Shaping Sustainable Future: Investment in Digital Transformation and Environmental Pollution on Green Innovation

Abstract

The pursuit of sustainability in the twenty-first century compels researchers, policymakers, and industries to reconcile economic development with environmental protection. This study examines how digital transformation and environmental pressures—particularly per capita methane emissions—shape cross-national trajectories of green innovation. Using panel data from 54 countries (2000–2022), green innovation is operationalized through environmental patent counts, digital transformation through internet penetration rates, and environmental pressure through CO₂-equivalent methane emissions. Control variables include GDP per capita, exports, urbanization, and foreign direct investment. Employing Pooled OLS, Fixed Effects, and Random Effects models, with the Hausman test favoring Random Effects (χ² = 5.31, p = 0.622), the analysis is validated through stationarity diagnostics and heteroskedasticity-robust checks.

Findings reveal that digital transformation exerts a strong, statistically significant positive effect on green innovation, highlighting the role of digital infrastructure in knowledge diffusion, R&D acceleration, and eco-technological advancement. By contrast, methane emissions show a negative yet statistically insignificant relationship, indicating that ecological pressures alone rarely catalyze innovation without supportive policies. Among controls, exports display a tentative positive association, while GDP, FDI, and urbanization remain largely insignificant once digitalization is accounted for.

The results underscore digital transformation as a critical enabler of sustainable technological progress, while emphasizing that environmental policies must complement pollution pressures with regulatory incentives and market mechanisms to stimulate eco-innovation. By integrating digital infrastructure expansion with environmental regulation, governments can accelerate the diffusion of green technologies and secure innovation as a cornerstone of sustainable development. This study contributes to both academic discourse and policy design by evidencing the transformative role of digitalization in advancing environmental sustainability and cautioning against reliance on pollution pressures alone to drive green innovation.