Digital Leadership in Developing Digital Culture and Employees’ Digital Capabilities for Sustainable Organizational Performance

Abstract

Digital transformation encourages organizations, including non-bank financial institutions, to strengthen technology-based leadership while cultivating a digital culture and digital capabilities to achieve sustainable organizational performance. This study aims to analyze the influence of digital leadership on sustainable organizational performance and examine the mediating role of digital culture and employee digital capabilities. A quantitative approach was used with the Structural Equation Modeling Partial Least Squares (SEM-PLS) method on data collected from 166 BMT employees in the Purwokerto and Purbalingga areas. The results show that digital leadership has a positive effect on digital culture, employee digital capabilities, and organizational performance. Furthermore, digital culture is shown to mediate the relationship between digital leadership and sustainable organizational performance; This finding is categorized as partial mediation because the direct influence of digital leadership remains significant. Conversely, employee digital capabilities are unable to mediate the relationship between digital leadership and organizational performance. These findings indicate that digital culture plays a significant role in supporting sustainable organizational performance, while individual capabilities have not shown a significant mediating role. This research provides theoretical contributions to the development of digital leadership literature as well as practical recommendations for non-bank financial institutions to prioritize strengthening digital culture in order to promote organizational sustainability