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Citation: Asif, M.; Yang, L.; Hashim,
M. The Role of Digital Transformation,
Corporate Culture, and Leadership in
Enhancing Corporate Sustainable
Performance in the Manufacturing
Sector of China. Sustainability 2024,16,
2651. https://doi.org/10.3390/
su16072651
Academic Editors: Kutoma
Wakunuma, Damian Okaibedi Eke
and Kehinde Aruleba
Received: 21 January 2024
Revised: 23 February 2024
Accepted: 20 March 2024
Published: 23 March 2024
Copyright: © 2024 by the authors.
Licensee MDPI, Basel, Switzerland.
This article is an open access article
distributed under the terms and
conditions of the Creative Commons
Attribution (CC BY) license (https://
creativecommons.org/licenses/by/
4.0/).
sustainability
Article
The Role of Digital Transformation, Corporate Culture, and
Leadership in Enhancing Corporate Sustainable Performance in
the Manufacturing Sector of China
Muhammad Asif 1, Liu Yang 2,* and Muhammad Hashim 3,*
1
School of Media, Hunan University of Science and Engineering, Yongzhou 425199, China; masif@huse.edu.cn
2School of Journalism and Communication, Hengyang Normal University, Hengyang 421010, China
3Faisalabad Business School, National Textile University, Faisalabad 37610, Pakistan
*Correspondence: liuyang614@hynu.edu.cn (L.Y.); mhashim@ntu.edu.pk (M.H.)
Abstract: The Chinese manufacturing industry faces many challenges to sustainable development.
This study examines how transformational leadership, corporate culture, and digital transformation
affect Chinese manufacturing organizations’ sustainability. It will also examine the moderating role
of environmental dynamism and the mediating effect of innovation capabilities. A self-administered
survey was distributed to 350 manufacturing companies’ owners, managers, leaders, and employees,
etc. Participants were selected via convenient sampling. This data collection effort validated findings
and empirically tested theories. Smart PLS structural equation modelling (PLS-SEM), quantitative
research, and cross-research are used in this study. The findings suggest that corporate culture, trans-
formational leadership, and digital transformation significantly affect organizations’ sustainability.
Innovation capability does not affect the relationship between corporate culture and sustainability.
However, it mediates the relationship between transformational leadership, digital transformation,
and business sustainability. Innovation capabilities and business sustainability performance are mod-
erated by environmental dynamism. This study contributes to sustainable corporate performance
theory by showing managers how transformational leadership, digital transformation, and corporate
culture can help manufacturing companies grow indefinitely. The findings have major implications
for China, a highly industrialized nation. This study could benefit regulatory authorities, academic
institutions, industry, government agencies, and researchers.
Keywords: corporate culture; digital transformation; transformational leadership; corporate sustain-
able performance
1. Introduction
The industrial sector is facing a significant challenge regarding achieving sustainable
development [
1
]. The industrial sector plays a pivotal role in fostering economic growth,
promoting competitiveness in the market, generating employment opportunities, and ad-
dressing income inequality [
2
,
3
]. Numerous businesses in this sector have been compelled
to close due to the COVID-19 pandemic, which has intensified the strain on these sectors.
Ensuring the survival of the manufacturing sector necessitates its expansion and growth,
which can be achieved through sustainable development [
4
]. As a result, businesses will
inevitably confront the issue of achieving sustainable development [
5
]. The concept of
corporate sustainability pertains to an organization’s capacity to fulfill its stakeholders’
expectations while concurrently advancing and maintaining development throughout its
existence [
6
]. Researchers have suggested several factors that may contribute to sustainable
performance, such as organizations [
7
], technology [
8
], intellectual property [
9
], human
resource management [
10
], knowledge sharing [
11
], lean procedures [
12
], corporate cul-
ture [
13
], and others. These factors’ significant impact on sustained efficiency justifies their
elevated designation as critical performance indicators.
Sustainability 2024,16, 2651. https://doi.org/10.3390/su16072651 https://www.mdpi.com/journal/sustainability
Sustainability 2024,16, 2651 2 of 31
Industry 4.0 has led to an increase in the prevalence of digitalization. Digitalization,
driven by digital technology, propels the economy and society into the digital era [
14
]. Many
countries prioritize digital transformation as a strategic approach to gaining a competitive
edge and achieving sustainable economic advantages [
15
]. “Digital transformation” is
influencing and shaping organizational change through digital technologies [
16
]. An
increasing number of organizations are turning to digital technologies such as the Internet
of Things (IoT), artificial intelligence (AI), and big data analytics to tackle the challenges
posed by a global marketplace, evolving consumer demands, emerging regulations, and
talent scarcity [
17
]. Business executives and researchers are eagerly seeking to use the
promise of these technologies, while governments are competing to incorporate them
into their agendas [
18
,
19
]. Sustainability is a key priority for businesses. Companies
prioritize the establishment of a durable competitive edge in a volatile and uncertain market,
particularly considering the several global obstacles they encounter, like the COVID-19
pandemic, energy and climate emergencies, political instability, and significant stakeholder
concerns [20,21].
China is highly compatible with research on digitization. China, the second-largest
economy and the largest population in the world has made notable advancements in digital
technology. The proliferation of digital technology has led to the establishment of the
digital economy, which presently assumes a critical position in China’s ongoing economic
evolution and expansion. Predictions place the digital economy’s value at CNY 50.2 trillion
in 2022, positioning it as the second-most substantial sector globally. It is anticipated to
contribute approximately 41.5% to China’s GDP [22].
In recent decades, there has been a clear change in research examining organizational
commitments’ influence on enhanced performance [
23
]. However, there is an increasing
amount of studies in the field of management literature that regard CSR as a dedication
made by a firm [
24
,
25
]. Consequently, firms across all industries have begun implementing
these tactics to enhance their reputation and efficiency and reduce conflicts with important
stakeholders [26].
Leadership style is a crucial component that significantly impacts a company’s ef-
fectiveness, among other factors. In addition, the competitive landscape is influenced by
corporate policies, which are determined by leadership decisions [
27
]. An organization
faces multiple challenges in a fiercely competitive environment. For a corporation, the
primary objective is to outperform its competitors, and the most effective approach to
achieving this is enhancing operational performance [28].
After reviewing the existing literature on the subject matter, researchers have identified
several deficiencies in our understanding of sustainable performance, digital transforma-
tion, transformational leadership, and corporate culture. Before commencing, it is imper-
ative to establish a greater level of uniformity in research about the impact of corporate
culture on sustained prosperity [
29
]. According to Liu, Wan, and Yu [
30
], corporate culture
hinders reform initiatives in firms since sustainable growth requires introducing new ideas
and changes in company culture. Multiple research studies [
31
–
33
] have provided evidence
that implementing the corporate culture can facilitate and enhance sustainable develop-
ment. The gap here may stem from the fact that different forms of business culture have
diverse effects on sustainable development. As a result, academic investigations concerning
the correlation between sustainable performance and corporate culture would be enhanced
by a concentration on collecting more precise data about the elements of corporate culture
that foster enduring success.
Our research needs to be improved due to the absence of well-defined boundary
conditions and a comprehensive comprehension of the fundamental mechanism via which
corporate cultures influence sustainable performance. The existing literature needs suf-
ficiently detailed advice for firms to effectively execute cultural changes that enhance
sustainable performance [
34
–
36
]. Studies have demonstrated that culture can influence
performance, while the specific methods for implementing this connection are still being
established. The environment in which an organization functions substantially influences
Sustainability 2024,16, 2651 3 of 31
its culture, which is inherent to the business. Instead of only focusing on culture, it is
essential to accurately analyze how culture interacts with other operational-related factors
to forecast its role [37].
Limited knowledge exists regarding the potential for companies to improve their
long-term success by cultivating their company culture [38,39]. Qualitative investigations
constitute the predominant body of research concerning the correlation between corpo-
rate culture and sustainable performance [
40
,
41
]. It is deficient in empirical evidence to
support its findings [
42
]. Hence, there is still potential for enhancing the applicability of
these findings.
Research investigations have examined how digital transformation impacts diverse
aspects of enterprises, such as organizational structure, resilience, performance, innovation,
and industrial structure upgrades. The ultimate objective is to optimize company models
and production processes while ensuring the most effective allocation of resources [
43
]. Dig-
itization enhances organizational resilience, creativity, and the achievement of sustainable
development goals. It also improves business, functioning, and environmental performance.
However, no definitive evidence exists to establish a direct correlation between digital
transformation and sustainability [
44
,
45
]. Few studies have been conducted on strategic
leadership, with most empirical studies concentrating on executive qualities [
46
,
47
]. This
research sheds new light on the impact of management teams on facilitating digital trans-
formation, fostering organizational culture, implementing transformational leadership, and
ensuring long-term sustainability.
To address these areas of limited understanding, the researchers delved deeper into
the resource-based view [
48
]. They developed a framework that examines the interplay
of innovation capabilities, digital transformation, company culture, and transformational
leadership. We also consider the moderating impact of environmental dynamism on
this association.
This enables an assessment of the influence of different leadership styles on the ability
to innovate, along with the potential ways in which transformational leadership, corporate
culture, and digital transformation can either support or hinder long-term success [
49
].
By demonstrating the possible effects of business culture, digital transformation, and
transformational leadership on sustainable performance, this research makes a valuable
contribution to the existing body of theoretical literature on corporate sustainable perfor-
mance. Furthermore, it discerns the mechanisms and boundary circumstances that might
regulate this association. The findings also illuminate how organizations employ corporate
culture to maintain financial stability and promote long-term growth.
The findings of this study will contribute to the body of management literature and
pave the way for further investigations with wider applicability [
50
]. This study clarifies
the potential for environmental and social leaders in government and business to sup-
port the sustainability efforts of their respective organizations by illustrating how digital
transformation can significantly enhance sustainability.
The main objective of this research is to determine the impacts of digital transformation,
corporate culture, and transformational leadership on the sustainable performance of
manufacturing companies in China, with the mediating effects of innovation capability
and environmental dynamism anticipated to have a moderating influence.
•
What is the impact of digital transformation, corporate culture, and transformational
leadership on the sustainability performance of Chinese manufacturing companies?
•
How does the ability to innovate affect the connection between digital transformation,
corporate culture, transformational leadership, and sustainable performance in China’s
manufacturing sector?
•
Does the level of environmental dynamism have a moderating impact on the rela-
tionship between a company’s ability to innovate and its sustainable performance in
China’s manufacturing sector?
Sustainability 2024,16, 2651 4 of 31
2. Literature Review
The resource-based view significantly improves the comprehension and prediction
of a business’s competitive advantage and financial performance. It asserts that differ-
ences in organizational performance stem from the diversity of resources within firms,
and it emphasizes the internal variables that give rise to a sustained competitive edge [
51
].
Enterprises develop a competitive advantage in the RBV [
52
] by utilizing a distinct combi-
nation and use of valuable, rare, difficult-to-imitate, and non-replaceable resources. Helfat
et al. [
53
] defined resources as anything that can be considered a benefit or drawback
of a specific company. A firm’s resources include all the assets, competencies, organiza-
tional procedures, attributes, data, expertise, etc., that the corporation controls and uses
to develop and implement strategies that increase efficiency [
54
]. Scholars [
55
–
57
] have
identified transformational leadership, digital transformation, and corporate culture as
essential elements of enterprise resources. This study aims to understand better how digital
transformation, transformational leadership, and corporate culture interact within the
resource-based paradigm to help manufacturing organizations gain a competitive edge.
2.1. Corporate Sustainable Performance and Corporate Culture
Wang and Huang [
58
] believe that organizational culture is a determinant of both
individual behavior and team performance inside an organization. An organization’s
strong culture is characterized by the widespread adoption of shared views and values,
which are actively pushed by the company’s leaders [
59
]. Corporate sustainability refers
to the set of leadership and management principles an organization implements to attain
social, environmental, and economic objectives concurrently [
60
,
61
]. A correlation has
been observed between an organization’s culture and its sustained success, as indicated by
the findings of Moslehpour [
62
], which suggests that an effective organizational culture
contributes to improved performance. According to [
63
], an organization’s culture could
potentially be a source of long-term financial success and competitive advantage.
A study by Shaukat and Ming [
64
] investigated the correlation between a solid corpo-
rate culture and the unpredictable nature of business outcomes. Cheng, Hua, and Wang [
65
]
argue that a robust corporate culture with clearly defined goals and processes facilitates
the smooth execution of internal administrative operations. A study conducted by Cheng,
Hua, and Wang [
66
] discovered a direct relationship between company performance and
organizational culture. A positive link was observed between (a) the effectiveness and the
performance of the company, (b) the alignment of the mission, consistency, and revenue,
and (c) the adaptability, mission, and growth in sales. Participation, consistency, adaptabil-
ity, and purpose are some factors that [
67
,
68
] found to impact organizations’ performance.
These aspects are interconnected with the processes of developing products, increasing
sales, and maintaining quality, ultimately affecting the financial performance of compa-
nies. Refs. [
69
–
72
] agreed that organizational culture significantly influences performance
enhancement. Results based on previous research show different findings in different
contexts, and very few studies have been conducted in the context of the manufacturing
sector, specifically in the context of China. Therefore, the present study aims to examine the
impact of corporate culture on sustainable corporate performance in China’s manufacturing
sector. To achieve this objective, the following hypotheses will be tested.
Hypothesis 1 (H1). Corporate sustainable performance is positively affected by organizational culture.
2.2. Corporate Sustainable Performance and Digital Transformation
According to Xu, Chen, and Dai [
73
] and Chen and Kim [
74
], resource-based theory
posits that organizations can achieve a competitive edge and exceptional performance by
leveraging scarce, valuable, and difficult-to-replicate resources. Due to the exponential
growth of digital technology, numerous enterprises have recognized the criticality of digital
resources in supporting their manufacturing operations. These assets generate a sustainable
competitive advantage due to their scarcity, distinctiveness, and acquisition challenges. In
Sustainability 2024,16, 2651 5 of 31
addition, digital transformation facilitates businesses in improving their environmental
impact, optimizing resource utilization, and advocating for a circular economy that is more
environmentally friendly. Initially, organizations can implement ecologically conscious
protocols utilizing digital technology, reducing their environmental impact and other
superfluous emissions [75].
Using the difference-in-differences (DID) method, the author Zhao [
76
] utilized China’s
low-carbon city pilot (LCCP) as a sort of natural experiment to examine the effect on the
digital transformation of manufacturing companies. The findings revealed that the LCCP
has effectively supported the digital transformation of manufacturing companies located in
pilot locations. This has significantly influenced the diversity of businesses, industries, and
regions. The LCCP has substantially influenced the advancement of digital transformation
within financially developed regions, state-owned enterprises (SOEs), and corporations
operating in high-carbon sectors.
As an experiment, the research investigates the impact of the 5G Technology Pilot
Construction program in China in 2018 on the efficiency of technological innovation within
manufacturing companies [
77
]. Research indicates that the promotion of 5G technology can
significantly increase manufacturing firms’ technological innovation output. The impact of
endorsing 5G technology on the efficacy of technological innovation is more pronounced
for manufacturing companies in urban areas with sophisticated digital finance abilities and
comparatively lower levels of technological proficiency.
Yang and Han [
78
] conducted a study to examine the potential of digital transfor-
mation to reduce carbon emissions through enhancements in governance, environmen-
tal information disclosure, and technological progress. Furthermore, the digitization of
industrial processes enhances energy and material efficiency, reducing overall energy
consumption [
79
]. Moreover, this development promotes the extensive integration of re-
newable energy sources in developing nations like China. Ultimately, firms can enhance
their sustained social, economic, and environmental development by leveraging digital
technology to generate distinctive manufacturing processes and gain a competitive edge
through continuous innovation [
75
]. The above discussion shows mixed and different
findings in different contexts on the relationship between digital transformation and cor-
porate sustainable performance. Rare studies have been conducted in the context of the
manufacturing sector, so the results of previous empirical studies require further study
in China’s manufacturing sector. Therefore, this hypothesis is postulated based on the
last analysis.
Hypothesis 2 (H2). The implementation of digital transformation has a beneficial influence on the
sustainable development of companies.
2.3. Corporate Sustainable Performance and Transformational Leadership
As defined by Widisatria and Nawangsari [
80
], leadership is an executive position
that gives an individual the authority to influence individuals within an organization. The
importance of leadership and its potential for development at any organizational level
was affirmed by Purwaningsih, Tarto, and Candraningsih [
81
]. Furthermore, leadership is
not contingent upon a certain job designation; instead, it is a phenomenon that multiple
individuals may experience at different stages within an organization’s operations [82].
Corporate sustainability refers to the leadership and management principles a com-
pany implements to effectively pursue its environmentally friendly, social, and economic
objectives simultaneously [
83
]. As per the findings of Wang and Huang [
58
], it is imperative
for corporate executives to effectively persuade all stakeholders, including themselves and
the community, to pursue a more capable future for the company to safeguard its interests.
The growing emphasis in the corporate environment on the association between corporate
sustainability and commercial success is driven by stakeholders’ strong interest in the
organization’s ethical culture [
84
]. The findings based on preceding studies show diverse
findings using different variables, and very rare studies have been conducted on these
Sustainability 2024,16, 2651 6 of 31
variables. Therefore, there is a need to study the impact of transformational leadership on
sustainable corporate performance in China’s manufacturing sector. Thus, the following
hypothesis is suggested:
Hypothesis 3 (H3). Corporate sustainability is significantly impacted by transformational leadership.
2.4. Mediating Role of Innovation Capabilities
Al Taweel and Al-Hawary [
85
] define innovation in manufacturing as the dominant
and widely adopted technological influences that have significantly impacted the sec-
tor throughout its history. Businesses that adopt intelligent technology have increased
customer achievement, contentment with environmental and social activities, and value
generation through implementation [
86
]. Companies can secure long-term sustainability
by implementing creative strategies prioritizing fundamental principles [
87
]. In addition,
Husban, Almarshad, and Altahrawi [
88
] emphasized that innovation is crucial for attaining
sustainability. However, Dixit, Jakhar, and Kumar [
89
] and Hwang, Choi, and Shin [
90
]
were among the few researchers who did not consider the significance of innovative perfor-
mance as a mediator between competitive advantages.
According to an alternative perspective held by scholars, the value of digitalization di-
minishes if creative methods remain stagnant for a long time [
91
–
93
]. Industry 4.0 presents
difficulties in various domains, such as sustainability, human resource management, per-
formance, operations, supply chain practices, business prospects, and quality management
principles [
94
–
96
]. Ferreira, Cardim, and Coelho [
95
] argue that innovation is essential for
enterprises of all sizes to remain competitive in organizational sustainability. According to
Liu, Chang, and Fang [
96
] and Molden and Clausen [
97
], equitable growth can be attained
through the strategic utilization of industrial technologies that improve an organization’s
capacity for innovation in product, process, and administration. China excels in manu-
facturing and exporting goods by leveraging smart technology to enhance its innovation
capabilities [98].
By incorporating mediation into a theoretical framework, it becomes possible to exam-
ine the mechanism through which the impact of an independent variable is transmitted to
the dependent variable [
99
]. The present study investigates the mediating role of corporate
culture in the relationship between transformational leadership, digital transformation, in-
ventive performance, and organizational sustainability. The collaborative implementation
of quality management approaches in the manufacturing sector minimizes the influence
of leadership and enhances creative performance [
100
]. According to Pundziene, Nikou,
and Bouwman [
101
], organizational innovation is essential to maximize the impact of an
entrepreneurial mindset on company performance. Sarfraz, Ivascu, et al. [
102
] did not
include innovation as a mediator between a business’s economic sustainability and the
simultaneous influence of social and environmental elements. Constraints regarding the
findings prompted the researchers to re-examine the impacts of creative performance. Pre-
vious research shows mixed and inconsistent results between variables, and the mediating
role of innovative capabilities between this study’s variables has not been studied. Based
on the above arguments, the study presents the following hypotheses:
Hypothesis 4 (H4). The impact of transformational leadership and organizational sustainability is
mediated by innovative capabilities.
Hypothesis 5 (H5). The impact of digital transformation and organizational sustainability is
mediated by innovative capabilities.
Hypothesis 6 (H6). The impact of corporate culture and organizational sustainability is mediated
by innovative capabilities.
Sustainability 2024,16, 2651 7 of 31
2.4.1. Corporate Culture and Innovation Capabilities
Although resources are important, they alone cannot ensure success for a firm. On the
other hand, the success of an organization can be attributed to its culture [
103
]. Corporate
culture may not always meet all VRIN characteristics [
58
]; thus, it cannot immediately
confer a competitive advantage to an organization [
104
]. According to field experts, in this
scenario, a firm’s resources can only serve as a durable competitive advantage if they are effectively
combined with other corporate capabilities, resources, or business activities [
105
–
107
]. Further-
more, the existence of intermediaries is essential for fostering the growth of sustainable
performance within the context of corporate culture. The capacity for innovation was
selected as an intermediary due to its critical importance in ensuring the industrial sector’s
survival [107].
The research’s null hypothesis posits that culture has a beneficial impact on innovative
capabilities. Research has shown that this type of culture is strongly linked to an innovation
culture [
108
–
110
], which, in turn, enhances creative ability [
110
]. In addition, a culture
that encourages openness, creativity, risk-taking, and entrepreneurial spirit motivates
employees to act in a way that prioritizes innovation as a core business concept [
111
].
Promoting a mindset that encourages thinking outside conventional boundaries would
enhance long-term innovation capacity [
112
]. Organizations that prioritize flexibility
typically adopt a natural framework [
113
], which has been demonstrated to improve their
ability to innovate [
114
]. An organization’s capacity for innovation may be strengthened by
its emphasis on fostering a culture of flexibility. Such cultures foster an environment that
promotes employee autonomy, engagement, and reciprocal knowledge acquisition [
115
].
Based on the above discussion, the findings of the previous studies were confusing, so there
is a need to identify the relationship between corporate culture and innovation capabilities
in the context of the manufacturing sector. Thus, the entirety of the research posits the
subsequent hypothesis:
Hypothesis 7 (H7). The relationship between corporate culture and innovation capabilities is significant.
2.4.2. Digital Transformation and Innovation Capabilities
To effectively adapt to digital transformation, businesses need to make significant
changes to their operations, work practices, and interactions with stakeholders in the
supply chain and related industries [
116
–
118
]. Hence, digitalization can be regarded as a
crucial enabler of flexible competencies that can identify changes, seize opportunities, and
transform companies [118].
The present body of literature has enhanced the relationship between digitization
and creative abilities through a comprehensive examination and assessment of prior re-
search [
119
–
121
]. Consistent with the findings of [
121
], the present study suggests that
digitalization initiatives may improve and maintain an organization’s innovation perfor-
mance. Organizations that wish to innovate in response to the opportunities and challenges
presented by new technologies must have a profound understanding of how digitalization
affects innovation capabilities [
122
]. Based on the above discussion about previous studies’
results, the researchers are conducting this research to provide clearer results regarding
the relationship between digital transformation and innovation capabilities. Therefore, the
research hypothesis might be expressed as:
Hypothesis 8 (H8). The relationship between digital transformation and innovation capabilities
is significant.
2.4.3. Transformational Leadership and Innovation Capabilities
To attain success at the organizational level, organizations must possess the ability
to innovate. Innovation encompasses the aptitude to recognize and execute innovative
ideas, products, services, methodologies, technologies, organizational frameworks, ap-
proaches, and initiatives [
123
]. Leaders who cultivate a conducive and supportive atmo-
Sustainability 2024,16, 2651 8 of 31
sphere for creativity directly influence the process of innovation [
124
]. Based on a previous
study conducted by Gui, Lei, and Le [
125
], transformational leadership motivates employ-
ees to prioritize the firm’s objectives over their interests, resulting in a continuous cycle
of innovation.
Scholars [
119
,
126
–
128
] have identified four distinct criteria that define transformative
leaders: (1) Idealized influence encompasses a transformative leader’s ability to inspire
a sense of pride, articulate a clear mission vision, and gain the respect and trust of their
people. (2) The ability of a transformational leader to inspire individuals to think critically
and solve complex problems shows that they can stimulate their intellectual capacities. A
transformational leader who places a premium on the sharing and distributing information
with outstanding standards has an inspirational drive. They use symbols to concentrate
efforts and employ straightforward approaches to communicate significant objectives
or aims effectively. (3) Individualized consideration demonstrates that a transformative
leader is genuinely concerned about fulfilling the requirements of their staff, providing
guidance and counsel, and treating each individual with personalized attention. Theng
et al. [
120
] found that transformational leadership significantly influences the creation of
a suitable atmosphere for business creativity. To better understand this influence, this
study will examine two aspects: idealized influence and customized attention. Evidence
suggests that transformational leadership is a solid predictor of an organization’s capacity
to generate novel ideas; however, further investigation is required to ascertain the precise
and transparent influence of various personality traits on these outcomes [
128
]. Based on
this discussion about previous studies, the findings were mixed and inconsistent, so there
is a need to clarify the relationship between transformational leadership and innovation
capabilities in the context of the manufacturing sector. Thus, as per the above findings, the
hypothesis of the study will be:
Hypothesis 9 (H9). The relationship between transformational leadership and innovation capabili-
ties is significant.
2.4.4. Corporate Sustainable Performance and Innovation Capabilities
According to the resource-based view—RBV—an organization’s capacity to innovate
is crucial since it enables them to accomplish their creative goals [
129
–
131
] and stimulate
growth, performance, and a competitive edge [
131
]. The NBRV highlights that a company’s
environmental relationship is its area of excellence [
132
]. Consequently, corporations are
placing a growing emphasis on achieving sustainable development. Studies have indicated
that innovation is crucial in this phenomenon [
133
]. Innovation is more important than
ever for a company’s long-term success in the current hostile business environment [
134
].
Businesses contemplate sustainable development initiatives as a potential strategy to gain
a competitive edge in the marketplace [
135
]. Therefore, forward-thinking companies will
actively seek sustainable development to retain a superior position in the market [
136
]. The
study is theoretically based on this.
Our research indicates that a company’s long-term performance is substantially in-
fluenced by its capacity for innovation, encompassing both technological and managerial
fields. Technological innovation is an area where strong skills truly excel. Proficient com-
panies effortlessly enhance their market share, generate greater profits, and contribute
to a more sustainable economy [
137
] by continuously improving their products’ quality,
performance, and production methods [
138
], strengthening their fundamental competi-
tiveness. In contrast, firms may improve their resource efficiency, produce products with
minimal pollution and energy consumption, and enhance their sustainable performance
by having a strong capacity for technical innovation [
139
]. In conclusion, the capacity for
innovation may ultimately enhance organizations’ social, environmental, and economic
outcomes. Based on the above discussion, there is a need to provide clearer and more
authentic results regarding the relationship between innovation capabilities and corporate
sustainable performance. Therefore, the subsequent hypothesis is proposed in this research:
Sustainability 2024,16, 2651 9 of 31
Hypothesis 10 (H10). The relationship between innovation capabilities and corporate sustainable
performance is significant.
2.5. Moderating Role of Environmental Dynamism
Specific aspects of the business environment significantly impact strategies aimed at
affecting the performance of firms [
140
]. According to Yu et al. [
141
] and Andrade, Franco,
and Mendes [
142
,
143
], businesses’ innovativeness substantially influences enhancing corpo-
rate performance. However, the dynamic nature of the business environment significantly
influences this effect. Abusiness’s success is contingent upon the reliability and competi-
tiveness of the business environment. The necessity for businesses to generate innovative
ideas to ensure their survival and success is underscored by competitive forces [
144
,
145
].
Organizations must exhibit resourcefulness and adopt an entrepreneurial orientation to
thrive in the volatile business climate.
According to a study by Purwanti, Lailyningsih, and Suyanto [
145
], organizations
with a propensity for innovation tend to fare better in volatile markets. Organizations are
compelled to augment their endeavors toward innovation as a reaction to an uncertain
commercial landscape. Organizations can attain a competitive edge by successfully satisfy-
ing the desires and requirements of consumers through innovative product offerings [
146
].
Organizations can utilize technological advancements to fulfill consumer expectations and
provide superior products. Businesses bolster their competitive edge through consistent
innovation, which enables them to increase sales, expand their market share, and guaran-
tee customer satisfaction amidst shifting environmental conditions. Hence, the extent to
which an organization lacks awareness of the ecological dynamism environment signif-
icantly influences its internal innovation capacities, affecting its long-term performance
considerably [147,148].
Both Taghizadeh et al. and Tindika et al. [
149
,
150
] concur that the dynamic character
of the corporate environment diminishes the impact of product innovation on business
success. Divergent viewpoints among scholars exist regarding the influence of environ-
mental dynamism on corporate success and innovation, as evidenced by these types of
disagreements. Furthermore, scholars persist in their disagreement regarding the purpose
of ecological dynamism [
150
]. No study has been conducted on the moderating role of
environmental dynamism. So, there is a need to examine the relationship between innova-
tiveness and company performance and the moderating effect of environmental dynamism
in China’s manufacturing sector. Thus, the hypothesis of the study will be:
Hypothesis 11 (H11). The relationship between innovativeness and company performance is
significantly moderated by environmental dynamism.
3. Research Methodology
3.1. Research Approach
A quantitative research method was employed in this study. The quantitative strategy
employed by Mulisa [
151
] is characterized by a logical approach and a focus on quantifying
and interpreting data. The current study followed previous research findings using a
quantitative approach to evaluate a hypothesis that aligns with the existing theory. The
research conducted by Jansen, Knippels, and van Joolingen [
152
] revealed a range of
investigations, explanations, and descriptive research. The objective of this study was to
investigate the correlation between transformational leadership, digital transformation,
and organizational culture in the context of business sustainability.
Therefore, this study’s primary objective was to provide a comprehensive depiction.
This study was cross-sectional in this quantitative research strategy, which collects infor-
mation from participants at a single time instead of monitoring the passage of time [
153
–
155
].
The data were obtained simultaneously through the dissemination of a questionnaire.
Bougie and Sekaran [
155
] state that researchers can efficiently collect data with a survey
questionnaire within a reasonable timeframe and at a minimal expense.
Sustainability 2024,16, 2651 10 of 31
3.2. Questionnaire Development
The researchers utilized preexisting research questions that had been thoroughly
analyzed to formulate our study topics. As a result, the trustworthiness and dependability
of the findings were improved [156].
The survey employed a Likert scale of five points, with 5 indicating strong agreement
and 1 representing strong disagreement. Following prior investigations, the participants
were requested to assess various products. The questionnaire underwent pilot testing
by several management and field experts before initiating the final data collection. The
individuals provided favorable feedback regarding the scales’ simplicity, grammar, and
practicality. The respondents offered valuable insights and recommendations for improving
its overall quality after their survey evaluation. Before data collection commenced among
the intended participants of the study, the final instrument was modified based on the
feedback and suggestions provided by the experimental research participants [157].
Evaluating corporate culture entailed implementing the assessment criteria established
by Wuensch et al. and Egholm et al. [
158
–
160
]. The Likert scale [
160
] was implemented
to assess transformational leadership. One can evaluate the degree to which a company
has accomplished sustainable development by analyzing its ethical conduct. For a firm
to ensure its long-term viability, it is crucial to prioritize both social and environmental
performance alongside short-term economic rewards [
161
,
162
]. The corporate sustainability
performance was assessed using Verhelst, Vanhoof, Van Petegem, and Kishore et al. [
163
,
164
]. In line with the methodology employed by Judge and Douglas, we also analyzed
environmental dynamism [
164
,
165
]. The innovative capability was measured using the
scale created by Wahbeh, Sarnikar, El-Gayar, and Bogaert et al. [
166
,
167
]. A scale devised
by González-Mesa et al. [167] was employed to quantify digital transformation.
3.3. Sampling and Data Collection
The researchers surveyed managers, owners, leaders, and employees of China’s
industrial sector. The participants were assured that their data would be kept confidential
and utilized solely for this study, following research ethics. The data for this study were
obtained from participants who were selected using a convenience sampling technique.
Furthermore, a total of 350 participants were surveyed for this study.
A sample of respondents can be selected using either probability or non-probability
methods [
168
]. Probability sampling ensures that every individual in the population has an
equal chance of being selected. Non-probability sampling, on the other hand, violates this
fundamental principle [
169
]. The researcher must ascertain the demographic of the study’s
population in this instance. The data were collected using a convenience non-probability
sampling procedure, as the survey was conducted online. The researchers requested that
participants complete an online survey autonomously to optimize the use of our resources,
including time, money, and samples. The technique’s efficiency, ease of use, and capacity to
encourage respondents’ voluntary participation in completing the questionnaire resulted
in its selection.
3.4. Data Analysis and Interpretation
Inferential statistics were used in this study to assess the data and accomplish the
research aim. The inferential statistics shed light on the nature and magnitude of the
correlations between the variables.
Statistical methods called Smart-PLS (partial least squares) were applied to achieve
this objective for elucidating the inferential statistics of the model in Partially Least Squares
Structural Equation Modeling—PLS-SEM [
170
]—Smart-PLS is an appropriate technique.
An advantageous characteristic of SEM is its adaptability, as it requires a small sample
size, a nominal measurement scale, and normal data [
171
]. In addition, investigators have
utilized Partial Least Squares (PLS) to evaluate their models’ variables effect [172].
Moreover, when contrasting the complex loadings of alternative methods like LISREL
and regression, PLS-SEM exhibits higher efficacy [
173
] in handling these loadings. Intelli-
Sustainability 2024,16, 2651 11 of 31
gent PLS applies to both informal and reflective evaluation systems. Smart PLS-SEM was
utilized in this investigation.
3.5. Conceptual Framework
The conceptual framework of the study is given below in Figure 1:
Sustainability 2024, 16, x FOR PEER REVIEW 12 of 33
Figure 1. Conceptual Framework. Source: Developed by the researcher.
Figure 1. Conceptual Framework. Source: Developed by the researcher.
4. Data Analysis
4.1. Demographic Data
Table 1shows the participants’ demographic characteristics. A total of 350 people
completed the survey. According to the study, men constituted 60.6% of the sample
size, while women comprised 39.4%. According to the data, men were more involved in
corporate performance and transformative leadership efforts than women. Furthermore,
older individuals were more confident due to their experience and knowledge. In total,
7.7% of the respondents were between 20 and 30, while the percentages of respondents
from 35 to 40, over 40, and 30–35 were39.1%, 40%, and 13.1%, respectively. Advanced
education had a substantial impact on both individual and organizational performance.
Postgraduates and graduates deeply understood the value of transformative leadership,
digital transformation, and organizational performance. The proportions of individuals
with bachelor’s, master ’s, and doctoral degrees were29.1%, 57.7%, and 13.1%, respectively.
The minimum level of education of the respondents in this survey was a bachelor’s degree
because the researchers targeted senior and managerial-level employees. Hence, their
education had tobe higher, and they had enough work experience due to their designation
and knowledge about business studies and relevant fields. In this way, the participants
responded better with enough knowledge.
Sustainability 2024,16, 2651 12 of 31
Table 1. Demographic data.
Respondents Description Frequency Percentage
Gender
Male 212 60.6%
Female 138 39.4%
Age of the Respondents
20–30 27 7.7%
30–35 137 39.1%
35–40 140 40%
40 and above 46 13.1%
Qualification
Bachelor 102 29.1%
Master 202 57.7%
PhD 46 13.1%
Position
Manager 97 27.7%
Leader 45 12.9%
Employee 208 59.4%
Source: Survey Data 2024.
Furthermore, 59.4% of participants were classified as permanent employees, 12.9% as
leaders, and 27.7% as managers. The target audience was managers, leaders, and senior
and permanent employees of the organization. The researchers thought they would be the
best choice for the survey because they were more experienced and would give more honest
and reliable responses to the study questionnaire than temporary employees because they
had spent more time in the organization.
4.2. Convergent Validity
The measurement model of the study depicted in Figure 2elaborates the main variables
of the study.
Convergent validity is a form of validity devoted to determining if various methods of
measuring a concept produce the same results [
174
]. It significantly validates research tools,
particularly in psychology and social science [
175
]. Convergent validity is established by
establishing high correlations between different measures of the same construct, along with
their inability to measure the same concept [176].
Criteria for Convergent Validity
•
Cronbach’s Alpha: This internal consistency measure shows the relationship of the
set of items as a whole. It varies from 0to 1, with higher values representing stronger
internal consistency. Values over 0.7 are usually regarded as acceptable [177].
•
Composite Reliability (rho_a and rho_c): This is the measurement of the validity of a la-
tent variable. LikeCronbach’s Alpha, it varies from 0 to 1, with higher scores reflecting
greater consistency. A value above 0.7 is commonly considered satisfactory [178].
•
Average Variance Extracted (AVE): AVE determines how much variance captured by
a latent variable from its indicators is due to measurements, as opposed to that due
to measurement error. A positive value (0.5 or greater) signifies that the construct
accounts for over 50% of the variability observed in its indicators, on average [179].
Corporate Culture (CC):
•Cronbach’s Alpha: 0.919, indicating excellent internal consistency.
•
Composite Reliability: Both rho_a (0.929) and rho_c (0.936) are well above the 0.7 thresh-
old, indicating a high reliability.
•
AVE: 0.677, exceeding the 0.5 threshold, showing that the corporate culture construct
accounts for most of the variance in the indicators.
Sustainability 2024,16, 2651 13 of 31
Sustainability 2024, 16, x FOR PEER REVIEW 14 of 33
Figure 2. Measurement model. Source: survey data (2024).
Convergent validity is a form of validity devoted to determining if various methods
of measuring a concept produce the same results [174]. It significantly validates research
tools, particularly in psychology and social science [175]. Convergent validity is estab-
lished by establishing high correlations between different measures of the same con-
struct, along with their inability to measure the same concept [176].
Criteria for Convergent Validity
• Cronbach’s Alpha:This internal consistency measure shows the relationship of the
set of items as a whole. It varies from 0to 1, with higher values representingstronger
internal consistency. Values over 0.7 are usually regarded as acceptable[177].
• Composite Reliability (rho_a and rho_c): This is the measurement of the validity of
a latent variable. LikeCronbach’s Alpha, it varies from 0 to 1, with higher scores re-
flectinggreater consistency. A value above 0.7 is commonly considered satisfactory
[178].
• Average Variance Extracted (AVE): AVE determines how much variance captured
by a latent variable from its indicators is due to measurements, as opposed to that
due to measurement error. A positive value (0.5 or greater) signifies that the con-
struct accounts for over 50% of the variability observed in its indicators, on aver-
age[179].
Figure 2. Measurement model. Source: survey data (2024).
Corporate Sustainable Performance (CS-DV):
•Cronbach’s Alpha: 0.898, showing a high internal consistency.
•
Composite Reliability: Both rho_a (0.902) and rho_c (0.921) are high, indicating reli-
able measurements.
•AVE: 0.627, above the 0.5 threshold, suggests a good convergent validity.
Digital Transformation (DT):
•Cronbach’s Alpha: 0.939, indicating an excellent internal consistency.
•Composite Reliability: Both rho_a (0.949) and rho_c (0.950) are very high.
•AVE: 0.733, well above the threshold, indicating a strong convergent validity.
Environmental Dynamism (ED-MOD):
•Cronbach’s Alpha: 0.948, showing a very high internal consistency.
•Composite Reliability: rho_a (0.962) and rho_c (0.959) are exceptionally high.
•
AVE: 0.795, indicating that the construct explains a large portion of the variance in
the indicators.
Innovation Capabilities (IC-MED):
•Cronbach’s Alpha: 0.904, indicating a high internal consistency.
•
Composite Reliability: rho_a (0.953) is high, but rho_c (0.910) is slightly lower, yet
still acceptable.
•AVE: 0.591, above the threshold, shows good convergent validity.
Transformational Leadership (TL):
•Cronbach’s Alpha: 0.823, indicating a good internal consistency.
Sustainability 2024,16, 2651 14 of 31
•
Composite Reliability: rho_a (0.829) and rho_c (0.868) are both above the threshold,
suggesting reliability.
•
AVE: 0.485, slightly below the desired threshold of 0.5, indicating that this construct
might not explain as much variance in its indicators as desired.
Table 2suggests that most constructs in the study exhibit a strong convergent validity,
as indicated by high Cronbach’s Alpha, Composite Reliability, and AVE values. The
exception is transformational leadership, where the AVE is slightly below the threshold,
suggesting a need for further investigation or refinement of this construct’s indicators.
Table 2. Convergent validity.
Cronbach’s
Alpha
Composite
Reliability (rho_a)
Composite
Reliability (rho_c)
Average Variance
Extracted (AVE)
CC- 0.919 0.929 0.936 0.677
CS-DV- 0.898 0.902 0.921 0.627
DT- 0.939 0.949 0.950 0.733
ED-
MOD- 0.948 0.962 0.959 0.795
IC-
MED- 0.904 0.953 0.910 0.591
TL- 0.823 0.829 0.868 0.485
Source: survey data (2024).
4.3. Discriminant Validity
An indicator of discriminant validity measures the extent to which a particular con-
struct or variable can be distinguished from others that may appear unrelated. Scale
validation requires a critical check to ensure that distinct constructs do not overlap exces-
sively [180].
4.3.1. Fornel and Lacker
In order for a construct to satisfy the Fornel and Lacker criteria, its Average Variance
Extracted (AVE) must be greater than the square of the correlation of each other construct
in the model, according to the findings of Ramayah [
180
]. Fundamentally, the construct
exhibits a significantly stronger correlation with its indicators when compared to other
constructs [178].
When displaying the square root of AVE in Table 3, the diagonal components (e.g.,
0.823 for CC) ought to be larger than the off-diagonal components within the same row
and column.CC meets the criteria if the sum of its correlations with other constructs
(which vary between 0.110 and 0.866) is greater than 0.823. In each row and column, the
diagonal components, representing the square roots of AVEs, invariably have a greater
number than the off-diagonal elements. This characteristic is consistent across all constructs.
Despite being less than the square root of AVE for both variables, the extremely high
correlation (0.866) between CC and DT indicates a noteworthy association that merits
further investigation.
Table 3. Fornell and Lacker criteria.
Fornell and Lacker Criteria CC- CS-DV- DT- ED-MOD- IC-MED TL-
CC- 0.823
CS-DV- 0.574 0.792
DT- 0.866 0.613 0.856
Sustainability 2024,16, 2651 15 of 31
Table 3. Cont.
Fornell and Lacker Criteria CC- CS-DV- DT- ED-MOD- IC-MED TL-
ED-MOD- 0.110 0.235 0.146 0.892
IC-MED- 0.285 0.501 0.325 0.512 0.769
TL- 0.583 0.725 0.542 0.169 0.303 0.697
Source: survey data (2024).
4.3.2. HTMT
The Heterotrait-Monotrait Ratio (HTMT)criterion is a relatively newer approach to
assessing discriminant validity [
181
]. It compares the mean of the heterotrait-heteromethod
correlations (correlations between different constructs) with the mean of the monotrait-
heteromethod correlations (correlations within the same construct). A value less than 0.85
or 0.90 (depending on the source) is typically indicative of discriminant validity [178].
As indicated in Table 4, the HTMT values were all below the threshold of 0.85 or 0.90,
suggesting a good discriminant validity. The highest HTMT value observed was between
CC and DT (0.928), which was very close to the threshold, indicating a potentially strong
relationship. The rest of the HTMT values were well below the threshold, reinforcing the
evidence of discriminant validity among the constructs.
Table 4. HTMT criteria.
HTMT Criteria CC- CS-DV- DT- ED-MOD- IC-MED TL-
CS-DV- 0.627
DT- 0.928 0.652
ED-MOD- 0.115 0.250 0.151
IC-MED- 0.239 0.443 0.274 0.605
TL- 0.735 0.817 0.634 0.181 0.268
ED-MOD- ×IC-MED- 0.022 0.148 0.044 0.097 0.098 0.098
Source: survey data (2024).
Thus, both tables suggest a strong discriminant validity among the constructs in the
study. The Fornell and Larcker criterion was consistently met, and the HTMT values were
generally below the threshold. However, the relatively high correlations and HTMT values
for certain pairs of constructs (such as CC and DT) may suggest a close relationship that
should be carefully considered in the research context.
4.4. Model Fitness
As per the findings of Table 5, the provided model fit summary indicates a poor fit
of the estimated model to the data in a structural equation modelling context. Key points
from the summary are:
Table 5. Model Fft.
Model Fit Summary Saturated Model Estimated Model
SRMR 0.118 0.143
d_ULS 11.994 17.572
d_G 5.520 5.596
Chi-square 9067.137 9217.817
NFI 0.560 0.552
Source: Survey data (2024).
SRMR (Standardized Root Mean Square Residual): Both the saturated and estimated
models had SRMR values (0.118 and 0.143, respectively) that exceeded the preferred
threshold of 0.08, suggesting a poor fit [182].
Sustainability 2024,16, 2651 16 of 31
d_ULS and d_G (Discrepancy Functions): The values for both d_ULS (11.994 and
17.572) and d_G (5.520 and 5.596) increased from the saturated to the estimated model,
indicating a worse fit for the estimated model.
Chi-square: The high values for both models, (9067.137) for the saturated model and
(9217.817) for the estimated model, typically point to a poor fit, although interpretation
should consider sample size and degrees of freedom [183].
NFI (Normed Fit Index): With values of 0.560 and 0.552, both models fellsignificantly
below the desired threshold of 0.90, suggesting an inadequate fit [184].
4.5. Hypothesis Testing
4.5.1. Direct Relationship
The hypothesis testing results in Figure 3revealed significant findings across various
aspects of corporate culture, digital transformation, transformational leadership, and their
impacts on corporate sustainable performance and innovation capability.
Sustainability 2024, 16, x FOR PEER REVIEW 18 of 33
Hypothesis 2 (H2).The implementation of digital transformation has a beneficial influence on the
sustainable development of companies.
Hypothesis 3 (H3).Corporate sustainability is significantly impacted by transformational lead-
ership.
Hypothesis 7 (H7).The relationship between corporate culture and innovation capabilities is
significant.
Hypothesis 8 (H8).The relationship between digital transformation and innovation capabilities is
significant.
Hypothesis 9 (H9).The relationship between transformational leadership and innovation capa-
bilities is significant.
Hypothesis 10 (H10).The relationship between innovation capabilities and corporate sustainable
performance is significant.
Figure 3. Hypothesis testing model source: survey data (2024).
As indicated in Table 6,forH1, which posits a positive effect of corporate culture on
corporate sustainable performance, the data show an original estimate of 0.019, a
T-statistic of 4.635, and a P-value of 0.000. This strongly supports the hypothesis, indi-
cating a significant positive relationship between corporate culture and sustainable per-
formance.
Table 6. Direct relationship between variables.
Relationship Original Sample Standard T Statistics p Values
Figure 3. Hypothesis testing model source: survey data (2024).
Hypothesis 1 (H1). Corporate sustainable performance is positively affected by organizational culture.
Hypothesis 2 (H2). The implementation of digital transformation has a beneficial influence on the
sustainable development of companies.
Hypothesis 3 (H3). Corporate sustainability is significantly impacted by transformational leadership.
Hypothesis 7 (H7). The relationship between corporate culture and innovation capabilities
is significant.
Hypothesis 8 (H8). The relationship between digital transformation and innovation capabilities
is significant.
Sustainability 2024,16, 2651 17 of 31
Hypothesis 9 (H9). The relationship between transformational leadership and innovation capabili-
ties is significant.
Hypothesis 10 (H10). The relationship between innovation capabilities and corporate sustainable
performance is significant.
As indicated in Table 6,forH1, which posits a positive effect of corporate culture
on corporate sustainable performance, the data show an original estimate of 0.019, a T-
statistic of 4.635, and a P-value of 0.000. This strongly supports the hypothesis, indicating a
significant positive relationship between corporate culture and sustainable performance.
Table 6. Direct relationship between variables.
Relationship Original Sample (O) Standard Deviation T Statistics pValues
H1: CC- -> CS-DV- 0.019 0.031 4.635 0.000
H2: DT- -> CS-DV- 0.330 0.054 6.139 0.000
H3: TL- -> IC-MED- 0.191 0.065 2.943 0.003
H7: CC- -> IC-MED- 0.070 0.110 4.635 0.007
H8: DT- -> IC-MED- 0.282 0.105 2.685 0.007
H9: TL- -> CS-DV- 0.559 0.049 11.508 0.000
H10: IC-MED- -> CS-DV- 0.276 0.042 6.529 0.000
Source: Survey data (2024).
In the case of H2, the results of assessing the impact of digital transformation on
sustainable corporate development are quite compelling. With an original estimate of 0.330
and a T-statistic of 6.139, coupled with a p-value of 0.000, the evidence robustly confirms
the positive influence of digital transformation on sustainable development.
The analysis of H3, concerning the influence of transformational leadership on innova-
tion capability, also yields supportive results. The original estimate stands at 0.191, and the
T-statistic of 2.943, along with a p-value of 0.003, validates the hypothesis of a significant
positive influence of transformational leadership on innovation capability.
H7 investigates the effect of corporate culture on innovation capability and presents an
original estimate of 0.070, T-statistic of 4.635, and p-value of 0.007. These numbers confirm
the assumption claiming that corporate culture influences innovation capacity positively.
Concerning H8 (which deals with the impact of digital transformation on innovation
capabilities), the results show a positive relationship. The original estimate is 0.282; the
T-statistic is 2.685; and the p-value is 0.007, which leads to accepting the hypothesis that
digital transformation has a positive effect on innovation capabilities.
In H9, the data on analyzing the effect of transformational leadership on corporate
sustainability are especially remarkable. The original estimate of 0.559, a high T-statistic of
11.508, and a p-value of 0.000 offer strong evidence in favor of the hypothesis, indicating a
significant positive impact of transformational leadership on corporate sustainability.
Last, H10, concerning the influence of innovation capability on sustainability perfor-
mance, gives an original estimate of 0.276, a T-statistic of 6.529, and a p-value of 0.000.
This is in line with the hypothesis and thus confirms that innovation capability positively
influences sustainable performance.
All data, without exception, support the hypotheses and show the significantly pos-
itive relationships between corporate culture, digital transformation, transformational
leadership, innovation capability, and corporate sustainability.
4.5.2. Mediation
The mediation analysis reveals varied results regarding the role of innovative per-
formance in mediating the relationships between transformational leadership, digital
transformation, corporate culture, and organizational sustainability.
Sustainability 2024,16, 2651 18 of 31
Hypothesis 4 (H4). The impact of transformational leadership and organizational sustainability is
mediated by innovative capabilities.
Hypothesis 5 (H5). The impact of digital transformation and organizational sustainability is
mediated by innovative capabilities.
Hypothesis 6 (H6). The impact of corporate culture and organizational sustainability is mediated
by innovative capabilities.
As per the findings of Table 7,the analysis indicates a significant mediation for H4,
examining the mediation effect of innovative performance between transformational lead-
ership and organizational sustainability. The original sample estimate is 0.053, with a
T-statistic of 2.685 and a p-value of 0.007. These figures suggest that innovative perfor-
mance does play a significant mediating role in the relationship between transformational
leadership and organizational sustainability.
Table 7. Mediation.
Relationship Original
Sample (O)
Sample
Mean (M) STDEV
T Statistics
pValues
H4: TL- -> IC-MED- -> CS-DV- 0.053 0.053 0.020 2.685 0.007
H5: DT- -> IC-MED- -> CS-DV- 0.078 0.077 0.030 2.553 0.011
H6: CC- -> IC-MED- -> CS-DV- -0.019 -0.018 0.031 0.635 0.525
Source: survey data (2024).
The results of H5, which focuses on the mediation effect of innovative performance
between digital transformation and organizational sustainability, are similarly significant.
The original sample estimate stands at 0.078, and the T-statistic is 2.553, coupled with a
p-value of 0.011. This indicates a substantial mediating effect of innovative performance in
the relationship between digital transformation and organizational sustainability.
However, the scenario changes with H6, assessing the mediation role of innovative
performance between corporate culture and organizational sustainability. Here, the original
sample estimate is
−
0.019, the T-statistic is relatively low at 0.635, and the p-value is high
at 0.525. These results suggest a lack of significant mediation by innovative performance in
the relationship between corporate culture and organizational sustainability.
The mediation analysis in Figures 4–6demonstrates that innovative performance
significantly mediates the impact of transformational leadership and digital transformation
on organizational sustainability. However, it does not significantly mediate the relationship
between corporate culture and organizational sustainability.
Sustainability 2024, 16, x FOR PEER REVIEW 20 of 33
As per the findings of Table 7,the analysis indicates a significant mediation for H4,
examining the mediation effect of innovative performance between transformational
leadership and organizational sustainability. The original sample estimate is 0.053, with
a T-statistic of 2.685 and a p-value of 0.007. These figures suggest that innovative per-
formance does play a significant mediating role in the relationship between transforma-
tional leadership and organizational sustainability.
Table 7. Mediation.
Relationship
Original
Sample
(O)
Sample
Mean
(M)
STDEV T Statistics p Values
H4: TL- -> IC-MED- -> CS-DV- 0.053 0.053 0.020 2.685 0.007
H5: DT- -> IC-MED- -> CS-DV- 0.078 0.077 0.030 2.553 0.011
H6: CC- -> IC-MED- -> CS-DV- -0.019 -0.018 0.031 0.635 0.525
Source: survey data (2024).
The results of H5, which focuses on the mediation effect of innovative performance
between digital transformation and organizational sustainability, are similarly signifi-
cant. The original sample estimate stands at 0.078, and the T-statistic is 2.553, coupled
with a p-value of 0.011. This indicates a substantial mediating effect of innovative per-
formance in the relationship between digital transformation and organizational sustain-
ability.
However, the scenario changes with H6, assessing the mediation role of innovative
performance between corporate culture and organizational sustainability. Here, the
original sample estimate is −0.019, the T-statistic is relatively low at 0.635, and the
p-value is high at 0.525. These results suggest a lack of significant mediation by innova-
tive performance in the relationship between corporate culture and organizational sus-
tainability.
The mediation analysis in Figure 4 Figure 5 Figure 6 demonstrates that innovative
performance significantly mediates the impact of transformational leadership and digital
transformation on organizational sustainability. However, it does not significantly medi-
ate the relationship between corporate culture and organizational sustainability.
Figure 4. First Mediation graph source: survey data (2024).
0.053
0.007
0
0.01
0.02
0.03
0.04
0.05
0.06
Sample mean (M) P values
H4: TL- -> IC-MED- -> CS-DV-
Figure 4. First Mediation graph source: survey data (2024).
Sustainability 2024,16, 2651 19 of 31
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Figure 5. Second Mediation graph. Source: survey data (2024).
Figure 6. Mediation graph. Source: survey data (2024).
4.5.3. Moderation
The result for hypothesis H11, which tests the moderating effect of environmental
dynamism (ED-MOD) on the relationship between innovativeness (IC-MED) and com-
pany sustainable performance (CS-DV), indicates a significant moderating effect.
Hypothesis 11 (H11).The relationship between innovativeness and company performance is
significantly moderated by environmental dynamism.
As per the findings of Table 8, the original sample estimate (O) for this hypothesis is
0.071, and the sample mean (M) is very close to this at 0.070, suggesting consistency in
the effect size. The standard deviation (STDEV) for this effect is 0.037, which is relatively
small, indicating a certain level of precision in the estimate. The T-statistic is 2.934, which
is well above the threshold typically used to denote statistical significance (usually
around 1.96 for a 95% confidence level). This suggests that the result is not due to ran-
dom chance and that there is a statistically significant relationship. The p-value is 0.000,
which is far below the conventional threshold of 0.05 for statistical significance. This low
0.077
0.011
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
Sample mean (M) P values
H5: DT- -> IC-MED- -> CS-DV-
-0.018
0.525
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
Sample mean (M) P values
H6: CC- -> IC-MED- -> CS-DV-
Figure 5. Second Mediation graph. Source: survey data (2024).
Sustainability 2024, 16, x FOR PEER REVIEW 21 of 33
Figure 5. Second Mediation graph. Source: survey data (2024).
Figure 6. Mediation graph. Source: survey data (2024).
4.5.3. Moderation
The result for hypothesis H11, which tests the moderating effect of environmental
dynamism (ED-MOD) on the relationship between innovativeness (IC-MED) and com-
pany sustainable performance (CS-DV), indicates a significant moderating effect.
Hypothesis 11 (H11).The relationship between innovativeness and company performance is
significantly moderated by environmental dynamism.
As per the findings of Table 8, the original sample estimate (O) for this hypothesis is
0.071, and the sample mean (M) is very close to this at 0.070, suggesting consistency in
the effect size. The standard deviation (STDEV) for this effect is 0.037, which is relatively
small, indicating a certain level of precision in the estimate. The T-statistic is 2.934, which
is well above the threshold typically used to denote statistical significance (usually
around 1.96 for a 95% confidence level). This suggests that the result is not due to ran-
dom chance and that there is a statistically significant relationship. The p-value is 0.000,
which is far below the conventional threshold of 0.05 for statistical significance. This low
0.077
0.011
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
Sample mean (M) P values
H5: DT- -> IC-MED- -> CS-DV-
-0.018
0.525
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
Sample mean (M) P values
H6: CC- -> IC-MED- -> CS-DV-
Figure 6. Mediation graph. Source: survey data (2024).
4.5.3. Moderation
The result for hypothesis H11, which tests the moderating effect of environmental
dynamism (ED-MOD) on the relationship between innovativeness (IC-MED) and company
sustainable performance (CS-DV), indicates a significant moderating effect.
Hypothesis 11 (H11). The relationship between innovativeness and company performance is
significantly moderated by environmental dynamism.
As per the findings of Table 8, the original sample estimate (O) for this hypothesis is
0.071, and the sample mean (M) is very close to this at 0.070, suggesting consistency in the
effect size. The standard deviation (STDEV) for this effect is 0.037, which is relatively small,
indicating a certain level of precision in the estimate. The T-statistic is 2.934, which is well
above the threshold typically used to denote statistical significance (usually around 1.96
for a 95% confidence level). This suggests that the result is not due to random chance and
that there is a statistically significant relationship. The p-value is 0.000, which is far below
the conventional threshold of 0.05 for statistical significance. This low p-value indicates a
Sustainability 2024,16, 2651 20 of 31
very low probability that the observed effect is due to random variation, thereby strongly
supporting the hypothesis.
Table 8. Moderation.
Relationship Original
Sample (O)
Sample
Mean (M) STDEV
T Statistics
pValues
H11: ED-MOD- ×IC-MED- ->
CS-DV- 0.071 0.070 0.037 2.934 0.000
Source: survey data (2024).
The analysis indicates that environmental dynamism significantly moderates the
relationship between innovativeness and a company’s sustainable performance. This
suggests that the strength or direction of the relationship between innovativeness and
sustainable performance is influenced by environmental dynamism, affirming the proposed
H11 hypothesis.
5. Discussion, Conclusions, and Limitations
5.1. Discussion
By examining the sustainability performance of businesses concerning digital transfor-
mation, transformational leadership, and corporate culture, this study builds upon prior
research from a resource-based approach. Due to these extraordinary efforts, the researchers
have learned that innovation capabilities are significantly correlated with digital transfor-
mation, transformational leadership, and company culture. The results of this study lend
credence to the hypothesis that an organization’s sustainability performance is influenced
by organizational culture, digital transformation, and transformational leadership. When
examining the association between corporate culture and corporate sustainability success,
it was found that innovation capacity does not serve as an effective mediator. Innovation
capabilities serve as a mediator for a company to achieve digital transformation, transfor-
mational leadership, and sustainability success. Environmental dynamism moderates the
relationship between innovation capability and corporate sustainability performance.
Contrary to the notion that company culture obstructs sustainable development,
several studies have indicated that the opposite is true [
58
]. Researchers argue that the
presence of varied cultural traditions is the fundamental reason for this disparity, and
this research aims to address it. The findings indicate that environmental dynamism has
an impact on the relationship between innovative capabilities and the long-term success
of companies.
Modern digital technologies such as the Internet of Things, blockchain, artificial
intelligence, and big data analytics have unveiled a new era. According to Al-Hakimi
et al. [
59
], the strategic objective of digital transformation is gaining significance due to the
potential advantages it can offer domestic economies, including sustainable growth and
a competitive edge. Microeconomic research predominantly concentrates on businesses
due to their pivotal significance in instigating initiatives for sustainable development and
digital transformation. Businesses enthusiastically embrace digitalization as they strive
to achieve breakthroughs and transformations in the digital economy [
62
]. Therefore, it
is advisable to explore their capacity to obtain an edge over others while simultaneously
promoting sustainable expansion.
Academics and companies are emphasizing digital transformation considerably, while
sustainability practices are being more widely recognized within the business sector. Hos-
sain et al. [
63
] assert that digital transformation can enhance operational and production
efficiency through cost reduction and idea generation. Research conducted by Lăzăroiu
et al. [
185
] indicated that organizations are more inclined to take risks due to the increased
operational flexibility and accelerated procurement of financial resources induced by digital
transformation. Instances of fraudulent activities can be diminished, and overall business
quality can be improved through digital transformation [
67
]. Implementing digital trans-
Sustainability 2024,16, 2651 21 of 31
formation incentivizes businesses to adopt a more proactive stance towards environmental
protection. This is accomplished through a greater implementation of environmentally
friendly technologies and decreased carbon emissions [68].
The growing demand demonstrates organizations’ increasing significance on sus-
tainability for research concerning incorporating the SDGs into the digital transformation
process. From the perspective of micro businesses, this study sought to empirically examine
how digital transformation contributes to the sustainability of organizations. The study ex-
plicitly aimed to investigate digital transformation’s favorable impacts on the environment
and the economy. Previous studies have largely arrived at comparable findings [69–71].
Islam, French, and Ali [
72
] posited that transformational leaders influence their ad-
herents’ performance by cultivating and reinforcing their social connections. A leader
motivates subordinates to surpass expectations by establishing an emotional connection
with them through transformational leadership techniques. Organizations require ad-
ditional visionary leaders to adjust to their changing surroundings effectively. A trans-
formational leader possesses the capacity to modify the culture of a firm and align all
of its strategies with the external environment. Businesses should redirect their focus
from pursuing immediate profits at the expense of the environment and instead prioritize
building interdependence and promoting ecological innovation. Businesses gain multiple
advantages when they adopt sustainable practices. These benefits encompass enhanced
brand reputation, decreased costs, higher shareholder satisfaction, heightened productivity,
and more. Individuals, organizations, and governments widely adopt sustainability as
a fundamental component of their objectives. The business environment is undergoing
significant changes due to the increasing societal awareness of the environment. These
changes are motivated by a collective dedication to a more environmentally friendly and
enduring future. Businesses that share their expertise may function more efficiently, be
more valuable, and maintain a competitive advantage. Sarfraz, [
186
], asserted that knowl-
edge, encompassing intangible assets, habits, and readily replicable creative processes,
stands as the preeminent asset for an organization. Adaptability is essential in gaining
a competitive edge and exchanging information augments knowledge resources [
187
].
Research findings indicate that a company’s performance could be enhanced through its
capacity for innovation [188].
5.2. Conclusions
As highlighted by numerous academics, sustainability and digitalization are two
significant megatrends that profoundly impact society and the economy [
189
–
191
]. The ob-
jectives of this study comprised an assessment of the sustainability performance of Chinese
manufacturing organizations and an examination of the interrelationships among digital
transformation, transformational leadership, company culture, and sustainability. The
study determined that implementing digital transformation, transformational leadership,
and a strong business culture can significantly improve the sustainability performance
of corporations. When analyzing the relationship between sustainability success and cor-
porate culture, innovation capacity was found to be an inadequate mediator. For digital
transformation, transformational leadership, and the long-term success of organizations,
the capacity for innovation was found to be a significant mediator. In addition, the associa-
tion between the capacity for innovation and sustainable performance in organizations is
influenced by environmental dynamism.
According to the findings, digitalization, transformational leadership, and corporate
culture play major roles in helping companies reap the benefits of sustainable growth. Digi-
tal transformation yields advancements in industrial infrastructure, the overall efficiency
of production, the reconfiguration of business models, and the optimization of resource
allocation and utilization. Organizations that adopt and achieve proficiency in digital
technology may potentially secure a competitive edge and cultivate unique manufacturing
capabilities. This, therefore, contributes to environmental and societal sustainability in
the long run. It has been demonstrated through research by multiple studies [
69
,
192
,
193
]
Sustainability 2024,16, 2651 22 of 31
that digital transformation increases the sustainability premium. The present investigation
supports the findings mentioned above.
The operational environment significantly impacts the organizational ethos of a com-
pany. Before this investigation, most research examining the long-term relationship between
corporate culture and performance [
194
–
198
] primarily ignored the factors that interact
with culture.
Our analysis demonstrated the interrelationships of the most vital components and lent
credence to our theory. According to research, organizational innovation and sustainable
innovation performance are positively and directly correlated [
194
]. Consequentially,
cultivating an atmosphere that promotes innovation is imperative for the long term. The
study’s findings are significant for organizations seeking to improve their sustainability
performance. Sarfraz, Ye et al. [
186
] suggest that sustainability initiatives can be propelled
by fostering a culture of creativity and adopting new methodologies.
The research established a positive and statistically significant correlation between
transformative leadership and firm performance. Long 2023 [
75
] and Mehedintu and
Soava [
79
] concur that a company’s performance is significantly influenced by its pioneering
executives. However, transformational leadership does provide a competitive edge to
organizations; the degree to which this advantage is actualized is contingent upon the
specific operations of each company.
5.3. Implications
This study significantly enhances the current body of literature on the sustainable per-
formance of firms in multiple respects. The objective of this study was to shed light on the
intricate mechanism through which long-term performance is impacted by organizational
culture. By incorporating culture as a component and elucidating this fundamental mecha-
nism, this study contributes to advancing knowledge regarding sustainable performance.
The environment in which an organization operates greatly influences the established
culture. Although numerous studies have investigated the long-term impact of company
culture on performance, relatively few have explored the interplay between culture and
other organizational components. Instead, these studies have regarded culture as an
independent variable, neglecting its intricate character.
Further investigation is required to comprehend the relationship between sustainable
performance and organizational culture. Notably, the manufacturing sector has received
limited attention in prior research [
197
,
198
]. By examining the industrial sector via the lens
of the cultural promotion of sustainable performance, this study contributes to the growing
body of literature on sustainable performance, particularly contributing significantly to
the existing body of knowledge on corporate sustainable performance from a theoretical
standpoint. It elucidates how corporate culture can influence sustainable performance and
the governing regulations, either positively or negatively.
The study’s findings illuminate how manufacturing businesses might achieve long-
term success with the assistance of corporate culture. It is advisable for companies in
the manufacturing sector, especially digital enterprises that stress ongoing innovation
and growth, to cultivate a culture that emphasizes adaptability rather than strict control.
In addition, company executives should abandon transactional leadership in favor of
transformative leadership. In addition, firms that primarily depend on manual labor but do
not prioritize employee innovation should cultivate a blend of transactional leadership and
a culture of control. Ultimately, the manufacturing sector must prioritize the improvement
of its innovation capacity to achieve economic, social, and environmental sustainability, as
it performs an essential role in sustainable development.
Organizational endeavors to undergo digital transformation necessitate more financial
and technical support. Companies may enhance their long-term sustainability by embracing
digital transformation, and policymakers must acknowledge this. Policymakers should
initiate nationwide initiatives focused on Industry 4.0 and implement other effective policies
to stimulate technological investment and offer customized incentives. These measures
Sustainability 2024,16, 2651 23 of 31
ensure the sustained functionality and flexibility of enterprises and contribute to the growth
of strong and sustainable organizations, a critical attribute during periods of worldwide
unrest and perils such as the ongoing COVID-19 catastrophe.
A company’s digital transformation strategy should include integrating digital op-
erations with overarching business plans, incorporating sustainability objectives into the
process, and acknowledging the transformative potential of digital technology [
197
]. Busi-
nesses can contribute to the attainment of sustainable development objectives by proactively
adapting their business models to leverage digital technologies and attain a competitive edge.
Leadership style greatly influences a firm’s sustainable performance, and a knowledge-
sharing culture within organizations is essential for improved firm performance. These
findings contribute to the current understanding of this field. Furthermore, enterprises can
enhance their operational effectiveness by fostering a culture of knowledge dissemination
and striving to achieve greater sustainability.
5.4. Limitations and Future Research
While this research does have many beneficial aspects, manufacturing companies
in China are the subject of this investigation, meaning the potential generalizability of
the results to multinational organizations is a matter of contention. To assess the gen-
eralizability of the findings, it would be beneficial for future studies to investigate their
applicability in countries other than China. Only the mediating effect of innovative capacity
was considered in this research. Other potential avenues via which digital transformation,
transformational leadership, and company culture may impact corporate sustainable per-
formance exist. Exploring the specific influence of business culture on long-term success
might be a promising topic for future investigation.
The study exclusively recruited individuals from China’s manufacturing sector for
its sample, rendering its findings inapplicable to other industries or distinct production
configurations. This investigation concentrated on a negligible subset of the population
from a single region, ignoring the rest of China. Moreover, supplementary processes that
might have been critical to the organization were disregarded to examine the impacts
of transformational and revolutionary leadership styles on specific business sustainabil-
ity initiatives. An inherent limitation of this study is its heavy reliance on quantitative
methodologies for data gathering. To achieve the study objectives, it is advisable to employ
qualitative procedures for data collection, as relying solely on self-reporting methods like
questionnaires can result in results that are influenced by bias.
To guarantee that new companies are accurately portrayed, future studies need to
replicate our findings using a varied selection of businesses [
198
]. To increase the cred-
ibility of the conclusions, future research should also attempt to collect examples from
various regions of the country. Additionally, it would be intriguing to ascertain whether
the findings were comparable to or dissimilar from those of prior investigations should
the researcher examine the various components of the study from many perspectives. In
future research, scholars should be mindful of this relationship and endeavor to extract
further insights by considering additional characteristics that may impact leaders’ future
success across different frameworks and leadership styles. Furthermore, to address the
deficiencies in the existing literature, forthcoming studies should prioritize investigating
the mediating and moderating dynamics of interactions. Researchers should utilize quanti-
tative and qualitative methodologies to collect data that accurately represent the factors
being studied. Structural equation modeling is highly recommended as an analytical tool
for future researchers due to its superior ability to streamline the underlying model of
the investigation.
Author Contributions: Methodology, M.A., L.Y. and M.H.; Software, M.A.; Validation, M.H.; Formal
analysis, M.A. and L.Y.; Data curation, L.Y.; Writing – original draft, M.A. and M.H.; Writing – review
& editing, M.A.; Supervision, M.H.; Project administration, L.Y. and M.H. All authors have read and
agreed to the published version of the manuscript.
Sustainability 2024,16, 2651 24 of 31
Funding: This research came from the “International Language and Culture Research” Project of
the China Foreign Language Strategic Research Center-Foreign Teachers Society, with the reference
number (WYZL2023HN0003).
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Not applicable.
Data Availability Statement: The data supporting this study’s findings are available from the
corresponding author upon reasonable request.
Conflicts of Interest: The authors declare no conflicts of interest.
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