Digitalization, Sustainability, and Radical Innovation: A Knowledge-Based Approach

This study investigates the interplay between digitalization capability, environmental sustainability perception, and radical innovation performance with a particular focus on the mediating roles of knowledge integration capability and knowledge accumulation. The study utilizes Structural Equation Modeling and the Hayes PROCESS Model to analyze data from 315 firms in technology-driven industries. The findings reveal that digitalization capability significantly enhances radical innovation performance (β = 0.767, p < 0.001, R2 = 0.589), while environmental sustainability perception does not directly influence innovation performance nor mediate its relationship with digitalization. However, knowledge integration capability and knowledge accumulation emerge as critical enablers, strengthening the effect of digitalization on innovation outcomes. Moreover, knowledge integration capability positively moderates the digitalization capability–radical innovation performance relationship, demonstrating that firms with higher knowledge integration capability derive greater innovation benefits from digital transformation. In contrast, environmental sustainability perception does not moderate this relationship, suggesting that sustainability perception alone is insufficient to drive radical innovation. The findings provide insights for firms leveraging digitalization to drive innovation and efficiency. Knowledge integration and accumulation are key to sustaining competitive advantage. These results contribute to the literature on digital transformation, innovation management, and sustainability, highlighting the necessity of knowledge-driven mechanisms in leveraging digitalization for innovation success. This study offers valuable managerial insights by highlighting the strategic significance of knowledge integration and accumulation in enhancing the effectiveness of digital transformation on innovation performance. Future research should explore longitudinal dynamics, sectoral variations, and additional moderating factors such as digital leadership and organizational culture to deepen the understanding of this evolving field.