Lora Ekana Nainggolan

Type of the article: Research Article

Abstract
Digital transformation and sustainability integration increasingly influence strategic decision-making in manufacturing firms, particularly in emerging economies. Despite growing investments in digital infrastructure and sustainability initiatives, empirical evidence regarding their financial implications remains inconsistent. This study examines whether the implementation of enterprise resource planning systems and sustainability practices influences financial performance directly or indirectly through the development of organizational capability in Indonesian manufacturing firms. The empirical analysis uses panel data from 185 firm-year observations of publicly listed manufacturing companies during the period 2020–2024. The proposed framework is tested using partial least squares structural equation modeling. The results indicate that enterprise resource planning implementation significantly strengthens organizational capability (t = 3.253; p = 0.001), whereas sustainability practices do not demonstrate a statistically significant relationship with capability development (t = 0.175; p = 0.861). Organizational capability shows a strong positive effect on financial performance (t = 19.563; p < 0.001) and fully mediates the relationship between enterprise resource planning implementation and financial outcomes (t = 3.163; p = 0.002). In contrast, neither enterprise resource planning systems nor sustainability practices exhibit significant direct effects on financial performance. These findings suggest that digital infrastructure alone does not automatically generate financial benefits. Financial value emerges when technological resources are effectively embedded in coordinated organizational processes that enhance firm capability. Within the observed emerging-market context, sustainability initiatives appear primarily compliance-oriented and therefore have not yet resulted in measurable improvements in financial performance.