Digital transformation enabled management control capability and sustainable operational performance: the sequential roles of market sensing and green operations

Abstract

Digital transformation is reshaping how firms collect, interpret, and use information for operational and sustainability-related decisions. However, digital investments do not automatically improve sustainable operational performance. Drawing on Dynamic Capabilities Theory and management control perspectives, this study examines how digital transformation capability is associated with sustainable operational performance through a sequential pathway of management control capability, market sensing capability, and green operations capability. The model proposes that digital transformation capability strengthens management control capability by improving the availability, integration, and usefulness of information for planning, monitoring, coordination, and corrective action. Stronger management control capability is then expected to support market sensing, which enables firms to recognize changing customer, competitor, supplier, technological, and regulatory conditions. Market sensing capability subsequently supports green operations capability, including responsible sourcing, resource efficiency, waste reduction, cleaner operating practices, and environmentally conscious logistics. Using survey data from managers in Iranian manufacturing and service SMEs, the study tests the proposed relationships with partial least squares structural equation modeling. The findings support the theorized sequential pattern of associations and contribute by explaining how digital transformation capability can be translated through management control and market sensing into green operations and sustainable operational performance. The study also offers practical guidance for managers seeking to align digital systems, management control practices, market intelligence, and green operational priorities.