This study aims to examine how digital transformation leadership enhances business performance through digital transformation capability. It extends transformational leadership theory to the digital era by investigating key mechanisms that drive performance in the retail banking sector.
A moderated mediation model is proposed to examine the direct and indirect effects of digital transformation leadership on performance via digital transformation capability. Primary data were collected through a web-based survey of retail banks and credit unions in Canada, and the model was empirically tested using Hayes' PROCESS analysis with bootstrapping analysis.
The results indicate that digital transformation leadership indirectly improves performance by strengthening digital transformation capability. However, this indirect effect varies across different levels of digital transformation leadership – being positive and significant at low and moderate levels but diminishing at higher levels. These findings reveal a threshold condition that delineates the limits of leadership effectiveness and underscores the potential dark side of excessive leadership in the digital age.
This study offers actionable insights for practitioners, regulators, policymakers and educators seeking to lead digital transformation responsibly and effectively. It underscores that digital transformation leadership matters most when balanced with strong internal capability development. Excessive or overly dominant leadership could suppress innovation and ultimately limit performance gains. Recognizing the dark side of over-reliance on digital leaders, organizations should pursue a balanced approach between proactive leadership and intrinsic capability development. Policymakers, regulators and educators should likewise promote governance frameworks and leadership development programs that foster responsible, transparent and sustainable digital transformation leadership.
This study contributes to the leadership literature by empirically defining, measuring and testing a new construct – digital transformation leadership. It advances to transformational leadership theory by identifying a moderated mediation mechanism that explains how and under what conditions digital transformation leadership enhances performance while also revealing its potential dark side as a boundary condition for leadership effectiveness in the digital age.
