When Innovation Meets Nature and Governance: A Conditional Path to Sustainable Development

ABSTRACT Despite expanding global innovation capacity, countries with similar green innovation trajectories exhibit sharply divergent sustainable development goal (SDG) performance. Drawing on strong sustainability theory, economic complexity theory and new institutional economics, this study develops a conditional sustainability framework in which ecological integrity and governance quality enhance the sustainability returns to green innovation. Using a balanced panel of 45 countries from 2000 to 2021 (990 observations), we apply CS‐ARDL estimation following cross‐sectional dependence, unit root, slope heterogeneity and cointegration tests, with CCEMG and AMG robustness checks. Results show that ecological integrity and governance quality exert positive long‐run effects on SDG performance, whereas green innovation alone has a statistically fragile direct effect. Crucially, ecological integrity × innovation and innovation × governance interactions are consistently positive and significant across estimators. Green innovation therefore generates stronger sustainability returns when supported by robust ecological systems and effective institutional governance.