Urban digital infrastructure and ESG performance in Chinese manufacturing SMEs

Abstract

Urban digital infrastructure alters the context in which small and medium enterprises gather their operational data, generate and share knowledge, and communicate with other parties. Extending the resource orchestration theory, we examine if the digital infrastructure in the city affects ESG (environmental, social and governance) performance in the Chinese manufacturing SMEs and identify three potential mediator variables: R&D investment, corporate governance and information transparency. Based on survey data collected from 300 SME managers, we conducted our research using the techniques of partial least squares structural equation modeling (PLS-SEM) and fuzzy-set qualitative comparative analysis (fsQCA). According to the results of PLS-SEM, there exists a statistically significant positive association between urban digital infrastructure and ESG performance, while the three mediators partially mediate this link. FsQCA reveals that high ESG performance is not contingent upon the existence of a unique configuration, but may occur due to different configurations involving innovation inputs, governance capacity, and disclosure context. The paper contributes to the literature on digitalization and sustainable development by establishing the link between city-level digital foundations and SME-level ESG performance. Our findings also demonstrate the need to take into account both infrastructure policies, disclosure regulations, and coordination by management when SMEs seek to leverage digital resources into sustainable development achievements.