Green Innovation, Environmental Management, and Digital Capability as Drivers of Business Performance: Mediating Role of Sustainable Competitive Advantage

Abstract

As global markets shift toward sustainability and digitalization, firms must realign their strategies to remain competitive. This study investigates the impact of Green Innovation, Environmental Management Practices, and Digital Capability on Business Performance, with Sustainable Competitive Advantage serving as a mediating variable. Drawing on the Resource-Based View (RBV) and Dynamic Capability Theory, the study argued that firms capable of integrating green initiatives with digital competencies and structured environmental practices can achieve a sustained competitive edge that translates into superior performance outcomes. Data were collected through a structured questionnaire from 345 managerial-level respondents in manufacturing and service firms across Pakistan. The proposed model was tested using Partial Least Squares Structural Equation Modeling (PLS-SEM). Results demonstrated that all three independent variables significantly contribute to sustainable competitive advantage, which in turn positively affects business performance. Moreover, the mediation analysis confirmed that sustainable competitive advantage partially mediates these relationships, underscoring its role as a strategic enabler. The findings offer both theoretical and practical insights for businesses aiming to create sustainable value through green and digital transformations.