Building eco-digital advantage: the role of knowledge management in linking digital capabilities to sustainable performance

Firms achieve sustainable innovation and performance by using their green and digital capabilities. Using dynamic capabilities and knowledge-based perspectives, this study puts forth a conceptual framework linking Big Data Analytics Capability (BDAC), Digital Orientation (DO), and Green IT Practices (GITP) to Knowledge Management Capability (KMC) and innovation outcomes. The study suggests that these digital capabilities enable firms to sense opportunities, combine knowledge from different domains, and reconfigure resources. KMC acts as a mediator that uses digital and green inputs to produce Eco-Design (ED) and Green Process Innovation (GPI), ultimately improving Economic Performance (ECOP). Based on a sample of 293 responses gathered from the supply chain and logistics industries across several countries, our model with paths of serial mediation shows that BDAC, DO, and GITP indirectly improve firm performance by means of knowledge and innovation capabilities. In particular, we verify how knowledge and innovation capabilities invigorate eco-innovation, serving as a driver for firms’ environmental sustainability. The present study contributes to the literature on digital transformation, sustainability, and knowledge management in two significant ways. First, it clarifies the role of dynamic capabilities in eco-digital innovation and value creation. Second, the results of the present study offer guidance to managers on how to align digital transformation and sustainability effectively. In addition, we also highlight that knowledge processes play a key role in securing long-term competitiveness and sustainable value.