From Transformational Change to Organizational Performance: Unpacking the Moderating Role of Organizational Agility
TL;DR
It is demonstrated that Organizational Agility functions as an important organizational capability but does not strengthen the effects of Digital Transformation Leadership on Business Model Innovation or Firm Performance, contributing to the literature by providing empirical evidence from an emerging economy.
Abstract
The increasing pace of digitalization has made digital transformation a critical strategic priority for small and medium-sized enterprises (SMEs), particularly in developing economies. This study examines the effects of Digital Transformation Leadership (DTL) on Business Model Innovation (BMI) and Firm Performance (FP), while investigating the moderating role of Organizational Agility (OA). Data were collected from 500 employees working in Pakistani SMEs and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings reveal that Digital Transformation Leadership has significant positive effects on Organizational Agility, Business Model Innovation, and Firm Performance. However, Organizational Agility does not significantly moderate the relationships between Digital Transformation Leadership and either Business Model Innovation or Firm Performance. The structural model demonstrates satisfactory explanatory and predictive capability, confirming the strategic importance of Digital Transformation Leadership in enhancing organizational innovation and performance. This study contributes to the literature by providing empirical evidence from an emerging economy and by demonstrating that Organizational Agility functions as an important organizational capability but does not strengthen the effects of Digital Transformation Leadership on Business Model Innovation or Firm Performance. The findings suggest that managers should prioritize leadership capabilities and digital transformation initiatives while simultaneously developing complementary organizational capabilities beyond agility to maximize digital transformation outcomes. The study also provides practical implications for policymakers seeking to strengthen SMEs' digital competitiveness through investments in digital infrastructure, digital skills, and innovation support programs.