This paper aims to investigate the “Twin Transition” (digital and green) in small and medium-sized enterprises (SMEs) within emerging markets. Specifically, it examines whether the formalization of Strategic Management practices mediates the relationship between Digital Adoption and Green Innovation outcomes, drawing on cross-national evidence.
Drawing on the dynamic capabilities and resource-based views, this study analyzes harmonized microdata from 5,371 firms across eight Latin American countries using the World Bank Enterprise Surveys (WBES) (2023–2024). Partial least squares structural equation modeling and importance-performance map analysis (IPMA) were used to test the hypotheses and assess managerial priorities.
The results indicate that Strategic Management acts as a complementary mediator (ßindirect = 0.023, p < 0.001). Digital Adoption forces the professionalization of management (monitoring, targets and incentives), which subsequently drives green innovation. The IPMA reveals a “managerial capability gap”: while firms exhibit high digital adoption performance, their strategic management performance lags behind despite being highly important for green outcomes. The country-level institutional context emerged as the most critical determinant of eco-innovation.
Limitations include the use of cross-sectional data, preventing strict causal inference over time. In addition, the single-item measure for Green Innovation, while standard in WBES research, captures adoption but not depth. Theoretical implications confirm that in emerging economies with institutional voids, internal managerial discipline acts as a crucial bridging mechanism between technology and sustainability, refining the “Twin Transition” framework beyond developed-market contexts.
The findings suggest that SMEs have acquired digital tools but lack the managerial discipline to leverage them for sustainability. Managers must pivot focus from acquiring basic digital technology to integrating data into formalized strategic decision-making (key performance indicators). Policymakers should target subsidies toward managerial training and strengthening national green ecosystems rather than basic hardware acquisition.
This study highlights how digital formalization can accelerate the environmental responsiveness of the private sector in Latin America. By linking digital tools to green outcomes through better management, SMEs contribute to regional sustainable development goals, potentially reducing the environmental footprint of the industrial sector in developing nations while improving digital literacy and firm competitiveness.
This study bridges the digital–environmental literature gap by empirically validating the “formalization mechanism” in a massive multicountry sample (n > 5,300). It challenges techno-centric views by providing evidence that managerial agency is a significant driver of the Twin Transition in emerging economies, offering a distinct perspective from infrastructure-led models prevalent in South Asia or state-led models in East Asia.
