Institutional Environmental Pressures, Digital Transformation, and Green Innovation Quality: Evidence From Ghanaian Manufacturing Firms

ABSTRACT Empirical evidence on how firms in emerging markets transform institutional pressures into high‐quality green innovation remains limited. This study examines how institutional pressures affect green innovation quality by considering the dual roles of digital transformation and green absorptive capacity. Grounded in institutional, dynamic capability, and resource‐based theories, this study developed and tested a moderated–mediation model using data from 486 Ghanaian manufacturing firms analyzed through PLS‐SEM. The findings reveal that institutional pressures significantly enhance green innovation quality both directly and indirectly via digital transformation and green absorptive capacity. Digital transformation functions as both a mediating and moderating mechanism, strengthening the influence of institutional pressures, whereas green absorptive capacity serves as a key knowledge‐based enabler that converts fragmented institutional signals into substantive technological advancement. The study contributes to sustainability management literature by demonstrating how organizational capabilities transform compliance‐oriented pressures into strategic green innovation outcomes.