| Summary: | This study examines the impact of knowledge application and digital marketing on innovation and sustainable performance of small and medium-sized enterprises (SMEs) in the manufacturing sector in an emerging market. It also examines the role of innovation as a mediating factor in the relationship between knowledge application and digital marketing on the sustainable performance of manufacturing SMEs. The Partial Least Squares - Structural Equation Modelling (PLS-SEM) approach was used to analyse the data from 428 Malaysian manufacturing SMEs. The results show that knowledge application indirectly affects the sustainable performance of manufacturing SMEs through innovation in partial mediation. In contrast, digital marketing indirectly affects the sustainable performance of manufacturing SMEs through innovation in full mediation. Manufacturing SMEs fulfil their responsibility to sustainably improve the safety and health of their employees in the course of their business while focusing on innovation in new product development and new business creation. They also promote awareness and protection of community entitlements and rights and reduce environmental impacts and risks to the community. This empirical study is unique in that it highlights the significant mediating role of innovation on the sustainable performance of manufacturing SMEs, which was examined in the empirical context of Malaysia's emerging market economy. The finding complements previous research conducted mainly in developed (Western) economies. In terms of practical contributions, this study helps SMEs realise the importance of innovation through frequent experimentation with new ideas to maintain consistent innovation and competitive advantage in a challenging business environment. Directions for future research are also provided. © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2023.
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