BRIDGING INSTITUTIONAL, CULTURAL, AND ENTREPRENEURIAL FORCES FOR SUSTAINABILITY: AN INTERDISCIPLINARY CASE STUDY OF SRI LANKAN APPAREL AND TEXTILE SMEs

Abstract

Sustainability is becoming increasingly important for small and medium-sized enterprises (SMEs), particularly in developing economies, where firms often operate with limited resources and institutional instability. While much of the existing research focuses on formal compliance and structured systems in large firms, far less is known about how SMEs embed sustainability informally, particularly in response to local crises and socio-cultural dynamics. This study investigates how Sri Lankan manufacturing SMEs adopt sustainability practices through relational and adaptive leadership in the face of institutional demands, economic constraints, and external shocks. Drawing on the Triple Bottom Line (TBL), institutional theory, and resilience leadership theory, the study explores how SME leaders in Sri Lanka respond to sustainability challenges not merely through systems and policies, but through flexible roles, moral commitments, and low-cost innovations. Using a qualitative multiple case study design, the research examines four certified SMEs in the Western Province. Data from interviews, observations, and document analysis were thematically analysed to uncover patterns in leadership behaviour and sustainable outcomes. The findings reveal that sustainability in these SMEs is shaped by role-sharing, ethical decision-making, and frugal innovation. Leadership responses to crises such as providing emotional support, modifying operations, and reusing waste materials emerged as central enablers of sustainability. A surprising insight was that relational trust and informal ethics were more influential than formal CSR programmes, especially in smaller firms. The study introduces a novel framework of "relational resilience," which integrates three interrelated dimensions: (1) emotional support and trust-building that strengthen cohesion during crises, (2) ethical responsibility guiding decisions beyond compliance, and (3) operational flexibility enabling continuity under constraints. This shows how culturally embedded leadership can institutionalise sustainable practices without significant financial investment. This challenges dominant Western assumptions about sustainability drivers and contributes a grounded, Southern perspective. The results also have practical implications for policy and buyer engagement by highlighting the need to recognise and support low-cost, trust-based, and ethically grounded sustainability practices in SMEs operating under resource limitations.