Drivers and barriers to green investment: understanding the factors influencing Malaysian SMEs.

Abstract

Small and medium enterprises (SMEs) play a vital role in Malaysia's economy but have been relatively slow in adopting environmentally sustainable practices and investing in initiatives to reduce their environmental impact. This study aims to develop a comprehensive conceptual framework for understanding the multifaceted determinants influencing Malaysian SMEs' decisions to invest in environmental initiatives. Drawing from well-established theories, including institutional theory, stakeholder theory, and the resource-based view theory, an integrative conceptual model is proposed. The framework encompasses regulatory, economic, organizational, socio-psychological, and stakeholder factors that shape SMEs' environmental investment behaviour. Key determinants explored include regulatory pressures, access to capital, economic benefits, management awareness and commitment, organizational resources and capabilities, and consumer demands. The conceptual framework provides a holistic lens to analyse the complex interplay between these factors, informing evidence-based policymaking, targeted support mechanisms, and capacity-building initiatives. By addressing the identified determinants, stakeholders can foster an enabling environment that encourages and facilitates sustainable practices among Malaysian SMEs, contributing to the nation's environmental goals, economic resilience, and long-term prosperity. The study contributes to the body of knowledge in environmental economics, sustainable business practices, and SME management, serving as a foundation for future empirical research and refinement of theoretical frameworks.