📈 economics

AI and digital capabilities: drivers of sustainable performance and competitive advantage

This study analyzes data from 1,120 Vietnamese manufacturing SMEs to demonstrate that AI and digital capabilities drive green innovation, which in turn mediates the path toward enhanced sustainable performance and competitive advantage.

Original authors: Huong Đinh Thi, Ngoc Anh Nguyen, Hong Nhung Nguyen, Kim Thoa Bui Thi

Published 2026-07-14

📖 6 min read🧠 Deep dive

CC BY 4.0

Original authors: Huong Đinh Thi, Ngoc Anh Nguyen, Hong Nhung Nguyen, Kim Thoa Bui Thi

Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). ✨ This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer

Imagine a bustling factory floor in Vietnam, but instead of just clanking gears and smoke stacks, picture a high-tech playground where tiny, invisible robots (that's Artificial Intelligence, or AI) are whispering secrets to the human managers. This new study, led by a team from Thuongmai University, went out to 1,120 of these managers to see what happens when you let these robots run the show. They wanted to know: Does this tech magic help companies become greener, more successful, and harder to beat by competitors?

Here's the scoop, served up with a side of analogies.

The Main Discovery: The "Green Rocket" Chain Reaction

The study suggests a powerful chain reaction. Think of AI as the fuel. You can't just pour fuel into a car and expect it to fly; you need an engine. In this story, Digital Capabilities (the company's ability to use tech, like having a super-fast internet connection and smart software) are the engine.

The researchers found that when you add more AI fuel, the engine (Digital Capabilities) gets stronger. But here's the kicker: the fuel also helps build the Green Innovation (GI) rocket directly, and it also does so through the engine. Green Innovation is like a special, eco-friendly turbocharger that makes the factory run cleaner, waste less, and use less energy.

The study suggests that AI is a massive driver for both the engine and the rocket. In fact, the data shows AI has a huge impact on Green Innovation (a score of 0.633), which is even stronger than its impact on just building the engine (a score of 0.444). Crucially, the paper confirms that AI doesn't just rely on the engine to work; it hands the managers the blueprints for the eco-friendly turbocharger directly as well. It's a dual-pathway: the fuel powers the engine, which then powers the rocket, but the fuel also powers the rocket on its own.

The Destination: Sustainable Performance and Competitive Advantage

Once the Green Innovation rocket is firing, where does it go? It boosts two things:

Sustainable Performance (SP): This is the company's overall health score—how well they do financially, socially, and environmentally all at once. The study suggests Green Innovation is a super-strong booster for this (a score of 0.672).
Competitive Advantage (CA): This is the "secret sauce" that makes a company the coolest kid on the block, harder for rivals to copy. Green Innovation helps here too (a score of 0.655), though the study notes it's slightly less direct than the boost to overall performance because winning the market also depends on other things like marketing and brand reputation.

The paper also suggests a long, winding road for the Digital Capabilities (the engine). The engine doesn't just jump straight to the finish line; it takes a detour. It helps build the Green Innovation rocket, which then improves Sustainable Performance, and that is what finally boosts the Competitive Advantage. It's a relay race where the baton is passed through several hands before the company crosses the finish line.

What the Paper Rules Out (The "Not-So-Simple" Stuff)

It's important to know what this study doesn't say. The paper explicitly argues against the idea that you can just slap AI onto a business and instantly get a competitive edge without the other steps.

It's not a magic wand: The study suggests that while AI is great, it doesn't work in a vacuum if you ignore the chain. However, the paper explicitly states that AI does have a significant direct effect on Green Innovation. So, while you need the engine (Digital Capabilities) to get the full picture, the fuel (AI) is powerful enough to start the rocket (Green Innovation) on its own, too.
It's not a guaranteed "win" for everyone: The paper notes that going green can sometimes be expensive or risky in the short term. It doesn't promise that every single company will instantly become a billionaire; it just suggests that the path to long-term success involves these green, digital steps.
It's not a crystal ball: The study is based on a snapshot in time (a survey), so it suggests these connections exist, but it doesn't prove that A caused B in a time-travel sense. It shows they move together strongly.

How Sure Are They?

The researchers are pretty confident, but they use careful language. They didn't just guess; they gathered data from 1,120 managers in Vietnam's manufacturing sector. They used a fancy statistical tool (PLS-SEM) to crunch the numbers.

They found that AI explains about 19.7% of the changes in Digital Capabilities.
They found that AI and Digital Capabilities together explain about 50.7% of the changes in Green Innovation.
They found that Green Innovation and Sustainable Performance together explain about 50.9% of the changes in Competitive Advantage.

These numbers suggest the relationships are strong and real, but they also admit there's still a lot of mystery left (the other 40-50% of the variance) that depends on other factors like market trends or management skills.

The "So What?" for a Curious Teen

Imagine you're building the ultimate video game character.

AI is the Power-Up you find.
Digital Capabilities are your Inventory Management (how well you can use that power-up).
Green Innovation is the Special Move that saves the world (and the environment).
Sustainable Performance is your High Score.
Competitive Advantage is becoming the Top Player everyone wants to team up with.

This paper suggests that if you just grab the Power-Up (AI) but don't know how to manage your inventory (Digital Capabilities), you might not unlock the Special Move (Green Innovation) as efficiently as you could. But the study also reveals that the Power-Up (AI) is so strong it can actually trigger the Special Move (Green Innovation) directly, even without waiting for the Inventory Management to fully upgrade. However, to get the massive High Score and become the Top Player, you still need to follow the whole chain of steps: the Power-Up boosts your Inventory, which helps the Special Move, which boosts your High Score, which finally makes you the Top Player. The study suggests that in the world of Vietnamese factories, this "Power-Up" is the key to unlocking a greener, more successful future, but you have to follow the whole chain of steps to get there.

The authors, who are based in Vietnam, suggest that for small and medium-sized businesses to survive and thrive in the future, they need to invest in this tech, train their people, and focus on being green. It's not just about being "nice" to the planet; it's about building a business that can't be beaten.

Technical Summary: AI and Digital Capabilities as Drivers of Sustainable Performance and Competitive Advantage

Problem Statement and Research Gap
This study addresses the multifaceted influence of Artificial Intelligence (AI) and Digital Capabilities (DC) on Green Innovation (GI), Sustainable Performance (SP), and Competitive Advantage (CA) within Small and Medium-sized Enterprises (SMEs). While existing literature acknowledges the individual roles of AI, DC, and GI, there is a significant gap in understanding their integrated relationships, particularly within emerging economies like Vietnam. Previous research has largely focused on developed nations or isolated variables, failing to concurrently examine the mediating mechanisms of DC and GI in the link between AI and SP, or the mediating roles of GI and SP in the relationship between DC and CA. Furthermore, the specific intermediary function of DC in translating AI potential into tangible green outcomes remains underexplored.

Theoretical Framework
The research is grounded in three primary theoretical lenses:

Resource-Based View (RBV): Posits that AI and DC serve as unique, scarce, and non-transferable strategic resources that enable firms to achieve sustained competitive advantage and superior performance.
Efficiency Theory (ET): Suggests that AI and DC enhance operational effectiveness, optimize resource utilization, and foster a foundation for long-term GI and SP.
Sustainable Development Theory (SDT): Advocates for the integrated development of economic, social, and environmental dimensions, framing AI and DC as tools to refine data governance and facilitate sustainable decision-making.

Methodology

Data Collection: The study utilized a quantitative survey approach targeting 1,120 managers from SMEs in Vietnam's manufacturing sector. Data was collected via convenience sampling through online and offline channels.
Instrument: A structured questionnaire with 37 items measured five constructs: AI, DC, GI, SP, and CA, using a 7-point Likert scale. Scales were adapted from prior validated studies (e.g., Khan et al., Wang et al., Chang).
Analysis: Data analysis was conducted using SPSS 26 for descriptive statistics and Smart PLS 4 for Partial Least Squares Structural Equation Modeling (PLS-SEM). The analysis included tests for reliability (Cronbach's Alpha, Composite Reliability), validity (Convergent and Discriminant validity via HTMT), and multicollinearity (VIF). Hypotheses were tested using bootstrapping with 5,000 resamples.

Key Results
The structural model analysis confirmed all nine proposed hypotheses:

Direct Effects:
- AI $\rightarrow$ DC: AI positively influences Digital Capabilities ( $\beta = 0.444$ ).
- AI $\rightarrow$ GI: AI has a strong positive direct effect on Green Innovation ( $\beta = 0.633$ ).
- DC $\rightarrow$ GI: Digital Capabilities positively influence Green Innovation ( $\beta = 0.367$ ).
- GI $\rightarrow$ SP: Green Innovation significantly improves Sustainable Performance ( $\beta = 0.672$ ).
- GI $\rightarrow$ CA: Green Innovation positively affects Competitive Advantage ( $\beta = 0.655$ ).
- SP $\rightarrow$ CA: Sustainable Performance positively influences Competitive Advantage ( $\beta = 0.375$ ).
Mediating Effects:
- DC as a Mediator: DC significantly mediates the relationship between AI and GI ( $\beta = 0.163$ ).
- Sequential Mediation (AI to SP): AI influences SP through the sequential mediation of DC and GI ( $\beta = 0.110$ ).
- Sequential Mediation (DC to CA): DC influences CA through the sequential mediation of GI and SP ( $\beta = 0.108$ ).
Model Explanatory Power: The adjusted $R^2$ values indicate that the model explains 50.9% of the variance in CA, 50.7% in GI, 45.2% in SP, and 19.7% in DC.

Key Contributions

Theoretical: The study advances the literature by elucidating the mechanism through which AI influences GI, mediated by DC, specifically within the context of SMEs in emerging markets. It extends RBV by identifying AI and DC as intangible strategic resources that convert into GI. Furthermore, it integrates SDT and ET to explain how SMEs balance economic, environmental, and social objectives through these digital and green capabilities. The research fills a gap by testing the comprehensive chain of mediating effects (AI $\rightarrow$ DC $\rightarrow$ GI $\rightarrow$ SP $\rightarrow$ CA) rather than examining variables in isolation.
Practical: The findings provide actionable insights for Vietnamese SMEs and stakeholders. The authors suggest that increasing investment in digital infrastructure and AI platforms, coupled with employee training in digital skills, is essential for enhancing GI and SP. The study advocates for aligning GI strategies with sustainable development goals (specifically SDG 12 and 13) to achieve Net Zero targets by 2030. It emphasizes that AI should be utilized for energy management, supply chain optimization, and emission reduction to build a sustainable competitive edge.

Significance and Limitations
The paper claims to offer a cohesive theoretical framework interlinking RBV, SDT, and ET for digital transformation in developing economies. It highlights the necessity of employing AI and DC to improve green innovation and competitive advantage in emerging markets.

The authors acknowledge limitations, noting that the study is cross-sectional, which limits causal inferences, and is restricted to the Vietnamese manufacturing sector. They suggest that future research should employ longitudinal designs and include diverse countries and control variables (e.g., gender, age, income) to provide a more nuanced understanding of these relationships. The study does not propose new experimental applications but rather validates existing theoretical relationships within a specific empirical context.