Abstract-Increased trend of globalization and focus on environment friendly processes and products has make it a biggest challenge for small and medium size enterprises (SME's) to play their active and equal role as compare to large multinational corporations (MNC's). SME's play a significant role in the overall supply chains around the globe and specifically in the economies of the developing countries. To meet the challenges of becoming green SME's in the developing countries need to follow business models based upon open innovation paradigm. This conceptual study reveals that by inbound knowledge sharing SME's can enhance their capabilities to mitigate environmental issues. At the same time by making inter and intra industry clusters and by using unique localized tacit knowledge they could come up with indigenous processes and products which they can offer to other companies including MNC's around the globe.

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