Digital Economy and Sustainable Development Challenges in the <scp>GCC</scp> Countries: Do Innovations Drive Sustainable Digital Transformation?

ABSTRACT This research investigates the complex interplay between the digital economy and sustainable development in the Gulf Cooperation Council (GCC) countries. It analyzes the interactions among contemporary technological forces, including green innovation technologies, environmental innovations, and technological innovation, and their impact on the digital economy in shaping sustainable outcomes in a region characterized by its dependence on hydrocarbon resources and ambitions for economic diversification. The study adopts sophisticated econometric methodologies, particularly the Cross‐Sectional Autoregressive Distributed Lag (CS‐ARDL) model, to estimate annual panel data for the period 2000–2022. The principal findings are that while green, environmental, and technological innovation significantly advance sustainable development, the digital economy poses significant challenges due to its substantial energy requirements, reliance on fossil fuels, and generation of electronic waste. The results also highlight the need for policy interventions that align digital transformation with the sustainability agenda by investing in renewable energy, fostering digital inclusiveness, and enhancing the uptake of green technologies. By addressing these challenges, GCC countries can leverage the digital economy to achieve the aspirational objectives of their national plans, such as Saudi Vision 2030, while advancing the broader United Nations Sustainable Development Goals (SDGs). This research contributes to academic discourse by filling significant gaps in understanding the moderating roles of technological innovations and offers actionable insights for policymakers striving to harmonize digital expansion with ecological sustainability in the GCC context.