Digitalization and network capability as enablers of business model innovation and sustainability performance: The moderating effect of environmental dynamism

Abstract

As a multidisciplinary maneuver accelerated by the global pandemic, digital transformation involves changes in technological development, organizational processes, inter-organizational relationships, and business models that influence the organization’s performance and the wider environment. To better understand the inherent mechanisms of digital transformation and their positive and negative outcomes, researchers and practitioners are exploring how and when digitalization—that is, the application of digital technologies—can lead to superior sustainability performance. Based on dynamic capabilities theory, we investigate the influence of digitalization and network capability on firms’ sustainability performance, and we propose that business model innovation (BMI) plays a mediating role while environmental dynamism plays a moderating role. Both economic and environmental performance are considered subdimensions of sustainability. We examine Chinese manufacturing firms because they are under tremendous pressure to undertake digital transformation. To achieve broad generalizability, our survey-based methodology targeted 1,600 firms; we received 255 completed and validated responses. The results indicate that the effects of digitalization on novelty- and efficiency-centered BMI are mediated by network capability and that both novelty- and efficiency-centered BMI mediate the effects of digitalization and network capability on economic and environmental performance. Environmental dynamism also negatively moderates the relationship between digitalization and efficiency-centered BMI; however, it positively moderates the effect of network capability on efficiency-centered BMI. This study provides theoretical and managerial insights into organizations’ trajectories toward digital transformation and sustainable development, with special applicability to Chinese manufacturing firms.