International Journal of Business and Economics Volume 23, No. 3 December, 2024

Decoding the Financial Efficiency Drivers for Indian Green MSMEs: A DEA-SEM Approach

Deepak Kumar Tripathi

School of Management Sciences, Chanakya University, Bangalore, India

Saurabh Chadha

Department of Management, Birla Institute of Technology and Science Pilani, Pilani Campus, Rajasthan, India

Ankita Tripathi

School of Commerce, Presidency University, Bangalore, India

Abstract

Given the importance of sustainable business practices in the contemporary scenario, this study delves into the financial efficiency and performance of Indian micro, small, and medium enterprises (MSMEs) in the green sector from 2012 to 2021. This research challenges assumptions about the impact of human capital and research and development spending on the financial dynamics of green MSMEs. Instead, it illuminates the crucial roles of financial literacy, trade credit utilisation, state-backed credit, productivity, and cash flow stability in influencing the success of environmentally conscious businesses. Using an innovative methodology combining Data Envelopment Analysis and Structural Equation modelling, the study challenges existing theories and offers theoretical insights and practical strategies. This study provides practical insights that empower green MSMEs with strategies for resilience, benchmarking, continuous improvement, and an integrated approach to navigating and excelling in the ever-evolving business landscape.

Keywords：Financial Efficiency, SBM-DEA, Structural equation modelling, Green Firms

JEL Classifications：C3, C6, G3, Q3, Q5

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