Keywords

Digital Leadership, Innovation Capability, Organization Performance, Industrial Sector, Jordan

Introduction

Digital Leadership and Organization’s Performance: The Mediating Role of Innovation Capability

Since the launch of the Fourth Industrial Revolution and the technological development that remains, organizations have been gradually shifting towards adopting contemporary technologies in various aspects of their work, especially managerial ones, in order to keep pace with the change in the business environment (Al-Hawary & Al-Hamwan, 2017; Al-Hawary & Ismael, 2010; Freitas Junior et al., 2020; Al-Hawary & Al-Syasneh, 2020). This was accompanied by the emergence of new concepts in management science to match the shift towards digital organizations (Murashkin & Tyrväinen, 2020). One of the most prominent of these concepts is "Digital Leadership" based on an approach that integrates technological advancement and transformational leadership to achieve the organization's strategic goals in the dynamic environment (Al-Hawary, 2009; Sheninger, 2019). Further, Further, it contributes to create a new generation of leaders who possess motivation and guidance skills backed by deep knowledge of modern methods based on digitization (Al-Hawary et al., 2012; Zeike et al., 2019).

Organizations strive for globalization and improving competitiveness prompted them to search for new methodologies that would enable them to conquer new markets or develop their current market share (Ngo et al., 2020; Al-Hawary & Obiadat, 2021; Al-Hawary et al., 2011; Alhalalmeh et al., 2020; Al- Quran et al., 2020; Al-Hawary et al., 2020; Al-Hawary & Alhajri, 2020; Parthasarathy et al., 2021; Phankhong et al., 2017). Innovation capability is the decisive factor to achieve strategic goals and create value for the organization by relying on the products and services it provides as well as the administrative methods used to meet the change in customer desires (Al-Hawary et al., 2018; Al-Lozi et al., 2018; Al-Lozi et al., 2017; Al-Hawary & Aldaihani, 2016; Freije et al., 2021; Migdadi, 2020). Moreover, it improves the organization's resilience in the face of fluctuations in the business environment (Cepeda & Arias-Pérez, 2019), develops core competencies (Hsiao & Hsu, 2018), and improves the organization's reputation (Foroudi et al., 2016).

The organization's performance has received the attention of researchers since its emergence as a comprehensive concept that expresses the ability of the organization to achieve its goals and the outcome of the results of its work (Wamba et al., 2017; Wang et al., 2020). A set of internal and external factors affect the performance of the organization, whether positively or negatively, where government policies and the competitive context are considered external factors, while organizational capabilities and knowledge gained from internal factors (Merendino& Melville, 2019; Migdadi, 2019; Zhou et al., 2019). The organization's performance is measured using financial and non-financial indicators that enable the organization’s management to continuously monitor its improvement, as well as identify deviations from plans and address them in a timely manner (Ali & Islam, 2020; Masa’deh et al., 2018; Subramony et al., 2018).

According to this context, the research seeks to address the literary and practical gap by developing a conceptual framework that tests the impact of digital leadership on the organization’s performance through the mediating role of innovation capability. Moreover, the application of this research in the industrial sector, which is a mainstay in the economies of developing countries and an important factor in attracting foreign investments and stimulating economic growth, represents a real contribution that decision-makers can rely on in developing their business.

Literature Review

Digital Leadership

Leadership is one of the topics that attracted the attention of researchers in the field of organizational behavior, as academics sought to develop the conceptual foundations of leadership, while professionals tended to absorb and implement leadership models that lead to improving the effectiveness of their organization (Freitas Junior et al., 2020; Kieser, 2017). The theory of change and transformational leadership played a key role in the structural change of organizations and the mechanisms in which they deal with rapid technological developments (Zeike et al., 2019). Hence, many concepts have emerged that integrate factors affecting organizational behavior and digitalization to achieve the best organizational results. Digital leadership is one of the contemporary concepts have adopted in order to indicate the utilization of digital platforms in directing and influencing the employees' behavior to achieve the strategic goals of the organization (Sheninger, 2019). Artüzand Bayraktar (2021) pointed that digital leader think and act differently from traditional leader in interacting with the digital world. Therefore, he/she should modify his/her leadership style consisting of the three elements computing, communication, and content to ensure the success of the organization.

Digital leadership was measured as indicated by the previous literature through a set of dimensions that can be classified in two prominent directions. The first direction argued that digital leadership is measured using a four-dimensional model consisting of digital culture, digital competencies, digital Insights, and digital strategy (Sultan & Suhail, 2019). The second direction proposed a five-dimensional model for measuring digital leadership, which consists of creativity, deep knowledge, collaboration, inquisitiveness, and global vision (Mihardjo et al., 2019; Sasmoko et al., 2019). Creativity in the field of digital leadership refers to the leaders' use of modern technology-based methods to influence the behavior of their employees (Tiekam, 2019). Deep knowledge of administrative aspects and technological developments is essential for the digital leader to achieve the desired impact on employee behavior within the limits of the available organizational resources (Mihardjo et al., 2019). Collaboration, both internally and externally, is one of the capabilities that digital leaders focus on in order to achieve organizational effectiveness and reach novel products and services (Prince, 2018). inquisitiveness is the psychological factor that raises the desire in the hearts of leaders to achieve difficult goals and motivates them to make extra efforts to gain a distinguished competitive position (Sasmoko et al., 2019). Global vision is the ambitions of leaders to create and develop high quality products and services that enable them to obtain a competitive position among international companies (Braf & Melin, 2020; Wasono & Furinto, 2018).

Innovation Capability

Innovation activities are usually considered complex as they require special skills and capabilities to generate or develop the organization's products and services to meet their customers desires (Aljanabi, 2020). Furthermore, these activities require the organization's continuous endeavor to configure and exploit the available knowledge in various aspects of the organization's work (Lei et al., 2019; Migdadi, 2020). Accordingly, innovation capability defined as the organization's ability to transform accumulated knowledge and new ideas into products and business models that achieve its strategic goals (Farhana & Swietlicki, 2020). While Puspita, et al., (2020) referred to the innovation capability as the tendency of the organization to engage in the implementation of creative ideas and adoption of work methods that would provide distinctive offers to their customers.

Developing the organization’s innovation capability requires giving its employees the freedom to think and express their opinions, as well as providing an organizational climate in which the principle of creative thinking and effective communication between creative human resources is spread (Maldonado-Guzmán et al., 2019; Miranda et al., 2020). Kafetzopoulos & Psomas (2015) identified four dimensions of innovation capability:

a) Product innovation

b) Process innovation

c) Marketing innovation

d) Organizational innovation.

Product innovation expresses the organization's ability to generate new products and services that meet the aspirations of its customers (Freije et al., 2021). Process innovation refers to an organization's tendency to change business and management methods in order to use its resources to offer new offerings (Aljanabi, 2020; Migdadi, 2020). Marketing innovation is a marketing approach based on the use of modern technologies to reach the largest possible segment of current and potential customers (Migdadi, 2020; Rajapathirana & Hui, 2018). While organizational innovation depends on the organization's ability to reconfigure its resources in order to achieves organizational effectiveness and efficiency (Parthasarathy et al., 2021).

Organization’s Performance

The organization's performance is a substantial concept in management studies, as it is still of interest to researchers since its appearance because it summarizes the results of the organization's activities within one indicator. Koohang, et al., (2017) referred to the organization's performance as a measure of progress and strategic development. It reflects the organization's success in achieving its planned goals by comparing them with actual results to identify weaknesses and address them. Moreover, it was defined as the organization's ability to achieve strategic goals effectively and efficiently through the optimal use of available resources (Mohammad, 2019).

Performance measures are well documented in the management literature, i.e., financial indicators (Parmenter, 2015; Sawaean& Ali, 2020), employee satisfaction (Zhai& Tian, 2019), customer satisfaction (Chakraborty & Biswas, 2020; T. Wang et al., 2020), productivity (Al-Surmi et al., 2020), quality (Loukis et al., 2019), efficiency (Merendino& Melville, 2019), and effectiveness (Vermeeren et al., 2014; Zhou et al., 2019). However, performance is discussed in this study as a comprehensive concept that expresses the outcome of all aspects and activities of the organization, whether financial or non-financial.

Conceptual Framework

Although the concept of digital leadership is so recent that it has not been studied in depth yet, there is a lot of evidence on the effects of digitalization on performance. Dijkstra (2020) pointed that the integration of digitization in the management of the organization enhances the effectiveness of communication between the administrative levels. Consequently, productivity increases, and outputs improve, which leads to customer satisfaction and a larger market share. Digital leadership plays a critical role in creating the vision of the organization and implementing initiatives that enable the realization of this vision by relying on generating employee enthusiasm and increasing the effectiveness of operations (Cong & Thu, 2020; Mardiana, 2020). Artüz & Bayraktar (2021) confirms that digital leadership is an effective source for achieving sustainable competitive advantage, where this leadership style leads to optimal use of organization's resources and improves its efficiency. Besides, the digital leadership's dependence on technological development and interaction with the business environment can reduce the duration of work due to the low percentage of defects and the possession of accurate information about the desires of customers (Freitas Junior et al., 2020; Sheninger, 2019). Therefore, the first research hypothesis was formulated as follows:

H1: Digital leadership has a positive impact on organization’s performance.

Since organizations have become operating in a business environment dominated by Volatility, Uncertainty, Complexity, and Ambiguity (VUCA) the role of the leader has become pivotal in guiding the organization towards success (Daft, 2021). Organizations always need a quick decision-making process related to investing their resources and competencies in the appropriate aspects of activity (Constantiou et al., 2019; Wang et al., 2019). Hence, digital leadership contributes to making the organization more agile by improving its awareness of the business environment (Brett, 2019). Moreover, it deems a cornerstone of the process of creating new products and services by integrating technology into the leadership thought to lead the efforts of employees and motivate them to propose innovative ideas that meet the aspirations of customers (Braf & Melin, 2020; Felix et al., 2019; Sasmoko et al., 2019). The role of digital leadership is not only limited to contributing to the creation of new products and services but extends beyond that to the development of innovative management manners and work methodologies that improve the organization's ability to compete and achieve strategic goals (Mihardjo et al., 2019; Wasono & Furinto, 2018). Accordingly, the second research hypothesis was formulated as follows:

H2: Digital leadership has a positive impact on innovation capability.

Many researchers have considered it necessary to analyze the organization's capabilities and strive to continuously develop them in order to improve performance in troubled business environments (Chiarelli, 2021; Correia et al., 2020; Falahat et al., 2020; Vilkas et al., 2020). Teece et al. (2016) indicated that the possessed organization's capabilities enable it to integrate and adapt to the external environment. Besides, Freije, et al., (2021) suggested that capabilities have a key role in obtaining better results in product and service innovation. In particular, Wang & Ahmed (2007) determined three categories of organizational capabilities that lead to developing the organization's performance: adaptive capability, absorption capability, and innovation capability. The innovation capability is usually deemed the most important for the organization, where it allows the organization to respond quickly to customer needs and market fluctuations through the generation and management of innovation activities. These activities lead to the creation of novel products and services that improve the organization's effectiveness and efficiency (Al-kalouti et al., 2020; Migdadi, 2020; Su et al., 2018). Moreover, they help the organization to reconfigure its resources and directing them towards producing new products and services that meet the aspirations of current and prospective customers which enhances its market position (Ferreira et al., 2020; Pongsa thorn wiwat et al., 2019; Puspita et al., 2020; Salisu & Goni, 2019). Thus, the third research hypothesis was formulated as follows:

H3: Innovation capability has a positive impact on organization’s performance.

Digital leadership is based on combining leadership competencies and digital competencies to influence the followers in the organization and motivate them to achieve its strategic goals (Brett, 2019; Prince, 2018). Sasmoko, et al., (2019) argues that digital leadership is a type of dynamic capability that makes an organization able to adapt to the conditions of a changing business environment by innovating offers that match the desires of customers. Therefore, digital leadership is based on monitoring business markets and gathering information through digital platforms in order to build alliances and direct organizational resources to provide solutions that meet customer needs (Braf & Melin, 2020). Providing such innovative offers significantly contributes to improving the organization's competitiveness and market share of the organization (Cong & Thu, 2020). Further, it helps in achieving organizational efficiency and effectiveness through optimal use of resources and investment in modern technology that reduces operational costs (Farhana &Swietlicki, 2020). Thus, the fourth research hypothesis was established as follows:

H4: Innovation capability mediates the relationship between digital leadership and organization’s performance.

Research Methodology

Population and Sample

The industrial sector plays a major role in consolidating the pillars of economic and social development. This role is evident through its active contributions in advancing economic growth, reducing unemployment rates, attracting foreign investments, and accessing global markets. According to the report of the Chamber of Industry in Jordan issued at the beginning of 2021, the industrial sector represents the nucleus of the national economy through its contribution approximately 30% of the GDP and its employment of 21% of the domestic workforce. Therefore, the current study targeted people in senior managerial level in 130 industrial companies in Jordan for their knowledge of aspects related to leadership styles and innovation. A self-reporting questionnaire was distributed to 390 managers in these companies via e-mail. 271 questionnaires were answered, and after reviewing them were found that 248 of them are valid for statistical analysis. The retrieved questionnaires constitute a response percentage 63.59% of the distributed questionnaires.

Analysis of demographic variables for the study sample showed that 71.77% of the respondents were male, while 28.23% of them were female. In addition, most of the study sample members were postgraduate degree holders, with a percentage of 58.06%. In terms of age group, the results indicated that 40.72% of the sample is within the age group (from 40 to less than 50), followed by 27.82% within the age group (from 30 to less than 40), then 20.97% within the age group (more than 50), and finally 10.67% of those who belong to the age group (less than 30). With regard to experience, the results showed that the majority of the sample had experience within the category (more than 15), which constituted 45.96% of the sample size, while the lowest percentage 11.29% was for those who had work experience within the category (less than 5).

Measures

An electronic instrument was developed based on Google Forms to test the impact of digital leadership on the organization's performance through the mediating role of innovation capability. The instrument included an introduction, a section devoted to control variables, and three sections to the main study variables. The introduction and all sections were drafted in Arabic and later translated into English to facilitate the data collection process. The study's main variables were measured based on a five-point Likert scale, where the minimum value of 1 indicates strongly disagree and the maximum value of 5 indicates strongly agree.

Digital Leadership

The digital leadership scale was developed based on (Mihardjo et al., 2019; Sasmoko et al., 2019), whereby digital leadership is a second-order construct divided into five first-order constructs. This scale consists of 23 items: four for creativity "e.g., the company's leadership styles are characterized as supportive of new ideas", five for deep knowledge "e.g., knowledge helps company leaders to anticipate the future situation of the competitive market", four for collaboration "e.g., company leaders seek to build strategic alliances to ensure optimal use of resources", five for inquisitiveness "e.g., company leaders focus on persuading all parties to rely on empirical evidence", and five for global vision "e.g., company leaders formulate strategies that enable access to international and global markets".

Innovation Capability

Innovation capability section was developed according to (Aljanabi, 2020; Migdadi, 2020; Saunila, 2020). The innovation capability deems as a second-order construct divided into four first-order constructs. This section consists of 16 items: four for product innovation "e.g., company uses the acquired knowledge and resources to develop new products and services", four for process innovation "e.g., company responds intelligently to the new processes adopted by competitors", four for marketing innovation "e.g., company has close relationship management with its clients", and four for organizational innovation "e.g., company has high levels of integration and coordination between the various core functions".

Organization’s Performance

The organization’s performance section was developed based on (Akdere & Egan, 2020; Chiarelli, 2021; Wang et al., 2020). This variable considers as a first-order construct that consists of eight items "e.g., company's sales have grown significantly over the past three years, perceived quality of products and services offered by the company is superior to that offered by competitors, company has high levels of effectiveness and efficiency compared to other companies, etc."

Control Variables

The current study contained a set of control variables related to the demographic characteristics of the sample. Gender includes both males and females. The educational level is divided into three categories (Diploma, bachelors, and postgraduate). The age group is divided into four categories (less than 30, 30 - less than 40, 40 - less than 50, and 50 years and older). Finally, the job experience was divided into four categories (less than 5, from 5 to less than 10, from 10 to less than 15, and 15 and more).

Research Findings

Validity and Reliability

The Confirmatory Factor Analysis (CFA) was conducted to test the validity and reliability of the measurement instrument, as it is widely used in management research to determine the belonging of the items to their latent construct (Brown, 2015). The convergent validity was measured based on the results of factor loadings and the Average Variance Extracted (AVE). Moreover, the discriminate validity was determined by comparing the values of AVE with the Maximum Shared Variance values (MSV) and the values of the square root of AVE with the correlation coefficients among the rest of the latent constructs. As for reliability, it was tested using Cornbrash’s alpha coefficients and McDonald's Omega coefficients, which express Composite Reliability (CR). Previous test results are listed in Table 1.

Table 1 Validly and Reliability Analysis
Constructs	1	2	3	4	5	6	7	8		10
1. CR	0.8
2. DK	0.7	0.74
3. CO	0.6	0.63	0.75
4. IN	0.6	0.62	0.6	1
5. GV	0.6	0.57	0.62	1	1
6. PD	0.7	0.69	0.54	1	1	1
7. PC	0.7	0.62	0.68	1	1	1	0.74
8. MA	0.7	0.69	0.62	1	1	1	0.64	1
9. OR	0.7	0.58	0.7	1	1	1	0.65	1
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