Harnessing digital transformation and ESG performance for innovation, competitiveness and financial success: insights from European multinationals

Purpose This study examines how digital transformation amplifies the effect of environmental, social and governance (ESG) performance on innovation, market competitiveness and financial performance in European multinational firms operating in Ghana. Design/methodology/approach Relying on the resource-based view and dynamic capability theory, we designed a model to assess a serial mediation to explain how ESG performance, innovation and market competitiveness can connect digital transformation to enhance financial performance. Data were collected from 340 senior and middle-level managers from European multinational firms in Ghana and employed structural equation modeling and the Sobel test for data analysis. Findings The study finds that digital transformation significantly enhances ESG performance. ESG performance positively influences innovation, market competitiveness and financial performance. Additionally, ESG performance has indirect positive effects on financial performance through innovation and market competitiveness, highlighting the importance of digital transformation in driving these outcomes. Practical implications The findings provide insights for managers, emphasizing the need to integrate digital transformation and ESG strategies to foster innovation and competitiveness, especially in emerging economies. Originality/value This research contributes to the growing literature on digital transformation and ESG by demonstrating their combined impact on business outcomes in an emerging market context. It offers a new framework for understanding how sustainability-driven strategies, enabled by digital transformation, can generate both economic and societal value.