Innovation and Sustainability: Analyzing <scp>GII</scp> ‐ <scp>ESG</scp> Relationships Across 131 Countries

ABSTRACT This study explores the relationship between Global Innovation Index (GII) pillars and Environmental, Social, and Governance (ESG) performance across 131 countries, integrating Institutional Theory and Resource‐Based View. Employing correlation, regression, mediation analysis, and clustering techniques, it examines how institutional quality, human capital, and digital infrastructure drive ESG outcomes, with political stability as a key mediator. Findings confirm that institutional quality strongly predicts governance performance, human capital associates with social outcomes, and digital infrastructure supports both social and environmental advancements, with stability amplifying these effects. Clustering identifies four distinct country groups: innovation‐driven, sustainability‐focused, and balanced profiles. The results underscore the need for institutional reforms, digital infrastructure investments, and innovation‐driven strategies to align innovation with sustainability, contributing to Sustainable Development Goals related to innovation, climate action, and strong institutions. Tailored policy and multinational enterprise strategies are proposed to bridge innovation–sustainability gaps, fostering global competitiveness.