From Digital Transformation to Innovation: The Sequential Role of Agility and AI Adoption in Pakistan’s Telecom and Manufacturing Sectors

This study examines how digital transformation (DT) influences innovation (INN) through the sequential mediating roles of organizational agility (OA) and AI adoption (AIA) in Pakistan’s telecom and manufacturing sectors. Guided by Dynamic Capabilities Theory, survey data from 510 managerial-level employees were analysed using PROCESS Macro. Results indicate that DT significantly enhances OA, which in turn facilitates AIA, and AIA positively impacts INN. Mediation analysis reveals that OA mediates the relationship of DT and AIA, AIA mediates the relationship of OA and INN, and both jointly mediate the relationship of DT and INN. These findings highlight the importance of integrating digital investments, agility development, and AI adoption to achieve innovation outcomes. The study contributes to theory by validating a serial mediation model in a developing economy and offers practical guidance for managers and policymakers aiming to leverage digital transformation for competitive advantage.