Transforming naval organizations in the digital age: leadership, AI and dynamic capabilities for change

Purpose Indonesia, with over 17,000 islands and one of the world's longest coastlines, faces escalating geopolitical dynamism, maritime tensions, and transnational threats such as narcotics trafficking, piracy and illegal fishing. As the principal naval defense force, the Indonesian Navy must enhance its organizational change capacity (OCC) to remain agile within a rigid command structure. This study examines the effects of dynamic managerial capability (DMC) and artificial intelligence capability (AIC) on OCC and investigates whether transformational leadership (TL) moderates these relationships. Design/methodology/approach A quantitative, cross-level design was employed, utilizing 1,215 naval personnel and 81 naval units. Multi-source survey data were analyzed using Mplus 8.3 to test cross-level relationships and moderation effects. Findings Neither DMC nor AIC had a direct effect on OCC. However, TL significantly strengthened the positive impact of both DMC and AIC on OCC. OCC, in turn, positively and significantly influenced organizational performance. These findings indicate that in highly mechanistic military organizations, managerial and technological capabilities require enabling leadership to translate into change capacity. Originality/value This study extends dynamic capability theory by identifying a boundary condition in hierarchical public-military contexts. It shows that DMC and AIC do not automatically enhance OCC without the presence of transformational leadership. It also underscores the strategic alignment of AI integration and leadership development to bolster change capacity in defense institutions.