DIGITAL TRANSFORMATION IN BANKING: DIGITAL LEADERSHIP AND DIGITAL INNOVATION: A PARALLEL MEDIATION STUDY

Abstract

Objectives: Present study examine the impact of digital leadership (DL) on digital innovation (DI) in the banking sector, with a particular focus on the mediating roles of digital orientation (DO) and digital capabilities (DC). The research addressed a gap in the literature by studying the process through which leadership vision transforms into innovation results through various organizational mechanisms.

Methods/approach/design: The research study collect data from 365 employees working in banking institutions located in Khyber Pakhtunkhwa who held various positions including IT professionals and customer service managers and operational staff. The researchers used a random sampling method to choose participants for their study. The researchers used validated multi item scales which they adopted to the banking context and measured responses through a five point Likert scale. The researchers conducted reliability assessment through alpha while KMO and BTS tests confirmed sampling adequacy and the researchers tested hypotheses using SPSS and Hayes' PROCESS macro for mediation analysis.

Findings: The study found that digital leadership (DL) significantly and positively influences digital innovation.  Further, the study also investigated both digital operations and digital capabilities performed as mediators between digital leadership and digital innovation.

Limitations/implications: The study is limited to only one region and one sector, which may affect its ability to generalize results. Future research should replicate the model across different sectors and cultural contexts, adopt longitudinal designs, and incorporate moderators such as organizational culture or environmental uncertainty.

Practical implications: Banks should strengthen digital leadership skills, embed digital orientation in strategy, and invest in IT, cybersecurity, and analytics. A holistic approach combining leadership vision, organizational commitment, and technical resources is essential to compete with Fintech challengers.

Originality/value This study provides empirical evidence that digital leadership fosters innovation through orientation and capabilities. By integrating Paradox Theory, AMO, and RBV, it advances theory and offers practical guidance for sustainable digital transformation.

Keywords: Digital leadership, digital innovation, digital capabilities, banking sector