INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue XI November 2025
Page 2721
www.rsisinternational.org
Strategic Thinking as a Catalyst: Linking Green Competency to Green
Innovation in the Malaysian Manufacturing Sector
Azmi Bin Mohamed
*
, Mohd Tajuzzaman Hassanor, Abdul Mutalib Mohamed Azim
Faculty of Technology and Applied Sciences, Open University Malaysia
DOI: https://dx.doi.org/10.47772/IJRISS.2025.91100215
Received: 10 November 2025; Accepted: 20 November 2025; Published: 05 December 2025
ABSTRACT
This study examines the mechanisms through which employee green competency (GC) translates into green
innovation (GI) within the Malaysian manufacturing sector. It specifically investigates the dual role of strategic
thinking (ST) as a mediator and moderator in the relationship between GC and GI. A quantitative, cross-
sectional survey was conducted among 300-350 employees in Malaysian manufacturing firms with ISO 14001
or other green certifications. The collected data were analysed using Partial Least Squares Structural Equation
Modeling (PLS-SEM) to test the proposed hypotheses concerning the direct, indirect, and conditional effects
among the variables. The results confirm that Green Competency positively influences both Green Innovation
(β = 0.409) and Strategic Thinking (β = 0.319). Strategic Thinking, in turn, is a strong predictor of Green
Innovation (β = 0.431). Crucially, the findings support the dual role of Strategic Thinking. It acts as a
significant mediator, with an indirect effect of 0.137, suggesting it is a key pathway through which GC
influences GI. Furthermore, Strategic Thinking positively moderates the GC-GI relationship (β = 0.227),
indicating that the effect of green competencies on innovation is amplified when employees possess higher
levels of strategic thinking. For manufacturing firms aiming to enhance sustainability, this research
underscores the need to cultivate not only green skills but also strategic thinking capabilities among their
employees. Fostering a workforce that can anticipate long-term environmental trends and align sustainability
goals with innovative actions is critical for maximizing the return on investment in green competencies. This
study provides a nuanced understanding of the GC-GI link by being one of the first to empirically validate the
dual role of strategic thinking as both a cognitive bridge (mediator) and an amplifier (moderator). It offers a
comprehensive model grounded in the Resource-Based View and Dynamic Capabilities Theory, providing
actionable insights for the Malaysian manufacturing sector.
Keywords: Green Competency, Green Innovation, Strategic Thinking, Malaysian Manufacturing, Dynamic
Capabilities Theory
INTRODUCTION
Amid mounting global environmental pressures, manufacturing firms are increasingly compelled to integrate
sustainability into their core strategies, with green innovation (GI) emerging as a critical pathway to achieving
this (Ashraf et al., 2024). Green innovation refers to the development of new products, processes, and
organizational practices that reduce environmental impact and enhance long-term sustainability. The
foundation for such innovation lies within a firm's human capital, specifically the green competencies (GC) of
its employees, the knowledge, skills, and attitudes necessary for environmentally responsible performance
(Yahya et al., 2022). While a direct link between GC and GI is established in the literature, the cognitive
processes that convert employee potential into tangible innovation remain underexplored.
This study addresses this gap by proposing that strategic thinking (ST), the ability to anticipate, analyse, and
act on complex environmental dynamics—is a critical catalyst in this relationship. This study seeks to achieve
several interconnected objectives. Primarily, it aims to confirm the direct, positive influence of employee
Green Competency on Green Innovation within the Malaysian manufacturing sector. Building on this, the
study further investigates the role of Strategic Thinking by first establishing its relationships with both Green
Competency and Green Innovation. The core of the research, however, is to explore the nuanced, dual role of
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue XI November 2025
Page 2722
www.rsisinternational.org
Strategic Thinking. It will be analysed first as a mediator that explains how Green Competency is transformed
into Green Innovation, and second as a moderator that clarifies when the relationship between Green
Competency and Green Innovation is at its strongest.
The research is grounded in the Resource-Based View (RBV), which posits that unique internal resources like
GC are a source of competitive advantage (Hart, 1995), and Dynamic Capabilities Theory, which argues that
firms need higher-order capabilities to reconfigure resources in response to changing environments (Teece et
al., 1997). We conceptualize ST as a micro-level dynamic capability that enables employees to leverage their
GC effectively. This study contributes a more nuanced model of green innovation, providing empirically
validated, actionable insights for the Malaysian manufacturing sector, a vital economic pillar facing significant
sustainability imperatives (Imran et al., 2024).
LITERATURE REVIEW
Green Competency and Green Innovation
Green competency encompasses the collection of knowledge, technical skills, behaviors, and attitudes that
enable employees to contribute to environmental sustainability. Prior research consistently demonstrates that
firms with a highly competent workforce in green domains are better positioned to innovate sustainably. Ashraf
et al. (2024) and Yahya et al. (2022) found that GC is a direct and significant driver of GI, as competent
employees are the primary source of sustainable solutions. Furthermore, green competencies enhance an
organization's absorptive capacity, enabling it to better recognize and utilize external environmental knowledge
for innovation (Qu et al., 2022). This leads to our first hypothesis:
H1: Green Competency positively influences Green Innovation.
Green Competency, Strategic Thinking, and Green Innovation
Strategic thinking is a cognitive process involving foresight, systems thinking, and the alignment of long-term
goals with current actions (Goldman & Scott, 2016). In a sustainability context, it enables employees to
translate broad environmental goals into concrete innovative practices. Research has shown that leadership
which fosters green thinking—a form of strategic cognition—leads to higher green innovation (Begum et al.,
2022). Strategic thinking empowers organizations to convert sustainability awareness into tangible outcomes
by improving foresight, planning, and adaptability (Gorondutse et al., 2024).
H2: Strategic Thinking positively influences Green Innovation.
Furthermore, green competencies are foundational to developing strategic thinking. Environmental knowledge
provides the necessary context for long-term planning and scenario analysis. Wiek et al. (2011) identified
sustainability competencies like systems-thinking and anticipatory thinking as core to strategic action.
Therefore, GC provides the analytical raw material necessary for the sustainability-driven decision-making that
defines strategic thinking.
H3: Green Competency positively influences Strategic Thinking.
The Mediating Role of Strategic Thinking
While GC provides the necessary "what" (knowledge and skills), ST provides the "how" (the cognitive bridge
connecting knowledge to innovative outcomes). Employees with GC can identify environmental problems, but
it is through ST that they connect these problems to market opportunities and devise long-term solutions.
Without this forward-looking cognitive process, the potential of green competencies may remain unrealized.
Gorondutse et al. (2024) identified ST as a key mediator between green capabilities and sustainability
outcomes. This aligns with Dynamic Capabilities Theory, where ST is the capability that reconfigures internal
resources (GC) to generate innovation.
H4: Strategic Thinking mediates the relationship between Green Competency and Green Innovation.
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue XI November 2025
Page 2723
www.rsisinternational.org
The Moderating Role of Strategic Thinking
Beyond its mediating role, strategic thinking can also amplify the impact of green competency. The
effectiveness of an employee's green knowledge is contingent on their ability to apply it strategically. When
employees exhibit high levels of ST, they are better able to leverage their competencies to formulate effective
innovation strategies, thereby strengthening the GC–GI link. This aligns with Contingency Theory (Fiedler,
1964), which suggests that the impact of a resource depends on contextual factors, in this case, the cognitive
capacity for strategic thought. When ST is low, the potential of green competencies may be underutilized,
leading to weaker innovation outcomes.
H5: Strategic Thinking moderates the relationship between Green Competency and Green Innovation, such
that the relationship is stronger at higher levels of Strategic Thinking.
METHODOLOGY
Research Design
A quantitative, cross-sectional survey design was employed. The target population was employees of
manufacturing companies in Malaysia holding ISO 14001 or other recognized green certifications, ensuring a
baseline level of environmental engagement. A stratified random sampling method was used to ensure
representation across different manufacturing sub-sectors. An estimated sample of 300–350 managers and
employees were targeted to ensure sufficient statistical power for structural equation modeling. Participants
were assured of anonymity and confidentiality to encourage candid responses.
Measures
A structured questionnaire was developed using validated scales from prior research, with all items measured
on a Likert-type scale.
Green Competency (GC) was measured with five items assessing employees' knowledge, skills, and
behaviors related to environmental sustainability.
Strategic Thinking (ST) was measured with three items assessing an individual’s capacity for foresight,
systems thinking, and long-term planning.
Green Innovation (GI) was measured with three items evaluating the extent of eco-product and eco-
process innovation within the respondent's scope of work.
Result and data analysis
Measurement Model
Partial Least Squares Structural Equation Modeling (PLS-SEM) was used via SmartPLS software. The
measurement model was assessed for reliability and validity. All item factor loadings exceeded the
recommended 0.70 threshold, ranging from 0.767 to 0.933. As shown in Table 1, the Cronbach’s alpha,
composite reliability, and Average Variance Extracted (AVE) values for all constructs surpassed the required
thresholds of 0.70 for reliability and 0.50 for convergent validity, confirming the quality of the measures.
Table 1: Reliability and Convergent Validity
Cronbach's
alpha
Composite
reliability (rho_a)
Composite
reliability (rho_c)
Average variance
extracted (AVE)
Green Competency
0.948
0.949
0.960
0.827
Green Innovation
0.920
0.921
0.949
0.861
Strategic Thinking
0.729
0.734
0.803
0.577
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue XI November 2025
Page 2724
www.rsisinternational.org
Discriminant validity was established using the Heterotrait-Monotrait (HTMT) ratio. All HTMT values were
below the conservative threshold of 0.85, confirming that the constructs were distinct from one another.
Structural Model and Hypothesis Testing
The structural model was assessed to test the proposed hypotheses. The results are summarized in Table 2. The
direct relationships proposed in H1, H2, and H3 were all significant and in the expected direction. Green
Competency had a significant positive effect on Green Innovation (β = .409, p < .001) and Strategic Thinking
(β = .319, p < .001). Strategic Thinking also had a significant positive effect on Green Innovation (β = .431, p
< .001).
To test for mediation (H4), the indirect effect was examined. The analysis revealed a significant indirect effect
of Green Competency on Green Innovation via Strategic Thinking (β = .137, p < .001), supporting H4.
To test for moderation (H5), the interaction term (ST × GC) was added to the model. The interaction was
significant and positive (β = .227, p < .001), supporting H5. As illustrated in Figure 1, the positive relationship
between Green Competency and Green Innovation is strongest when Strategic Thinking is high.
Table 2: Results of Hypothesis Testing
Path
Path Coefficient (β)
T-Value
P-Value
Result
Green Competency → Green
Innovation
0.409
8.007
0.000
Supported
Strategic Thinking → Green
Innovation
0.431
10.179
0.000
Supported
Green Competency →
Strategic Thinking
0.319
5.331
0.000
Supported
GC → ST → GI (Mediation)
0.137
4.385
0.000
Supported
ST × GC → GI (Moderation)
0.227
5.749
0.000
Supported
Figure 1: Moderating Effect of Strategic Thinking on the GC-GI Relationship
Note. The plot illustrates that the positive relationship between Green Competency and Green Innovation is
steeper (stronger) at high levels of Strategic Thinking (+1 SD) compared to mean or low levels (-1 SD).
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue XI November 2025
Page 2725
www.rsisinternational.org
DISCUSSION
Measurement Model
This study’s findings provide robust empirical support for the critical role of strategic thinking as a catalyst in
transforming green competencies into green innovations. The support for H1, H2, and H3 confirms the
foundational direct relationships, showing that green-competent employees are more innovative, and strategic
thinking is a key ingredient in that process.
The confirmation of H4 (mediation) reveals one of the primary pathways through which GC influences GI.
Strategic thinking is the cognitive mechanism that translates passive knowledge into forward-looking,
actionable strategies. It allows employees to connect their specific skills to the organization's broader
sustainability goals. Most critically, the support for H5 (moderation) highlights that the value derived from
green competencies is not fixed; it is amplified by strategic thinking. Employees with high GC and high ST are
best equipped to drive transformative innovation, whereas those with high GC but low ST may see their
potential underutilized.
Theoretical Implications
This research contributes to the RBV by demonstrating that the value of a resource (GC) is contingent on its
interaction with other capabilities (Teece, 2007). Our main contribution is to Dynamic Capabilities Theory,
where we position strategic thinking as a micro-level dynamic capability. It enables employees to sense
opportunities (anticipating environmental trends), seize them (formulating innovation strategies), and
reconfigure the firm’s resource base (applying green skills effectively) to achieve sustainable competitive
advantage.
Managerial Implications
The findings offer clear guidance for managers in the Malaysian manufacturing sector. First, organizations
should pursue dual competency development, investing in training that builds not only technical green skills
but also strategic thinking capacities like systems thinking and scenario planning. Second, managers should
foster a culture that encourages employees to connect their daily work to long-term sustainability goals.
Finally, recruitment and performance management systems should be aligned to identify, hire, and reward
individuals who exhibit both environmental awareness and strategic foresight.
CONCLUSION
This study successfully demonstrated that strategic thinking is a powerful catalyst that both mediates and
moderates the relationship between employee green competency and green innovation. For organizations
aiming to lead in sustainability, fostering a workforce that is not only skilled but also strategic is paramount.
However, the study has limitations. Its cross-sectional design limits causal inference, and its reliance on self-
report data may introduce common method bias. The focus on the Malaysian manufacturing sector may limit
generalizability. Future research could address these issues through longitudinal designs to track competency
development over time. Qualitative case studies could provide richer insights into the cognitive processes
involved, while comparative studies across different industries and national cultures could test the broader
applicability of the model.
REFERENCES
1. Ahmed, M., Khan, M. A., Asif, M., & El-Amir, A. (2022). Achieving green innovation and sustainable
development goals through green knowledge management. Journal of Enterprise Information
Management, 35(6), 1656–1681. https://doi.org/10.1108/JEIM-09-2021-0382
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue XI November 2025
Page 2726
www.rsisinternational.org
2. Ashraf, S. F., Li, C., Wattoo, M. U., Murad, M., & Mahmood, B. (2024). Green horizons: Unleashing
green innovation through green business strategies and competencies. Business Strategy and the
Environment, 33(5), 4233-4251.
3. Bani-Hani, J. (2021). The moderating influence of managers strategic thinking on the effect of talent
management on organization core competency. Management Science Letters, 11(1), 213-222.
4. Begum, S., Ashfaq, M., Xia, E., & Awan, U. (2022). Does green transformational leadership lead to
green innovation? The role of green thinking and creative process engagement. Business Strategy and the
Environment, 31(1), 580-597.
5. Fiedler, F. E. (1964). A contingency model of leadership effectiveness. In L. Berkowitz (Ed.), Advances
in experimental social psychology (Vol. 1, pp. 149–190). Academic Press.
6. Goldman, E., & Scott, A. R. (2016). Competency models for assessing strategic thinking. Journal of
Strategy and Management, 9(3), 258-280.
7. Gorondutse, A. H., Alqershi, N., Ibrahim, A. S., Abdussalam, I. I., & Salisu, I. (2024). Linking Green
Innovation and Business Sustainability: The Mediating Role of Strategic Thinking. Business
Perspectives and Research, 22785337241255835.
8. Hart, S. L. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20(4),
986–1014. https://doi.org/10.2307/258963
9. Imran, M., Rauf, A., & Ahmad, N. (2024). Sustainable practices in Malaysian Manufacturing: The
Influence of CSR, Transformational Leadership, and Green Organizational Culture on Environmental
Performance. Economic Analysis and Policy, 82, 803–818. https://doi.org/10.1016/j.eap.2024.03.013
10. Qu, X., Khan, A., Yahya, S., Zafar, A. U., & Shahzad, M. (2022). Green core competencies to prompt
green absorptive capacity and bolster green innovation: the moderating role of organization’s green
culture. Journal of Environmental Planning and Management, 65(3), 536-561.
11. Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable)
enterprise performance. Strategic Management Journal, 28(13), 1319–1350.
https://doi.org/10.1002/smj.640
12. Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic
Management Journal, 18(7), 509–533.
13. Wiek, A., Withycombe, L., & Redman, C. L. (2011). Key competencies in sustainability: a reference
framework for academic program development. Sustainability science, 6(2), 203-218.
14. Yahya, S., Khan, A., Farooq, M., & Irfan, M. (2022). Integrating green business strategies and green
competencies to enhance green innovation: Evidence from manufacturing firms of Pakistan.
Environmental Science and Pollution Research, 29(26), 39500-39514.