Growing global environmental concerns have made achieving a green competitive advantage (GCA) a critical objective for businesses. GCA signifies a company's commitment to environmental sustainability and its ability to leverage green practices to outperform competitors. This study focuses on two key factors contributing to GCA: Green Market Orientation (GMO) and Green Knowledge Management (GKM). GMO refers to a company's proactive adaptation to environmentally conscious market preferences, aligning with existing and anticipated environmental standards. Effective GKM involves acquiring, integrating, and utilizing environmental knowledge to foster innovation and adapt to the green framework. However, the direct effects of GMO and GKM on GCA are complex. This study explores the mediating role of Green Creativity (GC), defined as an organization's ability to provide innovative and effective environmental solutions, in clarifying how GMO and GKM translate into GCA. A research gap exists in understanding the intricate dynamics between GMO, GKM, GCA, and GC, especially in emerging economies like China where environmental concerns are often balanced with economic growth. This research addresses this gap by empirically investigating these relationships within the context of Chinese green businesses, specifically focusing on small and medium enterprises (SMEs) across diverse sectors.

The study draws upon the Knowledge-Based View (KBV) as its theoretical foundation. KBV emphasizes the strategic importance of knowledge integration and application, especially relevant in the context of environmental sustainability. The literature review examines existing research on the individual relationships between GMO and GCA, GMO and GC, GKM and GCA, and GKM and GC. While prior studies have individually explored the positive influence of GMO and GKM on organizational performance, there's limited research on their combined effect on GCA, particularly through the mediating role of GC. The review highlights inconsistencies in previous findings on the direct relationships between GMO and GCA, and GKM and GCA, indicating the potential for mediating factors. Existing studies suggest a positive correlation between GMO and GC, and GKM and GC, but the strength of these relationships might be contingent on other firm-specific factors. The literature also supports the positive effect of GC on GCA. However, the mediating role of GC in the GMO-GCA and GKM-GCA relationships has not been adequately explored.

This study employs a quantitative research design, utilizing a survey method to collect primary data from 325 environmentally conscious Chinese companies across various sectors (green tech solutions, sustainable transportation, eco-tourism, sustainable forestry, and bio-based industries). The target population comprised SMEs in the private sector, chosen to capture the diversity of green market activities and the unique challenges and opportunities faced by this segment. A structured questionnaire, developed based on existing literature and validated through expert feedback, measured the constructs of GMO, GKM, GC, and GCA using a seven-point Likert scale. Partial Least Squares Structural Equation Modeling (PLS-SEM) was employed to test the hypotheses, chosen for its ability to handle complex relationships and suitability for smaller sample sizes. The PLS-SEM analysis involved both measurement and structural model assessments, using bootstrapping (5000 subsamples) to enhance reliability. Various validity checks (convergent, discriminant) were conducted using metrics like Cronbach's alpha, composite reliability, average variance extracted (AVE), and the heterotrait-monotrait (HTMT) ratio. Analyses for common method bias and multicollinearity were also performed. The data collection spanned from January to May 2023, with a response rate of 63.72%. Descriptive statistics provided demographic details of respondents and firms, and response bias analysis was conducted.

The measurement model demonstrated satisfactory reliability and validity. All constructs (GMO, GKM, GC, and GCA) exhibited Cronbach's alpha values above 0.7 and composite reliability values above 0.7, indicating good internal consistency. Convergent validity was supported by AVE values above 0.5 for all constructs. Discriminant validity was confirmed using both the HTMT ratio and the Fornell-Larcker criterion. The structural model revealed significant positive relationships between GMO and GCA (β = 0.166, p < 0.001), GMO and GC (β = 0.262, p < 0.001), GKM and GCA (β = 0.194, p < 0.001), and GKM and GC (β = 0.552, p < 0.001). Further, GC significantly positively impacted GCA (β = 0.468, p < 0.001). The mediation analysis confirmed the mediating role of GC in the relationship between GMO and GCA (indirect effect = 0.123, p < 0.001) and between GKM and GCA (indirect effect = 0.258, p < 0.001). The R-squared values for GCA and GC were 0.488 and 0.467 respectively, indicating a substantial portion of their variance was explained by the model. Effect sizes were calculated and some showed large effect sizes, suggesting the importance of the relationships.

The findings support all hypotheses, confirming the positive impacts of GMO and GKM on both GC and GCA, and the mediating role of GC in these relationships. The positive effect of GMO on GCA aligns with previous research emphasizing the importance of aligning firm strategies with environmentally conscious consumer preferences. However, the study acknowledges the potential limitations of relying solely on GMO, highlighting the need for GC to translate market insights into tangible competitive advantages. Similarly, the positive effect of GKM on GCA highlights the importance of effective knowledge management in achieving sustainable competitive advantage. However, the study underscores the critical role of GC in transforming knowledge into actionable strategies and innovations. The mediating role of GC demonstrates that fostering green creativity is essential for maximizing the benefits of GMO and GKM in achieving GCA. The results are particularly relevant in the context of China's efforts towards sustainable business practices and eco-innovation, emphasizing the role of SMEs in driving green initiatives.

This study contributes to the literature by empirically examining the interconnectedness of GMO, GKM, GC, and GCA, emphasizing the mediating role of GC. The findings highlight the importance of both market orientation and knowledge management in achieving green competitive advantage, but also stress the critical need for fostering green creativity to translate these factors into tangible results. Managerial implications include the need for companies to prioritize GC, integrate green practices into their strategies, and effectively manage green knowledge. Future research could explore the moderating roles of other variables, extend the study to other countries or regions, and incorporate longitudinal data to capture the dynamic evolution of these relationships over time. Further investigation into the challenges faced by SMEs in implementing GC and exploring the potential for bidirectional effects would also enhance the understanding of this field.

The study's limitations include its focus on Chinese SMEs in specific sectors, which may limit the generalizability of the findings. The cross-sectional nature of the data limits the ability to establish causal relationships definitively, and while PLS-SEM addresses some endogeneity concerns, alternative methods could offer further insights. The voluntary nature of the survey might introduce selection bias, and future research could explore ways to mitigate this using alternative sampling methods. The study also focuses on the positive effects of the relationships explored, ignoring the possibility of negative relationships or feedback loops.