Policy and Institutional Arrangements for Socio-Ecological Value Creation: The Roles of Humane Entrepreneurship and Network Embeddedness in SMEs

Background This study investigates the role and the conditions under which policy and institutional arrangements can shape socio-ecological value creation by SMEs in Kenya, mediated by humane entrepreneurship and moderated by network embeddedness. Methods A mixed-method design was used. The SMEs were sampled from Nairobi, Kenya, using structured questionnaires and key informant interviews; a total of 208 SMEs were sampled. The hypothesized relationships were tested using structural equation modeling (SEM), and mediation was evaluated using bootstrap resampling (5,000 resamples), while moderation was evaluated using interaction-term analysis. Results Policy and institutional arrangements have a significant, positive direct effect on socio-ecological value creation (β = 0.47, p < 0.001). Humane entrepreneurship partially mediates this relationship, transmitting approximately 34% of the total effect (indirect effect = 0.341, 95% CI [0.206, 0.482]). The policy–value relationship is positively moderated by network embeddedness (β = 0.11, p = 0.003), suggesting that SMEs with greater network embeddedness benefit more from supportive institutional frameworks for sustainability. Conclusions For managers, cultivating network embeddedness and adopting humane entrepreneurship practices enhances socio-ecological outcomes. For policymakers, reducing compliance costs, improving institutional coordination, and supporting humane entrepreneurship training increase policy effectiveness. The study extends institutional theory by demonstrating that humane entrepreneurship serves as a transmission mechanism, while network embeddedness functions as a boundary condition that shapes socio-ecological value creation. This study is among the first to empirically examine humane entrepreneurship as a mediator and network embeddedness as a moderator in the relationship between policy and institutional arrangements and socio-ecological value creation within the African SME context.