Deconstructing Digital Transformation: A Multidimensional Analysis of Digital Literacy’s Role in Shaping Human Capital and Driving Organizational Success

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Abstract This study presents a comprehensive investigation into the multifaceted relationship between digital literacy, human capital development, and organizational performance in the context of digital transformation. Through a rigorous mixed-methodology approach combining quantitative surveys and real-time digital usage tracking, we analyzed data from 250 employees across 23 organizations spanning multiple sectors (technology 26.5%, finance 16.7%, healthcare 13.6%). The research employs structural equation modeling and demonstrates robust interrelationships between variables (correlations ranging r=0.689 to 0.817), with digital literacy and employee commitment exhibiting the strongest correlation (r=0.817). Statistical analysis reveals that human capital significantly mediates the relationship between employee factors and organizational performance, explaining 72.3% of performance variance (R²=0.723). All constructs demonstrated strong reliability (Cronbach’s α: 0.739-0.787) and convergent validity (AVE>0.5). Multiple regression analysis identified attitude (β=0.218) and human capital (β=0.184) as primary performance predictors, while frugal innovation showed significant influence (β=0.172, p<0.001). The study found that 69.1% of participants utilize digital tools multiple times daily, with 44.4% at intermediate digital literacy levels. Path analysis confirmed significant positive relationships (p<0.001) across all variables, with attitude demonstrating the highest direct effect on organizational performance (0.525). The research extends human capital theory by empirically validating digital competencies’ role in organizational success and identifies a critical digital literacy divide impacting performance outcomes. In work environments (48.1% hybrid, 42% on-site, 9.9% remote), findings demonstrate the universal importance of digital competencies across different operational models. These results have substantial implications for management practices, organizational strategy, and human resource development in the digital era, particularly in fostering comprehensive digital skill development programs and addressing organizational digital divides.