Examining the mediating role of organizational agility in the relationship between intellectual capital and digital transformation effectiveness

Abstract

The growing penetration of digital technologies has accelerated tremendous changes in various fields in these years, inevitably driving organizations to embark on a “digital transformation” journey. While agreeing on its growing importance to an organization’s success, the prevalence of such transformation is also seen as both an existential risk and a rewarding opportunity. Digital transformation efforts take twice as long and cost twice as much as anticipated but still hit roadblocks as they require technology and the alignment of factors resides in people, leadership, talent development, strategy, organizational structure and culture, mindset, and strategic alliances. This finding initiated the idea that the success of digital transformation might be highly dependent on intellectual capital as an organization’s hidden intangible assets that put comprehensive resources into action. As a way to manage unpredictable organizational changes when adapting to turbulent and hypercompetitive environments, organizational agility is considered a critical success factor for digital transformation. Nevertheless, empirical research rarely examines the impact of intellectual capital on digital transformation effectiveness in quantitative settings, and how this relationship correlates through organizational agility has not been well understood. Following a post-positivism philosophical lens, this study adopted a quantitative, correlational, and cross-sectional survey research design to examine the influence of intellectual capital on digital transformation effectiveness with the mediating role of organizational agility. A multi-stage sampling design (purposive sampling to select organizations; stratified sampling to select participants) was used to better address the research questions and objectives from the target population. Consequently, data was collected from 10 organizations in China and Thailand (5 organizations in each country), and 265 valid data were retained out of 333 responses. The proposed hypotheses were tested using a hierarchical component PLS-SEM, and a full mediation model was defended. The finding revealed that the effect of intellectual capital on digital transformation effectiveness is fully transmitted with the intervention of organizational agility. This supported the notion that building organizational agility in parallel with enhancing intellectual capital can help improve an organization’s digital transformation effectiveness. Moreover, organizational agility, as a higher-order dynamic capability, is the underlying mechanism through which intellectual capital supports digital transformation effectiveness. This study also proposed the three essential digital transformation pillars consisting of six corresponding sub-dimensions of intellectual capital and organizational agility. This research attempts to remedy an existing literature gap, and the contribution to the knowledge base is twofold. On the academic front, this study clarified the ontological, epistemological, and methodological issues of digital transformation and organizational agility in the extant literature and reconceptualized them more precisely. This correlational research examined the proposed conceptual model and closed the research gap of organizational agility’s mediating role based on empirical evidence. This study not only elaborated on how variables are correlated but also offered preliminary findings for further experimental research in the future. On the practical front, this study offered insight into developing a tested, valid, and reliable survey instrument. It can be potentially beneficial to organizations to identify their strengths and weaknesses in their possible orientation of digital transformation action plans from the organizational agility and intellectual capital perspectives, seeking to maximize their chance of effectively launching digital transformation projects.