Innovation Capabilities and Sustainable Performance: Evidence From Vietnam's Manufacturing and Service Sectors

Abstract

This study investigates how organizations in Vietnam achieve sustainable performance through green knowledge management (GKM), digital tools (DKM), leadership and culture (LOC), and institutional support (INS). Drawing on the Knowledge‐Based View, Dynamic Capabilities Theory, Institutional Theory, and Leadership Theory, we develop and test a model in which innovation capabilities (IC) mediate the link between organizational enablers and sustainability outcomes. Rather than treating these theories as interchangeable explanations, the study maps each theoretical lens onto a distinct capability‐building mechanism: knowledge conversion, dynamic reconfiguration, behavioral and cultural activation, and legitimacy‐enabled institutional support. Survey data from 350 firms across the manufacturing and service sectors were analyzed using structural equation modeling (SEM). Results show that all dimensions of GKM, DKM, LOC, and INS significantly enhance IC. Knowledge application emerged as the strongest GKM predictor, while AI‐based platforms were the most influential among DKM. Process eco‐innovation was the most powerful driver of sustainable performance across financial, environmental, and social dimensions. Mediation tests confirmed IC as a key mechanism translating organizational resources into sustainability outcomes. The study integrates multiple theoretical perspectives and validates the mediating role of eco‐innovation. It contributes to Corporate Social Responsibility and Environmental Management research by explaining how firms convert sustainability‐oriented knowledge, digital tools, leadership practices, and institutional pressures into innovation capabilities that generate triple‐bottom‐line performance. From a practical perspective, the findings guide managers in leveraging green knowledge, digital tools, and leadership culture, and inform policymakers about the role of incentives, regulations, and certifications in supporting sustainability transformation.