Innovation Capacity as a Mediating Mechanism Between Strategic Risk Integration and ESG Performance: Evidence from Jordanian Banks

While prior research has established direct relationships between strategic risk integration and ESG performance in banking, critical gaps remain in understanding the transformation mechanisms, particularly in emerging markets. This study investigated how banking innovation capacity mediates the relationship between strategic risk integration and ESG performance in Jordanian banks. Drawing on dynamic capabilities theory and questionnaire data from 165 banking executives (71.7% response rate), the results revealed that strategic risk integration significantly influences ESG performance both directly and indirectly through banking innovation capacity. The multi-group analysis showed institutional invariance between commercial and Islamic banks, suggesting the generalizability of these relationships. The findings advance dynamic capabilities theory by demonstrating innovation capacity's role as a transformative mechanism in banking sustainability and provide practical insights for emerging market banks seeking to enhance ESG performance through integrated risk management and innovation strategies.