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Article

The Interplay of Environmental Dynamism, Digitalization Capability, Green Entrepreneurial Orientation, and Sustainable Performance

by
Yi Liang
1,†,
Jung-Mo Koo
2,† and
Min-Jae Lee
3,*
1
School of Foreign Languages, Neijiang Normal University, Neijiang 641100, China
2
Department of Business Administration, Mokwon University, Daejeon 35349, Republic of Korea
3
Department of Global Business, Mokwon University, Daejeon 35349, Republic of Korea
*
Author to whom correspondence should be addressed.
†
These authors contributed equally to this work.
Sustainability 2024, 16(17), 7674; https://doi.org/10.3390/su16177674
Submission received: 26 June 2024 / Revised: 5 August 2024 / Accepted: 3 September 2024 / Published: 4 September 2024
(This article belongs to the Section Economic and Business Aspects of Sustainability)
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Abstract

:
The purpose of this study is to understand the interplay between environmental dynamism, digitalization capability, green entrepreneurial orientation, and sustainable performance by using contingency theory and the dynamic capabilities perspective as a comprehensive theoretical lens. More specifically, this study examines the impact of environmental dynamism on the development of digitalization capability and verifies the mediating role of green entrepreneurial orientation between digitalization capability and sustainable performance. As a result of analyzing 450 Chinese manufacturing firms, it was confirmed that environmental dynamism had a significant positive effect on the development of digitalization capability. In addition, the partial mediation effect of green entrepreneurial orientation on digitalization capability and sustainable performance was also identified. This indicates that firms with a green entrepreneurial orientation can better achieve sustainable development through digitalization capability. As a result, this study provides important implications for promoting sustainable development in both the literature and practice and also presents a contribution to current knowledge.

1. Introduction

As the turbulence of the modern business environment intensifies and the seriousness of the environmental crisis further drives it, managers’ concerns about increasing corporate sustainability and creating a competitive advantage are deepening [1,2]. To manage these scenarios, firms tend to design new business models for changing business environments and strive to develop digitalization capability that stimulates innovative offerings [3,4]. Digitalization capability is defined as the ability of firms to leverage digital technologies and resources to progress their organizational operations or business models [5]. Digitalization capability is highlighted by a diverse range of scholars and practitioners as it is expected to be a useful solution for advancing or innovating existing organizational operations to increase corporate sustainability [6,7]. In this vein, digitalization capability becomes increasingly important as more firms use digital technologies to improve organizational management efficiently and achieve sustainable performance based on optimized decision-making [8]. Sustainable performance is explained by the creation of harmonious values for environmental protection, poverty alleviation, and economic growth [9], and to achieve this, many firms focus not only on financial performance but also on non-financial performance that encompasses environmental protection and social values [8,10].
Meanwhile, some researchers believe that adopting digitalization capability is a pivotal driver of sustainable performance by increasing green entrepreneurial orientation (GEO), which emphasizes environmental benefit seeking in turbulent business environments [11,12]. GEO is a strategic orientation that seizes new opportunities to pursue green business innovation and drive the transformation and implementation of environmental practices [13,14]. It is known that firms can increase sustainability in dynamic and turbulent business environments by increasing the efficiency of organizational operations and reducing their impact on the environment, such as by improving products and services [15]. Perhaps no one is opposed to the fact that firms that actively challenge change achieve higher returns and survival rates. In this vein, to effectively utilize ever-evolving digital technologies, GEO that can actively respond to new challenges has become increasingly important.
Despite this importance, the current understanding of ‘what environmental dynamism influences digitalization capability’ and ‘the role of GEO as a mediator between digitalization capability and sustainable performance’ is still in its infancy. More specifically, the research gaps between previous empirical studies exist in the following areas: First, the current academic discussions on organizational management changes due to digitalization capability have been highlighted in various ways: innovation management [16], strategy management [17], and operations management [18]. Nevertheless, prior research that closely examines the relationship between the environmental context and the development of digitalization capability is difficult to identify. In particular, the environmental dynamism facing firms today can impact the development of organizational digitalization capability in a unique way [19]. Thus, our study aims to bridge this gap by examining the drivers of digitalization capability based on the contingency theory that corporate capability development can be determined by suitability with the external environment.
Second, previous studies examining digitalization from the dynamic capabilities (DCs) perspective have often focused on improving the financial performance of firms through digital resources and technology [20,21]. As the discussion of sustainable development intensifies, firms increasingly need to examine all resources and capabilities in terms of social and environmental performance. In this vein, this study can stimulate further research on the impact of organizational digitalization on sustainable development by including non-financial performance in corporate value creation due to digitalization capability. In particular, digitalization has the potential to pave the way for powerful improvements in the efficiency, productivity, and flexibility of corporate business processes, minimizing environmental impact and expanding social value and receptivity [8]. Thus, this study aims to determine whether digitalization capability is a DC in creating the sustainable performance of an organization in light of these issues.
Third, when many firms drive digitalization to achieve sustainable development, the results of previous studies often conflict and fail to demonstrate the effectiveness of digitalization in terms of performance. For instance, several studies find that the digitalization of a firm is important for improving corporate sustainable values [22,23], but some confirm that it has negative effects on its impact [24]. However, they generally do not appear to be aware of the role of GEO, and this probably indicates that it is important to examine how firms accept strategic responses to boosting sustainable performance through their digitalization capability. Digital technologies can drive organizational change, and GEO helps firms more strategically respond to innovate the path of value creation based on digitalization [25]. Nonetheless, there is a lack of studies on the mediating role of GEO in the relationship between digitalization capability, GEO, and sustainable performance.
This study makes several contributions to fill the research gaps in the current literature. First, this study examines whether environmental dynamism leads to the development of digitalization capability, thereby strengthening knowledge on the core drivers of digitalization capability by linking contingency theory and DC perspectives. Our findings demonstrate that environmental dynamism is a pivotal driver of digitalization capacity development. Second, this study expands the DC perspective by identifying the relationship between digitalization capability and sustainable performance in an increasingly turbulent business environment. Our findings illustrate how digitalization capability relates to the achievement of financial and non-financial performance as corporate sustainable performance. In summary, this study shows that digitalization capability can be strategized into DCs for sustainable growth. Third, by examining GEO as a mediator in developing digitalization capability and achieving sustainable performance, our research links DCs with sustainable development and provides new knowledge about the role that GEO plays in that relationship.

2. Theoretical Background

2.1. Digitalization Capability from a Dynamic Capabilities Perspective

Advances in digitalization change the nature of corporate strategy and organizational routines more rapidly. A DC perspective focuses on resource reconfiguration to respond to dynamic environmental changes rather than the retention of resources [3]. DCs have been described in previous studies as an organizational routine that influences changes in a firm’s existing resource base [26,27]. This highlights that DCs are based on learned and highly behaviorally patterned, commonly understood organizational routines [28]. The recent prior literature assumes that digitalization positively impacts organizational change by creating a better match between a firm’s resource composition and external environmental conditions and replacing existing resources [3,29]. Yoo et al. [30] explain that digital technologies and resources create innovative changes in businesses (e.g., improve products, productions, and distribution lines) by integrating digitalization capability into objects that have pure physical materiality. Ritter and Pedersen [31] document that the convergence and generativity of digital technologies have enabled firms to transform their products, services, business models, and organizational strategies. In this vein, digitalization capabilities are deeply involved in changing business environments and accelerating organizational innovation [16]. For example, in response to paradigm-shifting environmental changes with digitalization, GE introduces digital technologies (e.g., IoT, big data, and AI) into the wind turbine production process to develop a system that adjusts the blades of each turbine, minimizing the impact on nearby turbines and efficiently managing production operations. In addition, LG Chem shares work situations in real time using a cloud-based platform to increase efficiency, build a collaborative work environment regardless of location, and change organizational routines. As such, digitalization capability can make a significant difference to corporate organizational routine and innovation by providing new business activity opportunities based on digital components.

2.2. The Contingency of Environmental Dynamism

The contingency theory lens explains that organizational strategic choices and directions can be determined by accidental forces, emphasizing environmental dynamics, especially as a potentially vital contextual variable [32]. Proponents of a more contingent view argue that DC development depends on the environment in which the firm is situated [27,33]. DCs can be viewed as a strategic option that allows firms to reconfigure their existing resource base when opportunities or demands arise [34]. Indeed, the primary purpose of a firm’s development of DCs is to provide the ability to cope with an increasingly changing environment [35]. Thus, we argue that the environmental dynamics in which a firm operates are related to strategic decision-making, such as DC development. Dynamism is interpreted as unpredictability, that is, the rate of change and innovation in an industry as well as the uncertainty or unpredictability of actions by customers [36]. An environment with little dynamism is characterized by infrequent changes and less opportunity to ‘strike’ the option, which makes it less reasonable to develop DCs [37]. Following this logic, we can expect DC development to be relatively less important in low-dynamic environments. These business environments typically compensate for the consistent utilization of existing resources, which can prevent firms from sensing, seizing, and reconfiguring new resources [3]. On the other hand, at high environmental dynamism, DCs can be developed relatively actively. Schoemaker et al. [38] argue that a turbulent business environment encourages firms to develop new products and processes and innovate their business models through DC development. Thus, we expect that the more firms are affected by environmental dynamism, the more they will be able to develop DCs.

2.3. Green Entrepreneurial Orientation for Sustainable Development

As sustainability issues rapidly spread in the business environment, some scholars argue that entrepreneurial orientation is needed to identify opportunities, create business innovation, and create economic rent while solving ecological and social challenges [13,15]. Entrepreneurial orientation captures innovativeness (the tendency to experiment and depart from established practice), proactiveness (the propensity to act aggressively towards rivals and take initiative), and risk-taking (the willingness to assume high risks for high rewards or losses) [39]. The entrepreneurial orientation, which includes the intentional influence of entrepreneurs as a collection of challenging processes, structures, and behaviors of organizations, has attracted the attention of organizational theorists [40,41,42]. For example, Cruz and Nordqvist [40] explain that the essence of entrepreneurial orientation is the process of identifying opportunities for different stakeholders to create value and facilitating individual and collective efforts to achieve shared goals within an organization. Covin and Lumpkin [43] note that entrepreneurial orientation is not limited to any type of organization, industry, or culture and can thrive in a variety of settings, including for-profit and nonprofit firms and formal and informal economies. Suddaby et al. [44] argue that entrepreneurial orientation can have a strong imprinting effect within an organization and thus have a strong impact on corporate strategy and performance. Furthermore, numerous studies have revealed that entrepreneurial orientation leads to improved corporate performance [45,46] and has a positive effect on increasing stakeholder value [47].
In particular, recent studies have suggested that GEO facilitates the transition and implementation of responsible green practices in the business environment [14]. This coincides with the literature that argues that green-oriented entrepreneurs create and change institutions and social norms to positively influence ecological and social impact [48,49]. For example, Dean and McMullen [50] argued that GEO can improve organizational performance by identifying and utilizing new opportunities and promoting organizational capabilities. Shafique et al. [51] describe GEO as a core competency to identify opportunities and help them capitalize on environmental market failures. Iqbal et al. [52] document that GEO encourages the adoption of improved new technologies and production methods and facilitates the introduction of green products and green business models, enabling sustainable development. Thus, this study believes that GEO can drive the sustainable development of firms by facilitating the challenge of entrepreneurs to tackle constant innovation and change. In this vein, GEO draws attention, provides reflexivity [44], and enables the entrepreneur to assess the constraints of the environment and envision or construct alternative opportunities or “new social realities”, enabling the entrepreneur to act with agency in shaping the social, political, and economic conditions or engage in institutional entrepreneurship [53].

3. Hypothesis Development

3.1. Environmental Dynamism and Digitalization Capability

The current business environment corroborates the increasing environmental dynamism while experiencing simultaneous crisis situations such as advances in digital technology and market turbulence [36,54]. The argument that digital technologies and resources should be utilized to increase core competency as the best way to prepare for highly volatile environmental changes has been drawing increasing attention [55]. Knudsen et al. [56] emphasize the importance of securing digital capabilities that enable efficient opportunity detection, timely adjustment, and transformation according to environmental changes because prediction is difficult in turbulent environments. Hanelt et al. [57] explain that firms tend to focus on developing digital technologies in order to be provided with sufficient sources of information and systematic analysis to address uncertainty. Gathering appropriate information in uncertain situations can predict what will happen, and firms can be provided with appropriate predictions about their strategy development based on vast amounts of information through big data analysis [58]. Particularly in turbulent situations, it takes a lot of effort to collect, digest, and understand related information as a whole, and in this area [59], firms often find themselves trying to effectively implement digital transformation-related processes based on digital technologies [60]. As a result, in a highly dynamic environment, firms should enhance their response to change, and this external environmental dynamism forces firms to cultivate their digitalization capabilities. Thus, we predict that firms’ strategic response to increasing environmental dynamism is to foster digitalization capabilities and propose the following hypothesis.
Hypothesis 1.
Environmental dynamism has a positive impact on digitalization capability.

3.2. Digitalization Capability and Sustainable Performance

There is a consensus not only on financial performance in predicting corporate sustainability but also on the argument that sustainability can now be improved when firms achieve non-financial performance where the environment and society coexist [61]. Therefore, firms face a situation where they need to understand not only financial performance but also the impact of their business actions on society and the environment and create non-financial performance. A number of previous studies agree that digital technologies are essential for growing an organization, securing a competitive advantage, and improving financial performance or non-financial performance as a source of new innovation [62,63]. For example, Kohtamäki, Parida, Patel and Gebauer [20] maintain that leveraging digital technologies can help streamline business activities, which can reduce transaction costs for firms and increase financial performance. Various scholars, including Ardito [64], stress that digital technology-based business operational transformation can drive economic performance by not only reducing production costs for firms but also enabling more effective utilization of available resources [8,65]. Moreover, empirical studies confirm digitalization capability as a driver of non-financial performance increases. Li et al. [66] explain that digitalization capabilities can provide efficient solutions to green product design, production, and service processes, reducing hazardous pollutants and minimizing natural resource consumption throughout the product life cycle. Peukert et al. [67] indicate that digitalization capabilities, such as applying data-driven carbon footprint analysis to business operations, contribute to the reduction in greenhouse gas emissions. Dubey et al. [68] emphasize that information flow management is strengthened through digital technologies (e.g., IoT, cloud, and big data analysis), contributing to strengthening the safety of society. Lee and Roh [8] suggest that digitalization capability development can unlock sustainable development potential. As such, digitalization capabilities tend to drive sustainable development by enabling non-financial value creation as well as financial performance for firms. Thus, we assume that digitalization capability will lead to sustainable performance improvements:
Hypothesis 2.
Digitalization capability has a positive impact on sustainable performance.
Hypothesis 2a.
Digitalization capability has a positive impact on financial performance.
Hypothesis 2b.
Digitalization capability has a positive impact on non-financial performance.

3.3. Green Entrepreneurial Orientation as a Mediator

According to recent research on pursuing sustainable development, it is reported that there is a strong relationship between entrepreneurs who want to utilize digitalization technologies and corporate green innovation behavior [69,70]. For example, Elia et al. [71] emphasize the need to seriously explore the opportunities that digitalization capabilities provide to increase the entrepreneurship needed to adapt to changing environments and meet stakeholder demands. Wu and Yu [72] point out that using digital technologies can help firms foster green entrepreneurial behavior in accessing external resources and performing corporate activities. George et al. [73] explain that an increasing number of entrepreneurial firms use digitalization to address climate change and promote sustainable development. Likewise, other studies have also shown that the incorporation of digital technologies further expands a firm’s GEO, such as technology-based green process innovation [74] or e-vendor relationship management [75]. Thus, we argue that developing digitalization capabilities that effectively integrate digital technologies and business processes can be used to increase the GEO of firms in dealing with the challenges that increase environmental dynamics.
In addition, it has been shown that firms with GEO continue to pursue change and take advantage of new opportunities to achieve better sustainable performance [76]. First, GEO can reduce environmental degradation and capture economic value by increasing market efficiency and mitigating market failure. For example, monopolies are considered market failures because firms possessing monopoly power often lead to inefficiency in the economic system [77]. To eliminate these market failures, GEO can help capture potential markets by adopting new technologies and production methods that increase energy efficiency and enable better utilization of natural resources [78]. Second, GEO can help firms overcome these challenges by improving their ability to identify social and environmental issues and leverage new knowledge [79]. By reducing the consumption of toxic substances and reducing hazardous emissions, GEO can reduce the damage to the health and safety of workers in the workplace and create non-financial value [80]. If firms develop robust GEOs, approaches to reducing pollution during production are likely to be highlighted in next-generation manufacturing processes, which can reduce toxic and hazardous emissions from the production process. Furthermore, firms with GEO can increase the efficiency of resource conversion by reducing the consumption of water, electricity, coal, or oil through green technologies used in the production process [81].
To put these discussions together, firms with high GEO can not only motivate them to drive creative practice in response to the opportunities they face in the business environment but also achieve sustainable performance by linking these ideas to drive innovative green behaviors [77]. Thus, we propose that GEO promotes sustainable performance by facilitating the transition and implementation of responsible environmental practices in the digital era.
Hypothesis 3.
GEO plays a mediating role between digitalization capability and sustainable performance.
Hypothesis 3a.
GEO plays a mediating role between digitalization capability and financial performance.
Hypothesis 3b.
GEO plays a mediating role between digitalization capability and non-financial performance.
Figure 1 depicts the framework of this research.

4. Methodology

4.1. Research Context and Sample Collection

To test the hypothesis of this study, an analysis was conducted on manufacturing firms in China. The following are the reasons why Chinese manufacturing firms are considered suitable environments for studying organizational responses and sustainable performance through digitalization capability in a dynamic business environment. First, China has been considered the world’s most turbulent country through a process of economic liberalization and market transformation, and this huge change poses serious challenges for firms [82]. Second, China has the largest digital consumption market in the world [83] and pushes for a digital economy with clear slogans such as ‘accelerating digital development’ and ‘building a digital China’ [84]. Third, manufacturing firms, which are generally located in the middle of the value chain, require GEO that can significantly increase the overall efficiency of the value chain and promote sustainable development [85].
This study selected a sample of Chinese manufacturing firms in Shanghai, Jiangsu Province, and Zhejiang Province, located in the Yangtze River Delta. This region is a representative economic belt, accounting for more than 20% of China’s GDP, mainly in manufacturing. Specifically, Shanghai represents China’s high-tech and heavy industries; Jiangsu Province rapidly advances its industry around IT manufacturing and high-tech equipment manufacturing; and Zhejiang Province is a region developed by concentrating manufacturing-oriented industrial clusters. Thus, manufacturers in the three regions above can represent China’s manufacturing firms.
The design of the initial questionnaire was developed in English because it was based on literature written in English, and a Chinese professor with a high proficiency in English translated the questionnaire into Chinese. This questionnaire was back-translated into English by bilingual (English–Chinese) researchers. Then, the conceptual equivalence was confirmed by comparing the initial version of the questionnaire in English with the back-translated questionnaire. Through this comparison, we confirmed that there was some difference in phrasing, but the meaning of the questions did not change, and we adopted the translated questions for the final version of the questionnaire.
Our sampling frame was identified in the database of the National Bureau of Statistics of China (NBSC). This all-inclusive firm-level dataset is compiled by the Chinese statistical agency and is directly under the State Council of the People’s Republic of China. This database includes information on manufacturing firms’ tangible assets, number of employees, sales, exports, and so on. From this group of Chinese manufacturing firms, an initial sample of 1000 firms was collected. We commissioned a survey from a Chinese market research agency to collect data as quickly and accurately as possible. We asked the market research agency to conduct a survey only of senior managerial staff, including the CEO, vice president, and general manager. In order to encourage participation in the survey, it was recommended that the purpose, necessity, and confidentiality of this study were fully explained using fixed-line telephones and e-mails. The survey took place over about three months, from early September to the end of November 2023, and received 457 responses; 7 responses containing missing data were deleted, and a total of 450 cases were used for the final analysis (a 45.0% effective response rate).
The characteristics of our sample are as follows. Among the responses, the most frequent firm age was over 20 years (n = 116, 25.78%), followed by 115 firms being 10–15 years old (25.26%), 109 firms being 15–20 (24.22%), 77 firms being 5–10 (17.11%), and 33 firms being less than 5 (7.33%). The most frequent response regarding total asset size was USD 10–50 million (n  =  144, 32.00%), followed by 121 firms with a size over USD 50 million (26.89%), 87 firms USD 5–10 million (19.33%), 65 firms USD 1–5 million (14.45%), and 33 firms less than USD 1 million (7.33%). Meanwhile, as a result of comparing the firm age and firm size between the responding and non-response firms through the t-test, there was no significant difference (p < 0.05), indicating that the risk of non-response convenience was low.

4.2. Variables and Measurement

All items in this paper have been discussed in the existing literature, utilizing a Likert five-point scale (1 = strongly disagree, 5 = strongly agree).
First, based on the items adopted by Li and Liu [36], three items are designed as key environmental factors, considering the effects of the industrial environment, technological progress, and customer demands. Second, digitalization capability was measured through four questions that captured respondents’ perceptions on how firms use digital technologies and resources, based on Lee and Roh [8]. Third, GEO was measured via asking how much firms are willing to take risks and challenge green innovation through three questions based on the characteristics of GEO described by Jiang, Chai, Shao and Feng [77]. Fourth, the firm’s sustainable performance was measured through its financial and non-financial performance, based on research by Elkington [86]. Specifically, the financial performance question inquires a firm’s net income, sales growth, and market share over the past five years, all of which have increased in comparison to competitors [87]. Non-financial performance was assessed by inquiring to what extent firms have helped reduce carbon emissions, save resources (or energy), and solve a wide range of social problems over the past five years [8]. Finally, previous studies point out that firm size and firm age have a crucial influence on firm performance, and thus, we controlled the impact of these firm-level variables on sustainable performance [88]. More detailed information and specific scale items are presented in Appendix A.

4.3. Analytical Methods

This study conducted an empirical analysis by applying the PLS structural equation model (PLS-SEM). Smartpls4.0 software was used for this analysis. Structural equation models have recently been widely used in the field of social science research as they can indirectly measure latent variables that are difficult to observe and explain measurement errors of observed variables. In particular, since the PLS structural equation model focuses on the explanation and prediction of endogenous latent variables, it does not assume a specific distribution in the estimation of variables and thus has the advantage of being applied in a wider variety of fields [89]. Accordingly, PLS-SEM is useful for predictive analysis and exploratory analysis. Our study discusses the interplay of environmental dynamism, digitalization capability, green entrepreneurial orientation, and sustainable performance. In order to measure these mechanisms, an analysis should be performed from an integrated perspective that connects the firm’s internal capabilities and external influencing factors. Due to this usefulness, we determine that utilizing PLS-SEM is more effective in reliably estimating parameters and verifying integrated causality.

5. Results

5.1. Reliability and Validity Tests

The acceptability of this study was evaluated by verifying the confirmatory factor analysis (CFA), reliability, convergence validity, and discriminant validity of the model using the PLS-SEM [90]. If Cronbach’s alpha, composite reliability, and rho_A values exceed 0.7, the study model can be judged to have sufficient internal consistency and constant validity [91]. Table 1 shows the results of the measurement assessment. First, Cronbach’s alpha coefficient for all constituent concepts was 0.824 or higher, and the rho_A value was above 0.823. Second, the factor weights and factor loadings of all variables were significant, and the AVE values for all configurations were greater than 0.652, which provides strong evidence of convergence validity. Third, all HTMT values were lower than 0.85, indicating that discrimination validity was assured [92]. Finally, 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 are larger than the square of the correlation coefficients between all configurations.

5.2. Common Method Bias Tests

We have identified the common method bias (CMB) through three analyses. First, the minimum and maximum values of the variance inflation factor (VIF) for the data used were 1.789 and 2.817, respectively, with both values below the 3.3 threshold [93]. Second, Harman’s single factor analysis showed that the principal component value was 27.4% and less than 50% [94]. Third, the results from analyzing the correlation between marker variables (M1), which are composed of cost leadership and existing structures, were not statistically significant, confirming that there is no theoretical connection between M1 and existing structures [95]. These validations indicate that the research model is unlikely to have a CMB problem.

5.3. Hypothesis Tests

Table 2 and Figure 2 present the results of the path analysis for verifying the hypothesis. First, the path from environmental dynamism to digitalization capability was statistically significant and positively correlated (b = 0.420, p < 0.000), supporting Hypothesis 1. The explanatory power (R2) for digitalization capability was found to be 0.176, and the Stone–Geisser predictive relevance (Q2) was also analyzed to exceed 0 at 0.170. Second, the coefficients of the path between digitalization capability and sustainable performance, financial performance (b = 0.323, p < 0.000), and non-financial performance (b = 0.309, p < 0.000) were also significant, indicating that Hypothesis 2 was accepted. In addition, there was a positive significance (b = 0.415, p < 0.000) between digitalization capability and GEO. GEO was R2 (0.172) and Q2 (0.080). Furthermore, GEO was found to have a significant effect on both financial performance (b = 0.310, p < 0.000) and non-financial performance (b = 0.329, p < 0.000). The financial performance was R2 (0.284) and Q2 (0.116), while the non-financial performance was R2 (0.288) and Q2 (0.097). As a result of verifying partial and complete mediation through the Baron and Kenny [96] three-step test, there was a significant partial mediation effect (p < 0.05). Thus, Hypothesis 3 was also supported. Meanwhile, investigating whether control variables such as firm age and firm size affected sustainable performance did not show statistically valid results.

6. Discussion and Implications

6.1. Main Findings

Based on contingency theory and the DC perspective, this study explores the interplay between environmental dynamism, digitalization capability, GEO, and sustainable performance. Specifically, this study explored the impact of environmental dynamism as a driver of digitalization capability development. Our findings confirm that environmental dynamism has a significant impact on digitalization capability [97,98,99]. This supports the argument of some studies which cite environmental factors as drivers of digitalization capability. In addition, we analyze the interplay between digitalization capability and sustainable performance. While the existing literature has produced some contradictory results between digitalization capability and sustainable performance, this study confirms that digitalization capability is a strong driver of sustainable performance. Finally, by identifying the mediating role of GEO between digitization capabilities and sustainable performance, we provide a foundation for why some companies are more successful in achieving sustainable performance than others. As a result, this study provides important implications for promoting sustainable development in both the literature and practice and also presents a contribution to current knowledge.

6.2. Theoretical Contributions

This study contributes to the theoretical literature and empirical results in the following ways. First, this study predicted a positive relationship between environmental dynamism and digitalization capability by linking the contingency theory and the DC perspective, and the empirical results were found to support this hypothesis. These results support the discussion of the literature emphasizing digitalization in a turbulent business environment [56,100] and are meaningful as a result of reinforcing some views that the acceleration of digitalization is triggered by external environmental influences. This clarifies the debate over whether environmental dynamics are the drivers of digitalization capability development. Thus, this study indicates that the greater the environmental dynamics, the more digitalization capabilities can be cultivated with a higher level of DCs to respond to uncertainty.
Second, by identifying the positive causal relationship between digitalization capability and sustainable performance, it reinforces the existing view that leveraging digital technologies and resources can be used as a main tool to capture and innovate sustainable business opportunities [10,101]. Based on the perspective of DCs, this study confirmed that digitalization capability has a positive effect on both financial and non-financial performances. As digital technologies promote knowledge distribution and enhance innovation capabilities, improving organizational operations and production processes is not surprising [102]. Existing studies point out that digitalization capability can help firms optimize existing resource allocations and improve energy and material utilization efficiency to drive sustainable performance [66,103]. The results of this study are consistent with these discussions and emphasize that digitalization capability should be developed in order to move toward the sustainable development of firms. Thus, this study advances our understanding of digitalization capability as the DCs needed to achieve sustainable performance in modern business environments are increasing with uncertainty.
Third, the positive mediating effect of GEO on digitalization capability and sustainable performance supports research from the entrepreneurial perspective that GEO is a pivotal factor in enhancing sustainability in a business environment where digitalization is rapidly spreading [51,77,78]. Our empirical evidence shows that digitalization capability not only has a direct positive effect on financial and non-financial performance through GEO but also has an indirect positive effect. This shows that digitalization capabilities are external drivers of GEO. It is also consistent with the discussion that GEO is required to drive sustainable development by encouraging firms to use digital technologies and resources to challenge innovative environmental practices [104,105,106]. Thus, our study provides a broad view of corporate sustainable development from an entrepreneurship perspective by securing significance in achieving non-financial performance as well as their financial performance through GEO.

6.3. Practical Implications

This study shows that environmental dynamism has a significant impact on the development of digitalization capability, and corporate managers should keep an eye on accidental changes in the business environment and make the most of them to drive successful digitalization capability development. Given that this digitalization capability also has a significant impact on firms in emerging economies, managers should be aware of the decisive role of environmental dynamics and confidently invest in developing digitalization capability to cope with changes in the business environment. In particular, our empirical findings based on the context of China can have important implications for firms operating in other emerging countries. Furthermore, ensuring GEO can be a pivotal factor in achieving sustainable performance, and thus, business managers should explore and actively challenge more opportunities based on their digitalization capability to rebuild the organization into a competitive one. Accordingly, inspiring managers’ GEO can further promote sustainable development by enabling firms to proactively respond to the development of diverse capabilities for innovation that can increase sustainability.

6.4. Limitations and Future Research Directions

Despite these contributions, this study has some limitations. First, the development of a firm’s digitalization capability can be driven not only by external factors but also by internal circumstances. In this vein, this study limited its scope of digitalization capability to external accidental environmental factors as a determinant of the development of digitalization capability. Second, as digitalization is emerging as a major issue in firms’ responses to sustainable growth, it is necessary to more systematically consider the development of digitalization capability. In particular, paying attention to the discussion of the detailed components and sub-capacities that make up digitalization capability will compensate for the insufficient results found in this study. Third, as the results of this study are based on Chinese corporate samples, more studies should be conducted in other countries and regions because their generalizability may be limited. Finally, this study is based on survey data; it can be seen that there are some fundamental limitations in securing corporate changes and data validity. In future studies, more meaningful implications will be obtained if longitudinal studies are conducted based on time series and/or secondary data provided by authoritative institutions.

Author Contributions

Y.L. and M.-J.L. contributed to the conceptualization, methodology, investigation, and writing—original draft. Y.L., J.-M.K. and M.-J.L. applied the research model and performed data collection, data curation, and formal analysis. Y.L., J.-M.K. and M.-J.L. participated in the revision, review, and editing of the manuscript and validation. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

The data used in the results will be provided upon reasonable request.

Acknowledgments

The authors would like to thank the editors and anonymous reviewers for their insightful comments and suggestions.

Conflicts of Interest

The authors declare no conflicts of interest.

Appendix A. Results of Confirmatory Factor Analysis for Measurement (n = 450)

ConstructItemsSFLMeanSDVIFSources
Environmental dynamism[ED1] Volatility of industrial environment0.8923.101.362.282Li and Liu [36]
[ED2] Volatility of industry technology 0.8472.861.101.919
[ED3] Volatility of customer demands0.8442.891.091.707
Digitalization capability[DC1] To digitalize everything that can be digitalized0.8973.011.402.817Lee and Roh [8]
[DC2] To achieve information exchange through digitality0.8062.781.101.817
[DC3] To create stronger networking between the different business processes using digital technologies0.8172.821.121.867
[DC4] To collect massive volumes of data from different sources0.8102.801.121.870
Green entrepreneur orientation[GEO1] An aggressive investment for green practice toward uncertainty0.9013.481.402.499Jiang, Chai, Shao and Feng [77]
[GEO2] Efforts for R&D and technological innovation activities for greening0.8403.201.121.875
[GEO3] Leading the way in introducing green products, services, or technologies0.8383.101.111.766
Financial performance[FP1] Profit growth is superior to that of the main industry competitors0.9032.961.362.282Dey, Malesios, De, Chowdhury and Abdelaziz [87]
[FP2] Growth in return on investment is superior to that of industry leaders0.8372.811.091.919
[FP3] Market share growth is superior to that of main industry competitors0.8422.901.091.707
Non-financial performance[NFP1] Reduces its energy consumption compared to its main industry competitors0.9092.811.372.479Lee and Roh [8]
[NFP2] Reduces waste emissions compared to its main industry competitors0.7942.591.091.892
[NFP3] Reduced the environmental impacts of its products or services compared to its main industry competitors0.7752.661.091.841
[NFP4] Reduces social inequality compared to its main industry competitors0.7762.721.061.837
[NFP5] Contributes to the spread of social values compared to its main industry competitors0.7742.661.041.789

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Sustainability 16 07674 g001
Figure 1. Research model.
Figure 1. Research model.
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Figure 2. The estimated results of the structural equation analysis. Note: Non-significant paths are shown by the dotted lines; *** p < 0.001.
Figure 2. The estimated results of the structural equation analysis. Note: Non-significant paths are shown by the dotted lines; *** p < 0.001.
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Table 1. Correlations, reliability, and convergent and discriminant validity.
Table 1. Correlations, reliability, and convergent and discriminant validity.
ConstructFirm AgeFirm Size0102030405
Firm age1.000
Firm size0.7051.000
01. Environmental dynamism−0.034−0.0490.861
02. Digitalization capability0.0290.0680.4200.833
03. Green entrepreneur orientation−0.098−0.1000.3240.4150.860
04. Financial performance−0.022−0.0200.4210.4510.4450.861
05. Non-financial performance−0.023−0.0150.3770.4450.4580.4070.807
Cronbach’s α 0.8260.8520.8240.8250.865
rho_a 0.8260.8530.8230.8270.866
AVE 0.7420.6940.7400.7420.652
R2 0.1760.1720.2840.288
Q2 0.1700.0800.1160.097
HTMT < 0.85 YesYesYesYesYes
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, rho_a = Dijkstra and Henseler’s composite reliability, AVE = average variance extracted, HTMT = heterotrait–monotrait ratio of correlations.
Table 2. Results of path effect.
Table 2. Results of path effect.
Path β S.E.t-Statisticp-Value95% Confidence Interval
(Lower Bound, Upper Bound)
ED→DC0.4200.0429.9620.000
DC→GEO0.4150.04110.2160.000
DC→FP0.3230.0437.5930.000
DC→NFP0.3090.0447.0720.000
GEO→FP0.3100.0397.9060.000
GEO→NFP0.3290.0526.3090.000
DC→GEO→FP0.1290.0216.1280.000(0.091, 0.173)
DC→GEO→NFP0.1370.0275.1330.000(0.090, 0.194)
Firm age→FP0.0140.0610.2250.822
Firm age→FNP0.0040.0550.0770.939
Firm size→FP−0.0210.0600.3450.730
Firm size→NFP−0.0060.0550.1050.916
Note: All indirect effects are partially mediated, 5000 iterations for bootstrapping, S.E. = standard error, ED = environmental dynamism, DC = digitalization capability, GEO = green entrepreneur orientation, FP = financial performance, NFP = non-financial performance.
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Liang, Y.; Koo, J.-M.; Lee, M.-J. The Interplay of Environmental Dynamism, Digitalization Capability, Green Entrepreneurial Orientation, and Sustainable Performance. Sustainability 2024, 16, 7674. https://doi.org/10.3390/su16177674

AMA Style

Liang Y, Koo J-M, Lee M-J. The Interplay of Environmental Dynamism, Digitalization Capability, Green Entrepreneurial Orientation, and Sustainable Performance. Sustainability. 2024; 16(17):7674. https://doi.org/10.3390/su16177674

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Liang, Yi, Jung-Mo Koo, and Min-Jae Lee. 2024. "The Interplay of Environmental Dynamism, Digitalization Capability, Green Entrepreneurial Orientation, and Sustainable Performance" Sustainability 16, no. 17: 7674. https://doi.org/10.3390/su16177674

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