Balancing Growth and Sustainability: The Role of Technological Innovation, FDI , and Governance in Environmental Transition

Given the extensive environmental Kuznets curve (EKC) research, limited attention has been given to investigate technological innovation (TI), foreign direct investment (FDI), intellectual capital, and governance quality within developing economies like Malaysia. Besides, the synergistic short‐ and long‐run environmental effects of these dimensions remain underexplored, limiting policy insights to mitigate CO 2 emissions sustainably. Therefore, this study explores the impact of TI, FDI, intellectual capital, and governance quality on CO 2 emissions in Malaysia, tracing in short and long‐run trends by means of Pollution Haven, and Pollution Halo and EKC Hypotheses. The outcomes from the autoregressive distributed lag (ARDL) and fully modified OLS (FMOLS) exhibit that TI and intellectual capital substantially mitigate CO 2 emissions, highlighting their key role in pursuing sustainable development. On the contrary, no statistical impact of FDI was found on reducing CO 2 emissions. Industry growth, increased population, and GDP are also marked as dominant forces of CO 2 emissions, while governance quality and government expenditure reduce CO 2 emissions. Policymakers should prioritize TI and intellectual capital, while focusing on strengthening governance structures to ensure environmental compliance and improve sustainable development. Moreover, they should align FDI with green industries, promote energy efficiency, and integrate strict institutional reforms to simultaneously sustain economic growth and contribute to Malaysia's long‐term CO 2 emissions reduction strategy. This study extends the EKC hypothesis through the integration of TI, intellectual capital, FDI, and governance quality within a unified ARDL model. Through this integration, it further offers a multidimensional perspective on environmental sustainability, thereby contributing to the achievement of SDGs.