Institutional Pressures on Sustainability and Green Performance: The Mediating Role of Digital Business Model Innovation

Abstract

The purpose of this study is to examine the mediating role of digital business model innovation (DBMI) in the relationship between institutional pressures (i.e., regulation and normative pressures) on sustainability and green performance. To verify our hypotheses, we performed the structural equation model as an analytical technique using 396 datasets from firms listed on the China Stock Exchange. The structural results showed that institutional pressures had a positive effect on DBMI, and that DBMI had a significant effect on green performance. The analysis also supports the full mediation role of DBMI between institutional pressures and green performance. We believe that our findings contribute to ongoing knowledge by enriching institutional perspectives on sustainable management and providing managers with practical implications on how to drive DBMI.

1. Introduction

As stakeholder awareness and regulatory pressures for firms to integrate environmental issues into their commercial operations grow [1], a growing number of firms are looking for ways to enhance sustainability through business model innovation (BMI) [2,3]. Porter and Van der Linde [4] argued that “properly designed regulation can trigger innovation that may partially or more than fully offset the costs of complying with it.” To put it another way, firms need to explore innovation in the sustainability of their business models to find solutions to institutional regulations and stakeholder requirements. To develop sustainable remedies that drive green innovation value, firms have begun to pay attention to BMI, especially digitalization [5]. Despite the growing interest of academics and practitioners in digital transformation to achieve sustainability, there is a relative lack of literature on how these schemes transition to BMI-based firms’ green performance [6]. Put differently, a comprehensive study of the extent to which BMI based on digital transformation drives firms’ green performance is still in its infancy. Moreover, according to Zhang et al. [7] and Wang [8], research related to green performance is still lacking compared to its importance, and it is difficult to identify prior studies that closely examine the relationship between digital business model innovation (DBMI) and green performance.

This study examines mechanisms for achieving green performance through DBMI based on institutional pressures. Digitalization is the process of using digitalized information to make traditional practices simpler and more efficient [9]. By basing the definition on this, digital transformation is the process of reconstructing existing business processes, cultures, and customer experiences with digital technologies to meet changing business environments and market needs [10]. Due to the influence of digitalization, firms are generating more profits with less labor than in the past as marginal costs approach zero. Some firms are experiencing tremendous growth with a small capital by leveraging information goods that cost little to store, transport, and replicate. Furthermore, the COVID-19 pandemic rapidly transferred the flow of goods, consumers, information, and payments, which are the foundation of business activities, from the physical environment to cyberspace. In the process, digital technologies (e.g., AI, IoT, and cloud) linked offline-oriented businesses to the web [11], accelerating innovation [12] and creating new business models (e.g., online-to-offline business, direct-to-consumer business) as a cornerstone [13,14]. The resulting DBMI has dramatically affected the operations sector of a firm’s green management. As online consumption grows and the quantity of packing trash produced accelerates significantly, stakeholders have increased interest and pressure to achieve sustainability through resource recycling [15,16]. Accordingly, some firms seek solutions based on their connection to digital transformation. For example, SAP has developed digital solutions that help track and measure carbon footprints, transparently manage supply chains through blockchain technology, and support sustainability in retail and transportation firms.

In particular, since China joined the WTO, China’s economy has achieved rapid growth due to the opening of industries and the increase in consumption due to increased national income [17]. However, the consumption-oriented economic shift has rapidly exacerbated China’s environmental and social issues [18]. As these problems intensified, related regulations and institutions for suppression were strengthened, consumer trends changed, and the pressure of stakeholders that was facing firms increased [19,20]. This situation is expected to play a leading role in China’s economic development as more firms innovate business models based on digital transformation to respond to these issues and pursue sustainability. Tang et al. [21] reviewed what green practices Chinese firms have implemented to meet the needs of various stakeholders and confirmed that such practices have a positive impact on their financial performance. Gong and Ribiere [22] explained that Chinese manufacturers innovate their business models by improving value-chain operations through digital transformation to strengthen environmental protection measures. As such, digitalization factors play a key strategic role in transforming a firm’s business model to achieve sustainability. However, the results of digital transformation on firm performance are often contradictory; while some studies emphasize that digitalization catalyzes green performance, others have shown it to be an impediment. Nonetheless, studies examining the institutional pressures–DBMI–green performance relationship are scant, and less empirical research has been conducted so far on the mediating role of DBMI from an institutional perspective.

By filling these gaps, we will try to contribute to both facets of our understanding. First, to find solutions for achieving green performance under institutional pressures on sustainability, we applied institutional theory. The flow of research investigating the determinants of green innovation [23,24] identifies institutional pressures (e.g., government regulation and stakeholder normative) as the main drivers of green performance [4,25]. However, some studies [26,27], find that regulatory pressures have no significant effect on environmental value creation. Furthermore, Rehfeld et al. [28] have discovered empirical evidence suggesting that customer demand does not significantly influence a firm’s green performance, as eco-friendly items tend to be costlier. The presence of conflicting results implies that the mechanism by which institutional pressures drive green performance is still largely unclear. Therefore, this study builds a conceptual model based on an institutional perspective to explore the effect of institutional pressure on green performance based on DBMI.

Second, our research explores DBMI and green performance to increase sustainability from a digital transformation perspective. Digital transformation can provide firms with the ability to respond quickly and effectively to unpredictable changes in the business environment [29,30]. Some studies emphasize that digital transformation can lead to green performance and that DBMI is critical to ensuring sustainability, as it means changing the way business is conducted as well as the needs of customers and stakeholders [29,31]. Meanwhile, the core idea of the institutional perspective is that the actors in an organization pursue actions to secure their own interests within institutional constraints. Although institutional theory has been generally adopted in various strategic management studies, institutional applications related to understanding the mediating role of DBMI are insufficient. Under institutional pressure, looking at disruptive changes within firms, such as DBMI, can be a pivotal factor in finding remedies that drive the firm’s green performance.

2. Theoretical Frameworks

2.1. Institutional Pressures on Sustainability

According to institutional theory, firms can ensure the legitimacy of their business activities by complying with the prevailing practices of their business environment [32]. North [33] explains that institutions are the so-called rules of the game that make up political, economic, and social interactions. Institutional pressures can function as a mold for firms to move forward and form strategies [34]. This is an essential concept in conveying the influence of institutions on the strategic behavior and outcomes of firms [35]. Therefore, institutional pressures can provide an understanding of how institutions relate the relationship between strategic behavior and specific performance [36].

In a dynamic market where interest and anxiety about sustainability are increasing, how firms can innovate their business models to respond to the changing environment is becoming an essential concern [37]. Sustainability in firms arises not only from internal dynamics but also from external pressures that are becoming increasingly important to business management [38]. Institutional theory can be a good theoretical lens that explains that institutional pressures are an important dimension in explaining the adoption of sustainable practices [39] and are also related to the adoption of digital transformation [40]. In this vein, the institutional environment can provide an understanding of a firm’s BMI drive through pressures that affect its strategic behavior and decision-making [41,42]; these are divided into regulatory, normative, and imitation pressures according to institutional characteristics [43]. Regulatory pressure typically arises from stakeholders in firms, such as governments, non-governmental organizations, suppliers, and customers [44]. Normative pressure stems from collective expectations, values, and standards within a particular organizational environment [32]. Mimetic pressure refers to pressure that motivates an organization to imitate the actions and practices of people it considers similar [45]. In general, institutional pressures include three types of pressures, but in terms of sustainability management, a number of studies stress that regulatory and normative pressures can have a huge impact on firms [46,47].

As described above, in a business environment where the pressure on sustainability is growing, institutional perspectives can have crucial implications for understanding the strategic changes in firms due to digital transformation and achieving green performance.

2.2. Digital Business Model Innovation

Regulatory push and demand pull have been recognized as significant external factors driving the implementation of BMI in multiple studies [48,49]. The commonly accepted interpretation is that institutional pressures enable firms to explore legitimacy for how they do business and encourage them to innovate business models that sense, seize, and reconfigure new values [50,51]. This is because domestic and international regulations and stakeholder demands to preserve the natural environment have forced firms to consider the impact of operations on the natural environment and follow green production processes [52]. Therefore, the pressures and demands of future sustainability can be a starting point for BMI [53]. Spieth et al. [54] argued that the BMI concept is a blueprint that can provide legitimacy for firm activities well-beyond simple storytelling about how a firm conducts business activities. Amit and Zott [55] suggested that firms create innovation value by redesigning their business models to adapt to changing business environments. In this vein, BMIs represent innovations that ‘value creation’, ‘proposition’, and ‘capture’, thereby attracting a customer base and increasing profitability [50,56].

Meanwhile, the recent proliferation of digitalization helps firms to effectively innovate their business models by providing new products and revenue paths and by gaining a competitive advantage [57]. According to Foss and Saebi [58], BMI reflects designed, novel, and non-trivial changes to crucial elements of a firm’s business model and/or the architecture linking these elements. Digital technologies represent a valuable means of creating and capturing new value [30,59], thus enabling DBMI, which results in the update and formulation of new business models [60]. In particular, digital technologies have two main effects on traditional BMs’ value creation and capture mechanisms, thus enabling DBMI [61]. Previous studies explain that DBMI enables firms to leverage more direct channels to enhance value communication [62], better understand customer needs [63], co-create new values [64], and monetize network effects [65]. Amid growing institutional pressures on sustainability in recent years, firms are driving for DBMIs to find solutions for their survival.

2.3. Green Performance

Green performance is the positive impact of green initiatives on the natural environment both inside and outside the firm, providing core information about environmental impacts, regulatory compliance, and organizational systems that demonstrate the effectiveness and efficiency of the firm’s activity [66]. As sustainability concerns emerge as a pivotal issue for corporate management activities, some studies emphasize the need to drive business model innovation that can improve green performance directly or indirectly [67]. In particular, a growing number of firms are promoting and integrating work related to a variety of environmentally friendly processes based on digitization [68], while enhancing green performance based on DBMI.

3. Hypothesis Development

3.1. Institutional Pressures on Sustainability and Digital Business Model Innovation

Regulatory pressure on sustainability can encourage firms to push for a digital transformation of their business models when thinking about which direction they want to take in their move toward eco-friendliness. This is because digital transformation is expected to play a pivotal role in improving sustainability in firms’ business activities [30]. The trend that focuses on increasing sustainability through digital transformation is assembling an action plan. Its enforcement mechanisms include not only government regulations but also practical guidelines and conventions, which can trigger a firm’s DBMI execution. For example, the United Nations (UN) and the European Union (EU) supervise DBMI in order to promote the SDGs. The UN and the EU supervise digitization to facilitate the SDGs. These organizations establish rules and set requirements that firms must comply with in order to achieve SD [69], and they require DBMI. Specifically, in 2019, the UN published “The Digital Revolution and Sustainable Development: Opportunities and Challenges,” which explored ways to accelerate firms’ DBMI [70]. In this vein, top management may be forced to adopt DBMI by evaluating the consequences of non-compliance with regulations, such as possible legal actions, fines, and losses [71]. The fact that it can help organizations build healthy reputations and relationships with government agencies will also be fully considered [46].

In a competitive market environment, business activities by firms that do not conform to stakeholder-formed norms can lead to a loss of market share and a poor performance. Normative pressure stems from the appropriate standards of behavior set for relevant members of the business ecosystem to conduct the firm’s operations [67]. Firms strive to be recognized by various stakeholders because being recognized for complying with norms is beneficial to their business activities [72,73]. In this context, it is plausible that senior executives may be compelled to implement DBMI through a comprehensive assessment of the ramifications associated with non-adherence to regulatory requirements. These potential implications may encompass legal proceedings, financial penalties, and detrimental financial outcomes. For example, stakeholders such as governments, rating agencies, and investment organizations require data disclosure based on global ESG standards, such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) [74]. Under mounting pressures, firms are required to systematically manage ESG data and establish digital-based BMIs to ensure their survival. Therefore, the ability to structure, integrate, and reconstruct data from a digitalization perspective across business activities and systems is required [30]. Many firms are focusing on driving DBMI to effectively respond to sustainability issues and institutional pressures.

As discussed above, it is more important than ever for firms to pursue DBMI to respond to institutional pressures. In line with this trend, many firms are seeking to lead DBMI by introducing artificial intelligence (AI), blockchain, the Internet of Things (IoT), big data, and other digital technologies [75]. Therefore, this study predicts that these institutional pressures may affect the drive for DBMI.

Hypothesis 1.

The regulatory pressure on sustainability will affect the drive for DBMI.

Hypothesis 2.

The normative pressure on sustainability will affect the drive for DBMI.

3.2. Digital Business Model Innovation and Green Performance

As the future unfolds, the problem of environmental degradation looms large and poses a significant risk to human survival. Consequently, a growing number of firms are actively striving to attain green performance [76]. Green performance refers to the creation of value that can lead an organization to achieve a sustainable competitive advantage in an eco-friendly way [77]. The green performance of a firm shows how much it is striving for eco-friendly activities and measures to protect the natural environment. Some of the existing literature on green performance explores the environmental value of digital transformation [78]. At present, there is much research on digital transformation and its relationship with environmental issues such as energy conservation, emission reduction, and pollution control.

At the core of DBMI is the restructuring of the management mode, which can lead to disruptive innovation by introducing digital technologies into existing business models and by facilitating value creation and the reorganization of the business paradigm [61]. In this same vein, several studies state that DBMI has the potential to lead to improvements in green performance. Digitalization-based BMI can gradually realize the immediate interaction of internal and external innovators, encourage the full integration of innovation resources, and facilitate the gradual, in-depth integration of digital technologies and green innovations [29,31]. Moreover, some studies have confirmed that digital transformation of business models is considered a crucial solution for organizations seeking green process innovation; digital transformation can improve firms’ environmental performance by improving capacity utilization [79], operating efficiency [80], and supply chain optimization [81]. In light of these discussions, when a firm’s DBMI is achieved, it will have a positive ripple effect on the green performance of a firm powered by digital transformation. Therefore, we propose:

Hypothesis 3.

DBMI will affect green performance.

3.3. Digital Business Model Innovation and Its Mediating Effect

These hypotheses suggest that regulatory and normative pressures possess a beneficial influence on DBMI, which is expected to exert a positive impact on green performance. In particular, according to previous literature [82,83], BMI enables firms to develop value from external demands and achieve superior performance. We thereby argue that DBMI mediates the relationship between institutional pressures and green performance for the following reasons. First, institutional pressure can promote DBMI. Institutional pressures allow firms to identify opportunities they can leverage to increase legitimacy. DBMI emphasizes recreating business models to gain legitimacy so that they can be aligned with sustainable development and facilitated by external institutional pressures. Second, DBMI contributes to green performance in that it helps businesses leverage digitalization opportunities to cope with environmental changes and improve business efficiency. As shown in previous studies [29,31], the positive association between DBMI and green performance has been well demonstrated. Third, DBMI can serve as a channel between external pressure and internal performance. As the results of previous empirical studies show, the relationship between institutional pressure and green performance is a cross between significant [4,25] and insignificant [26,27]. This indicates that the role of DBMI in increasing green performance is important. In the context of environmental management, some studies [48,84] argue that green performance depends on the coordination between external drivers and internal competencies. The disparity in green performance among different firms can be attributed to their distinct reactions to equivalent levels of external demand. When a firm effectively responds to both regulatory and normative pressures, the execution of DBMI is more effective, as evidenced by the positive performance outcomes observed in firms. Thus, the subsequent hypotheses are additionally established (Figure 1).

Hypothesis 4a.

DBMI mediates the relationship between regulatory pressure and green performance.

Hypothesis 4b.

DBMI mediates the relationship between normative pressure and green performance.

4. Research Methods and Results

4.1. Sample and Data Collection

To verify the hypotheses of this study, we conducted an empirical analysis of the dataset of Chinese listed firms. Since the reform and opening, China has grown into the second-largest economy in the world based on government-centered industrial development policies and aggressive investment programs. However, behind the rapid development, there is also a view that firms have worsened environmental pollution. Against this background, the Chinese government has become very committed to environmental protection and has established strict environmental regulations and policies [7,85]. For example, China’s 2015 Environmental Protection Law is the strictest legislation in the environmental sector so far; environmental protection is also listed as one of the six national priority tasks in the government’s 13th Five-Year Plan for Economic and Social Development (2016–2020); in 2018, the Chinese State Council (CSC) set concrete targets for air, forest, marine, and land protection and promulgated them to firms [86]. Moreover, Chinese media and NGOs are often seen putting pressure on environmental improvement by announcing blacklists and announcing firms that emit environmental pollutants. Considering this environment, China is one of the largest emerging economies and is selected as a research context in many studies [7,87] because it provides unique characteristics that provide theoretical and practical implications for the relationship between sustainability pressures and a firm’s development.

In general, listed firms are under constant pressure from stakeholders to monitor their management activities and respond quickly to changes in government agencies. The Shenzhen Stock Exchange and the Shanghai Stock Exchange issued notices and guidelines on the disclosure of environmental information for listed companies in 2006 and 2008, respectively, making the firms’ environmental practices transparent to stakeholders [86]. Thus, we based our collection of listed firms on the China Exchange. As of the end of 2022, there were a total of 5067 firms listed on the China Stock Exchange, and we asked a market research agency in China to survey them to gather data as quickly and accurately as possible. First, the market research agency provided a list of firms so that the author could randomly select some of them as potential samples. And then, the market research agency randomly selected 1000 potential samples of listed firms, contacted them by e-mail, and contacted them by phone to encourage the survey. We asked the market research agency to only contact informants within the senior managerial staff, including chief executive officers (CEOs), vice presidents, and general managers. A single survey was conducted for each firm during our data collection process. The survey was carried out over a period of three months, from March to June 2023, and a total of 396 significant responses were received (the response rate was 39.6%).

4.2. Variables and Measurement

In this study, all items are derived from the existing literature and measured on a Likert seven-point scale (one = strongly disagree and seven = strongly agree).

The institutional pressures of digitalization on sustainability were measured in each of the three questions about regulatory and normative institutional pressures. Regulatory pressure was measured based on previous studies [1,88], and perceived pre-pressure caused by strict legal restrictions or regulations by Chinese government agencies to increase sustainability was evaluated. To measure normative pressure, we adopted measurements from [89,90] to assess the normative pressures of stakeholders on sustainability felt by respondents.

DBMI consisted of three dimensions, such as digital value creation innovation, digital proposition innovation, and digital capture innovation, and was measured through two questions, each based on the items adopted by Clauss [56]. The first question posed by digital value creation innovation is whether or not a firm is implementing business improvement initiatives to build digital capabilities and digital processes. Second, digital proposition innovation inquired as to whether or not a firm is engaging in business development activities to develop digital channels and digital offerings. Thirdly, digital capture innovation inquired as to whether or not a firm participates in business development activities such as creating digital revenge models and value–cost structures.

Green performance was measured based on three questions, based on [91], and asked how firms have helped reduce carbon emissions, save resources (or energy), and address environmental challenges such as climate change over the past five years.

4.3. Bias Tests

Since the survey elicited responses from a single representative of each firm, a common method bias may have posed a problem for our study [92]. Our study tried to solve these problems through three validations. First, Harman’s single factor test was performed using exploratory and unrotated factor analysis. This result shows that a single factor does not account for the majority of the variance and that the first factor accounts for 37.4% of the total variance, which is less than 50% [93]. Second, the minimum and maximum values of the variance inflation factor (VIF) for the data used were 1.000 and 2.547, respectively, with both values below the 3.3 threshold [94]. Third, as a result of analyzing the correlation between marker variables (M1), which are composed of an entrepreneur orientation, and existing structures, it was found that it was not statistically significant, confirming that there is no theoretical connection between M1 and existing structures [95]. These findings suggest that common method bias does not present a serious concern in our study.

4.4. Reliability and Validity of the Model

This study conducted the validity and hypothesis testing using the PLS-SEM.

Table 1. Correlations, reliability, and convergent and discriminant validity.

Construct	RP	NP	DBMI	GP
Regulatory pressure	0.957
Normative pressure	0.882	0.931
DBMI *	0.844	0.873	0.917
Green performance	0.850	0.893	0.924	0.916
Cronbach’s alpha	0.954	0.923	0.962	0.961
Composite reliability	0.970	0.951	0.969	0.972
rho_A	0.955	0.924	0.963	0.964
AVE	0.915	0.867	0.840	0.896

Note: The square roots of the AVE values are shown on the diagonals, and printed with bold, non-diagonal elements are the latent variable correlations. All correlations are statistically significant at p < 0.01, * reflective–reflective second order, rho_a = Dijkstra and Henseler’s composite reliability, AVE = average variance extracted.

shows the results of the validity analysis. First, Cronbach’s alpha coefficient for all constituent concepts was 0.70 or higher (0.903 < all alpha coefficients < 0.962). Second, the factor weights and factor loadings of all variables were significant, and the AVE values for all configurations were greater than 0.50 (0.840 < all AVE values < 0.953), which provides a strong evidence of convergence validity. When the AVE of each configuration exceeds the square of the standardized correlation between the two configurations, we determine that discriminant validity is achieved, and this study shows that all AVE estimates were larger than the square of the correlation coefficients between all configurations.

4.5. Hypotheses Testing

Table 2. Results of path effect.

Path	$\mathit{\beta }$	S.E.	t-Value	p-Value	95% Confidence Interval (Lower Bound, Upper Bound)	Hypothesis Test
H1. RP → DBMI	0.331	0.047	7.012	0.000	(0.236, 0.423)	Supported
H2. NP → DBMI	0.582	0.046	12.582	0.000	(0.492, 0.673)	Supported
H3. DBMI → GP	0.923	0.008	120.228	0.000	(0.907, 0.937)	Supported
H4a. RP → DBMI → GP	0.305	0.044	6.985	0.000	(0.218, 0.390)	Supported
H4b. RP → DBMI → GP	0.537	0.043	12.405	0.000	(0.452, 0.623)	Supported

Note: All indirect effects are partially mediated, 5000 iterations for bootstrapping, S.E. = standard error, RP = regulatory pressures, NP = normative pressures, GP = green performance.

presents the path analysis results, R², effect size (f²), and Stone-Geisser’s predictive relevance (Q²). First, the path from regulatory pressure (b = 0.331, p < 0.000) and normative pressure (b = 0.582, p < 0.000) to DBMI was statistically significant and positively correlated, supporting H1 and H2. Both institutional pressures on DBMI were found to have a small (RP: 0.114) and medium (NP: 0.353) effect in f², and the explanatory power for DCs was found to be 0.787. Second, the coefficient of the path between DBMI and green performance (b = 0.923), was significant at the level of 0.000, indicating that H3 was supported. The f² of DBMI for green innovation (5.770) was large, and the explanatory power was found to be 0.852. Note that there is a small effect (0.02 < f² ≤ 0.15), a medium effect (0.15 < f² < 0.35), and a large effect (f² ≥ 0.35) [96].

Moreover, we further validated the mediating role of DBMI in the direct influence of institutional pressures on green performance. We performed 5000 replicates using bootstrapping [97]. The mediating effects of the regulatory pressure → DBMI → green performance path was 0.305. The mediating effects of the normative pressure → DBMI → green performance path was 0.537. As a result of the confidence interval verification, it was found that the bias–correct confidence interval did not contain zero, and the indirect effect was found to be significant at the 5% level. As a result of verifying the partial and complete mediation through Baron and Kenny [98]’s three-step test, there was a significant partial mediation effect (p < 0.05).

5. Discussion and Implications

5.1. Discussion

Some core findings found in this study are discussed below. The first two hypotheses predicted a direct relationship between each institutional pressure on sustainability, such as regulatory and normative pressure, and the DBMI, which was consistent with the discussion of previous studies [30,75] that supported these hypotheses. This suggests that government regulations and market normative pressures, which have sparked a growing interest in sustainability in recent years, can have a positive impact on firms, driving DBMI. Indeed, various stakeholders on sustainability issues, including governments and customers, propose digital transformation as a potent remedy and encourage firms to drive DBMI [99]. Second, the third hypothesis expected a positive correlation between DBMI execution and green performance. This result was consistent with [100,101], which demonstrated a significant positive and direct relationship between digital-linked BMI and green performance. Our results extend existing research discussions to provide a supplementary explanation of the positive association between DBMI practice and environmental performance. Third, this study proposed that DBMI fully mediates the relationship between regulatory and normative pressures and green performance. These findings extend previous studies that investigated the mediating effects of BMI through digital transformation on the association between institutional pressure and green performance [102,103]. When digitalization is promoted and regulatory pressures, such as laws and policies, that promote environmentally friendly behavior are high, firms believe that digitally converting existing business models to comply with these regulations can reduce environmental pollution and increase their competitive advantage. While regulatory compliance may be a primary driver of these actions, the impact of DBMI can also have a positive impact on a firm’s green performance. In addition, when there is high normative pressure to promote environmentally friendly behavior, such as customer and supplier demands, firms can adopt DBMI to create a better performance that meets these expectations. While the primary motivation for this behavior may be that of being socially responsible and meeting stakeholder expectations, implementing DBMI has a positive impact on green performance.

5.2. Theoretical Contributions

This work holds immense significance in enhancing our comprehension of sustainable development by empirically validating a set of mechanisms for implementing DBMI and improving green performance under increasing institutional pressures on sustainability. This study provides a new channel to explain how DBMI affects green performance from an institutional perspective. Our empirical results on listed firms in China provide evidence of claims that institutional pressures can affect DBMI and that these DBMIs play a pivotal role in improving green performance. This reinforces the discussion, from an institutional perspective, that firms develop behaviors that are most appropriate and profitable to adapt to the rules and belief systems that exist around them for survival [32]. It also supports the theoretical discussion in some studies that firms will build BMI based on digital technology and digital transformation to increase sustainability [91,104]. With the recent climate crisis increasing interest in creating a strong green performance to achieve a firm’s competitive advantage, this study is a very encouraging contribution to confirming that there is a significant relationship between DBMI and green performance.

5.3. Managerial Implications

The results of our study indicate that DBMI has an advantageous effect on improving a firm’s green performance, and the findings of this study provide implications for managers looking for remedies to address sustainability issues. Institutional pressures for the sustainable development of firms require innovation in digital business models to comply with stakeholder needs, ensure social legitimacy, and enhance green performance. In particular, given that a firm’s competitive advantage depends on its ability to transform its business model in ways that competitors cannot easily emulate, DBMI appears to be a valuable milestone for managers to pursue. Our research suggests that institutional pressures on sustainability can inspire firms’ managers to drive digital transformation, and managers that are actually facing pressures from environmental misconduct or compliance issues can quickly consider digital business model innovation. Therefore, this study advances the legitimacy of DBMI in enhancing the green performance of a firm in a situation where the digitization of the business environment is proceeding rapidly with the fourth industrial revolution. In this context, our findings provide managers with useful and practical advice to overcome institutional pressures on sustainability and complement them for eco-friendly growth. Finally, managers should understand that the DBMI response is not a simple reaction to institutional pressures. In other words, managers should pay attention to the efficient use of digital technologies to drive DBMI to achieve green performance. For example, some firms, such as Siemens, GE, and Schneider Electric, are trying to achieve their decarbonization values by introducing artificial intelligence (AI), blockchain, the Internet of Things (IoT), big data, and other digital technologies, and by promoting DBMI.

6. Conclusions

This study expands institutional theory and sustainable management literature by examining the mediating role of DBMI in the relationship between institutional pressures and green performance, derived from Chinese listed firms, and helps managers to respond systematically in their pursuit of sustainable development.

Limitations and Future Research Directions

This study has the following limitations and can be supplemented by the following efforts in future studies. First, this study conducted verifications on Chinese listed firms, and it should be careful to generalize these results to other countries. Therefore, replicating the research model of this study with data collected from other countries with strong institutional pressures on sustainability can further highlight the appropriateness of the research model in future studies. Second, this research is limited by its cross-sectional design, and the collected data only permit one-time evaluations of the responses. In order to analyze changes in responses over time and determine the causal relationships between variables, longitudinal research is employed. Third, China maintains a market economy system, but it is a country where the government can exert strong institutional power to adjust the market. As with the emphasis on “guanxi” in China [105], future research may be a good way to consider institutional distance from the government when examining institutional pressures on firms.