Tuesday, May 19, 2026

 

Green innovation and AI adoption drive sustainable advantage for construction SMEs in emerging economies



New study finds financial resources, institutional support, and AI-enabled innovation are critical for sustainable competitiveness in Pakistan’s construction sector




Bentham Science Publishers





Construction SMEs in emerging economies face mounting pressure to balance sustainability goals with competitiveness amid climate change and rapid digital transformation. A new study examining Pakistan’s construction sector found that green product innovation, AI adoption, and institutional support play a critical role in helping firms achieve sustainable competitive advantage.

Researchers surveyed 228 construction SMEs and used Partial Least Squares Structural Equation Modeling (PLS-SEM) to investigate how financial resources influence sustainability performance through green innovation strategies. The study found that green product innovation fully mediates the relationship between financial resources and sustainable competitive advantage, meaning firms gain stronger long-term benefits when financial investments are directed toward eco-friendly innovation.

The findings also revealed that AI adoption significantly strengthens the positive impact of green innovation on business performance. AI technologies such as predictive analytics, digital twins, generative design, and AI-driven logistics optimization help firms improve operational efficiency, reduce waste, and enhance sustainability outcomes.

Institutional support, including regulatory clarity, sustainability incentives, and access to green finance, was also found to strengthen the relationship between financial resources and green innovation adoption. Researchers noted that clear and consistent environmental policies are more influential than financial incentives alone in encouraging sustainable transformation among SMEs.

The study highlights that sustainable competitive advantage in construction SMEs does not emerge from isolated capabilities but from the coordinated interaction of financial resources, environmental innovation, digital transformation, and supportive institutional frameworks. Researchers argue that policymakers and industry leaders should prioritize green financing mechanisms, AI capability development, and long-term sustainability policies to accelerate the transition toward environmentally responsible construction practices in emerging economies.

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