Environmental protection through green innovation performance

Purpose Businesses focus on digital transformation (DT) to improve performance; hence, this study aims to examine the relationship between DT and green innovation performance (GIP) within small- and medium-sized enterprises. In line with stakeholder theory, the study investigated the mediating impact of absorptive capacity (AC) and the moderating role of competitive pressure (CP) and environmental regulations (ERs). Design/methodology/approach Data were collected from 233 enterprises in China via an online survey and analyzed empirically. Findings Outcomes explained the positive and significant impact of DT on GIP and highlighted the mediating role of AC. In addition, CP and ERs were found to be convincing moderators, modeling dynamics of GIP. Conclusions extend enterprises’ understanding of how to strategically control DT and emphasize AC linked with ERs and CP. Social implications The study supports cleaner business practices by showing how digital transformation and knowledge absorption can help SMEs reduce environmental harm and contribute to sustainable development. Originality/value Theoretically, this study advances the literature on stakeholder theory and DT, shaping GIP. It also offers practical guidance for small- and medium-sized enterprises on aligning digital strategies with regulatory demands and using external knowledge to improve green innovation outcomes.