Leveraging Artificial Intelligence (AI) Capability and Sustainability Orientation for Sustainable Performance: Mediating Role of Green Innovation in Malaysian Manufacturing Sector

Abstract

This study examines the influence of artificial intelligence capability and sustainability orientation on sustainable performance, with green innovation capability serving as a mediating variable. Grounded in the resource-based view, dynamic capabilities theory, and knowledge-based view, the research develops an integrated model to understand how digital transformation and strategic sustainability orientation contribute to long-term environmental and organizational outcomes. Data were collected from 197 respondents representing medium and large manufacturing firms in Malaysia. The model was tested using Partial Least Squares Structural Equation Modeling. The findings reveal that artificial intelligence capability has a significant positive impact on both green innovation and sustainable performance. While sustainability orientation positively influences green innovation, it does not have a direct effect on sustainable performance. However, green innovation capability significantly enhances sustainable performance and mediates the effects of both artificial intelligence capability and sustainability orientation. These results highlight the importance of green innovation as a critical mechanism through which digital capabilities and strategic sustainability efforts are translated into measurable performance outcomes. The study contributes to theory by linking technological and sustainability constructs and offers practical guidance for manufacturing firms aiming to align innovation, digital transformation, and sustainability goals in emerging economies.