Sustainability without scale: organizational capabilities and dual transformation in internationalizing SMEs

Abstract

Sustainability is increasingly positioned as a strategic imperative for internationally active small and medium-sized enterprises (SMEs). However, international growth is often assumed to require scale, creating a paradox between expansion and sustainability performance. This study aims to examine the relationship between digital transformation (DT) and sustainable transformation (ST) exploring the role of organizational capabilities as a structural foundation for this dual transformation and to assess how organizational capabilities structurally enable sustainability outcomes independent of firm size among internationalizing SMEs. The study adopts a quantitative research design based on data collected from 148 firms. Structural equation modeling (SEM) was applied using the SEMLj module in Jamovi. Organizational capabilities were operationalized through four categorical dimensions: quality certifications (QC), output, experience and firm size. A leave-one-out sensitivity analysis was conducted to test the robustness of structural paths. The results indicate an excellent model fit (χ2 = 8.75, df = 8, p = 0.364) and confirm that digital maturity is a significant predictor of sustainability performance. The sensitivity analysis identifies QC as the critical anchoring capability, as their exclusion leads to a loss of model convergence. Despite only 38.5% of firms holding formal QC, this dimension emerges as the primary driver enabling the integration of digital strategies with environmental and social responsibility. Importantly, sustainability performance is found to be independent of firm size, while digital infrastructure scales with organizational growth. These findings reveal a paradox of “sustainability without scale,” showing that sustainability performance in internationalizing SMEs is anchored in disciplined organizational capabilities rather than firm size. The findings contribute to capability-based and paradox perspectives by demonstrating that sustainability is strategically accessible to both SMEs and larger firms, offering actionable insights for entrepreneurs, policymakers and practitioners seeking sustainable international growth.