Digital-Driven Technologies for Sustainable Innovation: Empirical Insights from Romania and Greece Toward an Inclusive Smart World

This study covers more than a decade of the relationship between digital transformation, innovation capacity, and sustainable development in Romania and Greece. It applies guided principal component analysis to build up a composite index of digitalization, innovation, and sustainable development with interpretive consistency ensured by the application of the principle “higher is better.” The structural break analysis identified major changes in digital development as turning points for both countries when a new stage of development was attained. As indicated by causal effect models, a comprehensive policy transformation slightly improved Greece’s digital performance, and placebo sensitivity tests confirmed the robustness of these results. Granger causality and Toda–Yamamoto analyses proved a unidirectional effect of digitalization on sustainable development in Romania, while in Greece the relationship appeared more balanced though statistically less decisive. Time series regression analysis shows that after the turning point, Greece suffered an immediate loss but then adopted a long-run positive trend that overshoots the expected counterfactual scenario. This puts upfront digital policies as part of the strategy for improving sustainable development outcomes, provided there is timely and consistent governance. Comparative data suggest that coordinated investment in digital infrastructure targeted incentives for R&D, and strong public-private partnerships accelerate progress toward an inclusive smart world. In this context, the paper contributes to the debate on how digital-driven innovation can act as both a catalyst and a constraint for sustainability. By providing comparative empirical insights, it advances the understanding of how differentiated national strategies can converge toward the broader European digital and green transition agendas.