From Instability to Sustainability: How Governance Shapes Entrepreneurship, Industrialisation and Carbon Neutrality in Emerging Markets

ABSTRACT The transition from instability to sustainability poses a major challenge for emerging markets pursuing carbon neutrality and the Sustainable Development Goals (SDGs). This study examines how governance quality, proxied by political stability, shapes the entrepreneurship–industrialisation–environment nexus in an emerging economy context. Using annual data from 2006 to 2023, the analysis applies a Nonlinear Autoregressive Distributed Lag (NARDL) model, complemented by FMOLS, DOLS, CCR and quantile regression to ensure robustness, identify mechanisms and capture distributional heterogeneity. The results show that entrepreneurship enhances environmental sustainability (SDG 8.3) through innovation and efficiency gains, while industrialisation undermines it via carbon‐intensive production (SDG 9.4). Political instability weakens the environmental benefits of entrepreneurship and amplifies the adverse effects of industrialisation, confirming governance as both a moderating and transmission mechanism (SDG 16.6). A comparative institutional robustness benchmark using China demonstrates that stronger governance amplifies sustainability gains and mitigates industrial pollution. The significant error‐correction term confirms a stable long‐run equilibrium, while quantile estimates indicate persistence across sustainability levels. Scenario‐based policy predictions highlight that achieving carbon neutrality (SDG 13.2) requires integrating green entrepreneurship, sustainable industrial transformation and governance reforms that ensure policy continuity, accountability and institutional resilience. The study shows that political stability is foundational—not merely complementary—to low‐carbon development in emerging and transition economies.