Investigating the Influence of Leadership on the Sustainable Performance of SMEs in Emerging Economies: Evidence from Bangladesh

Abstract

This study investigates how leadership influences the sustainable performance of small and medium-sized enterprises (SMEs) in Bangladesh, focusing on the economic, social, and environmental dimensions of sustainability. Grounded in Dynamic Capabilities Theory, which explains how leaders sense opportunities, seize resources, and reconfigure organizational routines under constrained conditions, this study employed a cross-sectional survey and analyzed data using PLS-SEM (SmartPLS 4.1.0.8). The instrument comprised 16 reflective indicators across four latent constructs (leadership; economic, social, and environmental sustainability). After screening, 180 owner/manager responses were retained for analysis; reliability and validity (α, CR, AVE), discriminant validity (HTMT, Fornell–Larcker), and collinearity (outer/inner VIF) were assessed prior to testing structural paths with 5,000-sample bootstrapping. Results demonstrate that leadership has a positive and significant effect on economic, social, and environmental sustainability. Among these, the strongest influence is observed on social sustainability, followed by economic and environmental dimensions. These findings underscore the critical role of leadership in shaping triple bottom line outcomes within SMEs operating under resource constraints. The study is limited by its cross-sectional design and reliance on single-respondent survey data, which may constrain causal inferences. The findings provide actionable insights for SME managers and policymakers in emerging economies by demonstrating how effective leadership can drive sustainability practices, enhance resilience, and align SMEs with national development priorities and global sustainability goals. Rather than proposing a new theoretical model, this study extends the leadership–sustainability nexus into the underexplored context of SMEs in Bangladesh, contributing contextual empirical evidence and practical guidance for fostering sustainable growth in emerging economies.