ABSTRACT

The authors studied the effects of knowledge management practices (KMP) on green technology
innovation (GTI) and sustainable performance (SP) in the SME manufacturing industry of
Pakistan to promote responsible and efficient use of factories' resources. Integrating knowledge-
based technology today is important for decreasing environmental problems, making production
cleaner, and increasing a company’s competitiveness in the future. If a firm manages its
knowledge well, internal tasks can be improved, creativity can rise, and greener technologies
may be adopted. Information from middle-level managers showed that KMP improves
companies’ ability to be green and makes them more sustainable for a long period. The study
reveals that absorptive capacity is an important factor that allows businesses to use their
knowledge to develop innovative technologies that are greener and more sustainable. The
findings contribute to the growing body of evidence supporting the shift toward systems that
manage waste effectively and utilize resources and energy efficiently. Such insights are
particularly valuable for corporate decision-makers and policymakers focused on advancing
industrial sustainability.

Keywords: Knowledge Management Practices, Green Technology Innovation, Sustainable

Performance, Absorptive Capacity, Manufacturing Sector, Cleaner Production, Sustainability.

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1. INTRODUCTION:

In recent years, rapid growth in global business activities, alongside dynamic social,
technological, and environmental changes, has led to significant transformations in
organizational operations. (Arsawan et al., 2022)The rise of high technologies and the internet
has enabled firms to connect with customers and suppliers worldwide, dissolving geographical
barriers. However, this global expansion has also contributed to increasing environmental
concerns, including resource depletion, greenhouse gas emissions, and industrial pollution. (H.
T. Pham et al., 2023)As environmental pressures intensify, businesses are compelled to rethink
their strategies not only to remain competitive but also to align their operations with the
Sustainable Development Goals (Shehzad et al., 2024). Organizations are now embracing
strategic approaches such as Knowledge Management Practices (KMP) and Total Quality
Management to address these challenges and enhance performance and sustainability. (A. N.
Khan et al., 2024). Knowledge is a vital intangible asset, playing a central role in improving
decision-making, fostering innovation, and strengthening customer satisfaction (Gauthier &
Zhang, 2020). In the past two decades, KMP has gained significant traction as a tool for fostering
innovation, high-quality products, and enhancing organizational effectiveness (Polas et al.,
2023). As a result, firms are now recognizing knowledge as a core strategic resource in building
a competitive advantage (Muñoz-Pascual et al., 2019). At the same time, growing regulatory and
societal expectations are placing pressure on organizations to minimize their environmental
footprint by limiting resource consumption and mitigating the negative impacts of industrial
activities (Akhtar et al., 2024). According to UNEP (2022), a failure to align business operations
with sustainability goals could result in a 5% annual increase in global carbon emissions,
threatening long-term ecological stability. Consequently, businesses are shifting toward
sustainable development models, emphasizing adoption of environmentally friendly technologies
and practices.

Green Technological Innovation (GTI) has emerged as a forward-thinking approach to tackling

environmental challenges. GTI integrates environmental knowledge with technological
advancements to reduce resource consumption and pollution while supporting the development
of green products and processes (Raudeliuniene & Matar, 2022). Firms implementing GTI aim to

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lower their environmental impact while maintaining stakeholder satisfaction and gaining market
advantage. Prior literature highlights the critical role of GTI in building a green economy,
enhancing green productivity, and fostering organizational competitiveness (Nisar et al., 2021).
GTI enables companies to redesign existing products and innovate new solutions that are more
resource-efficient and environmentally responsible (Fan et al., 2023; Fu et al., 2022). Moreover,
firms leveraging green innovation are often able to establish "isolation mechanisms" that protect
competitive advantages by creating entry barriers for rivals and maintaining profit margins (N.
T. Pham et al., 2021). This positions GTI not only as a tool for sustainability but also as a
strategic asset in achieving long-term business success under increasing environmental scrutiny.

Another key concept explored in the current study is the mediating approach of Absorptive
Capacity (AC), which is defined as the ability of a firm to recognize, integrate, assimilate, and
apply external knowledge to improve innovation and performance (Sancho-Zamora et al., 2022).
AC acts as a mediator in translating knowledge management practices into effective green
innovations and sustainable outcomes. While numerous studies have examined the relationship
between KMP, GTI, and Sustainable Performance (SP), limited research has investigated the
mediating effect of absorptive capacity and the moderating role of environmental awareness
within this context.

To address this gap, this study examines the relationships between KMP, GTI, and SP, with a
focus on the mediating effect of AC and the moderating impact of environmental awareness. The
research is conducted within Pakistan's SME manufacturing sector, which provides a relevant
context due to the tangible nature of its operations and its significant environmental footprint.
Data were collected from 256 mid-level managers and analyzed using structural equation
modeling to assess the proposed relationships.

This study aims to answer the following research questions:

1. How are Green Technological Innovation and Sustainable Performance impacted by

Knowledge Management Practices?

2. Does Absorptive Capacity significantly mediate the relationship between KMP and both
GTI and SP?

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By addressing these questions, the study adds valuable insights to the ongoing discussion on
cleaner production and sustainable industrial practices. It offers practical insights for managers
seeking to leverage knowledge and innovation for environmental performance improvement and
provides policy implications for fostering sustainable development in emerging economies.

2. Theory and hypotheses

This study uses the concept of two theories, the resource-based view and the knowledge-based
view

2.1. Resource-Based View Theory

Wernerfelt (1984) introduced the Resource-based view theory, which became the literature's
cornerstone. Altaf et al. (2019) firmly assert that any business success is rooted in its internal
resources, which consist of its unique assets and abilities. This perspective underscores that
a firm can gain its competitive edge by effectively using its main resources (Kull & Mena,
2016). The competencies, assets, knowledge, and information within an organization are
important for designing and implementing strategies that increase both efficiency and
effectiveness. Leveraging these resources empowers firms to optimize operations and attain
strategic goals, driving sustained performance and competitive advantage (Barney, 2018).
NRBV highlights the need for firms to develop dynamic capabilities, such as environmental
awareness, stakeholder engagement, and innovation, which support adaptive and learning
organizations. These are essential for improving absorptive capacity, which helps
organizations integrate sustainability-related knowledge into strategy and operations. The
Resource-Based View (RBV) mainly focuses on the firm outcomes and ignores its impact
on environmental practices. It is based on the attributes of business resources, such as (1)
valuable, (2) rare, (3) inimitable, and (4) non-substitutable, which encourages long-term
sustaining competitiveness. In response to RBV limitations, (Hart 1995) introduces the
Natural Resource-Based View (NRBV), which extends the RBV framework by combining
environmental considerations and positioning this theory as a competitive advantage related
to the firm’s relationship with the natural environment. Many scholars and environmental
experts have encouraged that adopting an NRBV perspective empowers green innovation

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(GI) and sustainable performance, which in turn can boost a firm's long-term success.
Moreover, Mills and Smith (2011) highlighted that knowledge resources are primary drivers
of economic growth. In the modern environment and information-based economy, the best
way to implement green innovation is to depend high capacity of firms to absorb new
information. While RBV suggests that firms with environmental goals seek strategic
resources (like knowledge) to develop capabilities such as AC. By promoting
environmental awareness in an organization, an RBV fosters the structure of a higher KMP
that enhances sustainable performance and green innovation through the firm's absorptive
capacity. An organization with a high level of absorptive capacity can effectively acquire
and apply external knowledge, which not only improves its existing resources but also
facilitates the development of new capabilities.
The Resource-Based View (RBV) framework is primarily utilized by managers to examine
the relationship between a firm's resources and its performance. The study showed that
knowledge resources are intangible, ever-changing, hard to repeat, and beneficial for
obtaining long-term competitiveness (Curado & Bontis, 2006). The study looked at certain
intangible items as indicators of green innovation and sustainability, for example, KMP,
staff’s ability to use information, and their awareness of environmental concerns. Experts
think that knowledge is an important resource that separates a company’s success from
failure (Ooi, 2014). The ability to absorb knowledge is seen as a firm’s main competitive
advantage (Tufan & Mert, 2023). Businesses can use environmental awareness to help their
staff become aware of environmental issues. The performance of an organization’s
environment is affected by environmental concerns, so those matters cannot be neglected
(Rehman et al., 2021). This paper includes KMP, AC, and EA along with RBV to evaluate
the green technological innovation and sustainable performance of the organization.

Explanation of Research Hypothesis

2.2 Knowledge Management Practices and Green Technological Innovation:

In an organization, knowledge is acquired, developed, and shared to gain a competitive

advantage and enhance overall organizational performance (Firdaus et al., 2024).KMP supports

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organizations to sustain, which helps in shareholders' and customers' trust (Arsawan et al.,
2022).In the fast-growing world, KMP is considered an important component in producing new
products and services while handling the operational process (Sahoo et al., 2023). Modern
economies are integrating eco-friendly innovations through intellectual capital, resulting in
sustainable and profitable outcomes (Ogiemwonyi et al., 2023). Knowledge management helps
the organization in enhancing the capabilities that are essential for green innovation. Green
technologies are derivative from KMP and it refer to the development and application of
innovative technologies designed to reduce environmental harm, enhance sustainability, and
facilitate the transition to a more sustainable, low-carbon economy. (Javeed et al., 2022). It spans
a wide range of sectors, including energy, transportation, construction, agriculture, and
manufacturing. Knowledge resources and competences are the main building blocks for an
organization's ability to innovate sustainably (Nisar et al., 2021). Knowledge Management plays
a vital role in gaining a competitive advantage and holds considerable strategic value for
organizations committed to green technological innovation. Recently, innovation has become a
focal point for decision-makers aiming to promote a more sustainable and environmentally
responsible future. Now, many marketing, business ethics, and environmental researchers are
focusing more on the topic of green innovation (Ogiemwonyi et al., 2023). Using green
technologies would contribute to the environment as well as enable organizations to last a long
time and be more competitive.

With time, several studies and research have proven that knowledge management (KM)
significantly supports the growth of green technological innovations (GTIs), since it influences
organizations in generating, sharing, and using knowledge to support the development of
environmentally sustainable technologies. Siemens’ sustainability strategy includes KM by
sharing knowledge across the world to speed up the creation of smart and eco-friendly energy
and infrastructure systems. In another study (Abdulmuhsin et al., 2024), research on UAE SMEs
found that knowledge acquisition, sharing, and responsiveness boost green innovation. The study
shows a strong and positive link between knowledge creation, acquisition, sharing,
dissemination, and responsiveness and green innovation. In the case study in Nepal’s cement
industry, the study investigates the relationship between green knowledge management and
green innovation through green innovation culture. The study reveals there is a positive
relationship between KMP and green innovation (Bhattarai, 2023). Another study in Malaysia’s

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public sector explores that KM strategies support green innovation and knowledge sharing
(Tangaraja et al., 2015). For the above study, we illustrate that

H1 Knowledge Management practices serve as a pivotal driver of green technological

innovation, yielding a demonstrable and positive impact.

2.3 Knowledge Management Practices and Sustainable Performance:

The organization's ability to manage knowledge is an important factor that underpins a firm's
competitiveness. (Ramos Cordeiro et al., 2024). When enhancing its quality, the organization
also improves its competitiveness, depending on knowledge-based competitiveness (Rasheed et
al., 2025). Knowledge management helps the organization identify the knowledge for its long-
term benefit (Durrani et al., 2024). It is an important tool that creates the organizational future,
including the efforts to ensure its sustainability.(Nasyiah et al., 2024). Knowledge management
goes beyond cost-efficient production methods; it significantly contributes to the enhancement of
those products that add value and distinguish organizations in competitive markets (Al-Hawari et
al., 2021). Therefore, there is an urgent need to manage knowledge more efficiently through
maintaining the organization's sustainability(Al-Balushi et al., 2025). Many researchers and
scholars reveal that knowledge is an important source of competitive edge and a necessary asset
for organizations; therefore, adopting and implementing knowledge is beneficial for
organizations (Al-Abbadi & Abu Rumman, 2023). Empirical research demonstrates that KMP
has a substantial influence on organizational performance.(Shahzad, Qu, Zafar, et al., 2020).
Previous studies have revealed the critical role of knowledge in achieving sustainable
performance. several scholars argued that to gain a competitive edge, an organization has to
acquire knowledge and implement that knowledge in an effective and efficient way (Luo et al.,
2025).
The concept of sustainable performance emerged approximately three decades ago due to
global environmental concerns, particularly those involving the depletion of natural resources
and energy consumption (Kun, 2022). Sustainable performance identifies how well an
organization is successful in meeting its long-term goals (Wang et al., 2022).These goals can be
achieved through effective knowledge management, skilled and highly qualified staff, a
commitment to continuous learning, and a readiness to apply suitable changes. (Alraja et al.,
2022). Therefore, seeking opportunities that enable an organization to maintain strong

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performance while integrating quality management system models is necessary. (M. S. Khan et
al., 2020).
Organizations aiming to sustain their performance must know their responsibilities to various
stakeholders and endlessly adapt their activities, strategies, and tools to drive ongoing
improvement(Parekh & Wright, 2024). This indicates that Knowledge Management Practices
(KMP) can substantially attain a firm's sustainable performance. Knowledge resources and
abilities served as the foundation for a firm's capacity to drive sustainable innovation(Al-Abbadi
& Abu Rumman, 2023).
A study conducted in Vietnam showed that KM practices (creation, acquisition, sharing, and
application) have a significant positive impact on green innovation and sustainable performance.
The data was gathered from managers, including males and females from different enterprises in
the SME manufacturing sector. The relationships among knowledge management practices,
green technological innovation, and sustainable performance were analyzed using Structural
Equation Modeling (SEM). The findings suggest that knowledge management has a significant
and positive impact on green technological innovation and sustainable performance (Sahoo et al.,
2023). Research on Malaysian SMEs reveals that KMP has a significant effect on green practices
through the mediation of green innovation of the association between KMP and sustainable
performance (Saman et al., 2025). Thus, the above studies illustrate our hypothesis that
knowledge management practices significantly affect sustainable performance.

H2 Knowledge management has a substantial and positive impact on the organization's

sustainable performance.

2.4 The Mediating Effect of Absorptive Capacity

Absorptive capacity represents a company's strong ability to identify and acquire new
information, integrate it into its operations, and leverage it to drive significant improvements in
performance and innovation (Shafait & Huang, 2024). Huy et al., (2023) identified four main
capabilities of absorptive capacity for effective knowledge management, which are acquisition,
assimilation, transformation, and knowledge exploitation. Absorptive capacity plays a significant
role in knowledge creation (Shah et al., 2023). It is considered a firm capability that enables
them to use knowledge more effectively, building a seamless system of knowledge. To enhance

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the firm's absorptive capacity, management must prioritize investments in internal research and
development capabilities, utilize external R&D resources, embrace new and advanced
technologies, and improve employee training and development initiatives (Huang et al., 2023).
Knowledge is the most important asset for the organization. (Qu et al., 2022). Maximizing
external knowledge plays a key role in strengthening organizational sustainability. As part of a
green innovation strategy, firms should combine their internal knowledge with external insights
(Lam et al., 2021). Van et al., (2025) argued that absorptive capacity enables firms to leverage
external knowledge for gaining sustainability insights and applying sustainable practices

Previous studies also show a strong relationship between absorptive capacity with KMP, GTI,
and SP. According to Talaja and Hajdić (2015), there is a strong relationship between
Knowledge management and firm absorptive capacity. Knowledge sharing as a key element of
absorptive capacity plays a significant role in becoming innovative and is strongly shaped by a
leader's capability to acquire both internal and external information (Albort-Morant et al., 2018).
This approach entails developing environmentally friendly goods and implementing methods for
recycling, waste reduction, and preventing pollution. To accomplish this, organizations must
leverage both internal and external knowledge to seek sustainable processes and effectively
address the environmental challenges(Gluch et al., 2009). Empirical studies also show that
absorptive capacity has an impact on a firm's green performance (Akhtar et al., 2024). Chen et
al., (2014) Investigate the relationship between green services in the electronic industry of
Taiwan and absorptive capacity. His study reveals that the absorptive capacity has a strong
relation to green innovation. Gholami et al. (2013) investigated the relationship between
knowledge management practices and SME performance, concluding that the effective
absorption of knowledge significantly enhances performance. Aboelmaged & Hashem,(2019)In
his study also examined the impact of absorptive capacity towards green innovation in SMEs,
though the mediating effect of sustainable organizational abilities. The results show AC a strong
predictor for green innovation and firm sustainability.

Therefore, based on the above literature, it can be inferred that

H3: Absorptive capacity functions as a mediating mechanism through which Knowledge

Management Practices influence Green Technological Innovation.

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H4: The influence of Knowledge Management Practices on Sustainable Performance is
transmitted through the mediating role of absorptive capacity.

2.5. Moderating impact of Environmental Awareness towards knowledge

Management Practices and Absorptive Capacity
Environmental awareness in organizations refers to the extent to which a firm recognizes the
environmental challenges and integrates ecological factors into its decision-making processes. It
includes understanding the environmental impacts of business activities, fostering a culture that
values sustainability, and committing to practices that protect and preserve natural resources.
Environmental awareness is considered a key element that includes understanding current
environmental challenges and recognizing how the actions of individuals affect them. These
concerns built pressure on organizations to develop products that use limited natural resources.
(Hussain et al., 2022).Employees' environmental awareness fosters a tendency toward green
behavior, which enhances the organization's overall capacity for sustainability (Rani & Devi,
2024). Furthermore, it can significantly reduce a firm's environmental impact by encouraging
green and sustainable practices, enhancing employee morale, increasing the organization's
reputation, attracting environmentally conscious customers, and achieving cost savings through
efficient resource use (Appiah-Kubi et al., 2024).

Organizations with heightened EA are more likely to prioritize environmental knowledge,

facilitating better assimilation of such knowledge into organizational processes. EA can drive
organizations to seek and implement environmentally friendly innovations, which requires
effective knowledge management and a strong absorptive capacity. Environmental awareness
fosters a culture that values continuous learning about environmental problems. A previous
research, (Hussain et al., 2022), indicates that environmental complexity moderates the
relationship between knowledge management capability and a firm's absorptive capacity. This
implies that external environmental factors can influence how organizations manage and utilize
knowledge.

Hence, from the above literature, we illustrate that

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H5: Environmental awareness positively moderates the relationship between knowledge
management practices and absorptive capacity, such that the relationship is stronger when
environmental awareness is high.

2.6 Conceptual Framework

Environmental
Awareness

H1 H5 H3

H3
Knowledge Green Technological
Absorptive
Management Practices Capacity innovation
H3,

H4 Sustainable
H2 performance

3. Research Methodology

3.1 Target population and Sampling techniques

The target population of the present study is SMEs of manufacturing that are registered with
SMEDA. The SMEDA is responsible for promoting and helping small and medium enterprises
in Pakistan. Purposive sampling is used, and the data is collected from two big cities of Pakistan,
Islamabad and Rawalpindi. Data is gathered from high and middle-level managers of the firms
through a personal visit to them and asked them to fill out the questionnaire to assess the
performance of their organization concerning KMP, green technological innovation, and
sustainable performance on a five-point Likert scale. Data is collected only from management
staff because they are also responsible for implementing the policies and procedures in their
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departments. Data is gathered between May 2023 to August 2023 through the technique of
purposive sampling. Out of 320 responses, only 256 responses are taken as the remaining
responses have some mission data

The demographic details of the respondents are as below

Table 1 Employees' Experience in the Company

Frequency Percent Valid percent Cumulative Percent

less than 2 Years 143 55.9 55.9 56.6
02- 05 Years 100 39.1 39.1 58.1
Valid 05-10 Years 11 4.3 4.3 75.3
Total 256 100.0 100.0

Table 1.1: Size of Company

Frequency Percent Valid Percent Cumulative Percent

Less than 30 81 31.6 31.6 32.8

30-50 50 19.5 19.5 95.0
Valid
50-70 83 32.4 32.4 80.5

Greater than 70 40 15.6 15.6 100.0

3.2 The Measurement Instrument

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The research is based on six sections. The first section contains the demographic part that
includes information about the respondents. The second section contained eight items related to
the knowledge management section, which were taken. The third section has five items related to
Green technological innovation from the study of Sahoo et al., (2023).While the four sections
have five items related to Sustainable performance developed by the author Chopra et al.,
(2021)The fifth section contained the four items of absorptive capacity used as a mediator, and it
is measured and taken from the Flatten et al., (2011) . The last section contained the five items
of environmental awareness taken from Cao and Chen (2019).

3.3 Data analysis and results

The next step was to process and analyze the information after the data was collected. For the
analysis of the data, the Statistical Package for the Social Sciences (SPSS), version 20, was
chosen. SPSS is a powerful statistical tool for analyzing descriptive statistics, regression,
ANOVA, and various non-parametric tests. It helps manage large datasets with efficient tools.
The AMOS was also applied using Structural Equation Modeling (SEM) and SPSS to better
study the connections between the mediation and moderation. Data collection and analysis on a
five-point Likert scale were used in the questionnaire. To enable reliability, SPSS carried out
reliability analysis and descriptive statistics in the study. CFA was used in the analysis to check
if the findings were valid. To analyze the model in AMOS, SEM was used to check the
hypothesis.
3.4 Measurement Model and the Structural Model.

The study uses confirmatory factor analysis to analyze the measurement model. The validity and
one-dimensionality are confirmed through the CFA analysis. The reliability of the measurement
model is assessed through Cronbach’s alpha. The value of Cronbach’s alpha of each variable
should be greater than 0.8 suggested by Peterson (1994), demonstrating strong internal
consistency and reliability. The Validity is examined through a discriminant and convergent
validity test. According to Hair et al. (2010), convergent validity is examined through factor
loadings. It is suggested that the values of factor loading should be greater than 0.6. While it is
also recommended that the Average Variance Extracted (AVE) of each construct has to be more

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than 0.5. In the results, the values of factor loadings are greater than 0.6, while the AVE is also
more than 0.5. Detailed factor loadings, AVE values, and composite reliability are presented in
Table 2.
Fornell and Larcker (1981) state that for the discriminant validity, the construct’s shared variance
with its indicators should be greater than its correlation with other constructs. Moreover,
discriminant validity is established when the square root of the AVE for each construct exceeds
its correlations with all other constructs. Hair et al. (2010) also suggested that inter-construct
correlations should remain below 0.9. As shown in Table 3, the results meet both Hoyle (1995)
and Hair et al.’s (2010) standards, confirming the presence of discriminant validity.
Model fit was evaluated for both the measurement and structural models. For the measurement
model, the χ²/df ratio was 1.099, satisfying (Bentler & Bonett, 1980) requirement of a value
below 3. The RMSEA was 0.0546, well within the acceptable limit of 0.08 . Additionally, the fit
indices GFI, CFI, and TLI all exceeded the ideal threshold of 0.9 as suggested by (Bollen,
1989). While the CMIN/DF for the structural model is 1.245, and RMSEA is also less than 0.08
while all the values of TLI, CFI, and GFI are more than 0.9.
Thus, it can be confidently concluded that both the measurement and structural models
demonstrate an excellent fit with the collected data.

Table No. 2

Reliability and validity of Constructs

Constructs Items Factor Loading Ranges

KMP 8 0.625-0.788
GTI 5 0.698-0.718
SP 5 0.659-0.732
EA 5 0.712-0.833
AC 4 0.765-0.916

Table 3 Validities of the Construct

CR AVE MSV ASV KMP GTI SP AC EA

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 KMP 0.962 0.681 0.416 0.321 0.699

GTI 0.960 0.866 0.421 0.201 0.305 0.617

SP 0.964 0.672 0.321 0.399 0.351 0.731 0.525

AC 0.942 0.939 0.521 0.254 0.482 0.409 0.687 0.736

EA 0.976 0.800 0.502 0.298 0.443 0.581 0.520 0.283 0.758

Table 4 Model Fit Indices with Accepted Value

Measure Fit RMSEA CMIN/DF CFI TLI IFI GFI

Accepted Value .80 ≤2 ≥ .90 ≥ .90 ≥ .90 ≥ .90

Further Analysis >.1 >2 < .90 < .90 < .90 < .90
Required
The above values are taken from Byrne (2001,2010)

3.6 Overall Model Fit Measurement

The overall fit of the measurement model is evaluated by integrating all the previously discussed
Confirmatory Factor Analyses (CFAs). These CFAs link the independent and dependent
variables, aiming to confirm the model’s suitability by examining the covariance structure
between these variables. The related items, including potentially conflicting constructs, are
assessed to ensure they provide an adequate fit between the data and the measurement model.
Essentially, a measurement model demonstrates how precisely and consistently the survey items
or indicators capture the theoretical constructs under investigation.

Table 5: Cut-off values of fit indices

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 CMIN/DF RMSEA GFI TLI CFI

Measurement 1.757 .054 .981 .920 .929

Model
Structural Model 1.245 0.023 .945 .981 .965

4.1 Hypothesis Analysis

4.1.1 Knowledge Management positively and significantly impacts the Green
Technological Innovation.

The result of the standardized approximation of the relationship between KMP and GTI yields
the beta value 0.392, while the value of p is 0.00, which is less than 0.05, showing us that the
results are significant, while the critical value is 5.433 These results indicate a significant and
positive association between KMP and GTI. A higher level of Knowledge Management practices
within an organization supports the effective integration of green technological innovation. Prior
research also supports this relationship; for instance, a study published in the Journal of Cleaner
Production examining Pakistani manufacturing and service firms found that KM practices
significantly influence green innovation and the sustainable performance of firms. Specifically,
knowledge creation and acquisition were strongly linked to environmental and economic
sustainability, although their influence on social sustainability was less significant (Abbas &
Sağsan, 2019). Based on these findings and our hypothesis, it can be concluded that there is a
positive and significant relationship between knowledge management practices and green
technological innovation.

Hence, H1 is backed by prior research that knowledge management practices have a large
and favorable influence on the Green technological innovation. This is displayed below in
Table 6

4.1.2 Knowledge Management Practices and Sustainable Performance

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The analysis reveals a strong and statistically significant relationship between Knowledge
Management (KM) and Sustainable Performance (SP). A beta value of 0.459 indicates that
enhancements in KM are associated with notable improvements in sustainable performance
outcomes. The p-value is also 0.00, which is significant. Additionally, the critical value of 6.179
reinforces the robustness and reliability of this finding. Collectively, these results underscore the
essential role of effective KM in achieving long-term sustainability goals across environmental,
social, and economic dimensions.
Previous research further supports this conclusion. Numerous studies have documented a
significant relationship between KM practices and sustainable performance across various
sectors and regions. Key KM practices such as knowledge acquisition, sharing, and application
have been shown to significantly contribute to sustainability outcomes. For example, Shahzad,
Qu, Ur Rehman, et al., (2020) in examined in their research that multinational manufacturing
firms in Pakistan and found that KMP positively influence green innovation, which subsequently
enhances corporate sustainable performance.
Based on the statistical findings of this study, the hypothesis that Knowledge Management has a
significant and positive impact on Sustainable Performance is supported and accepted.
Hence, from the results of the analyses and hypothesis, we concluded that H2 knowledge
management practices have a positive impact on sustainable performance. This is displayed
below in Table 6.

Table 6: Summary to analyze the Results of the mentioned hypothesis

Relation Between Beta Value P Value Final Decision

Critical Value
Variables

β1 (GI←KMP) .392 0.00 5.433 Supported

β2 (SP ← KMP) .459 0.00 6.179 Supported

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4.1.3 Absorptive Capacity significantly and partially mediates the relationship
between KMP and Green Innovation, and KMP and Sustainable Performance

The table presented below shows the value of beta for KMP-AC-GTI, with the total effect being
1.765, while the value of P is .001, which shows there is a significant relationship. The table also
shows the direct effect of KMP on GTI, which is 0.392, while the value of p is .004, which is
also significant, and the indirect effect of KMP on GTI in the presence of AC, that is the
mediator variable, is 0.470, which is calculated by multiplying the path from (KMP to AC) and
(AC to GTI). The P value is .001. As a result of KMP on GTI is significant, which indicates
there is a partial mediation among variables. The table also shows us the relationship of KMP on
SP in the presence of mediator AC. The total effect of KMP on SP and AC is 1.773, while the p-
value is .001. while in direct effect of KMP on SP is .459, the p-value is .002, which is
significant. The indirect effect of KMP on SP in the presence of AC is 0.431, while the p-value is
0.001, which shows there is a significant relationship between KMP on SP in the presence of
AC.

Table 7: Mediation Analysis KMP-AC-GTI

Variables Total Effects Direct Indirect Results Mediation

(C) Effects (C’) Effects (ab) Level

KMP-AC-GTI β= 1.765 β= 0.392 β= 0.470 Significant Partial

p = .001 p = .004 p = .000

Table 8: Mediation Analysis KMP-AC-SP

Variables Total Effects Direct Indirect Results Mediation

(C) Effects (C’) Effects (ab) Level

KMP-AC-SP β= 1.773 β= 0 .459 β= 0.431 Significant Partial

p = .001 p = .002 p = .000

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 4.10.4 Environmental Awareness strengthens the relationship between KMP
and Absorptive Capacity

The interaction effect between knowledge management practices and environmental awareness
on absorptive capacity was found to be positive and statistically significant (β = 0.128, S.E =
0.030, CR = 2.719, p < 0.01). this indicates that environmental awareness partially moderates the
relationship, such that organizations with higher environmental awareness benefit more from
KMP in developing absorptive capacity. The previous study examined the relationship between
environmental factors, knowledge management, absorptive capacity, and innovation capacity.
The findings indicated that environmental factors positively influence knowledge transfer and
absorptive capacity, thereby enhancing innovation capacity (da Silva Neto & La Falce, 2024). So
based on the results and previous hypothesis, we accept our last hypothesis that environmental
awareness strengthens the relationship between Knowledge management practices and
absorptive capacity

Table 9: Moderation Analysis KMP*EA-AC

Variables Estimates S.E P-Value Result Moderation level

CR
KMP-EA-AC 0.128 0.30 2.719 *** Significant Partial

***P ≤0.05
4. Discussion

Hypothesis I: Knowledge Management (KM) is very helpful for advancing Green

Technological Innovation (GTI). KM practices help an organization by letting its experts save,
share, and apply knowledge needed for building and using environmentally friendly
technologies. Because of these practices, people work together, never stop learning, and share
green knowledge throughout the company. It has been shown in studies that businesses with
developed KM approaches are more prepared to solve green challenges by coming up with new

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solutions. Besides, KM motivates the development of a climate-friendly culture, encourages
people to discover eco-friendly options, and boosts the efforts of innovation (Polas et al., 2023).
As a result, companies looking to be competitive and also care about the environment should
invest in KM to help advance their green technology. In light of the previous findings and what
is seen in this study, we can conclude that KMP improves green technological innovation

Hypothesis II: Applying Knowledge Management practices improves the overall sustainability of
a company by giving them skills to plan good economic, social, and environment-related
strategies (Jeong et al., 2020). Efficient knowledge management helps firms boost their
operations, contribute to green ideas, lessen their ecological impact, and build better
relationships with their stakeholders. Various researchers show that KM helps companies
achieve sustainable results by managing changes in the market, following new environmental
rules, and looking forward to lasting growth (Saifulina et al., 2023). Embedding KM throughout
the company and in its culture allows organizations to meet their targets in sustainability and
provide benefits to all, not just to their stockholders. It is important for every organization
interested in sustainable development to use knowledge management. Hence, according to past
studies and findings, we concede our second hypothesis.

According to the next two hypotheses, Absorptive capacity (AC) stands between Knowledge
Management Practices (KMP) and Green Technological Innovation (GTI). Even though KM
practices give organizations knowledge, it is abilities that help absorb knowledge, change it, and
use it to promote eco-friendly solutions (Abdulmuhsin et al., 2024). Socially responsible
organizations are able to identify the benefits of information from the outside, put it together
with what they already have, and use this to produce new, green products, firms possess good
knowledge management systems but struggle to benefit from external knowledge as it may not
suit their own goals (Dabić et al., 2019). Moreover, when a firm’s absorptive capacity is strong,
it can turn its knowledge into helpful strategies and use resources efficiently, minimize its
negative effect on nature, improve communication with stakeholders, and promote ongoing
sustainable development. All in all, having the ability to absorb knowledge makes it possible for
organizations to use knowledge management for sustainability. Establishing this capacity lets
people start with knowledge and then turn it into workable, fresh, and resourceful practices in the

20
company (Pacheco et al., 2018). Research done earlier also pointed out a relation between AC
and KMP, SP, and GTI. For this reason, we take our III and IV hypotheses as true.

Hypothesis V: Because of their awareness of the environment, firms’ KMPs play a major role in
shaping their AC levels. Although KMP plays a basic role in helping organizations learn and
grow, their degree of success relies heavily on how aware and important they consider
environmental factors. To be environmentally aware, people and organizations must accept that
caring for the environment is vital and must behave sustainably at all times. If people understand
environmental issues, organizations are inclined to seek environmental knowledge, involve
others outside the company, and concentrate on environmentally friendly choices. Because
people are more aware of the environment, KMP works better and lets companies take in and
apply information about sustainability and green innovation.
When a company has a strong sense of environmental awareness, knowledge is well taken care
of and used precisely to tackle environmental issues and increase sustainability. The adoption of
best green technologies, following regulations closely, and using circular economy principles is
more common among such businesses (Abbas & Sağsan, 2019). In companies with low
environmental awareness, KM systems can fail to increase their absorption power because
environmental insight is not given much importance (Shah et al., 2023). Various studies indicate
that environmental awareness enhances how KMP impacts the development of an organization’s
absorptive capacity by adjusting the organization’s motivation, attention, and resource use.
Basically, EA improves the organization’s activities by ensuring the company values and relies
on knowledge that is useful for environmental protection.
An increase in environmental awareness strongly improves the connection between Knowledge
Management Practices and Absorptive Capacity (Rustam et al., 2020). It helps keep information
available, shares it, and makes certain that it is both useful for the environment and definitely
employed. If a company wishes to have dynamic skills and support green developments,
everyone must be aware of environmental issues. It takes basic KM processes and turns them
into useful sustainability tools, making sure that people’s ability to learn new information
connects with global environmental concerns. Thus, due to previous research and the results of
the moderator effect, we think our fifth hypothesis is valid.

21
4.1 Conclusion

It is evident from SEM’s findings that all the research hypotheses are accepted as correct. The
model being studied in this work brings new ideas to conceptual frameworks. Firstly, studies so
far have often connected Knowledge Management Practices (KMP) and Sustainable
Performance (SP) either by themselves or with a direct link, and the current work introduces
Green Technological Innovation (GTI) as its own interesting dependent variable, directly
connected to KMP in the area of environmentally oriented innovation. In addition, the authors
introduce Absorptive Capacity (AC) as a variable that explains in more detail the way knowledge
management helps drive green innovation within companies. Very little research has looked at
this mechanism, mainly involving manufacturing SMEs in countries like Pakistan. Also,
Environmental Awareness (EA) was added as a moderator to investigate the situations when
KMP is more likely to result in GTI and SP because of AC. As a result of this effect, we can see
that being environmentally aware plays a bigger part in shaping innovation approaches than is
commonly thought in literature today. Using SEM in AMOS with the help of moderated
mediation analysis helps ensure that relationships between hidden variables are analyzed
properly. This way of organizing things, based on the RBV and Knowledge-Based Theory, is
insightful and not commonly used in the research on Pakistani SMEs when it comes to green
innovation. All of these factors make the study both original and sound in its methods.
In Pakistan, because environmental laws and infrastructure for sustainability are not yet
complete, the results of this research are much more significant. They point out that being
environmentally conscious and having the ability to fully take advantage of knowledge help a
company achieve growth that is friendly to the environment. It helps solve several important
issues that exist in prior research. First, it analyzes the direct effect of Knowledge Management
Practices (KMP) on Green Technological Innovation (GTI), thus helping to explain how
knowledge management within SMEs assists in green innovation. Even though studies explain
the connection between KMP and innovation, the practical link between KMP and innovation in
SMEs in Pakistan, which remains Gap 1, has not been proven.
Second, the study takes into account Absorptive Capacity to explain how KMP works and
Environmental Awareness to explain in what settings this effect happens. As a result, the study

22
highlights the possible conditions that enable KMP to have positive impacts on GTI, answering
the second gap, which has not often been addressed by keeping an eye only on direct effects.
Also, the fact that this study deals with SME manufacturers rather than larger ones responds to
Gap 3, since it means that less attention has been given to GTI uses and outcomes in resource
shortage, developing economies. It sheds light on the reasons behind SMEs’ participation in GTI
in Pakistan, a sector that helps the country save resources and increase prosperity.
To conclude, this study adds value by giving a complete picture of how having internal
knowledge and understanding the environment helps SMEs invent green technology, which can
be applied both in theory and in management. It points out that companies should develop ways
to exchange knowledge and strengthen their ability to use green technologies. Also, by pointing
out how awareness of sustainability issues helps, the study proposes that supporting a green
culture can greatly boost the role of KMPs in encouraging green innovation. With these results, it
will be possible to support SMEs in adopting better environmental policies and practices.

4.2 Research Implications

This study offers valuable contributions to the managerial, academic, and organizational
viewpoints. The present also contributes towards several practical and theoretical implications
for the SME manufacturing sector.

 It highlights the significant relationships between Knowledge Management Practices

(KMP) and both Green Technological Innovation (GTI) and Sustainable Performance
(SP). It demonstrates how effective KMP facilitates the achievement of sustainability
goals and the successful implementation of green technological innovations.

 The study highlights the crucial role of absorptive capacity in enabling organizations to
realize GTI and SP through KMP. Absorptive capacity helps firms obtain and integrate
external knowledge to evolving technology as well as create high-quality products that
are also eco-friendly.

 The findings provide reassurance to managers of small and medium-sized enterprises

that, like larger firms, they too can leverage KM and absorptive capacity to enhance their
green innovation efforts and sustainability outcomes.

23
Theoretically, by addressing the relatively limited literature on KMP, absorptive capacity, GTI,
and SP. By applying a multivariate statistical approach through Structural Equation Modeling
(SEM), it further explores the complex, multidimensional relationships among these constructs
within the context of small, medium-sized manufacturing firms in Pakistan. Moreover, the
research emphasizes the role of green technology innovation and sustainability outcomes as key
results of knowledge and innovation [Link] also strengthens the rationale for KMP
implementation, aiming to improve absorptive capacity. Subsequently, this improves innovation
capabilities and helps meet long-term sustainability goals.

4.3 LIMITATION OF THE STUDY

The present study has some limitations as well

 Data is collected only from the two cities of Rawalpindi and Islamabad, and the analysis is
only on the Manufacturing sector of SMEs. For the future, it is recommended to take the data
from other cities and sectors as well

 Questionnaires used in the analysis have less length, so by increasing the number of
questions the better and significant results will be accomplished.

4.4 FUTURE DIRECTIONS

The study contained some future directions

 Future authors can improve the model by adding independent variables such Green human
resource and increasing complexity to achieve various results.
 The analysis must be conducted on other sectors of the Pakistan pharmaceutical business and
from other management levels, such as low-level management.

24
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