When Digitalization Meets Sustainability: Investigating Performance Outcomes of Twin Transformation in Business Model Innovation

ABSTRACT Digitalization and sustainability are increasingly pursued jointly, yet empirical evidence on whether their integration within business model innovation is associated with firm performance remains limited. This study examines the relationship between twin transformed business model innovation (TTBMI) and firm success, considering digital competitive advantage (DCA) and sustainable competitive advantage (SCA) as distinct mediating pathways and environmental turbulence as a boundary condition. Drawing on dynamic capabilities theory, the resource‐based view, and contingency theory, we analyze cross‐sectional survey data from 565 German firms using partial least squares structural equation modeling. The findings show that TTBMI is strongly and positively associated with both DCA and SCA, but only modestly with firm success directly. Both competitive advantages partially mediate this relationship, with DCA exhibiting the stronger downstream association with firm success. Environmental turbulence significantly but modestly moderates the focal relationships. Customer turbulence moderates the relationships between TTBMI and firm success, DCA, and SCA to a similar extent; competitor turbulence shows its strongest interaction with the TTBMI–firm success relationship, and technological turbulence significantly moderates only the TTBMI–SCA relationship. The study contributes by distinguishing two domain‐specific value‐creation pathways and by showing that their relevance varies across environmental conditions. For managers, the results suggest evaluating twin transformation initiatives not only through immediate financial outcomes but also through their contribution to digital and sustainable competitive advantages.