Navigating Competitive Intensity: The Role of Digital Orientation in SMEs’ Green Innovations

This study investigates the interrelations among digital orientation (DO), green absorptive capacity (GAC), and radical green innovation (RGI) in small and medium-sized enterprises (SMEs) in China, emphasizing the mediating role of the realized-to-potential GAC ratio (R-P ratio) and the moderating effect of competitive intensity (CI). Data from 157 Chinese SMEs, analyzed through hierarchical regression and the bootstrap method, indicate that a strong digital orientation significantly enhances the R-P ratio and RGI. The R-P ratio mediates the relationship between DO and RGI, confirming that enhanced green absorptive capacity is crucial for leveraging digital orientation towards effective green innovation. Furthermore, competitive intensity positively moderates the relationship between digital orientation and the R-P ratio, enhancing the strategic use of digital tools to manage environmental challenges effectively. These findings extend the dynamic capabilities theory by integrating digital and green dimensions and offer practical insights for SMEs striving to incorporate sustainable practices through technological and digital advancements. This research enriches the discourse on the synergy between technology and environmental innovation within the knowledge economy framework, providing valuable perspectives for policymakers and business leaders aiming to foster a sustainable, innovative, and technologically adept business environment.