Eco-innovation is increasingly recognised as a vital way in which firms can achieve both environmental sustainability and competitive advantage, particularly in rapidly developing economies. This study explores how firms can leverage internal capabilities and respond to external institutional support in order to enhance adoption of eco-innovation and improve organisational performance. Anchored in the resource-based view and dynamic capabilities theory, the article introduces and empirically tests an integrated framework that encompasses green supply-chain agility, development of sustainable infrastructure, and eco-process innovation. Based on data from 272 manufacturing firms in southern Vietnam, the findings reveal that internal capabilities serve as critical enablers of eco-innovation, which in turn drives superior performance outcomes. Organisational learning capacity emerges as a key mediating mechanism, and government support enhances both innovation and performance, though indirectly. By highlighting the dynamic interplay between firm-level competencies and institutional interventions, this study offers novel insights into how green transformation can be strategically managed. The results have practical implications for policymakers and business leaders seeking to embed sustainability in organisational systems and national innovation strategies.
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