Although SMEs contribute much to Vietnamese economic growth, they cause significant negative impacts on the environment. In environmental literature, the institutional theory is suggested to be used as a theoretical lens to examine the pressure driving an organization to improve environmental performance and indirectly through strategic response. Despite that, this theory needs more application to predict SMEs' environmentally friendly outcomes. Hence, this study draws upon institutional theory to examine that three institutional pressures, coercive, normative, and mimetic pressures have a direct impact on environmental performance as well as an indirect impact through the adoption of environmental management practices. Data were collected by surveying 253 manufacturing SMEs operating in Vietnam. Partial least-squared structural equation modeling was executed to assess data. The results suggest that three institutional pressures, coercive, mimetic, and normative pressure, indirectly improve environmental performance by adopting environmental management practices. At the same time, there is no direct effect of these pressures on environmental performance. These findings shed light on how institutional pressures affect environmental management practice adoption and environmental performance in the SME context. These findings also contribute the theoretical development of institutional theory by showing that adopting environmental management practices is a strategic response to institutional pressures to gain environmental performance. Lastly, due to mixed results on the relationship between institutional pressures and its outcomes (e.g., environmental management practice adoption, environmental performance), this study cast light on those relationships in Vietnam.
Keywords: Environmental management practices; Environmental performance; Institutional theory; SME; Vietnam.
© 2023 The Author. Published by Elsevier Ltd.