Board Effectiveness as a Strategic Driver of Digital Transformation and Sustainable Innovation in Manufacturing Firms: A Hierarchical Framework
Abstract
The increasing convergence of digital transformation and sustainability transition has expanded the strategic responsibilities of corporate boards, particularly in manufacturing firms facing technological disruption, environmental pressures, and demands for sustainable innovation. However, existing studies on board effectiveness predominantly emphasize structural characteristics, providing limited understanding of how board capabilities interact and which governance factors function as influential mechanisms in organizational transformation. This study develops a causal governance framework to examine the interrelationships among board effectiveness dimensions that support digital transformation and sustainable innovation in manufacturing firms. Grounded in Upper Echelons Theory and Dynamic Capabilities Theory, this study conceptualizes board effectiveness through five dimensions: board composition and expertise, strategic oversight capability, decision-making effectiveness, digital governance capability, and sustainability governance capability. A DEMATEL approach is employed to analyze the influence relationships among twenty board effectiveness criteria and to identify prominent and causal factors within the governance system. The study contributes theoretically by extending board effectiveness research beyond traditional structural indicators toward a capability-based perspective that links board cognitive resources with organizational sensing, seizing, and reconfiguration capabilities. Practically, the proposed framework provides guidance for manufacturing firms to prioritize board development initiatives, including digital competence, sustainability expertise, strategic oversight, and governance mechanisms according to their systemic influence. Overall, this research conceptualizes board effectiveness as an interconnected governance capability that enables firms to navigate digital and sustainability transformations.