Green Leadership as A Strategic Capability: Driving Green Performance Through Green Innovation and Middle Management Innovativeness

Abstract
This study addresses a paradox in the literature on management accounting and entrepreneurship: the common assumption that management accounting practices in Micro, Small, and Medium Enterprises (MSMEs) directly contribute to improved performance, yet in practice, they do not always result in innovation or consistent business growth. Many MSMEs have adopted various forms of accounting practices, ranging from simple financial record-keeping to digital systems; however, their use is often limited to control functions and historical reporting rather than serving as a basis for strategic decision-making that drives innovation. This study aims to explain how management accounting information is translated by MSME owners into innovation strategies that ultimately influence entrepreneurial performance. This study employs a multiple-case study approach with abductive logic, examining a number of SMEs in Indonesia that vary in the level of formality of their accounting practices—ranging from fully formal systems to informal practices based on the owners’ intuition and experience. The results indicate that management accounting practices do not have a direct impact on entrepreneurial performance but rather operate through a more complex process mechanism. Accounting information first creates visibility into the state of the business; it is then interpreted as business opportunities or problems, which in turn shape innovation strategies, followed by a process of experimentation, and ultimately determine the decision to scale up or discontinue the innovation. This mechanism explains that innovation strategies serve as the primary bridge that transforms accounting information into entrepreneurial outcomes. The main contribution of this study is the development of the concept of hybrid management accounting practices, which integrate formal and informal practices, as well as the accounting-to-innovation translation mechanism, which reconceptualizes mediation not as a statistical relationship but as a dynamic process that explains how accounting information is transformed into innovative actions and entrepreneurial performance.