Driving sustainable business performance in Indonesian traditional ethnic fashion: the roles of sustainability-oriented innovation, organisational readiness and firm size

Purpose This study aims to examine how sustainability supply chain transparency, technological innovation and sustainability marketing drive sustainability-oriented innovation (SOI) and green organisational readiness (GOR), and how these factors contribute to sustainable business performance in Indonesia’s traditional ethnic fashion industry. The study also investigates the moderating role of firm size in the innovation–performance relationship. Design/methodology/approach Using a quantitative cross-sectional design, data were collected from 500 owners and managers of traditional ethnic fashion businesses, including batik, weaving and songket enterprises. The structural relationships were analysed using partial least squares structural equation modelling to assess direct effects and moderation. Findings The results indicate that sustainability supply chain transparency, technological innovation and sustainability marketing significantly enhance SOI and GOR. SOI emerges as a key driver of sustainable business performance, while firm size positively moderates this relationship, indicating stronger innovation–performance effects in larger firms. In contrast, GOR does not exhibit a direct effect on performance. Research limitations/implications This study extends the resource-based view by clarifying how SOI and organisational readiness shape performance outcomes under different firm size conditions within culture-based creative industries. The findings offer practical insights for policymakers and entrepreneurs seeking to strengthen innovation capabilities, digital adoption and sustainability strategies in traditional fashion sectors. Originality/value This study provides empirical evidence from Indonesia’s traditional ethnic fashion industry by highlighting the differentiated roles of innovation, organisational readiness and firm size in driving sustainable business performance.