The Influence of Digital Leadership on Firm Performance in Dynamic Environments: The Role of Dynamic Capabilities, Business Model Innovation, and Sustainable Competitive Advantage

Today, technological developments and business restructuring have highlighted the need for new leadership styles to overcome uncertainties. Therefore, this study seeks to examine the impact of digital leadership on firm performance in dynamic environments by explaining the mediating role of dynamic capabilities, business model innovation, and sustainable competitive advantage.

The current study is an applied descriptive survey. Its statistical population includes a group of managers of knowledge-based companies based in Tehran province. The sample size was calculated by G-Power 3.1 software, which included 244 individuals. The non-probability method was used for sampling and 240 questionnaires were distributed by conducting an online survey. The reliability and validity of the questionnaire were confirmed. Descriptive data were analyzed by SPSS software version 26 and a research model based on structural equation modeling using Smart PLS software version 3.

This study confirmed the direct and indirect effects of digital leadership on firm performance through the dynamic capabilities and business model innovation. It rejected the direct effect of digital leadership on sustainable competitive advantage, however, its indirect effect was confirmed. In addition, the perceived environmental dynamics only moderated the relationship between dynamic capabilities and business model innovation, sustainable competitive advantage, and firm performance.

Digital transformation of companies can be a challenging task in leadership and a high interconnectedness of virtual teams via technology could cause an identity crisis for leaders. Therefore, leaders’ role is changing and the new trends in the business environment require a new paradigm for future leadership. In sum, the findings of this study can provide an important combination of managerial and theoretical perspectives. The results underline the valuable information for addressing emerging challenges and opportunities in the digital age as well as the transformations to guide, support, and manage personnel, especially under the COVID-19 Pandemic, when digital leadership plays an important role in transformation in order to guide, support and manage personnel in the digital era and it provides key insights for leaders to enhance their digital leadership skills by abandoning traditional leadership styles. Navigating a dynamic environment in the digital era requires digital leadership that combines leadership capabilities with optimizing digital opportunities and threats to ensure a sustainable and profitable organization. Leaders of knowledge-based companies must develop their individual capacity and competence to manage uncertainty and create organizations with strong dynamic capabilities. Dynamic capabilities are important to create numerous business model innovations, especially in the digital era.