The mediating role of digital technology in the relationship between green innovation and business performance: evidence from Indonesia’s automotive industry

Purpose This study aims to examine the impact of green innovation (GI) on business performance (BP) and investigate the mediating role of digital technology (DT) in this relationship within Indonesia’s automotive industry. Design/methodology/approach This study uses a quantitative method, collecting data through a survey of sales managers, finance managers and workshop managers at automotive dealerships of all brands across Indonesia. A total of 269 respondents participated in this study, and the data were analyzed using Structural Equation Modeling-Partial Least Squares. Findings This study demonstrates that GI has a significant positive effect on BP, and that DT serves as a significant mediator in this relationship Research limitations/implications The findings advance the understanding of how digital technology mediates the relationship between green innovation and business performance, offering new insights to strategic management and innovation literature. Practical implications The results provide guidance for automotive industry practitioners and policymakers in Indonesia to promote green innovation supported by digital transformation, thereby enhancing sustainable business performance. Originality/value This study presents a novel model by integrating digital technology as a mediator between green innovation and business performance. Theoretically, it contributes to the literature by applying the Technology–Organization–Environment Framework to explain digital technology adoption and enriching the Resource-Based View theory by emphasizing its role as an internal capability for competitive advantage. Practically, it provides insights for policymakers to promote green innovation and guides automotive firms in leveraging digital technology for sustainability and enhanced performance.