How Does ESG Decoupling affect the Organizational Change Capabilities of Korean SMEs?

Based on the performance feedback perspective of the behavioral theory of the firm (BTOF), this study examines the impact of ESG decoupling on the organizational change capabilities of Korean SMEs. The results of the empirical analysis of 127 Korean SMEs are as follows. Environmental decoupling, social decoupling, and governance decoupling of SMEs all have significant positive effects on the organizational change capability of SMEs. In other words, the empirical findings of this study suggest that SMEs with limited resources tend to perceive the gap between their ESG goals and their actual behavior as a problem and improve their organizational change capabilities to gain legitimacy from their stakeholders through problematic searches. This study has significant academic implications in that it extends the analysis of organizational change capabilities to SMEs and the concept of ESG decoupling and identifies the link between ESG decoupling and organizational change capabilities of SMEs from the performance feedback perspective of the behavioral theory of the firm. In addition, since SMEs tend to perceive the gap between their goals and actual activities in each of E, S, and G (i.e., ESG decoupling) as a problematic situation and improve their organizational change capabilities to gain legitimacy from stakeholders and respond to environmental changes quickly and effectively, the empirical findings of this study can provide practical implications that SMEs can develop organizational change capabilities if they set high ESG goals and strive to achieve them.