CONSTRUCTING CAPABILITIES FOR DIGITAL TRANSFORMATION BY OPENING AND CLOSING LEADERSHIP: AN EMPIRICAL STUDY OF INDONESIAN BANKING INDUSTRIES

Abstract

The purpose of this study is to investigate the impact of ambidextrous leadership on digital transformation capabilities. In the banking industry, the relationship between these two variables is an extremely intriguing topic. Extant literature has argued that leadership plays an important role in firms’ organizational change. Digital transformation capabilities enable a firm to execute the digital transformation and realize strategic changes. To succeed in the digital era, incumbents need to build new capabilities; however, prior studies have lacked empirical evidence on what microfoundations build the aggregation of digital transformation capability. Furthermore, we argue that ambidextrous leadership plays a pivotal role in building heterogeneous capabilities where incumbents need to balance the trade-off between building new business and existing performance. The financial industry is undergoing significant transformation because of technological advancements; in particular, banks are facing the transition from traditional to digital services. Through a quantitative study in Indonesian banking industry, this paper aims to investigate the effect of opening and closing leadership behavior to build dynamic capabilities in digital transformation. Hypothesis testing and evaluation of the model fit were performed using PLS-SEM. The result indicates that ambidextrous leadership has a positive and significant impact on digital transformation capabilities. The relationship between these two variables is rarely examined in a banking context, which is one of the novel aspects of this study. Therefore, the results of this investigation can be applied practically by banking stakeholders. Keywords: Ambidextrous Leadership, Digital Transformation, Commercial Bank DOI： https://doi.org/10.35741/issn.0258-2724.58.3.36