Sustainability-driven determinants of SMEs’ effectiveness: Evidence from the green transition in the Western Balkans

Small and medium-sized enterprises (SMEs) play a central role in the Western Balkans as the region advances its green transition and alignment with European Union (EU) sustainability frameworks. Under increasing environmental and regulatory pressures, SMEs must strengthen managerial capabilities, strategic planning, and technological investment to remain competitive. This study examines the sustainability-driven determinants of SME effectiveness by analyzing managerial education, prior experience, business planning, research and development (R&D) investment, and innovation activities. Using cross-sectional survey data from 336 SMEs in Kosovo, the study applies binary logistic regression to estimate the likelihood of sustainability-oriented effectiveness under 2025 green transition conditions. The results show that managerial education, experience, structured planning, and R&D investment significantly increase the probability of improved performance, while product and service innovation remain statistically insignificant. These findings suggest that in transition economies, innovation alone may not generate sustainability outcomes without adequate institutional and financial support. Unlike prior studies focusing primarily on financial performance, this research reframes SME effectiveness through a sustainability-readiness perspective. The study contributes empirical evidence to the limited literature on SME sustainability in the Western Balkans and highlights the importance of strengthening green finance instruments and governance mechanisms to support a successful green transition.