Digital transformation in the SME context: The nexus between leadership, digital capabilities and digital strategy

Digital transformation (DT) fundamentally disrupts enterprise operations presenting both unprecedented opportunities and complex challenges for organisational leadership. Drawing upon dynamic capability theory, we develop a model exploring the dynamics of digital transformational leadership (DTL) and its effects on DT within small- and medium-sized enterprises (SMEs). Specifically, we investigate the mediating roles of digital capabilities and digital strategies. Data from 256 SMEs in Ghana were analysed using structural equation modelling techniques to test hypotheses. The findings reveal a positive relationship between DTL and DT, demonstrating that the former positively influences digital IT capabilities (ITDC), employee digital capabilities, and digital strategies. ITDC and employee digital capabilities partially mediate the relationship between leadership and DT, while digital strategy shows a weaker mediating effect. The findings enhance understanding of how transformational leadership influences DT in SMEs, emphasising the role of digital capabilities and the nuanced impact of digital strategies.