ESG, open innovation, and firm performance in construction firms: exploring the mediating role of digital transformation

The construction industry faces growing pressure to reconcile financial performance with Environmental, Social, and Governance (ESG) commitments and open innovation strategies. Although ESG and open innovation are recognized as drivers of long-term corporate value, their impact mechanisms on firm performance, particularly the mediating role of digital transformation and the moderating role of financing constraints, remain insufficiently understood. This study addresses this gap by empirically analyzing Chinese listed construction firms from 2013 to 2021. Using multiple regression, bootstrap mediation, and moderation analysis, we examine how ESG performance and open innovation affect firm performance, and how digital transformation and financing constraints shape these relationships. The results reveal that both ESG performance and open innovation negatively affect firm performance in the short term, while open innovation improves ESG performance. Digital transformation partially mediates the relationships between ESG performance, open innovation, and firm performance. Financing constraints strengthen the positive effect of ESG on digital transformation and weaken the negative effect of open innovation on firm performance. Notably, all these relationships are significant only in state-owned enterprises, not in nonstate-owned enterprises. These findings illuminate the complex interplay among ESG, open innovation, digital transformation, and financing constraints, providing actionable implications for construction enterprise.