Clusters, Global Value Chains, and the Business Environment: A Hierarchy of Institutional Influence on Small and Medium Enterprise Sustainability

ABSTRACT Small and medium enterprises (SMEs) dominate the global business landscape, making their sustainability efforts crucial. Yet little is known about how institutional contexts shape these practices. Using Institutional Theory, we compare the influence of cluster membership (CM), global value chain (GVC) membership, and the organizational business environment (OBE) on SMEs' implementation of sustainability practices. Data from 12,326 SME decision‐makers in the European Union—collected via computer‐assisted telephone interviewing (CATI)—were extracted from the Eurostat Flash Eurobarometer 486. We use ordinal logistic regression to model SME sustainability practices as a function of CM, GVC membership, and the OBE, and dominance analysis to compare their relative influence. Findings show a hierarchy of contextual influence: CM has the strongest association, followed by GVC membership, while that of the OBE is relatively weak. These insights support efforts to expand SME cluster development and GVC integration to accelerate sustainable transformation and meet EU sustainability objectives.