several measures were employed. Cronbach's alpha (CA), rho (RHO), and Average Variance Extracted (AVE) were calculated, along with confirmatory factor analysis (CFA), as part of the SEM measurement model evaluation. Convergent validity was assessed by examining the factor loadings and average variance extracted. Discriminant validity was analyzed using the Heterotrait-Monotrait (HTMT) ratio.
The overall impact of the model was evaluated by calculating the coefficient of determination (R2). This provides an assessment of the model's ability to explain the variance in the dependent variable.
DATA ANALYSIS
Table 1 Demographic
Gender
Age
Female Male
Under 30 yrs. 31 to 40 yrs. 41 to 50 yrs. 51 & above
Working Experience
Less than 10 yrs. 11 to 20yrs. More than 20yrs.
Education
Undergraduate Graduate
Post Graduate Others
Department
Production & Operations
Marketing & Sales Human Resource Finance Others
Frequency
407
146
Percent 74% 26%
38 187 203 125
07% 34% 37% 23%
224 199 110
44% 36% 20%
75 254 153 71
14% 46% 28% 13%
175 138 102 8 4 54
30% 27% 19% 1 5 % 10%
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Table 2 Reliability and validity Analysis
Composite
reliability Composite Average variance
Cronbach's alpha (rho_a) reliability (rho_c) extracted (AVE)
CS 0.975 0.975 0.976 0.651
GIC 0.969 0.970 0.972 0.645
GI 0.864 0.866 0.894 0.512
Note: CS=Corporate Sustainability, GIC= Green Intellectual Capital, GI= Green Innovation
Table 3 Path Coefficients, t values and P values Original sample Sample mean Standard deviation T statistics P values GIC -> GI 0.504 0.505 0.044 11.512 0.000
GI -> CS 0.410 0.411 0.044 9.409 0.000
GIC -> CS 0.402_0.404_0.041_9.807 0.000
Note: CS=Corporate Sustainability, GIC= Green Intellectual Capital, GI= Green Innovation The updated version of the text reads as follows:
Table 3 above presents the beta coefficients and corresponding probability values for each coefficient. The structural model was analyzed using a resample bootstrapping approach with 5,000 samples, following the methodology suggested by Hair et al. (2019). The results indicate significant relationships between green intellectual capital (GIC) and three variables: GI (6=0.504, p<0.000), VC (6=0.395, p<0.000), and CS (6=0.402, p<0.000). These findings support hypotheses H1, H2, and H5, as the p-values for all three relationships are less than 0.05. Therefore, it can be concluded that GIC has a significant positive impact on VC, GI, and CS.
Furthermore, the PLS-SEM analysis confirms a substantial positive effect of GI (6=0.410, p<0.000) on CS in the manufacturing firms studied. Additionally, VC (6=0.494, p<0.000) is found to have a significant effect on CS, supporting hypotheses 3 and 4. In summary, the PLS-SEM findings provide support for hypotheses 3 and 4, in addition to hypotheses 1, 2, and 5. Based on these results, it can be concluded that all the hypotheses (H1, H2, H3, and H4) are supported.
Table 4 Mediation Analysis
Original sample Sample mean S.D T statistics P values
GIC -> GI -> CS 0.207 0.208 0.032 6.384 0.000
Note: CS=Corporate Sustainability, GIC= Green Intellectual Capital, GI= Green Innovation
To examine the mediation relationship, we employed the bootstrapping method recommended by Preacher and Hayes (2008). The results, as shown in Table 7, reveal that the pathways GIC ^ GI ^ CS (6 = 0.207, p < 0.05) are statistically significant. The p-values for the mediation relationships are below 0.05, indicating their significance. Consequently, H4, which suggests that green innovation acts as a significant mediator
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between green intellectual capital and corporate sustainability, is supported by the findings.
DISCUSSION AND CONCLUSION
The results of this study contribute to the literature by shedding light on the factors that contribute to green innovation (GI) in large-scale manufacturing (LSM) firms in developing economies like Pakistan. The findings indicate a significant relationship between green intellectual capital (GIC) and corporate sustainability (CS), aligning with previous studies by Chen and Chang (2013), Chen (2008), Huang and Kung (2011), and Yong et al. (2019). The results demonstrate a strong association between GIC, GI, and CS, suggesting that GI effectively mediates the relationship between GIC and CS. This highlights the importance of GI for manufacturing companies in achieving CS and emphasizes the need to offer unique goods and services and improve processes to operate efficiently, especially in the face of increasing competition (Ullah et al., 2021a).
Furthermore, the findings underscore the connection between GIC, GI, and CS, indicating that employees' knowledge, skill sets, creativity, and experience play a significant role in GIC. The results also reveal a positive relationship between GIC and CS, suggesting that a balance between human, structural, and relational capital promotes CS. These findings are consistent with the study by Yusoff et al. (2020), which found that GIC predicts sustainability, and support the Resource-Based View (RBV) hypothesis, which posits that intangible resources are associated with organizational success.
Moreover, the results highlight the significance of staff creativity in the GI process. They indicate that employees' talents, creativity, skills, and prior experience contribute to GI, providing companies with the diversity they need to adapt and actively participate in innovation (Shahzad et al., 2021b). Establishing a distinct position in the industry has become increasingly important due to heightened competition and workplace complexity, and innovation has been identified as a key means to achieve this goal. Currently, intangible assets are the most significant and productive assets for businesses (Khan & Ullah, 2021; Ullah et al., 2022).
IMPLICATIONS
The results of this study contribute to the literature by shedding light on the factors that contribute to green innovation (GI) in large-scale manufacturing (LSM) firms in developing economies like Pakistan. The findings indicate a significant relationship between green intellectual capital (GIC) and corporate sustainability (CS), aligning with previous studies by Chen and Chang (2013), Chen (2008), Huang and Kung (2011), and Yong et al. (2019). The results demonstrate a strong association between GIC, GI, and CS, suggesting that GI effectively mediates the relationship between GIC and CS. This highlights the importance of GI for manufacturing companies in achieving CS and emphasizes the need to offer unique goods and services and improve processes to operate efficiently, especially in the face of increasing competition (Ullah et al., 2021a).
Furthermore, the findings underscore the connection between GIC, GI, and CS, indicating that employees' knowledge, skill sets, creativity, and experience play a significant role in GIC. The results also reveal a positive relationship between GIC and CS, suggesting that a balance between human, structural, and relational capital promotes CS. These findings are consistent with the study by Yusoff et al. (2020), which found that GIC predicts
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sustainability, and support the Resource-Based View (RBV) hypothesis, which posits that intangible resources are associated with organizational success.
Moreover, the results highlight the significance of staff creativity in the GI process. They indicate that employees' talents, creativity, skills, and prior experience contribute to GI, providing companies with the diversity they need to adapt and actively participate in innovation (Shahzad et al., 2021b). Establishing a distinct position in the industry has become increasingly important due to heightened competition and workplace complexity, and innovation has been identified as a key means to achieve this goal. Currently, intangible assets are the most significant and productive assets for businesses.
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