From openness to orchestration: the relationship between digital green orchestration capability and business model adaptation in complex environments

Abstract

This study examines the relationships of open innovation (OI) with the development of Digital Green Orchestration Capability (DGOC) and the integration of digital transformation and sustainability among manufacturing small and medium-sized enterprises (SMEs). It further examines the effects of DGOC on business model adaptation and firm performance under conditions of environmental complexity. A quantitative survey was conducted among 232 Iranian manufacturing SMEs. The proposed research model was tested using partial least squares structural equation modeling (PLS-SEM) with SmartPLS 4.0, incorporating mediation, moderation, and nonlinear analyses. The results show that inbound OI positively influences DGOC, whereas outbound OI exhibits an inverted U-shaped relationship, indicating that excessive openness reduces orchestration effectiveness. DGOC is positively associated with business model adaptation and statistically mediates the relationship between OI and organizational adaptation. Environmental complexity strengthens the effects of DGOC on both business model adaptation and firm performance. However, the direct association between business model adaptation and firm performance was positive but not statistically significant in this cross-sectional sample. This result indicates that a clear performance association was not observed at the time of data collection; future longitudinal research should examine whether such benefits materialize over time. This study introduces and empirically validates DGOC as a novel dynamic capability that integrates digital transformation, sustainability, and ecosystem collaboration within a unified orchestration framework. By combining dynamic capabilities theory, open innovation, and complexity theory, it advances understanding of how SMEs convert external knowledge into coordinated digital and green transformation in complex environments while providing practical guidance for managers and policymakers seeking to enhance organizational adaptability.