The paper examines the relationship between digital transformation (DT) and green innovation (GI) in small and medium-sized enterprises (SMEs) in developing economies through the lens of resource constraints to fill empirical gaps about the digital-environmental nexus. Based on the Dynamic Capabilities Theory and innovation management approaches, the study uses a quantitative research design based on survey data collected from 411 SMEs in Kosovo. Multi-item Likert scales were used and validated, and the analysis of the hypothesized relationships was done with the help of partial least squares structural equation modeling (PLS-SEM). The findings suggest that there is a positive and statistically significant relationship between DT and GI ( β = 0 . 334 , p <0.001), which is accounts for a rather large percentage of variance in the outcomes of green innovation (R 2 = 0 . 656 ). As a precursor of DT, digital human capital quality ( β = 0 . 655 , p < 0.001) confirms the significance of skills and competencies at the firm level. The mediating role of technological innovation capability (TIC) between the DT-GI relationship implies that learning, absorptive, and recombination processes are a significant means by which the digital resource is translated into GI results. Moreover, investment in digital infrastructure and societal awareness of digital change have positive effects with GI, and the digital policy support does not show a significant moderating effect on the relationship between DT and GI, which supports the facilitating but not enhancing role in the studied environment. The research also has theoretical value, with the extension of the Dynamic Capabilities Theory to the concept of environmentally oriented innovation with SMEs, with its focus on the eventual conditional and context-specific character of outcomes of digital transformation in the developing economies. Practically, the findings highlight the need to empower digital human capital, innovation potential and favourable digital ecosystems in order to enhance sustainable change with resource-constrained SMEs. • Digital transformation fosters green innovation among SMEs. • Human capital quality drives digital adoption and eco-innovation. • Technological innovation capability mediates the DT-GI link. • Policy support acts as a direct enabler, not a moderator. • Infrastructure and societal awareness enhance sustainable outcomes.
Gashi et al. (Wed,) studied this question.