Navigating <scp>ESG</scp> Performance Through Management Ability, Innovation, and Stakeholder Pressure. A Novel Moderation Analysis

ABSTRACT Can firms operating in institutionally fragile environments successfully advance Environmental, Social, and Governance (ESG) goals? This question is particularly urgent in the context of the energy sector of Latin America and the Caribbean (LAC), a region marked by regulatory inconsistencies, sustainability pressures, and growing stakeholder scrutiny. This study addresses the research questions: (1) Does management ability influence ESG performance? (2) To what extent do technological innovation and stakeholder pressure moderate the relationship between management ability and ESG performance? Grounded in the resource‐based view, upper‐echelon, and legitimacy theories, the study analyzed panel data from 283 energy firms across 18 LAC countries for the period 2010–2022. Methodologically, it employed common correlated effects mean group and pooled mean group estimators, alongside dynamic GMM and IV‐2SLS techniques to account for potential endogeneity and ensure causal robustness. The findings revealed that management ability has a strong positive impact on ESG performance, and this effect is significantly amplified by technological innovation and stakeholder pressure. Academically, the study advances theoretical discourse and literature by integrating multiple theoretical frameworks to explain ESG performance in emerging markets, demonstrating that the synergy of internal leadership and contextual forces drives sustainability. Practically, the results offer actionable guidance for firms and policymakers. For managers, the findings demonstrated that cultivating ESG‐oriented leadership skills, strategically aligning technological innovation with sustainability goals, and proactively engaging with stakeholders enhance corporate legitimacy and competitive advantage. Policy‐wise, the results underscore the importance of designing regulatory frameworks, incentive mechanisms, and innovation‐support policies that reinforce corporate sustainability practices.