Abstract
Small and medium-sized enterprises (SMEs) play a vital role in economic development and sustainability. In Indonesia, SMEs account for a significant portion of the economy but face challenges in adapting to eco-innovation practices. To address this issue, this study examines the role of eco-regulation and government support in promoting eco-innovation adaptation among SMEs in Indonesia. We also explore the moderating effect of eco-environmental factors, including eco-customers, eco-managerial, eco-competition, and eco-process innovation. We collect data from 859 SMEs in Indonesia and use the Structural Equal Modeling-Partial Least Square (SEM-PLS) method to analyze the data. We measure eco-regulation and government support as independent variables and eco-environmental factors as moderating variables. We use eco-innovation adaptation as the dependent variable. Our results show that eco-regulation and government support have a positive effect on eco-environmental factors, except for eco-customers. We also find that eco-environmental factors have a positive impact on eco-innovation adaptation. Furthermore, we find that eco-regulation and government support indirectly influence eco-innovation adaptation through the mediation of eco-environmental factors. In conclusion, our study highlights the importance of eco-regulation and government support in promoting eco-innovation adaptation among SMEs in Indonesia. We find that eco-environmental factors mediate the relationship between eco-regulation and government support and eco-innovation adaptation. Our study provides valuable insights for policymakers and practitioners seeking to enhance SMEs' eco-innovation practices and promote sustainable development.
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