Abstract
Drawing on the Dynamic Capabilities Theory, this study examines the direct and indirect effects of DT on firm performance conceptualised through economic, social, environmental, and digital competitive
advantage (DCA) dimensions, while investigating the mediating role of green innovation (GI). A
quantitative research design was employed using cross-sectional data collected from 314 hospitality
firms. Structural equation modelling (SEM) was applied to test the proposed relationships. The findings
reveal that DT positively and significantly influences all dimensions of firm performance, demonstrating
its strategic role in enhancing both economic and sustainability-oriented outcomes. The results further
indicate that DT significantly strengthens GI, suggesting that digital capabilities serve as important
enablers of environmentally sustainable innovation practices within hospitality firms. In turn, GI
positively affects economic, social, and environmental performance, confirming its importance in
supporting sustainable organisational development. However, GI was found to exert a negative effect on
DCA, implying that investments in sustainability-oriented innovation may not generate immediate
digitally driven competitive benefits due to associated implementation costs and capability adjustment
challenges. Mediation analysis further demonstrates that GI significantly mediates the relationships
between DT and economic, environmental, and DCA outcomes, while a negative mediating effect was
observed for social performance. This study makes several important contributions to theory and practice.
First, it advances DT literature by adopting a multidimensional perspective of firm performance that
extends beyond traditional financial indicators. Second, the study introduces and empirically validates
DCA as a novel strategic outcome within the DT framework. Third, the findings provide deeper insight
into the role of GI as a critical mechanism linking digitalisation and sustainable performance outcomes.
Practically, the study highlights the importance of aligning digitalisation and sustainability strategies to
improve long-term competitiveness, innovation, and resilience within the hospitality sector. The study
further offers policy-relevant insights for promoting sustainable digital transformation within emerging
economies.