Digital transformation and sustainability performance: an empirical study from Indonesia

PurposeDigital transformation and sustainability performance have attracted extensive academic attention in developed economies; however, research within developing markets such as Indonesia remains scarce. This study investigates publicly listed companies in Indonesia to address this gap.Design/methodology/approachGrounded in the resource-based view (RBV) and dynamic capability (DC) theory, this study employs panel regression that includes industry and year-fixed effects to ensure a more accurate assessment of the relationship between digital transformation and sustainability performance. The sample covers 255 firm-year observations from companies listed on the Indonesian Stock Exchange between 2019 and 2023.FindingsThe findings reveal an insignificant relationship between digital transformation and sustainability performance in the pre- and post-COVID-19 periods in the context of underdeveloped digital infrastructure. However, during periods of economic uncertainty, such as the COVID-19 pandemic, accelerated digital transformation efforts were significantly associated with improved sustainability performance among Indonesian companies. These findings underscore the importance of robust digital infrastructure and highlight the role of economic factors in driving digital advancements and sustainability outcomes.Research limitations/implicationsThe findings extend RBV and DC theory by demonstrating the critical role of strategic resources in gaining competitive advantages. In the context of digital transformation, these strategic resources encompass not only technological advancements but also strategic implementation and organizational capabilities.Originality/valueThis study offers a novel perspective on the relationship between digital transformation and sustainability performance in the context of a developing economy. By incorporating macroeconomic conditions, this study suggests that the stage of economic development can significantly influence this relationship.