Purpose <p>This study examines the impact of employee engagement on innovative work behavior, with knowledge sharing serving as a mediating factor within the Bangladeshi ready-made garment (RMG) industry context.</p> Design/methodology/approach <p>Data were collected using a judgmental sampling technique from 390 respondents across 23 garment companies. Structural equation modeling (SEM) using partial least squares (PLS) was employed via SmartPLS 3.2.7 to examine the relationships among constructs and validate the proposed model.</p> Findings <p>The findings reveal that knowledge sharing significantly mediates the relationship between employee engagement measured by vigor, dedication, absorption, and innovative work behavior. Employees with a strong sense of identity and engagement in their roles are more likely to share knowledge and propose innovative solutions, thereby fostering organizational adaptability and smart workplace transformation.</p> Practical implications <p>The study offers actionable insights for managers in labor-intensive industries who seek to cultivate a culture of innovation through engaged employees. Enhancing knowledge sharing mechanisms can catalyze eco-innovative behavior, thereby contributing to sustainable practices and a competitive advantage in the global supply chain.</p> Originality/value <p>This research enriches the literature on employee-driven innovation by highlighting the mediating effect of knowledge sharing in the engagement–innovation link. It also offers policy and strategic insights for boosting eco-innovation in emerging economies through human capital development.</p>