Volume 7, Issue 3, March – 2022 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165

The Influence of Green Organizational Culture,

Green Innovation, and Environmental Performance
on Competitive Advantage Moderated by Green
Supply Chain Management
(Case Study on SME in Solo Raya)
Hurrina Awaliyah, Budhi Haryanto
Magister Management, Professor of Marketing,
Sebelas Maret University, Faculty of Economics and Business,
Indonesia, Indonesia Sebelas Maret University, Indonesia

Abstract:- This study aims to determine the effect of In today's global competition, all resources can move
green organizational culture, green innovation, and freely. To face these challenges, quality resources are
environmental performance on competitive advantage needed to create various advantages, both competitive
moderated by GSCM on SMEs in Solo Raya. SMEs are advantage through creative and innovative processes. In
the most significant contributor to GDP in Indonesia, so competition in the business world, it is necessary to involve
they must be aware of taking advantage of various parties to respond to a situation. Individual
environmental issues to achieve economic growth and companies and other productive industrial sectors such as
competitiveness. The study method used is quantitative small and medium enterprises are expected to compete in
by distributing online questionnaires to SMEs in Solo global competition.
Raya. Data were collected using convenience sampling
with a sample of 250 SMEs in Solo Raya. The data One of the most discussed issues related to SMEs is
obtained will be analyzed using the Structural Equation environmental pollution due to the disposal of production
Model (SEM). Green organizational culture and green waste. One of the environmental damage is waste pollution.
innovation applied in SMEs in Solo Raya achieve a In Indonesia, waste pollution is mainly caused by
tremendous competitive advantage. Green supply chain companies, home industries, and SMEs. The next issue that
management contributes implicitly and explicitly to becomes a problem for SMEs is how SMEs target
influencing green organizational culture and green consumers with their products. In other words, SMEs must
innovation in improving environmental performance compete and market their products appropriately. The
and competitive advantage. This study can improve Indonesian Retail Entrepreneurs Association (Aprindo) said
innovation strategies in achieving competitive advantage that the obstacle faced by SME actors is inappropriate
creatively on SMEs by paying attention to the marketing that affects their income.
surrounding environment.
SMEs are one of the most significant contributors to
Keywords:- green organizational culture, Green Innovation, the GDP of non-oil exports in Indonesia. Solo Raya is one of
Environmental Performance, Competitive Advantage, the areas where SMEs are increasing, helping local incomes,
GSCM, SMEs. and reducing poverty and unemployment. In the Solo Raya
areas, SMEs can contribute 31.18% lending.
I. INTRODUCTION
Several MSMEs in various fields in Solo Raya are
Environmental issues have become the most discussed recommended to implement environmentally friendly
issue in recent years. This is evidenced by the level of public products. This encourages MSMEs to survive and create
awareness of environmentally friendly products. The new strategies to compete with other industries. Such as
existence of a class of public awareness of environmentally utilizing existing natural resources in the production process.
friendly products then encourages industry players to apply Using natural resources is one proof to realize an
the concept of caring for the environment into their business. environmentally friendly approach.

Industrial companies, large and small, have an essential This study uses the concept of research development
role in building the country's economy. The development from several existing studies. Several variables include
and growth of the current industry cause the rapid pace of green organizational culture and green innovation as
the economy and increasing public demand for products to independent variables, environmental performance as a
meet their needs. Currently, the increasingly competitive mediation, competitive advantage as the dependent variable,
and open global competition creates many challenges that and GSCM as a moderating variable.
must be faced. Challenges of international competition,
unemployment, population growth, social responsibility, and Based on the preliminary study results, Green
employment diversity. organizational culture is a development of organizational

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culture. Green organizational culture includes shared beliefs, modification. The process becomes environmentally
values created and norms built within the company to friendly, increasing efficiency in resource use, reducing
achieve the company's goals. Green organizational culture pollution, and carrying out activities in a sustainable manner
itself is the assumptions, values , and norms in organizations called reforestation (Francis et al., 2007).
that make and reflect the obligation to be an
environmentally friendly organization (Harris & Crane, H1: Green organizational culture has a positive effect on
2002). competitive advantage
H3: Green organizational culture has a positive effect on
Green innovation is an effort made by several Environmental performance
industries to improve their performance to maintain
organizational sustainability by considering environmental B. Green Innovation
aspects (Pradnyandana, I Made Septian ; Yasa, 2017). Green Green innovation is the same as reducing the
innovation is a new idea or idea in developing existing environmental impact caused by consumption and
innovations by considering the existing environmental production activities (Horbach et al., 2012). (Chen et al.,
aspects. A company implements its strategy of green 2006)define green innovation as “hardware or software
innovation to achieve sustainable success. The innovations related to green products or processes, including
characteristics of green innovation, such as green products innovations in technologies involved in energy saving,
and environmentally friendly processes, are a new pollution prevention, waste recycling, green product design,
development for the industry. or the environment. management company"

Environmental performance as a mediating variable in H2: Green innovation has a positive effect on
the company is described as follows: reducing air emissions, competitive advantage
reducing wastewater and solid waste produced that can H4: Green innovation has a positive effect on
worsen the environment, and decreasing consumption of environmental performance
hazardous materials. Companies that implement GSCM will
deliver good environmental performance so that GSCM C. Environmental Performance
affects improving environmental performance (Purba Rao, Environmental performance refers to environmental
2018). damage caused by activities carried out by the company or
organization. In contrast, a low level of environmental
Competitive advantage is a company strategy that damage refers to a high and better environmental
cooperates to compete more effectively than its competitors performance. (Lankoski, 2000).The company's
(Porter, 1993). The increasing competition of companies environmental performance is described as follows:
makes companies compete in improving their innovations reducing air emissions, reducing wastewater and solid waste
and strategies. The success of strategy and innovation in a produced that can worsen the environment, and decreasing
company can be measured by its competitiveness. consumption of hazardous materials. Companies that
Competitive advantage has several indicators, one of which implement GSCM will deliver good environmental
is superior products. performance so that GSCM affects improving environmental
performance (Purba Rao, 2018).
Green supply chain management (GSCM) is an
outgrowth of regular SCM with environmental awareness, H5: Environmental Performance has a positive effect on
emphasis on green productivity, and reducing environmental competitive advantage.
impact ((Wang, H.F. and Gupta, 2011). The GSCM variable
as a moderator in this study has a role in determining D. Competitive Advantage
whether GSCM strengthens or weakens the relationship According to (David, 2006), Competitive advantage is
between other variables. anything a company does very well compared to its
competitors. When a company can do something, and
This study uses the concept of research development another company can't do it, or has something that its
from several existing studies. In this study, a model was competitors won't, it represents a competitive advantage.
built to explain the influence of green organizational culture Having and maintaining a competitive advantage is critical
and green innovation on competitive advantage, which then to the long-term success of an organization. Generally, a
environmental performance as mediator and GSCM as a company can maintain a competitive advantage only for a
moderator. certain period due to being imitated by competitors and
weakening that advantage.
II. LITERATURE REVIEW
E. Green Supply Chain Management
A. Green organizational culture Supply chain management can integrate environmental
Culture as a mindset and behavior from basic management practices into the entire supply chain
assumptions that have been determined or developed to management to achieve green supply chain management,
learn ways to integrate, which function well and are maintain a competitive advantage, and increase business
considered new and therefore must be taught to new profits and market share objectives. (Seman et al.,
members as a great way to think about, perceive, and feel 2012)Green supply chain management (GSCM) has
interested in the problem (Gibson, 2006). Green continued to develop to build awareness of the environment
organizational culture is a process of organizational and understand mechanism theory as a form of

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environmental improvement. GSCM is a supply chain H6b:Green supply chain management moderates the
management widely used to reduce the impact of industrial relationship between green innovation and
supply chain activities on the environment (Sarkis & environmental performance
Dijkshoorn, 2007). H6c:Green supply chain management moderates the
relationship between environmental performance
H6a: Green supply chain management moderates the and competitive advantage
relationship between green organizational culture
and environmental performance

F. Conceptual Framework

H1

Green
organizationalcu H3
lture
H5
Environmental Competitive
H4 performance advantage

Green innovation

H6a

H2

H6b H6c

Green supply chain

management(GSCM)

III. METHODOLOGY of 140 for the minimum value, and 280 for the maximum
value. So that this study uses a sample of 250 samples. This
A. Sampling and Data Collection method using the Partial Least Squares Structural Equation
The population in this study are the owners of Micro, Modeling (PLS-SEM)
Small, and Medium Enterprises (MSMEs) in Solo Raya,
which are engaged in packaged food that are willing to Individuals selected as samples can be described as
achieve competitive advantage through green organizational presented in Table 1. The research results that have been
culture and green innovation. Because the city of Solo Raya processed show that the majority of the respondents' last
is very large, the data collection is divided into 7 regions, education was at the Senior High School (SMA) level with a
namely, Surakarta, Sukoharjo, Karanganyar, Sragen, total of 144 or 57.6%. While the minority of respondents'
Wonogiri, Boyolali and Klaten. It is recorded in the Welfare education level is at the Postgraduate level, as evidenced by
Department of the government in Solo Raya that there are the number of respondents as much as 4 or 1.6%.
712 MSME owners engaged in packaged food.
The company's age, the majority are in the number 5 to
Data collection was carried out through an online 10 years with a total of 100 or 40%. The number of
questionnaire method to 250 MSMEs. The sampling method employees, the majority of companies have 6 to 20
in this study used Convenience Sampling by searching for a employees, as evidenced by the number of respondents as
list of Solo Raya SMEs engaged in the packaged food many as 150 or 60% of the amount of annual income
industry on the Solo Raya SME website, then recording data generated by the company. The majority of the company's
in the form of cellphone numbers and contacting via yearly income is in the range of more than IDR 50,000,000
WhatsApp for availability in the questionnaire. to less than IDR 200,000,000, as evidenced by the number
of respondents as many as 148 or 59.2%.The last
Then the sampling that will be used in this study will characteristic of respondents is based on the number of
be adjusted based on the theory of Hair et al, in the second agents or distributors owned by the company. The majority
point for the number of samples can be obtained from the of companies have 5 to 15 agents or distributors, amounting
number of variable indicators multiplied by 5 to 10, where to 167 or 66.8%.
there are 28 variable indicators multiplied by 5 with a total

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Category n %
High School 144 57.6%
Education Diploma 33 13.2%
Bachelor 69 27.6%
Master 4 1.6%
< 5 years 56 22.4%
The age of the company 5-10 years 100 40%
11-15 years 63 25.2%
16-20 years 28 11.2%
> 20 years 3 1.2%
< 5 employees 61 24.4%
The number of employees 6-20 employees 150 60%
21-50 employees 35 14%
> 51 employees 4 1.6%
< 50.000.000 43 17.2%
The company's annual income >50.000.000 – <200.000.000 148 59.2%
>200.000.000 – < 500.000.000 35 14%
> 500.000.000 24 9.6%
< 5 agents/distributors 62 24.8%
The number of agents or 5-15 agents/distributors 167 66.8%
distributors 15-30 agents/distributors 12 4.8%
> 30 agents/distributors 9 3.6%
Table 1: Respondents’ Profile

B. Questionnaire Design and Measurement Product quality, Product-market fit, Product prices can be
The process of determining the score in the questionnaire competitive, Long life cycle (expired) (Bharadwaj et al.,
uses an interval scale with a 5-point Likert scale approach. 2015). Green supply chain management (GSCM) is defined
Green organizational culture is defined as a way of thinking, as distribution management/agent support for product
values, and norms that exist within the organization to distribution to customers by taking into account the
support organizational processes and goals that are more surrounding environment. which is then measured using the
environmentally oriented, which is then measured using the following five items; Appeal for preservatives, Call for
following five items; Don't litter, Emphasis on using natural environmentally friendly packaging, Notice of expiration
ingredients, Sort the trash properly, Energy saving date, Rejection of dyes, Support natural-based products
(electricity and water), Socialization of healthy life ((Chiou et al., 2011).
(Banerjee, 2002) and (Fraj et al., 2011). Green Innovation is
defined as a new idea to continue adapting without C. Data Analysis
damaging the surrounding environment and maintaining Data obtained through the survey were analyzed with
environmental balance. Green innovation has two Partial Least Squares Structural Equation Modeling (PLS-
dimensions: green product and green process (Chen et al., SEM) using Smart-PLS 3. The analysis comprised of
2006). which is then measured using the following ten validity, reliability, model, and hypotheses testing. Test The
items; Products made from nature, Environmentally friendly analysis results begin by testing the validity and reliability
product packaging, Product materials can be recycled, The of research instruments. Items are declared valid if they have
product is free from chemicals, The product does not contain a factor loading value greater than 0.5. (Hair et al., 2010).
coloring agents, Use of environmentally friendly This assumption must be met because it is one of the
technology, Production waste is not dangerous, Production requirements to analyze the model with Structural Equation
process with recyclable materials, Environmentally friendly Modeling (SEM). Table 1 indicates that all variables have
production process materials, Energy-saving production convergent validity > 0.50. The reliability test was carried
process (Chen, 2008)(Chen et al., 2006); (Roper & Tapinos, out with the Alpha Cronbach reliability technique. An
2016). Environmental performance is defined as the instrument is considered reliable if it has a reliability
company's ability to reduce air emissions, waste, and coefficient greater than 0.7. (Hair et al., 2010).
consumption of hazardous and toxic materials to the
surrounding environment (Menguc & Ozanne, 2005), which Model testing was performed to test the quality of the
is then measured using the following four items; model used in this study and see whether it could represent
Management of production waste pollution, Management of the data obtained through surveys empirically (Tenenhaus et
pollution due to production, Recovery of environmental al., 2005). This test was accomplished by calculating the
pollution due to production waste, Reduction of hazardous average AVE and R square (R2) values of the model used in
materials (Larrán Jorge et al., 2015). Competitive advantage this study. The resulting value is called the Goodness of Fit
is defined as a collection of different and/or better strategies (GoF) index. A model should have a minimum value of .36
to achieve an advantage over competitors (David, 2006). to be considered valid (Tenenhaus et al., 2005).
which is then measured using the following four items;

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IV. RESULT AND DISCUSSION composite reliability is higher than 0.6, and convergent
validity meets the requirements (Huang et al., 2013).
A. Validity and Reliability
Test The analysis results begin by testing the validity and All indicators can be considered reliable since they
reliability of research instruments. Items are declared valid meet the following requirements. This assumption must be
if they have a factor loading value greater than 0.5. (Hair et completed because it is one of the requirements to analyze
al., 2010). The recommended minimum AVE value is 0.5, the model with Structural Equation Modeling (SEM). Table
but 0.4 is acceptable because if the AVE is less than 0.5, but II shows the outer loading, Composite Reliability (CR), and
Average Variance Extracted (AVE) values of each indicator.

Variable / Indicator Outer CR AVE

loading
Green Organizational Culture .824 .487

GOC1: Don't litter .607

GOC2: Emphasis on using natural ingredients, Energy saving (electricity and water), .594
GOC3:Sort the trash properly
GOC4: Energy saving (electricity and water) .756
GOC5: Socialization of healthy life .774
.737

Green Innovation .875 .413

Green Product
GPD1:Products made from nature .714
GPD2:Environmentally friendly product packagingGPD3: Product materials can be .799
recycled, .783
GPD4:The product is free from chemicals .820
GPD5: The product does not contain coloring agents .686
Green Process
GPS1: Use of environmentally friendly technology .636
GPS2:Production waste is not dangerous, .704
GPS3:Production process with recyclable materials, .833
GPS4:Environmentally friendly production process materials .740
GPS5:Energy-saving production process .733

Environmental Performance .891 .672

EP1:Management of production waste pollution .823
EP2: Management of pollution due to production .839
EP3:Recovery of environmental pollution due to production waste .821
EP4:Reduction of hazardous materials
.795
Competitive Advantage .864 .615
CA1: Product quality .847
CA2: Product-market fit .793
CA3: Product prices can be competitive, .826
CA4: Long life cycle (expired) .659
Green Supply Chain Management .885 .607
GSCM1: Appeal for preservatives .793
GSCM2: Call for environmentally friendly packaging GSCM3: Notice of expiration .766
date .792
GSCM4: Rejection of dyes .746
GSCM5: Support natural-based products .798

Table 2: Convergent Validity and Reliability Tests

Discriminant validity indicates the extent to which a with other latent variables in the model (Chin, 1998).
given construct differs from other constructs (Hulland et al., Discriminant validity was assessed through cross-loading
1996). This follows the rule that indicators have a higher analysis. Overall, the results of the discriminant validity
correlation with latent variables and should be measured testing of this study can be seen in the following Table 3.

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1 2 3 4 5 6 7
Green organizational culture 0.698
GSCM 0.469 0.779
Green innovation 0.726 0.585 0.643
Green product 0.746 0.474 0.880 0.762
Green process 0.491 0.536 0.842 0.486 0.732
Competitive advantage 0.571 0.594 0.750 0.654 0.638 0.784
Environmental performance 0.654 0.526 0.656 0.595 0.530 0.633 0.820
Table 3: Discriminant validity

B. Hypothesis Testing and Discussions convergent validity meets the requirements (Huang et
a) The goodness of Fit Model Testing al., 2013).The GoF index can be calculated using the
The purpose of GoF is to measure the performance of following formula: GoF = √AVE × R2. The AVE and
the PLS model both on measurement and on the R2 values of each indicator and their averages are
structural model with a focus on predicting the shown in the following table.The initial step is testing
overall performance of the model (Chin, 2010). The the goodness-of-fit model; the results indicate the
recommended minimum AVE value is 0.5, but 0.4 is GoF value = .405. The minimum GoF Value that
acceptable because if the AVE is less than 0.5, but needs to be met is 0.36.Table 4 describes that the
composite reliability is higher than 0.6, and model is a good fit.

AVE R Square GoF1

Green organizational culture .487
Green innovation .413

Environmental performance .672

Green supply chain management .607
Competitive advantage .615 .622
Model Fit .405
Table 4: The Goodness of Fit

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b) Hypothesis testing and interpretation (St. Coeff. = .323; SD. = .070; p = .000), so hypothesis 3 is
a. Main Effect Testing supported. This finding confirms the results of research
A variable has a significant effect with a p-value obtained from several previous studies that explain a
below 0.05 (Hair et al., 2010). The direction of the effect is significant and positive relationship (Fergusson & Langford,
shown in positive or negative values in the Original Sample 2006).
column. Table V indicates that the relationship between
green organizational culture and competitive advantage does Green innovation was found to have a significant and
not significantly influence SMEs, so hypothesis 1 is not positive relationship to environmental performance (St.
supported (St. Coeff. = -.048; SD. = .067; p = .494). This Coeff. = .301; SD. = .073; p = .000), so hypothesis 4 is
insignificant relationship does not confirm the results supported. This finding confirms the results of research
obtained in previous studies (Chao, 2019). obtained from several previous studies that explain a
significant and positive relationship (Seman et al., 2012).
The relationship between Green innovation and
competitive advantage was significant and positive (St. Environmental performance was found to have a
Coeff. = .530; SD. = .075; p = .000), so hypothesis 2 is significant and positive relationship to competitive
supported. This finding confirms the results of research advantage (St. Coeff. = .200; SD. = .067; p = .003), so
obtained from several previous studies that explain a hypothesis 5 is supported. This finding confirms the results
significant and positive relationship(Chiou et al., 2011). of research obtained from several previous studies that
The relationship between Green organizational culture explain a significant and positive relationship (Larrán Jorge
and environmental performance was significant and positive et al., 2015).

Standardized Std. T-Stat P-

Coefficient Dev. Value

GOC->Competitive Advantage -.048 .067 .684 .494

Green Innovation ->Competitive Advantage .530 .075 7.040 ***

GOC->Environmental Performance .323 .070 4.543 ***

.301 .073 4.148 ***

Green Innovation -> Environmental Performance
Environmental Performance ->Competitive Advantage .200 .067 2.972 .003

-.236 .070 3.393 .001

GOC*GSCM->Environmental Performance
Green Innovation*GSCM->Environmental Performance .095 .074 1.316 .189

Environmental Performance*GSCM ->Competitive Advantage -.023 .035 .756 .450

Table 5: Results of Hypothesis Testing
* Note: ***< 0.001

b. Interaction Effect Testing

The test results on the relationship green The relationship between Environmental
organizational culture*green supply chain management and performance*green supply chain management and
Environmental performance indicated asignificant competitive advantage was also found to be insignificant
relationship (St. Coeff. = -.236; SD. = .070; p = .001). The (St. Coeff. = -.023; SD. = .035; p = .450). The results of this
results of this test indicate that green supply chain test indicate that green supply chain management is not a
management is a variable that moderates the relationship variable that moderates the relationship between
between green organizational culture and environmental environmental performance and competitive advantage.It
performance. It indicates that the conceptualized hypothesis indicates that the conceptualized hypothesis 6c is not
6a is supported in this study. supported in this study.

Furthermore, the relationship between green c. Mediation effect Testing

innovation*green supply chain management and The test results on the mediating effect indicate
environmental performance was found to be insignificant that environmental performance was found to mediate
(St. Coeff. = .095; SD. = .074; p = .189). The results of this directly or partially. The relationship between green
test indicate that green supply chain management is not a organizational culture and competitive advantage (St. Coeff.
variable that moderates the relationship between green = .064; p = .015) is displayed in Table V. This means that
innovation and environmental performance. It indicates that green organizational is an effective stimulus to form
conceptualized hypothesis 6b is not supported in this study. competitive advantage.

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Furthermore, it was found that environmental .060; p = .016). The relationship between green innovation
performance partially mediates the relationship between and competitive advantage is significant.
green innovation and competitive advantage (St. Coeff. =

Path Standardized coefficient P -Values

GOC ->environmental performancecompetitive advantage .064 .015
Green Innovation ->environmental performancecompetitive advantage .060 .016
Table 6: Results of Mediation effect

V. CONCLUSION AND DISCUSSION

In contrast, the relationship between green innovation
This research aims to determine the effect of green and competitive advantage mediated by environmental
organizational culture and green innovation on competitive performance variables and moderated by green supply chain
advantage by mediating environmental performance and management has no significant effect. This shows that green
moderated by green supply chain management. Hypothesis supply chain management is a moderating predictor that
test results indicate that the green organizational culture significantly affects environmental performance and
does not positively affect competitive advantage. The results competitive advantage. The moderating variable is a
of this test do not support previous research (Wang, 2019). moderating predictor when the variable has a significant
This explains that managers or organizational structures in effect, but the moderating effect has no significant effect.
companies who understand the values of an environmentally This means that the green supply chain management
friendly organizational culture will support and be fully variable only acts as a predictor (independent) in this path
aware of environmental strategies. This includes decisions and cannot strengthen or weaken the relationship. Likewise,
on how to compete with competitors for achieving a clear green supply chain management moderates the relationship
competitive advantage. between environmental performance and competitive
advantage.
Green innovation on competitive advantage has a
significant and positive effect. The results of this test  LIMITATIONS
support previous research (Chiou et al., 2011), which The limitation of this research is using a sample of 250
explains that a high concentration on environmentally SME entrepreneurs in Solo Raya. They are engaged in the
friendly product innovation will benefit organizations packaged food industry to achieve competitive advantage
through increased costs, increased environmental efficiency through environmentally friendly industrial processes.
and increased productivity and product quality, which Suggestions for further research, choose a sample with a
directly contributes to increasing competitive advantage. broader range and more specifically within certain limits
This supports existing research where the higher the business criteria.
innovation carried out by the company, the higher the
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