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As sustainable performance has a central role in the small and medium enterprises (SMEs) performance literature, this study aims to examine the influence of networking capabilities in enhancing sustainable performance through knowledge workers’ productivity and digital innovation. It also examines the sequential mediating role of knowledge workers’ productivity and digital innovation on networking capabilities and SMEs’ sustainable performance relationship.

Data were collected from 308 knowledge workers in the information technology sector and analyzed using the Hayes Process Macro bootstrapping method to test the proposed hypotheses.

Results indicate that knowledge workers’ productivity and digital innovation individually and sequentially mediate the relationship between networking capabilities and SME’s sustainable (economic and environmental) performance, surprisingly, they do not act as a mediator between networking capability and SME’s social performance. SMEs should prioritize investments in the professional development of their knowledge workers through training and skill enhancement programs. This investment equips knowledge workers with the tools to effectively use the knowledge and resources acquired through networking. Thus, knowledge workers may improve performance by using these resources to tackle challenges.

Although this research focused on this specific context, it is prudent to acknowledge that additional factors may also exert influence on sustainable performance within SMEs, factors that managers may consider when making decisions. Methodologically, the cross-sectional design of this research poses a potential limitation, as it does not allow for the complete elimination of endogeneity concerns. However, it is worth noting that scholars have endorsed the use of cross-sectional data in cases where management researchers aim to expand beyond well-documented and longitudinal data sets.

This research offers practical recommendations for SMEs to improve their sustainable performance through networking. SMEs should seek partnerships with complementary knowledge to improve operations and for other performance-oriented benefits.

This study adds significantly to the literature on sustainable SME performance by studying the interdependent effects of networking capabilities. It also represents the individual and sequential mediation mechanism that links networking capabilities to SME success through knowledge worker productivity and digital innovation.

This study examines the effects of formal institutional distance (ID) on the foreign subsidiary global mandates (i.e. the subsidiary value-added role in terms of research and development (R&D), product management and supplying of inputs to the multinational enterprise (MNE) globally). Furthermore, it examines the mediating role of subsidiary autonomy for innovation in the relationship between formal ID and subsidiary global mandates.

Survey evidence from foreign subsidiaries in a remote developed economy, i.e. New Zealand, is obtained. Formal distance is measured based on the worldwide governance indicators (WGI), and the hypotheses are tested using structural equation modeling.

Results show that the direct link between formal ID and subsidiary global mandates is negative. However, autonomy for innovation as a mediator offsets this negative relationship, showing a positive mediating effect between formal ID and subsidiary global mandates.

This study extends research on foreign subsidiaries and their value-added roles in the MNE. We show the differentiated role of formal ID and indicate a contingency showing how the negative influence of formal ID on subsidiary global mandates can be offset. The inconsistent mediation of autonomy for innovation suggests that the concept of ID is multifaceted and complex, in contrast to the popular view that ID has only negative implications. Drawing upon evidence from a remote, developed economy and secondary data sources, we suggest how MNEs may positively use their formal ID with their subsidiaries.