Transformational Leadership and Sustainable Development of industrial SMEs in Vietnam: The mediating role of Organizational Adaptive Capacity

Abstract

In emerging economies, transformational leadership is widely recognized as a critical driver of organizational change; however, empirical evidence regarding the mechanisms through which it contributes to ESG-oriented sustainable development remains limited. This study examines the impact of transformational leadership on organizational adaptive capacity toward ESG-oriented sustainable development among industrial small and medium-sized enterprises (SMEs) in Ninh Binh province, Vietnam. Drawing upon Dynamic capabilities Theory, the study proposes a research framework in which organizational adaptive capacity acts as a mediating mechanism linking transformational leadership and sustainable development outcomes measured through environmental, social, and governance (ESG) dimensions. Primary data were collected from middle- and senior-level managers of industrial SMEs using a stratified non-probability sampling approach. A total of 366 questionnaires were distributed, of which 360 valid responses were retained for analysis. The proposed model was analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) through SmartPLS 3.0. The findings reveal that transformational leadership has a significant positive influence on organizational adaptive capacity. However, organizational adaptive capacity does not significantly affect environmental, social, and governance outcomes, and its mediating role in the relationship between transformational leadership and ESG-oriented sustainable development is not supported. These findings suggest that adaptive capability alone may be insufficient to transform leadership practices into sustainability outcomes in industrial SMEs. This study contributes to the existing literature by extending Dynamic capabilities theory within the context of SMEs in emerging economies and provides managerial implications for enhancing sustainable competitiveness.

Keywords: Transformational leadership; Sustainable development; Organizational adaptive capacity; industrial SMEs; Vietnam

DOI: 10.7176/EJBM/18-6-07

Publication date: June 30^th 2026