Bridging dynamic capabilities and the knowledge-based view: Digital antecedents of sustainability-oriented innovation and environmental governance

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Emerging digital technologies are transforming how organizations sense, interpret, and respond to environmental challenges. In this study, we develop and test a model grounded in the Dynamic Capabilities View and the Knowledge-Based View that explains how big data analytics capability, Internet of Things intensity, and artificial intelligence assimilation, collectively referred to as emerging digital capabilities, enhance environmental governance through sustainability-oriented innovation. We conceptualize these technological capabilities as complementary digital inputs that enhance the organization’s sensing and analytical capacity, while knowledge integration and creation capability serves as the central conduit through which digital inputs are transformed into sustainability-oriented innovation and, ultimately, environmental governance outcomes. Using survey data collected from organizations across multiple sectors, we employ PLS-SEM to test the sequential paths from digital capabilities through knowledge integration and creation to innovation and governance effectiveness. The results demonstrate that well-developed capabilities stimulate knowledge integration and creation, which in turn drives sustainability-oriented innovation, leading to more transparent, adaptive, and evidence-based environmental governance. Green strategic orientation is introduced as a boundary condition that shapes how knowledge created through digital capabilities is channelled toward sustainability innovation and governance outcomes. This paper makes a theoretical contribution by integrating the Dynamic Capabilities View and the Knowledge-Based View theories in the context of digital sustainability, showcasing how knowledge creation transforms digital capability into environmental governance value. From a managerial perspective, this study positions knowledge integration and creation as the engine of sustainable organizational management.