From Capital to Capability: The Roles of Governance, Finance, and Technology in Driving Sustainable Production in Developing Economies

ABSTRACT Developing nations face the formidable challenge of balancing rapid economic growth with environmental sustainability amid industrialization, resource constraints, and governance shortfalls. This study investigates the determinants of sustainable production (SP) in 24 developing economies from 2000 to 2023, examining green finance (GF), institutional quality (IQ), energy productivity (EP), education (EDU), digital transformation (DT), population growth (PG), and export diversification (DE). Employing a two‐step system Generalized Method of Moments (GMM) estimator, complemented with Fixed Effects (FE) and panel Granger‐causality analyses, the methodology addresses endogeneity, dynamic persistence, and cross‐country heterogeneity. The findings indicate that an increased EP, GF, DT, and EDU have a strong positive effect on SP, whereas currently, it seems that DE limits it in most situations. Notably, the interaction term (PG × IQ) is positive and significant, and it signifies that a stronger governance system can turn the demographic pressures into the assets of sustainability. The Granger causality shows that EP, GF, EDU, IQ, and PG cause SP, and there are two‐way interactions between SP and GF, DT, and DE. This work contributes by integrating digital transformation and institutional moderation into the SP framework, offering a multidimensional view of financial, technological, and demographic interactions in emerging economies. The results highlight real‐world energy conservation policies, scaling green finance, improving the pace of digitization adoption, greening export policies, and strengthening institution quality in order to enable the developing nations to work towards staying in line with environmental objectives and improve faster towards SDGs 7, 9, 11, and 13.