Leveraging digital transformation for green innovation: the role of organizational agility, innovation capabilities, and institutional pressures

Abstract This study examines the relationship between digital transformation and green innovation in Malaysian ICT firms. It specifically investigates the mediating roles of organizational agility and innovation capabilities and the moderating role of institutional pressures. By integrating dynamic capabilities and institutional theory, the research aims to explain how digital transformation supports environmentally sustainable innovation and helps organizations achieve sustainable competitive advantage. A quantitative research design was employed using survey data from 400 employees in Malaysian ICT firms. Data were collected in two phases to minimize bias. Structural equation modeling (SEM) was used to test the relationships among variables. At the same time, conditional process analysis examined the mediation effects of organizational agility and innovation capabilities and the moderating role of institutional pressures. The findings show that digital transformation positively influences green innovation. Organizational agility and innovation capabilities significantly mediate this relationship, indicating that digital transformation enhances sustainable innovation by improving adaptability and strengthening innovation capacity. Institutional pressures further strengthen the effects of organizational agility and innovation capabilities on green innovation. This study provides an integrated framework linking digital transformation to green innovation through organizational agility and innovation capabilities while considering institutional pressures as a moderator. It contributes to the literature on digital transformation and sustainability and offers practical insights for managers seeking to use digital technologies to achieve sustainable competitive advantage.