Role of Artificial Intelligence (AI) Adoption and Digital Transformation in Enhancing Sustainable Business Performance: The Mediating Effect of Green Product Innovation

Purpose: adoption and digital transformation on sustainable firm performance, with a specific focus on the mediating role of green innovation practices. It aims to uncover how advanced digital technologies and AI can drive sustainability through innovation in manufacturing firms. Design/Methodology/Approach: The research employs a quantitative, questionnaire-based survey conducted among 311 manufacturing firms. Structural equation modeling (SEM) was utilized to analyze the relationships between AI adoption, digital transformation, green innovation practices, and sustainable firm performance. Findings: The findings reveal that both AI adoption and digital transformation significantly enhance sustainable firm performance. Green innovation practices partially mediate this relationship by leveraging digital capabilities to develop environmentally friendly products and processes. Originality/Value: This research contributes to the growing literature on sustainability and digital innovation by introducing green innovation practices as a mediator between AI, digital transformation, and sustainable firm performance. It provides a novel perspective on how digital advancements can enable sustainability in the manufacturing sector.