Sustainability and Organizational Performance in South Korea

sustainability
Article
Sustainability and Organizational Performance in South Korea:

The Effect of Digital Leadership on Digital Culture and
Employees’ Digital Capabilities
Jinkyo Shin 1, Md Alamgir Mollah 1,2 and Jaehyeok Choi 1,*
1
School of Business Administration, Keimyung University, Daegu 42601, Republic of Korea
2
Department of Management Studies, University of Barisal, Barishal 8254, Bangladesh
* Correspondence: greg4090@hotmail.com
Abstract: In the era of digital transformation, organizations are making efforts towards sustainability.
In particular, leadership is transforming into digital leadership according to changes in management
environments, which are deeply related to organizational performance. In this study, we focus on
organizational performance and sustainability management and clarify the role of digital culture
and employees’ digital capabilities in perspectives on digital leadership. We collected data from
149 employees who work in South Korean organizations using a survey based on digital
leadership, digital culture, employees’ digital capabilities, and organizational performance, and
we tested our hypotheses using structural equation modeling. The results show that digital leadership
has a positive direct and indirect effect on organizational performance. Moreover, digital culture
and employees’ digital capabilities partially mediate the relationship between digital leadership
and sustainable organizational performance in South Korea. This study contributes to leadership
and resource- based view (RBV) research by providing evidence for the role of digital leadership
in sustainable organizational performance. As leadership continues to extend alongside
verification of the RBV theory, the crucial role of digital leadership is changing, and the role of
employees’ digital capabilities in organizational performance in South Korea needs to be
considered.
Citation: Shin, J.; Mollah, M.A.; Choi,
J. Sustainability and Organizational
Keywords: digital leadership; digital culture; employees’ digital capabilities; digital transformation;
Performance in South Korea: The
South Korea
Effect of Digital Leadership on
Digital Culture and Employees’
Digital Capabilities. Sustainability
2023, 15, 2027. https://doi.org/ 1. Introduction
10.3390/su15032027
Traditional business strategies and processes are shifting due to recent breakthroughs
Academic Editor: Sooksan in digital technology and the growth of threads in digital transformation [1,2]. These
Kantabutra changes are motivating organizations to update their resources to gain competitive ad-
vantages. The emergence of digital technology, as evidenced by artificial intelligence,
Received: 1 December 2022
blockchain technology, cloud computing, Big data, edge computing, and 5G, is driving
Revised: 11 January 2023
a new wave of the economic and industrial revolution and is profoundly altering orga-
Accepted: 17 January 2023
Published: 20 January 2023
nizational management [3]. Kamalaldin et al. [4] stated that digital transformation is not
limited to implementing more and better technologies in a rapidly changing digital world,
as it includes efforts to align company culture, people, structure, and tasks. By 2022, 47%
of businesses were projected to be technologically advanced, 20% of them intended to
utilize digital leadership, and 53% of them planned to switch from old platforms to public
Copyright: © 2023 by the authors.
cloud ones. However, many companies still have a long way to go before fully embracing
Licensee MDPI, Basel, Switzerland.
This article is an open access article
digital transformation.
distributed under the terms and
Similarly, 70% of digital executives have reported that their organizations are already
conditions of the Creative Commons experiencing increased customer satisfaction [5]. Organizations in South Korea are also
Attribution (CC BY) license (https:// improving and hiring new types of leadership, known as digital leadership, to deal with
creativecommons.org/licenses/by/ this new digital culture. Mihardjo et al. [6] defined digital leadership as a combination of
4.0/). transformational leadership and the use of technology. Furthermore, it is a combination
Sustainability 2023, 15, 2027. https://doi.org/10.3390/su15032027 https://www.mdpi.com/journal/sustainability

Sustainability 2023, 15, 2027 2 of 15
of digital competence and culture used to drive change and take advantage of digital
technology. Moreover, Amelda, Alamsjah, and Elidjen [7] explained that digital
leadership is created by combining leadership and digital abilities to optimize the
benefits of digital technology to improve business performance. Therefore, digital
leadership combines transformational leadership and digital skills [8]. Digital
leadership is essential for businesses to survive in the new digital era because it adapts
and alters company strategies. Our modern digital culture gives importance to rapid
change in organizational environments. Here, the use of digital culture indicates
attempting to consider some of the most important and dramatic changes brought by the
growing pervasiveness and importance of digital technologies. Therefore, in this study,
we use the context of South Korean industry.
Numerous studies have been related to leadership and performance [4,8,9]. In the
modern era, digital leadership positively affects organizational capabilities [10]. Moreover,
Mohamed [11] concluded that digital leadership, digital training, and subjective well-
being positively affect job motivation and that digital leadership affects innovative work
behavior [12]. Furthermore, DL influences different performance outcomes. For
instance, Mihardjo et al. [13] found that DL affects business model innovation and has
an effect on digital maturity. Finally, Al-Husban et al. [14] noted that digital leadership
has significant positive direct and indirect effects on organizational performance.
However, Muniroh et al. [15] found that DL does not directly affect employee
performance. Despite this, the effects of DL on organizational performance remain non-
specific. Moreover, many authors have analyzed the effect of digital culture [9,16]. For
example, senior executives in strategic positions have effects on corporate culture, as
supported by ample research [9]. Top managers have a crucial yet challenging role in
establishing a culture of innovation, the main challenge of which is translating it into a
proper framework [16].
Furthermore, Deuze [17] defined digital culture as an emerging set of values, practices,
and expectations regarding the way people (should) act and interact within a contemporary
networked society. Moreover, Duerr et al. [18] described digital culture as fostering innova-
tion and the creation of new knowledge, thus supporting the creation of new goods and
services. However, Muniroh et al. [15] found that digital culture does not affect
employee performance. Furthermore, digital transformation occurs through the use of
computers, but organizations need to hire computer-skilled employees to enact digital
change. Moreover, organizations must use this digital mindset as a strategic opportunity
for investment and profit. A leader plays a crucial role in an organization because of his
or her responsibility in choosing, preparing, training, and influencing one or more
followers. Therefore, traditional business strategies and processes have shifted due to
recent advancements in digital technologies and the emergence of threads in the digital
sphere [1,2].
As indicated by previous studies, a research gap appears to exist regarding the
effect of digital leadership on employees’ digital capabilities and culture. Erhan et al.
[12] suggested that DL can be considered a core variable, and they examined different
mediating variables in a different context of the future. Moreover, Khin and Ho [19]
noted that future technological culture can be an important factor for innovation and
that it can be tested. Investigating the above highlighted factors not covered in research
would therefore be useful [20], such as aspects of digital culture [21,22]. In addition, a
similar opinion suggested by Adie et al. [23] emphasizes the role of digital culture in
organizations. El Sawy et al. [24] found a relationship between digital leadership and
organizational capabilities with a decade of digitalization research. Moreover,
Aramburu et al. [25] argued that digital capability is a crucial source of sustainable
competitive advantages for SMEs. However, the role of employees’ digital capabilities on
organizational performance still has a missing link. Therefore, we predict that DL, digital
culture, and employees’ digital capabilities can influence organizational performance.
To fill the above gaps, we designed a research model (Figure 1) in the South Korean
context to measure the effect of DL on organizational performance with two mediating
variables. Based on the above situation, the following questions were raised for this
study:
Figure 1. Proposed research model.
Research Questions.
• RQ1: What is the effect of digital leadership on organizational performance for sus-
tainability in South Korea?
• RQ2: What are the roles of digital culture in DL and performance for organizational
sustainability?
• RQ3: What is the role of employees’ digital capabilities in the relationship between DL
and performance for organizational sustainability?
In this study, we aim to identify the relationship between digital leadership and
organizational performance in order to reveal the mediating role of digital culture and
employees’ digital capabilities. The structure of this study is as follows: Section 1 introduces
the research background and motivations, Section 2 describes the theoretical background
and hypotheses, Section 3 presents the research model and methodology, Section 4
describes the empirical results, and Section 5 includes the conclusions, discussions,
limitations, and future research directions.
2. Literature Review and Hypotheses

2.1. The Effect of Digital Leadership on Organizational Performance
Digital leadership uses a company’s digital resources to promote its organizational
and individual objectives [26,27]. Due to organizational digitalization and transformation,
in this digital age, firms face uncertainty and the challenge of maintaining of sustainable
growth. To address these issues and to aid firms in making necessary changes, digital
leaders must possess specific competencies [28,29] that can foster better management and
achieve sustainable organizational performance. Recent advancements in digital
technology have greatly altered organizational and competitive landscapes and job
positions in many businesses [5]. To manage digital organizations, an extension of
transformational leadership theory has emerged as digital leadership, which can lead to a
firm’s sustainable goals. The roles of employees, digital workplace culture, and
technological advancements are just a few of the organizational aspects that must
evolve. The transformation of these aspects affects organizational performance, as
leaders are key influencers [30]; therefore, digital leadership is expected to have a
greater positive impact on sustainable performance than that of transformational
leadership. Empirical findings have shown that transformational leadership improves a
company’s product innovativeness and employee
performance [31], whereas digital leadership combines transformational leadership with

technology [8]. Therefore, we expect digital leadership to both directly and indirectly affect
organizational performance. Somerville [29] asserted that critical thinking, adaptability,
resilience, and openness to new ideas and technologies are necessary traits of digital
leaders. Therefore, digital leaders have a large impact because new skill sets are needed to
effec- tively lead sustainable organizations in a dynamic digital environment. An excellent
digital leader helps to define a digital business strategy, resulting in superior business
performance. In addition, in companies with digital histories, executives are more likely to
push digital transformation across the board, accelerating their companies’ performance
[32] and achieving sustainable goals. Based on the preceding discussion, we argue that a
significant positive relationship exists between DL and organizational performance, and we
propose the following hypothesis:
H1. There is a positive relationship between digital leadership and organizational performance for
sustainability in Korea.
2.2. The Effect of Digital Leadership on Digital Culture and Employees’ Digital Capabilities
As a result of digital evolution and transformation, organizations must deal with
digital culture to achieve organizational stability. Adaptation to digital culture is impossible
without digital leaders who are masters of strategic thinking and who use
advancements in each wave of digital technology to forge new business prospects that
benefit their customers [5]. Moreover, Oberer and Erkollar [30] stated that a leader can
persuade others, thus supporting the building of a new digital culture to deal with the
digital environment and leading to achieving sustainable goals. In this study, we mainly
focus on the theory of the effect of leadership on resources on organizational
performance. In addition, the mediating effect of employees’ digital capabilities and
digital organizational culture is also covered based on the resource-based view (RBV)
theory. The term “digital culture” refers to the way that the Internet and technology
influence how people interact with one another. In society, it refers to how we act,
think, and communicate. The reason behind this is to find the role of employees’ digital
capabilities and digital organizational culture in sustainable digital environments.
According to Hambrick and Mason’s upper echelons theory, digital leadership research
is a subset of the more extensive study of leadership [33]. A digital leader is responsible
for planning and carrying out a company’s plans and creating or assisting in modifying
cultures, including forming digital cultures, to increase a company’s competitiveness.
The authors of a previous study found that digital leaders influence employees’
innovative behaviors [12], leading to organizational performance for sustainability.
Digital leadership combines digital competency with digital culture. Today’s digital leaders
should adopt a global mindset, communicate with others, and be more inventive in
fostering an innovative culture in their organizations.
Moreover, organizational culture is a set of shared fundamental beliefs that a group
learns as it deals with external adaptations and internal integration issues. This digital
culture has emergent characteristics with roots in both online and offline phenomena. It
has connections to trends and developments that predate the World Wide Web. Senior
executives are in a strategic position to influence corporate culture, which is supported by
ample research [9]. In the era of technology, the digitalization of businesses seems to be a
common factor and is supported by digital cultures such as AI, IoT, Big data, and cloud
computing. According to Wan et al. [16], top managers have a crucial yet challenging role
in establishing an innovation culture, i.e., a digital culture for the digital age. A digital
leader is responsible for planning and carrying out a company’s plans and creating or
assisting in modifying cultures, including forming digital cultures, to increase a company’s
competitiveness. The authors of a previous study also found that digital leaders influence
employees’ innovative behavior [12] and enhance organizational performance.
Furthermore, digital transformation occurs through the use of computers, but organi-
zations needs to hire computer-skilled employees to run these computers. A competent
digital leader properly materializes organizational assets, achieving a high level of

performance and aiding digital business strategies [5]. Successful digital businesses
have strong and developed leadership skills that envision and drive transformation
[34], known as digital leadership, i.e., digital leaders allow businesses to more easily
incorporate digital capabilities into developing their culture and competence [35].
Therefore, digital leaders can lead their followers to improve digital capabilities and, in
turn, enhance organizational performance. Holding a formal position or being a
manager is not necessary to be a leader [36]. From this perspective, we predict that DL
also influences employees by en- hancing their digital capabilities through
organizational training and learning. As a result, digitally capable employees work
together to achieve better performance and sustainable organizations. Based on the
above context, we propose the following set of hypotheses:
H2. There is a positive relationship between digital leadership and digital culture.
H3. There is a positive relationship between digital leadership and employees’ digital capabilities.
2.3. The Role of Digital Culture

Previous studies have highlighted the critical importance that a company’s digital
culture plays in realizing the full potential of digitalization in new endeavors, and leaders
significantly influence organizational culture [17,37–39]. The behavioral norms that define
a new company’s identity are included in its culture [40]. Flat hierarchies and decentralized
decision making are also permitted in digital cultures, which encourage creativity and create
prospects for digital goods and services [37,41]. In addition, motivating individuals to work
with a new set of technologies that may or may not be employed is a huge problem for
digital leaders, given the ambiguity of the digital future. A digital culture fosters innovation
and new knowledge, thus supporting the creation of new goods and services [18]. Moreover,
this leads to financial and non-financial organizational performance.
Furthermore, digital culture influences behavioral changes brought by technology
use within a company. This culture may consist of adaptable and sustainable skill sets
that allow for failure when developing digital skills, agile and flexible working styles, an
emphasis on data, and a mindset that prioritizes digital processes in new enterprises
[39]. Moreover, no significant mediation effect of organizational learning culture exists
between empowering leadership and open innovation [42]. However, Proksch et al. [43]
found that digital culture is mediated between digital strategy and digital innovation. In
other words, digital leaders should allow businesses to more easily incorporate digital
capabilities into developing their culture and competence [35]. In view of previous
research findings, we believe that a digital culture can mediate the interaction between
DL and organizational performance. Digital culture is essential for digitalization and
communication among internal and external environments. Consequently, we
hypothesize the following:
H4. There is a positive relationship between digital culture and organizational performance.
H5. Digital culture positively mediates the relationship between digital leadership and
organizational performance.
2.4. The Mediating Role of Employees’ Digital Capabilities

The capacity to use digital technologies is reflected in employees’ digital
capabilities, expertise, and technical knowledge [44]. For instance, to apply Big data
analytics, employees need to be familiar with the apps that enable them to store,
process, and utilize a vast amount of data to simulate scenarios, establish networks, or
develop causal expla- nations [43]. According to Ritter and Gemü nden [45], the
outcomes of such work may be utilized, for example, to enhance or develop new digital
products/services or processes and, ultimately, organizational performance.
Two examples of an employee’s digital capabilities are the capacity to actively ex-
change information and documents through digital platforms, such as cloud services
[46], and the capacity to use digital channels (such as mobile platforms and social media) to
inte- grate digital communication processes [47]. In a study in a new venture, Proksch et al.
[42] found that employees’ IT capabilities are partially mediated by digital strategies
and process digitalization. Therefore, the impact of digital leadership in terms of digital
products/services and processes may be strengthened by employees’ digital
competencies. Employees with a high level of digital proficiency can monitor workflows
in real time and can make them more visible. Thus, identifying processes that can be
modified or improved using digital technology is possible [48,49]. Therefore, we assume
that employees’ digital skills in the digitalized era impact digital leadership and
organizational performance for sustainable organizations. Consequently, we believe
that employees’ digital skills act as a mediating factor between digital leadership and
organizational performance [37]. As a result, we speculate the following:
H6. There is a positive relationship between employees’ digital capabilities and organiza-
tional performance.
H7. Employees’ digital capabilities positively mediate the relationship between digital leadership
and organizational performance.
3. Research Model and Methodology

In the era of digital technology, employees, leaders who are digital experts, and digital
culture make an organization sustainable and competitive. Figure 1 shows the proposed
model describing the effect of digital leadership on organizational performance. Moreover,
it shows the mediating effect of digital culture and employees’ digital capabilities between
digital leadership and organizational performance.
3.1. Sample and Data Collection

We collected these data from employees of South Korean industries, such as man-
ufacturing, engineering, accounting/finance, human resources, supply chain/logistics,
sales/marketing, services, and information technology, using an online questionnaire in
Google Forms (Appendix A). We randomly selected employees who were willing to partici-
pate in this study. Out of 159 employees, we only validated 149 filled-out questionnaires for
analysis. The remaining questionnaires had irregularities, so we discarded them. Therefore,
the rate of usable data was 93.71%. Based on the distribution of employee
characteristics, the results show that the sampled respondents were appropriately
represented. The most common industry type was the manufacturing sector (32.90%),
followed by the services (18.10%) and supply chain/logistics (18.10%) sectors. The results
indicate that the majority of organizations had a size between 21 and 50 employees
(46.30%), followed by sizes of 11 to 20 employees (27.50%) and 51 to 100 employees
(17.40%).
Furthermore, the data show that organizational sizes of more than 500 employees
were not common (2.00%). For employee position, the majority of respondents indicated
senior staff or assistant manager (79.20%) as their job positions, 12.10% had staff positions,
and those who were general managers or above belonged to 0.70%. The majority of
respondents (56.40%) indicated that they had between 6 and 10 years of work experience,
followed by those with 1 to 5 years of work experience (40.30%). Moreover, 2.00%
indicated that they had worked in the organization for less than one year.
3.2. Measurement of Variables

Digital Leadership: Ulutas and Arslan [50] used six items [12] to measure digital leader-
ship in the textile industry to assess employees’ perceptions of digital leadership. However,
due to very low loading, we removed one item from the study: “In order to increase
participation in the corporate vision, a digital leader guides the employees of the institution
about the technological tools that can be used”. Therefore, in this study, we used six
items for measuring digital leadership. We used the following sample item regarding
digital leadership: “A digital leader raises awareness of the organization’s employees
about the risks of information technologies”. We assessed each item on a five-point
Likert scale (1 = strongly disagree, 5 = strongly agree).
Digital Culture: We measured digital culture using five items from the work of
Proksch et al. [43], a previous study by Lukas et al. [51], and a digital culture study by
Duerr et al. [18]. We used the following sample item regarding digital culture: “We openly
discuss failures with all team members”. We assessed each item on a five-point Likert scale
(1 = never, 5 = always).
Employees’ Digital Capabilities: We measured employees’ digital capabilities using five
items from the work of Rosin et al. [52], which was originally based on technological
competence and employee expertise, adopted from the work of Ritter and Gemü nden [45]
and Knight et al. [49] for measuring digital innovation. We used the following sample
item regarding employees’ digital capabilities: “We offer different types of training
(courses, literature, coaching) to improve the digital expertise of our team members”.
We assessed each item on a five-point Likert scale (1 = strongly disagree, 5 = strongly
agree).
Organizational Performance: We used five items to measure organizational performance
in this study [53]. We used the following sample item: “Our Company is more successful
than competitors”. We assessed each item on a five-point Likert scale (1 = strongly disagree,
5 = strongly agree).
3.3. Construct Validity Analysis

In this study, we examined the hypothesized model using SPSS version 23 and
AMOS version 16. The analysis included convergent validity, discriminant validity, data
reliability, validity measurement models, and confirmatory factor analysis (CFA). We
utilized exploratory and confirmatory factor analyses to ascertain the validity.
Cronbach’s alpha revealed that the measurement scales were reliable [54], with a value
of >0.60 indicating excellent internal consistency [55]. Using the indices suggested by
Anderson and Gerb- ing [56], we found that x2 = 0.000, x2/df = 1.836, GFI = 0.876, AGFI
= 0.826, RMR = 0.029, RMSEA = 0.075, NFI = 0.925, CFI = 0.964, and TLI = 0.956. Based
on [57,58], the values of
GFI and AGFI are acceptable if they are higher than 0.8. Therefore, our model is fit. The
construct validity analysis is shown in Table 1.
Table 1. Construct validity analysis.
Fit Index Recommended Model and Factors

Value
Factor 1 * Factors 2 ** Factors 3 *** Factors 4 ****

2
x >0.05 - 0.000 0.000 0.000
x2/df <2.50 - 2.348 2.287 1.836
GFI >0.80 1.000 0.887 0.831 0.876
AGFI >0.80 - 0.827 0.772 0.826
RMR <0.08 0.000 0.043 0.043 0.029
RMSEA <0.08 0.357 0.095 0.903 0.075
NFI >0.90 1.000 0.921 0.891 0.925
CFI >0.90 1.000 0.953 0.935 0.964
TLI >0.90 - 0.940 0.923 0.956
* Digital leadership, employees’ digital capabilities, digital culture, organizational performance. ** Digital
leadership + employees’ digital capabilities, digital culture, organizational performance. *** Digital leadership
+ employees’ digital capabilities + digital culture, organizational performance. **** Digital leadership + employees’
digital capabilities + digital culture + organizational performance.
As shown in Table 2, for reliability, Cronbach’s alpha values range from 0.877 to 0.946,
which are higher than 0.70, and the CR values are more significant than 0.70, which is
in the acceptable range. In addition, for convergent validity, all constructs’ standardized
factor loadings are substantial (p < 0.000). Their standardized regression estimates extend
from 0.826 to 0.878 for digital leadership, from 0.812 to 0.869 for digital culture, from
0.765 to 0.848 for employees’ digital capabilities, and from 0.857 to 0.899 for organizational
performance. Based on the construct reliability results and significant factor loadings,
we can conclude that our model also has convergent validity [56,59]. Moreover, the AVE
(average variance extracted) values for all constructs are greater than 0.60, and the results
provide confidence that the study has high convergent validity [55].
Table 2. Reliability and validity of construct.
Standard Cronbach’s
Construct Indicators Factor Loading t-Value p-Value AVE CR
Error Alpha
DL1 0.826 0.000
DL2 0.878 0.073 11.978 0.000
Digital Leadership 0.778 0.933 0.915
DL5 0.857 0.064 11.132 0.000
DL6 0.860 0.000 11.255 0.000
DC2 0.854 0.000
Digital Culture DC4 0.869 0.711 0.811 0.877
DC5 0.812 0.079 12.790 0.000
EDC1 0.806 0.000
Employees’ Digital EDC2 0.817
0.682 0.859 0.875
Capabilities EDC3 0.765
EDC5 0.848 0.126 10.886 0.000
OP1 0.899 0.000
OP2 0.857 0.064 15.514 0.000
Organizational 0.879 0.073 15.983 0.000 0.811 0.955 0.946
Performance OP3
OP4 0.879 0.058 17.219 0.000
OP5 0.897 0.080 16.129 0.000
Table 3 shows discriminant validity, which demonstrates that the model is correct if
the AVE value of the constructed result is more than the square of the AVE of the other
constructs [60]. Therefore, discriminant validity is present in our study model. As shown in
Table 4, the bold elements on the diagonal are the square roots of the AVEs that are bigger
than the corresponding correlation construct’s row or column.
Table 3. Discriminant validity analysis.
Construct 1 2 3 4
Digital Leadership 0.882
Digital Culture 0.778 ** 0.825
Employees’ Digital Capabilities 0.743 ** 0.843 ** 0.843
Organizational Performance 0.743 ** 0.828 ** 0.814 ** 0.900
** p < 0.01.
Table 4. Means, standard deviations, and correlations among variables.
Variables Mean SD 1 2 3 4 5 6 7 8
1. Types of organizations 4.127 2.590 1
2. Organization Size 2.933 0.949 0.318 ** 1
3. Experience 2.570 0.560 0.001 0.263 ** 1
4. Employee Position 1.973 0.479 −0.024 0.234 ** 0.486 ** 1
5. Digital Leadership 3.909 0.794 0.004 −0.006 0.068 0.163 * 1
6. Digital Culture 3.664 0.919 0.061 −0.072 0.090 0.164 * 0.778 ** 1
7. Employees’ Digital 0.782 0.044 −0.041 0.131 0.229 ** 0.743 ** 0.843 ** 1
Capabilities 3.726
8. Organizational
3.578 0.850 0.066 −0.055 0.120 0.230 ** 0.743 ** 0.828 ** 0.814 ** 1
Performance
* p < 0.05; ** p < 0.01.
4. Empirical Results
4.1. Structural Model
The mean, standard deviation, and correlation matrix used in this study are shown
in Table 4. Employees’ experience and position are negatively correlated with
organization size. However, digital leadership has a significant positive correlation with
digital culture (r = 0.778, p < 0.01) and employees’ digital capabilities (r = 0.743, p <
0.01). Moreover, digital leadership has a positive relationship with organizational
performance (r = 0.743, p < 0.01), and the control variables do not have any significant
correlation with study model variables such as digital leadership, digital culture,
employees’ digital capabilities, and organizational performance.
4.2. Testing of the Hypotheses

We used structural equation modeling with AMOS version 16 to evaluate the hypothe-
ses. We also used a bootstrapping resampling method to examine the mediating effect and
the other two hypotheses [61]. Previously, this method has been preferred over Baron and
Kenny’s [62] method, which was heavily criticized [63]. A total of 1000 bootstrap samples
with 95 percent bias-corrected confidence intervals were chosen [64]. The hypothesis of
an indirect impact is accepted or rejected based on the lower and upper confidence inter-
val boundaries. If the number zero is contained within the two borders, the alternative
hypothesis in which the indirect influence is zero is rejected with 95% confidence. The
indirect impact alternative hypothesis is chosen if no zero exists between the lower and
upper ranges.
5. Conclusions and Discussions

5.1. General Discussion
We conducted the above analysis to accomplish the goals of our study. As is known,
leaders are the influencers of organizational performance. Therefore, we examined the
direct effect of DL on organizational performance (Figure 2). Our analysis showed that DL
has a positive direct effect on organizational performance (ß = 0.743, p < 0.001). However,
with mediators, the result indicates that DL is also significant (ß = 0.184, p < 0.05);
therefore, H1 is accepted.
In this model, we found that DL has direct and indirect effects on organizational
performance. Based on the above results, we examined the direct impact of digital
leadership on digital culture (H2). The effect of digital leadership on digital culture is
positive and significant (ß = 0.778, p < 0.001); therefore, we accepted H2, which is
supported by a previous study [31]. Then, we found that DL positively affects
employees’ digital capabilities (ß = 0.743, p < 0.001); therefore, we accepted H3.
Figure 2. Analyzed model.
Moreover, the hypothesized effect of digital culture on organizational performance is

statistically significant (ß = 0.419, p < 0.001); therefore, we accepted H4. In addition, we
accepted H5 because a significant indirect effect exists between DL and organizational
performance (ß = 0.325, p < 0.01). Thus, digital culture has a partial mediating effect on
the relationship between DL and organizational performance. Additionally, for measuring
the effect of employees’ digital capabilities on organizational performance, we
developed H6. The result shows that employees’ digital capabilities significantly and
positively affect organizational performance (ß = 0.340, p < 0.001). Therefore, we
accepted H6. The results also reveal that employees’ digital capabilities partially
mediate the relationship between DL and organizational performance (ß = 0.253, p <
0.01); thus, we accepted H7. Consequently, we can conclude that employees’ digital
capabilities play a crucial role in performance improvement and sustainability in South
Korea.
5.2. Implications
Adopting new technology is a difficult task in the era of digital technology and the
VUCA environment, but digital leaders can help achieve organizational sustainability
smoothly. This study’s results can theoretically help us better understand the
connection between digital leadership and organizational performance in South Korea.
As is known, digital leadership has the influencing power of fostering digital culture and
reshaping organizational environments, as digital leaders have the expertise and
dynamic capability to reorganize organizational environments and ensure sustainable
performance. In excellent digital culture environments, employees are empowered to
employ digital technologies, and digital culture can mediate the interaction between
digital leadership and organizational performance. In addition, based on Hambrick and
Mason’s upper echelons theory [33], digital leadership is crucial in allocating resources
to sustain business in the future [65]. Digitally skilled managers encourage their staff to
adopt creative techniques, thus boosting motivation and productivity. In addition to
their leadership style, leaders of businesses must be able to adjust to new technology to
influence their workforce to follow current trends [12]. The results of this study shed
light on the importance of digital leadership for organizational performance in a
digitally advanced country such as South Korea. Implementing digital leadership
supports employees’ digital capabilities and organizational performance. This study has
some valuable theoretical contributions; Earhan et al. [12] suggested that DL can be
used as a core variable to find other matching variables for empirical testing in the
future.
Theoretically, this study contributes to both leadership behavior and the RBV theory.
In this study, DL was the core variable, and organizational performance was the dependent
variable. However, the results demonstrate a significant direct effect but an insignificant
indirect effect on organizational performance. Moreover, this study’s results conflict
with
previous research [19,21–23] even though digital culture has a partial mediating effect on
the relationship between DL and organizational performance in the South Korean context.
In addition, based on El Sawy et al.’s [24] findings, digitalization enhances organizational
capability. Moreover, we found that employees’ digital capabilities have a partial mediating
effect that aligns with Ritter and Gemü nden’s [46] research.
By examining Industry 4.0’s role in technology management, as conducting future
research in the fourth industrial revolution is more efficient, this study contributes to the
empirical literature. As digital leadership possesses both transformational leadership and
digital skill [8], digital leadership behaviors foster the construction of a digital workplace
but is not supported by concrete research [13]. In this case, the findings of this study
indicate that digital culture and employees’ digital capabilities partially mediate the
relationship between DL and organizational performance. This suggests that leaders’
support for improving employees’ digital capabilities increase organizational performance.
Furthermore, in a digital environment, an organization’s digital culture also enhances
organizational performance; therefore, organizations need to form a digital culture.
Organizations in the digital transformation era demand digitally skilled leaders to influence
staff to improve capabilities and to maintain a consistent digital culture for improved
performance. Likewise, a firm’s futuristic, digitally professional leaders can maintain a
digital cultural environment and promote the improvement of employees’ digital
capabilities. Organizations should pay more attention to digitally capable employees to
improve performance. The results of this study have a large contribution that is supported
by digital leadership and sustainable organizational performance through digital culture.
5.3. Limitations and Future Research

This study, like previous studies, has some limitations. First, the results cannot be
generalized because we only studied the manufacturing, human resource, and service
industries in South Korea. Therefore, this study cannot be generalized to all industries;
however, in the future, a single industry, such as the IT industry, can be studied.
Moreover, future studies can test our model in different cultural contexts in other nations.
Second, we used 149 respondents for our analysis; thus, future researchers can collect
more data.
Moreover, we used two mediating variables to find the relationship between digital
leadership and organizational performance. Future researchers can use different variables,
such as digital business strategies, structures, etc. Last, we used organizational perfor-
mance as a dependent variable. However, many variables are related to digital leadership.
Therefore, future researchers must find new variables that are affected by digital leadership.
Author Contributions: For this research article, M.A.M. wrote and analyzed the theoretical portion,
and J.C. performed data curation and writing—review and editing under the supervision of J.S. The
co-authors then revised the manuscript. All authors have read and agreed to the published version of
the manuscript.
Funding: This research received no external funding.
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Informed consent was obtained from all subjects involved in the study.
Data Availability Statement: The data presented in this study are available on request from the
corresponding author.
Conflicts of Interest: The authors declare no conflict of interest.
Appendix A. Questionnaire
1. Digital Leadership: Please rate whether the following statements apply to your
company on a scale from 1 (strongly disagree) to 5 (strongly agree).
DL1: A digital leader raises the awareness of the employees of the institution about the risks of
information technologies.
DL2: A digital leader raises awareness of the technologies that can be used to improve
organizational processes.
DL3: A digital leader determines the ethical behaviors required for informatics practices together
with all its stakeholders.
DL4: A digital leader plays an informative role to reduce resistance to innovations brought by
information technologies.
DL5: A digital leader shares his/her own experiences about technological possibilities that help
his/her colleagues to learn about the organization’s structure.
DL6: In order to increase participation in the corporate vision, a digital leader guides the
employees of the institution regarding the technological tools that can be used.
2. Employees’ Digital Capabilities: Please rate whether the following statements apply
to your company on a scale from 1 (strongly disagree) to 5 (strongly agree).
EDC1: We offer different training (courses, literature, coaching) to improve the digital expertise of
our team members.
EDC2: Digital skills are an important selection criterion in recruiting new team members.
EDC3: Our team members use all digital services and products we offer.
EDC4: Our team has the necessary skills to further digitalize our company.
EDC5: We actively discuss our digital projects within our company, including failures
and best practices.
3. Digital Culture: Please rate whether the following statements apply to your company on
a scale from 1 (strongly disagree) to 5 (strongly agree).
DC1: We openly discuss failures with all team members.
DC2: Decisions are based on the opinion of the whole team, not on a single person only.
DC3: We work in cross-functional teams (combining people from IT, marketing, finance, etc.).
DC4: In our company, we avoid strong hierarchies in project work.
DC5: Every team member brings in ideas and suggestions for digital products and services.
4. Organizational Performance: Please rate whether the following statements apply to
your company on a scale from 1 (strongly disagree) to 5 (strongly agree).
OP1: Compared with key competitors, our company is more successful.
OP2: Compared with key competitors, our company has a greater market share.
OP3: Compared with key competitors, our company is growing faster.
OP4: Compared with key competitors, our company is more profitable.
OP5: Compared with key competitors, our company is more innovative.
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Sustainability and Organizational Performance in South Korea:

Sustainability 2023, 15, 2027. https://doi.org/10.3390/su15032027 https://www.mdpi.com/journal/sustainability

Figure 1. Proposed research model.

2. Literature Review and Hypotheses

performance [31], whereas digital leadership combines transformational leadership with

digital leader properly materializes organizational assets, achieving a high level of

2.3. The Role of Digital Culture

2.4. The Mediating Role of Employees’ Digital Capabilities

3. Research Model and Methodology

3.1. Sample and Data Collection

3.2. Measurement of Variables

3.3. Construct Validity Analysis

Table 1. Construct validity analysis.

Fit Index Recommended Model and Factors

Factor 1 * Factors 2 ** Factors 3 *** Factors 4 ****

Table 2. Reliability and validity of construct.

Table 3. Discriminant validity analysis.

Table 4. Means, standard deviations, and correlations among variables.

* p < 0.05; ** p < 0.01.

4.2. Testing of the Hypotheses

5. Conclusions and Discussions

Figure 2. Analyzed model.

Moreover, the hypothesized effect of digital culture on organizational performance is

5.3. Limitations and Future Research

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Factor 1 * Factors 2 Factors 3 * Factors 4 ****