This research presents a systematic literature review examining green innovation as a strategic driver of competitive advantage and sustainable business performance. Based on 67 peer-reviewed articles published between 2015 and 2025, the review consolidates theoretical frameworks, empirical insights, and methodological trends to clarify the strategic importance of green innovation. A significant limitation identified is the minimal integration among theoretical perspectives; most studies apply single frameworks, such as the Resource-Based View (RBV) or stakeholder theory, without exploring their intersections. For example, RBV emphasizes internal capability development, whereas stakeholder theory underscores external pressures, yet few studies examine how stakeholders influence capability formation or how internal capabilities impact stakeholder interactions. Additionally, existing literature inadequately addresses the dynamic and multilevel nature of green innovation, which occurs across individual, team, and organizational levels, with limited analysis of inter-level interactions or how feedback from innovation outcomes shapes future strategies. Core mechanisms connecting green innovation to performance include resource efficiency, stakeholder alignment, and strategic renewal. Organizational capabilities, leadership practices, and stakeholder relationships are essential mediators influencing green innovation outcomes, although their interactive dynamics remain insufficiently studied. The developed conceptual framework integrates external and internal drivers, innovation processes, and performance outcomes, guiding future research and practical management approaches. © 2026 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.