Enterprise Innovation in The Distribution Sector Such as Logistics and Trade Towards Green and Sustainable Development

Abstract

Purpose: Despite significant commitments between corporations and the government on green supply chain, green logistics and sustainable production, the adoption of green and sustainable trading innovation in Vietnam continues to face many obstacles. The objective of this study is to approach the decision to adopt green and sustainable trading innovation from the perspective of the enterprise. Research Design, Methodology and Approach: A cross-sectional study with the participation of 651 employees and managers at distribution enterprises such as logistics, supply, and delivery enterprises in southern Vietnam was conducted to assess business innovation decisions through innovation awareness. Partial least squares structural equation modelling (PLS-SEM) was proposed to evaluate the structural relationships of the model. Results: The research results show that the decision to innovate an enterprise is directly positively affected by the perception of marketing innovation, process innovation and organizational innovation; in which process innovation and organizational innovation are mediators for the perception of marketing innovation. Conclusions: This study makes a significant contribution by demonstrating the impact of marketing innovation awareness on the entire process that leads to enterprise innovation decisions to fulfil customer expectations and competitive pressure in the context of the green supply chain, green logistics and sustainable production.

1. Introduction

Innovation can be seen as the foundation for the success of many businesses in recent times (Drucker, 1998). It is the mechanism by which the entrepreneur either generates new wealth-producing resources or endows current resources with greater capacity to generate prosperity (Drucker, 1998). Innovation helps businesses grow and thrive (Chesbrough, 2006; Drucker, 1998). In the process of formation and development step by step, whether more or less, it is inevitable that an enterprise can avoid the appearance of weaknesses related to products/services, production processes, working processes, strategies marketing, or organizational structure (Coskun et al., 2008). Therefore, investing in and conducting innovation activities will help the company detect itslimitations early and quickly improve or change those weaknesses to grow and develop stronger (Tucker, 2002), especially in emerging countries.

In the context of green and sustainable development, enterprise innovation's role in limiting climate change and environmental pollution cannot be denied (Greenland et al., 2023). Despite significant commitments between enterprises and the government on green supply chain, green logistics and sustainable production, corporate innovation adoption towards green and sustainable development in Vietnam still has many challenges (Nguyen & Dekhili, 2019; TA et al., 2020). These challenges come with the growth of the business as well as the ability to reduce the impact of distribution, logistics, trade and manufacturing operations on the environment (Hoang Tien et al., 2020; TA et al., 2020). According to Li and Qamruzzaman (2023), pollution concerns created by rising industrialization and urbanization are major challenges for businesses and governments. Another economic consequence related to agriculture is that due to the impact of pollution, such as soil and water pollution, producers face reduced crop yields and poor quality (Li & Qamruzzaman, 2023) while Vietnam is a leading agricultural exporter. Hence, in the contemporary setting of global integration and continual innovation in technology, processes, and production methods (in a green and sustainable orientation), the role of firm innovation must be evaluated and prioritized.

Regarding enterprise innovation decision-making towards green and sustainable development in Vietnam, a few studies have been undertaken, particularly from a corporate standpoint (Dey et al., 2022). Based on the research of Ngo and Ngo (2023), green commitment strongly influencessustainable development, in which green commitment plays an intermediary role between green innovation, corporate social, and green HRM. In addition, Ngo and Ngo (2023) insisted that green knowledge sharing moderated the interaction between green innovation, human resource management, corporate social responsibility, and sustainable development. According to Le and Govindan (2024), green innovation (management, process, and product innovation) and technological innovation were positively associated with corporate performance. The highlight of this study is the emphasis on the moderating role of managerial environmental concern. In the otherstudy, Le et al. (2024) demonstrated that three factors strongly impacted green innovation (green management, product, and process) in the current context: corporate social responsibility, environmental strategy, and corporate sustainable development. In line with this, Tseng et al. (2022) insisted that sustainable supply management and process management are the main cause components. The preceding studies on the topic of business innovation in Vietnam towards green and sustainable development have shown the importance of product, management, and processinnovation, as well as the role of social responsibility; however, these studies have only mentioned the issue of environmental awareness, while awareness prior to green innovation has not been mentioned.

It can be concluded that there are significant research gapsin existing studies. These gaps are related to innovation awareness before making decisions for enterprises to innovate towards green and sustainable development. According to Khalilzadeh et al. (2024), decision-making is a complex behaviour that requires cognitive activity, specifically parts of the brain; therefore, cognition is an inseparable process in the decision-making process (TRAN et al., 2024). Although previous studies emphasize green innovation in relation to product innovation, process innovation, organizational innovation, etc., no study has examined the cognitive link between them. In addition, most former researchers indicated that the decision to innovate a business not only promoted but also strengthened the company's competitive advantage (Skordoulis et al., 2020) or customer satisfaction (Ayinaddis, 2023; Mahmoud et al., 2018) while lacking consideration of meeting the requirements of competitive pressure and customer expectations. Based on these research gaps and the current significance of corporate innovation, this study aims to take a behavioural epistemology approach to the distribution enterprise innovation in the context of green and sustainable development via the organism–response paradigm (Mehrabian, 1974). Organisms refer to innovation awareness (marketing innovation perception, process innovation perception, and organizational innovation perception) before making innovation decisions as a cognitive process of individuals in the enterprise. In alignment with this, responses refer to enterprise innovation decision-making, including competitive pressure responses and customer expectation responses. The uniqueness of this study is the emphasis on the role of innovation perception when referring to marketing innovation perception related to all aspects such as product/service, price, distribution and promotion. On the other hand, process innovation perception and organizational innovation perception are also mentioned in association with enterprise innovation decision-making. As a result, this study offers significant contributions in both theoretical and practical aspects for policymakers and managers in such distribution, trading, and logistics sectors towards green and sustainable development.

2. Literature and Hypothesis development

2.1. Literature Review

Former researchers and economists have also given many different definitions of innovation in many different situations and times. According to Schumpeter and Swedberg (2021), the definition of "innovation" or "improvement" is a "new combination" of resources, equipment, knowledge, technology, ... In line with this, Drucker and Maciariello (2014) defined innovation as the process of equipping new capabilities and improving or increasing utilities. At the corporate level, innovation refers to a company's ability to assimilate and adopt new ideas leading to the development and launch of new product lines (Rubera & Kirca, 2012). On the other hand, the Oslo Handbook (OECD) also provides an objective way of defining and classifying types of innovation (Manual, 2005). The Manual (2005) mentioned that innovation was mainly concerned with product technology and process innovation. In line with this, former scholars have agreed to two main categories of innovation, such as product and process innovation (Audretsch et al., 2014; Brouwer, 1991; Rousseau et al., 2016). In addition, Innovation can be understood as “the implementation of a new or significantly improved product (goods/service) or process, a new marketing method, or a new organisational measure in practice, in the work organisation or in external relations” (Manual, 2005). As a result, many international business scholars have asserted that innovation can be classified into four categories: product, process, marketing, and organisational (Atalay et al., 2013; Kalkan et al., 2014; Lee et al., 2019). However, the prior perception of innovation leading to enterprise innovation decision-making was rarely mentioned in previous studies (Russell et al., 2020).

Recognizing the critical necessity of businessinnovation in the current setting, former researchers have undertaken research on corporate innovation towards green and sustainable development (Le et al., 2024; Le et al., 2022; Liu & Yan, 2018; Nguyen & Le, 2020; Yi et al., 2024). To better understand this topic, the authors conducted a systematic review of prominent and relevant previous studies related to corporate innovation towards green and sustainable development in the marketing and distribution sectors. There are two main approaches of previous studies related to business innovation towards green and sustainable development: (1) apply behavioural models and theories to predict or explain corporate innovation behaviour (Han & Chen, 2021; Shahzad et al., 2022); (2) construct the conceptual models based on the literature (Beneito et al., 2015;Jun et al., 2021; Le & Govindan, 2024; Le et al., 2024; Ngo & Ngo, 2023; Polas et al., 2023; Wasiq et al., 2023; Zailani et al., 2015).

In the first research approach, Han and Chen (2021) identified the determinants of eco-innovation adoption of small and medium enterprises in Malaysia. This study utilised the Theory of reasoned action (TRA) to explain the eco-innovation adoption via customer demands, rivalry pressures, firm innovative capabilities, managerial environmental concerns, and environmental regulation. In line with this, Shahzad et al. (2022) employed the Unified Theory of acceptance and use of technology (UTAUT2) to explain green innovation adoption via the mediating role of green behavioural intention. Although previous studies in this approach have explained the decision to innovate businesses towards green and sustainable development, the cognitive process when innovating is mentioned very vaguely and especially lacking contextual factors (Tran & Van Pham, 2024). On the other hand, Sahu et al. (2020) pointed out that behavioural theories have certain shortcomings in describing decision-making as contextual factors, lack of emphasis on factors such as mediators and moderators, and factors outside the theory.

In the second research approach, most of the previous studies related to decision-making towards green and sustainable development have built conceptual models through literature and related to internal and external factors of the enterprise (Beneito et al., 2015; Jun et al., 2021; Wasiq et al., 2023; Zailani et al., 2015). According to Zailani et al. (2015), external factors(environmental regulations and market demand) and internal factors(firm internal initiatives) were positively associated with green innovation initiatives (product innovation and process innovation). Besides, Beneito et al. (2015) indicated that competitive pressure (product substitutability, market size, and entry costs) was strongly associated with not only product innovation but also process innovation. On the other hand, Jun et al. (2021) provided a conceptual model for green innovation under the impacts of external partnership and cooperation, government support, rules and regulatory factors, market and customer factors, organizational and human resource factors, and technological factors. Similarly, Wasiq et al. (2023) offered the same conceptual model for green innovation as Jun et al. (2021) but added a new factor, green innovation strategy; however, green innovation strategy was not associated with green innovation while the other factors were positively correlated. Nevertheless, these studies lack consideration of the role of cognition in innovation decision-making while decision-making requires a great deal of cognitive effort (Tran & Van Pham, 2024). In alignment with this, Polas et al. (2023) offered a conceptual model of green innovation under the impacts of knowledge acquisition, knowledge dissemination, and knowledge responsiveness via environmental awareness (mediate variable). The results of this study indicated that all the factors in the conceptual model had positive relationships with the sustainable development of enterprises through environmental awareness. Despite the fact that Polas et al. (2023) mentioned environmental awareness as a mediating variable, this study did not clarify the role of innovation perception (such as marketing innovation perception, process innovation perception, or organizational innovation perception).

2.2. Hypothesis Development

Decision-making is a procedure by which an individual or organisation acknowledges a choice or judgement that has to be made, collects and assesses information about alternates, and then chooses one of the possibilities (Tran & Van Pham, 2024). Hence, firm innovation decision-making towards green and sustainable development can be understood as the process by which an organisation acknowledges a choice or judgement in the context of innovation towards green and sustainable development. According to Shahzad et al. (2022), decision-making related to green innovation adoption was influenced by the components of the unified theory of acceptance and use of technology (such as performance expectancy, effort expectancy, hedonic motivation, social influences, facilitating conditions, and innovation cost) via the green behavioural intention as a mediating factor. In this approach, service or product users' perceptions of aspects such as expectation, motivation, social influence, cost, and condition were considered in relation to behavioural intentions (Shahzad et al., 2022); however, innovation awareness leading to innovation decision-making was not taken into account (Russell et al., 2020), whereas green behavioural intention was a low level of cognition that led to a decision or not (Tran & Van Pham, 2024). On the other hand, Zhou et al. (2019) emphasized the significant role of customer concentration in enterprise innovation decision-making while Beneito et al. (2015) affirmed the relationship between competitive pressure in the market and business innovation decisions (Boone, 2000). In another approach to firm innovation decision-making, Du et al. (2007) insisted that product and process innovations were the two main components, in which product innovation was mainly affected by customers and process innovation was influenced by suppliers (Geng et al., 2021). Based on the above findings, the following hypotheses were proposed:

H1: Marketing innovation perception is positively correlated with distribution enterprise innovation decision-making towards green and sustainable development;

H2: Process innovation perception is positively correlated with distribution enterprise innovation decisionmaking towards green and sustainable development;

H3: Organizational innovation perception is positively correlated with distribution enterprise innovation decision-making towards green and sustainable development;

As mentioned, innovation is the introduction of new products or services that add value, and improve the performance and efficiency of an organization (McFarthing, 2013). At the corporate level, innovation refers to a company's ability to assimilate and adopt new ideas leading to the development and launch of new product lines (Rubera & Kirca, 2012). In thisresearch, innovation awarenessrefers to marketing innovation perception, process innovation perception, and organizational innovation perception. Marketing innovation perception is the awareness of the implementation of new marketing methods involving significant changes in product design or packaging, product placement, product promotion or pricing (Purchase & Volery, 2020). Process innovation perception refers to the awareness of the new work methods, the actual process design activity, and the execution of the change in all its complex technological, human, and organisational elements (Davenport, 1993). Organizational innovation perception has been consistently defined as the perceived adoption of a concept or behaviour that is novel to the organization (Wongtada & Rice, 2008). On the other hand, the association between innovation cognition and decision-making towards green and sustainable development was confirmed in previous studies (de Medeiros & Ribeiro, 2017; Fang & Zhang, 2021; Shahzad et al., 2022); however, most of them focused on decision-making from the customer's viewpoint instead of the enterprise’s (de Medeiros & Ribeiro, 2017; Fang & Zhang, 2021). This research, therefore, looks into the connections between marketing innovation perception, process innovation perception, and organizational innovation perception in the context of the enterprise’s perspective and decision-making towards green and sustainable development.

H4: Marketing innovation perception is positively correlated with process innovation perception in the context of green and sustainable development;

H5: Marketing innovation perception is positively correlated with organizational innovation perception in the context of green and sustainable development;

H6: Process innovation perception is positively correlated with organizational innovation perception in the context of green and sustainable development.

Figure 1: Proposed conceptual model of distribution enterprise innovation decision-making towards green and sustainable development

3. Methods

3.1. Data Collection and Measurement Scales

Data was collected through an online survey of individuals who are managers and employees at distribution enterprises in southern Vietnam. Using the convenience sampling method, the survey was conducted with the participation of more than 1000 respondents from March to May 2024; however, only 651 responses were valid and used for the study. Following the instructions of Hair Jr et al. (2021), the 10 times rule of sample size was applied in the PLS structural model. Therefore, this research was satisfactory in this requirement with 651 samples (Table 1).

Table 1: Respondents’ description

A five-point Linkert scale was applied for the measurement instruments, as shown in Table 2. The initial scales were tested and checked for reliability through Cronbach's alpha coefficient using SPSS software.

Table 2: Measurement instrument

3.2. Procedures to Analyze

After conducting a systematic review to figure out the research gaps in this area, the authors built up the initial scales to measure innovation awareness and decision-making towards green and sustainable development. To consolidate the reliability of the scale, the Cronbach’s Alpha index must be above 0.6 (HairJr et al., 2021). Moreover, the Correlation item total must be greater than 0.4 to indicate a satisfactory correlation (DeVellis & Thorpe, 2021; Hair et al., 2014; Shamshiri et al., 2013). As a result, all indicators were satisfactory (Table 2). On the other hand, to limit the biases of methods, the VIF check wasrecommended by Hair Jr et al. (2021) and all values should be smaller than 3.3. After checking, all VIF indexes were smaller than 3.3.

In the next step, to evaluate the research results of an exploratory study, the author conducts a measurement model and structure assessment according to the guidelines of Hair Jr et al. (2021). Criteria for evaluating measurement models include convergent validity (loading index ≥ 0.6 and AVE ≥ 0.5), validity and reliability (α ≥ 0.6 and CR ≥ 0.6), and discriminant validity (HTMT index < 0.9). In terms of evaluating structural models, partial least squares structural equation modelling (PLS-SEM) was recommended by Hair Jr et al. (2021).

4. Research Findings

4.1. Measurement Model

According to the findings of evaluating the measurement model, all criteria related to convergent validity, validity and reliability, and discriminant validity were satisfied (Table 3). The minimum factor loading and AVE are 0.698 and 0.573, respectively. Similarly, the minimum α and CR are 0.852 and 0.894, respectively. Besides, all HTMT indexes are smaller than 0.9.

Table 3: Assessment of the measurement model

4.2. Structural Model

According to the findings in Table 4 and Figure 2, all associations were significant with a level of 1%. Not beyond initial expectations, the hypotheses were all accepted (H1 → H6). This means that for a second-order variable like EID, the two components CER and CPR are both very suitable in this study. Based on these findings, it can be concluded that pre-decision awareness of innovation to meet customer expectations and competitive pressures positively influences firms' innovation decisions. Specifically, MIP, PIP, and OIP are positively correlated with EID (β = 0.415, 0.140, and 0.234, respectively).

Table 4: Direct and indirect associations of the structural model

Figure 2: The results of coefficient paths

Regarding the interplays of innovation awareness, MIP and PIP are positively correlated with OIP (β = 0.385, and 0.426, respectively). Notably, MIP is significantly positively correlated with PIP (β = 0.755). As a result, the mediating role of PIP and OIP is significant in shaping corporate innovation decisions towards green and sustainable development to meet customer expectations and competitive pressures (p < 0.01).

5. Discussion

Stem from the practical issues and research gaps presented in the introduction, this study has proposed a comprehensive research model to describe the mechanism of innovation decision-making of enterprises in the field of distribution, logistics and trade towards green and sustainable development in the current context. This study has highlighted the mediating role of pre-innovation awareness leading to business innovation decisions, especially business innovation towards green and sustainable development to meet customer expectations and competitive pressure. To clarify this, this section focuses on discussing two core content: (1) the interactions between the elements in innovation perception; and (2) the correlation between pre-innovation perception and the enterprise's innovation decision.

In terms of the interplays of the elements in innovation perception, the link between MIP, PIP, and OIP is a significant finding in this study. Most previous studies have assumed that product innovation is a part of corporate innovation (Beneito et al., 2015; Le & Govindan, 2024; Zailani et al., 2015); however, this is not sufficient since product innovation is only a part of marketing innovation perception which includes product, price, distribution and promotion. This innovation must be consistent with its perception of products, prices, distribution and promotional activities. In other words, it is the innovative perception of marketing that has made a significant positive impact on process and organisational innovation perceptions (β_MIP→PIP = 0.755; β_MIP→OIP = 0.385, p < 0.01). This cognitive shift is the bridge from marketing to process and organizational innovation and cannot be discontinued at any stage (such as PIP and OIP, β_PIP→OIP = 0.426, p < 0.01). Compared to previous research, such as Kahn (2018), innovation can be divided into outcome, process, or mindset; this study reaffirms the connection between them. The interaction of elements in innovation perception is like mindset, and the process of converting perception into action as a process, and finally the decision to innovate the enterprise to meet the competitive requirements and customer expectations is the outcome of the innovation perception process.

The correlation between pre-innovation awareness and firms' innovation decisionsis another highlight of this study. As mentioned, this study approaches innovation decisions from the firm's perspective, in other words, these approaches delve into the alignment of employees' perceptions of firm innovation in the context of green and sustainable development. The research results show that all three components of innovation awareness have a positive impact on business innovation decisions to meet customer expectations and competitive pressures (β_MIP→EID = 0.415, β_PIP→EID = 0.140, and β_OIP→EID = 0.234, p < 0.01) and are consistent with the research results of Lopez-Fernandez et al. (2016) when considering the link between managers’ perception and innovation decision. Returning to previous studies on this topic, according to El-Kassar and Singh (2019), green products and processes have a positive impact on the decision to innovate a business to increase competitive advantage; thus, this study is unique in that it takes into account both marketing and organizational aspects when deciding to innovate a business to meet competitive requirements and customer expectations. Compared with Chiou et al. (2011), this study presents a uniqueness in examining the impact of cognitive innovation on marketing, process, and organizational innovation on the decision to innovate a business to meet customer expectations and competitive pressure instead of the three intermediate factors that directly impact the competitive advantage of the business, which are product innovation, process innovation, and managerial innovation.

Following the above findings, this study contributes to both practical and theoretical aspects. Theoretically, this study offers a new approach according to behavioural epistemology, in which the mediating role of cognition is inseparable from the decision-making process. The consideration of aspects of marketing innovation perception such as product/service, price, distribution and promotion, contributes to the completion of previous studies which mainly focus on product/service innovation while meeting customer expectations and competitive pressures requires more than that in the current context. In addition, the study approaches the decision to innovate businesses towards green and sustainable development with a second-order structure in the dependent variable, which allows the research results to be expressed more comprehensively and answer the question of what is the purpose of business innovation.

In practice, the study clearly shows the mechanism of business innovation decision formation in the current context of distribution enterprises, affirming the role of distribution businesses in understanding marketing, process and organization to meet customer expectations and competitive pressure better. On the other hand, synchronization in employees’ innovation awareness helps businesses in the distribution, logistics and trading sectors achieve common goals through their employees. An illustrative example is that the world's greening trend and increasing awareness of environmental protection require customers to have high demands on products and services (Lavanya & Jeyakumar, 2019); therefore, enterprises themselves have to transform to meet their customers. Scales associated with the "recognize" and "understand" levels of awareness allow for a comprehensive picture of the employee's current awareness. It shows that implementing or applying green and sustainable business innovation decisions at businesses in the distribution sector (such as logistics, trading, supply chain, etc.) does not require a high level of thinking, which is largely at the level of recognition, understanding, and application. In alignment with this, some practical implications are given as follows:

· Increase engagement and information-sharing activities on the role of green and sustainable innovation for employees to meet customer expectations.

· Strengthen training and orientation activities for employees related to product distribution, promotion and product/service improvement activities to meet customer requirements and competitiveness in the same segment.

· Continuously improve work processes, and promote new individuals and methods in work and activities related to green supply chain, green trade and green logistics.

· Focus on and create the best conditions to implement good ideas to meet customer requirements and business competitiveness in the context of green and sustainability.

6. Conclusion, limitation and future direction

The study has successfully modelled the decision-making process of green and sustainable business innovation from the perspective of businesses. This is the first study to examine the correlation between pre-innovation perceptions of aspects such as marketing, processes and organization leading to business innovation decisions of enterprises in the distribution, logistics, and trading sectors. The study reaffirms the appropriate approach related to the current trend in the distribution enterprises in terms of decision-making while previous behavioural theories have many limitations. Research has shown that marketing innovation awareness leads to major changes in perceptions of innovation processes, organisations, and decisions, and this has significant practical implications for policymakers and enterprises in the current environment. In addition, with the participation of the construction of the second-order dependent variable, this study points out the important role of innovation such as what to innovate for and why to innovate. This study is a typical study in Vietnam but it can be applied in some emerging countries to examine the level of awareness of enterprises towards green and sustainable development today in many areas such as logistics and distribution.

Aside from the theoretical and practical contributions, this study has some drawbacks. This is a cross-sectional study and its appropriateness for application should be reconsidered at some point in the future. The study did not address external factors that influence cognition (such as emotions and social influences), which is also a noteworthy future research direction. Finally, research needs to be conducted in more areas to assess its generalizability.