Driving interactive green innovation in traditional industries: the impact of AI and KM in the oil and gas sector

Purpose The interactive green innovation (IGI) highlights cross-organisational collaboration, stakeholder engagement and shared knowledge flows, while traditional/internal innovation centres on firm-level processes. Thus, the purpose of this study is to investigate how the integration of artificial intelligence (AI) and knowledge management (KM) processes drives IGI within the Iraqi oil industry. This study further explores the moderating roles of trust in technology and sustainability initiatives in this relationship. Design/methodology/approach Using a cross-sectional survey of 612 middle management executives in Iraqi oil companies, this study uses structural equation modelling (SmartPLS v3.9) and statistical analyses (SPSS v26) to validate the conceptual framework and examine the hypothesised relationships. Findings The findings of this study reveal that AI significantly enhances KM processes and directly fosters IGI (β = 0.448, f2 = 0.273 and p < 0.001). KM processes mediate the relationship between AI and IGI (β = 0.251, f2 = 0.153 and p < 0.001) and serve as a pivotal enabler of sustainable practices. Although trust and sustainability exert moderating effects, their influence is relatively modest. These results underscore the transformative potential of AI and KM integration in advancing IGI in resource-intensive industries. Practical implications This research offers actionable insights for oil sector leaders aiming to embed environmental sustainability into core business practices. By harnessing AI and KM, firms can optimise resource use, streamline operational processes and cultivate a culture of innovation. Moreover, investing in trust-building and sustainability-focused strategies can enhance organisational resilience and competitive advantage in an increasingly eco-conscious global market. Originality/value This study bridges a critical gap by elucidating the combined impact of AI and KM on IGI in the context of the Iraqi oil industry – a sector facing profound environmental and geopolitical challenges. By incorporating trust and sustainability as moderating factors, it deepens understanding of the drivers of innovation adoption in traditional industries and highlights pathways for sustainable transformation.