Achieving sustainability through digital transformation: innovation mechanisms and boundary conditions

Purpose – Drawing on ambidextrous innovation theory and the perspective of external governance, this study theorizes the impact of digital transformation (DT) on corporate sustainability performance (CSP) by examining the mediating role of exploratory innovation capability (ERIC) and exploitative innovation capability (EIIC) as well as the moderating role of analyst coverage (AC). Design/methodology/approach – Using panel data from Chinese listed firms from 2011 to 2021, this study applies a fixed-effect model to empirically tests the proposed hypotheses. Findings – The findings show that, first, DT significantly enhances CSP, with notable heterogeneity across firms. Second, the positive impact of DT on CSP is mediated by both ERIC and EIIC. Third, AC significantly strengthens the DT–CSP relationship. Finally, post hoc analysis reveals that balanced improvements in ERIC and EIIC yield the greatest benefits for CSP. Originality/value – This study advances research at the intersection of DT and CSP, particularly in the environmental and social domains, by identifying ambidextrous innovation capabilities as key underlying mechanisms and analyst coverage as an important boundary condition.