Leveraging Green Innovation to Foster Sustainable Development through Green Dynamic Capabilities

Green dynamic capabilities are crucial for sustainable development and have gained substantial scholarly as well as practitioners’ attention. Given the escalating concerns about climate change, resource depletion, and environmental stress, companies must address ecological issues and promote green innovation. The literature emphasizes the role of environmental management practices, institutional pressures, and government regulations in driving green innovation. Despite this, there is a significant knowledge gap regarding the influence of GDCs on sustainable development through green innovation, especially with environmental regulations as a moderating factor in manufacturing firms. Effective use of GDCs can alleviate sustainability challenges such as pollution and resource depletion. This study aims to investigate the impact of GDCs on sustainable development via green innovation, moderated by environmental regulations, offering new insights into the interplay between green dynamic capabilities green innovation, and sustainable development within manufacturing firms in Pakistan. Primary data through survey design was gathered from manufacturing firms publicly traded on Pakistan's stock exchange. After testing for assumptions, covariance-based structural equation modeling approach was used where measurement model and structural model were developed. The data validates the underlying factor structure, their loadings and then testing the proposed hypotheses for direct relation, mediation and moderation. The results indicate that green innovation mediates the impact of GDCs on sustainable development, with environmental regulations moderating the relationship between GDCs and green innovation. The findings present important implications for both theory and practice.