Abstract

In this paper, we examine how SMEs successfully implement proactive social and environmental strategies (PSEs). Using inductive theory building on 8 case studies of small and medium enterprises (SMEs) operating in both developing and developed country contexts, we identify four dynamic capabilities that explain how SMEs overcome time, resources, knowledge, and power constraints when implementing proactive social and environmental strategies. We introduce three moderating variables to explain how level of country development, organizational lifecycle, and availability of supporting institutions could impact the level of capability importance. Furthermore, we discuss the interconnectedness of these capabilities to fully explore their dynamism in explaining how SMEs engage in sustainable business practices