Business sustainability practices and financial performance in the creative economy sector in Indonesia: Moderating role of power distance and long-term orientation

Abstract

Purpose: This research explores the effect of business sustainability practices (BSP) on micro, small, and medium enterprises (MSMEs) financial performance, with cultural dimensions serving as moderating variables.

Design/methodology: A survey strategy was used to gather data from 467 MSMEs keris respondents in Indonesia. Meanwhile, the hypothesis was validated using the Partial Least Squares Structural Equation Modeling (PLS-SEM) method.

Results: The results suggested that incorporating BSP positively impacted financial performance. This research also reported the moderating effects of culture on the relationship between BSP and financial performance. However, there was no evidence to support the idea that long-term orientation (LtO) in BSP moderated financial performance.

Research limitations and implications: This research should be carried out in other sectors to observe the differences in characteristics of each MSMEs location. Additionally, cultural dimensions were considered to obtain more complex results.

Theoretical Implication: BSP enhanced MSMEs financial performance, particularly when cultural factors such as power distance (PwD) were considered.

Managerial Implication: The results implied that MSMEs systematically integrated BSP into business strategies and operations. Meanwhile, cultural factors, such as PwD could be reported in the implementation of these practices to optimize financial performance.

Originality/value: Novel insights were provided into the effect of BSP on MSMEs financial performance, emphasizing the role of cultural factors. This research advanced the literature by showing the moderating influence of the cultural context on practices and identified a gap regarding LtO.