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Article

Building Sustainable Competitive Advantage in Banking through Organizational Agility

by
Wiweko Probojakti
*,
Hamidah Nayati Utami
,
Arik Prasetya
and
Muhammad Faisal Riza
Faculty of Administrative Science, Brawijaya University, Malang 65145, Indonesia
*
Author to whom correspondence should be addressed.
Sustainability 2024, 16(19), 8327; https://doi.org/10.3390/su16198327
Submission received: 11 July 2024 / Revised: 14 September 2024 / Accepted: 23 September 2024 / Published: 25 September 2024
(This article belongs to the Special Issue Sustainable Business Management: Operations Competitiveness, Digital Competence and Supply Chain Network)
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Abstract

:
The fast development of technology in the banking sector has forced a basic review of organizational strategies and structures since banks want to keep ahead of the curve and satisfy the evolving needs of the digital era. This study examines the mediating role of organizational agility in the relationship between transformational leadership and digital transformation on sustainable competitive advantage in the banking sector. The research sample was drawn from a population consisting of head offices, branch offices, and sub-branch offices of regional banks in Indonesia, totaling 185 units. Based on 185 data points collected through surveys distributed to unit leaders, we used PLS-SEM analysis to test the proposed hypotheses. Empirical results indicate that transformational leadership and digital transformation have no significant effect on sustainable competitive advantage. However, organizational agility can significantly mediate this impact on sustainable competitive advantage. The findings underscore the importance of developing agility as an internal factor of organizations that plays a crucial role in achieving sustainable competitive advantage.

1. Introduction

In the rapidly evolving digital era, the banking business faces increasingly complex and dynamic difficulties [1,2]. The operating and customer interactions of banks are being profoundly transformed by innovations such as mobile banking, artificial intelligence (AI), and blockchain, which present both opportunities and challenges [3]. Fintech innovations like peer-to-peer lending, digital payments, and cryptocurrency platforms have empowered non-traditional players to offer financial services, increasing competition for banks. To remain competitive and relevant, firms must embrace digital transformation in the face of rapid technical advancement, shifting regulatory frameworks, and altering customer behaviors [4,5,6]. Digital transformation, defined as strategic projects planned and implemented inside the IT services function [5], has become a critical component for banks attempting to navigate this volatile environment. Robust IT infrastructures and advanced data analytics enable banks to identify and mitigate risks proactively, ensuring business continuity in the face of disruptions [7,8]. The use of cutting-edge technologies and the promotion of an innovative culture are critical as banks work to modernize their operations and service offerings.
Digital transformation has an important role in building a sustainable business model and achieving sustainable competitive advantage [9]. This includes the interaction of the Internet of Things (IoT), numerous tools, and people, all of which encourage information dispersion and knowledge sharing. In the age of digital transformation, knowledge is seen as the primary source of profit. Companies devoted to using digital technology want to improve their knowledge levels and long-term performance by investing in suitable training courses for their human staff [10].
Digital transformation can result from R&D activities by research institutions or business organizations [7]. Firms that fail to respond correctly to the needs and opportunities given by digital transformation risk losing market share and becoming obsolete or even extinct [7,11,12]. Firms that are agile in their use of digital transformation, on the other hand, can gain a competitive edge [7,13].
Amid these changes, transformational leadership emerges as a key factor that can drive organizations to adapt and innovate effectively [14,15,16]. Transformational leadership, with its focus on idealized influence, inspiration, intellectual stimulation, and individualized consideration [17], plays a crucial role in guiding organizations through the digital transformation process. Transformational leaders not only promote the adoption of new technologies but also inspire the cultural and operational changes necessary to leverage these technologies optimally. In this context, digital transformation and transformational leadership complement each other in enhancing organizational agility [18,19,20].
While previous studies have highlighted the importance of digital transformation for gaining a competitive edge, this study focuses on how the combination of transformational leadership and digital transformation influences organizational agility, which in turn contributes to sustainable competitive advantage in the banking sector. By exploring this relationship and the mediating role of agility, an element that is often overlooked in similar studies, this research offers a unique contribution.
The resource-based view (RBV) theory supports this approach by highlighting the significance of internal resources and capabilities in achieving and sustaining competitive advantage [21,22]. An RBV emphasizes that firms gain a competitive edge through resources that are rare, valuable, inimitable, and non-substitutable [21]. Furthermore, organizational transformation theories offer valuable frameworks for understanding the underlying drivers. Organizational transformation theories highlight the need for continuous adaptation in an ever-changing environment [22]. In the banking industry, transformational leadership and digital transformation serve as critical resources that drive innovation, adaptability, and operational efficiency [15]. The ability of banks to exploit these unique resources underlines their competitive strength in a fast-changing market [8].
The foundation of organizational agility lies in the integration of information systems/technology, human resources, business processes, and facilities into a harmonious and flexible organization, enabling it to respond swiftly to changing situations [23]. These aspects are crucial in the highly regulated and externally vulnerable banking industry. By enhancing agility, banks can better adapt to market and regulatory changes and manage risks more effectively.
Additionally, organizational agility is one of the key elements that enable organizations to achieve and sustain competitive advantage [24,25,26]. In the banking industry, agility allows banks to adjust to technological advancements, regulatory changes, and market dynamics [27,28]. Agile banks can quickly launch new products and services [29], optimize their operations for efficiency, and respond better to customer needs.
According to Koentjoro & Gunawan [30] and Rohde & Sundarman [31], a firm’s ability to learn new knowledge is crucial to achieving a sustainable competitive advantage. Refs.Teece et al. [32] and Ed-Dafali et al. [33] define sustainable competitive advantage as a dynamic process that enables firms to adapt and prosper in changing market situations. The true source of sustainable competitive advantage lies in an organization’s ability to integrate innovations and develop capabilities that allow the business to quickly adapt to emerging opportunities [33,34]. This concept extends beyond traditional notions of competitive advantage, emphasizing the need for long-term viability and ethical considerations in business practices.
The combined impact of transformational leadership and digital transformation on organizational agility directly contributes to sustainable competitive advantage in the banking industry. Agile organizations are better equipped to optimize resource utilization, reduce operational costs, and enhance customer satisfaction through personalized services and efficient processes [35,36]. Furthermore, transformational leaders who prioritize digital transformation foster an environment where continuous learning, collaboration, and ethical business practices are integral to the organizational culture. This holistic approach ensures that banks can attract and retain top talent, drive sustainable growth, and maintain stakeholder trust over the long term.

2. Theoretical Framework and Hypothesis Development

2.1. Transformational Leadership on Organizational Agility

Organizational agility refers to a company’s ability to swiftly adapt and effectively adjust its plans in response to changes in markets, technical breakthroughs, trends, and rivalries [37,38,39]. The role of leadership is crucial in fostering this agility, with transformational leadership being particularly influential [39]. Transformational leaders enhance organizational agility by building strong relationships with subordinates and motivating them to prioritize organizational interests over personal ones, ensuring operations remain effective in a dynamic, changing, and uncertain environment [39]. This aligns with the view of [19], who assert that transformational leaders consistently prepare their subordinates to take necessary actions in response to the challenges of a fragile work setting.
Transformational leadership is critical in fostering organizational agility [18,39,40]. These leaders inspire and motivate employees to embrace change and innovation, which is essential in a rapidly evolving digital landscape [41]. They cultivate a culture of continuous improvement and adaptability [42,43], enabling the organization to respond quickly to market changes and technological advancements [44]. This leadership style is particularly effective in navigating the uncertainties and complexities of the digital age, where agility is paramount for survival and success.
To further connect this to the RBV theory, which emphasizes the importance of unique, valuable, inimitable, and non-substitutable resources as sources of sustainable competitive advantage [21], transformational leadership itself can be understood as a critical internal resource. Within the RBV framework, transformational leadership contributes to organizational agility by fostering an adaptive organizational culture and enhancing human capital, two resources that are key to achieving and maintaining competitive advantage. These leaders not only motivate and inspire their teams but also align organizational goals with external changes, ensuring that the organization can rapidly adjust to shifts in markets, technologies, and competition.
Given the critical role of transformational leadership in promoting organizational agility, we propose the following hypothesis:
H1. 
Transformational leadership positively influences organizational agility.

2.2. Transformational Leadership on Sustainable Competitive Advantage

Transformational leadership plays a crucial role in achieving sustainable competitive advantage by fostering innovation, adaptability, and continuous improvement within an organization [15,45,46]. Transformational leadership not only drives innovation and adaptability but also serves as a key internal resource, aligning with the principles of the RBV, which suggests that unique, valuable, and inimitable internal resources are critical for sustaining competitive advantage [21]. Leaders who adopt a transformational approach inspire and motivate employees to embrace change, think creatively, and contribute to the organization’s long-term goals. This leadership style encourages employees to challenge the status quo and focus on reaching higher levels of performance, which is essential for maintaining a competitive edge in rapidly changing markets [47].
Transformational leadership enhances sustainable competitive advantage by aligning the organization with market demands, technological advancements, and evolving customer preferences. Through visionary leadership, transformational leaders help organizations anticipate market trends and proactively develop strategies to respond to competitive pressures. This strategic foresight and adaptability enable the organization to remain resilient and capitalize on emerging opportunities, thereby maintaining a distinct advantage over competitors [48].
Additionally, transformational leaders cultivate a culture of trust, collaboration, and employee engagement, which improves organizational performance and strengthens innovation capabilities. This not only enhances operational efficiency but also ensures that the organization consistently delivers high-quality products or services, contributing to long-term customer loyalty and market leadership. In essence, transformational leadership provides the foundation for sustainable competitive advantage by aligning the organization’s resources and capabilities with dynamic external conditions, ensuring continued success in the marketplace. The research hypothesis is as follows:
H2. 
Transformational leadership positively influences sustainable competitive advantage.

2.3. Digital Transformation on Organizational Agility

Organizational agility is defined as “the capacity of an organization to efficiently and effectively redeploy/redirect its resources to value-creating and value-protecting (and capturing) higher-yield activities as internal and external circumstances warrant” [49]. It also refers to the ability of an organization to sense and respond with relative speed to environmental changes and to take advantage of new opportunities [50,51,52,53,54,55].
Digital transformation typically introduces rapid and radical changes to products, services, and current business models [7]. To effectively navigate these changes, organizations need agility to sense and gain insights into these transformations and develop effective responses, such as new products and services, to meet new customer preferences and needs [7]. Digital transformation enhances organizational agility by enabling companies to quickly adapt to technological advancements and evolving market demands. The rapid and radical changes brought about by digital transformation require an agile approach to resource deployment, allowing organizations to efficiently respond to new opportunities and threats. This capability is crucial for creating and capturing value in a dynamic environment, ensuring that organizations remain competitive and resilient.
Additionally, organizational agility, supported by digital transformation, can be viewed through the lens of the RBV, as the ability to rapidly redeploy and redirect resources in response to changing environments represents a valuable and inimitable capability that enables firms to sustain competitive advantage [21]. By leveraging advanced technologies, organizations can gather and analyze data in real-time, providing valuable insights into market trends and customer behavior. This enhanced sensing capability enables organizations to quickly identify new opportunities and develop timely responses, such as innovative products and services that meet changing customer preferences and needs.
Given the significant role of digital transformation in promoting organizational agility, we propose the following hypothesis:
H3. 
Digital transformation positively influences organizational agility.

2.4. Digital Transformation on Sustainable Competitive Advantage

Digital transformation has emerged as a pivotal factor in achieving sustainable competitive advantage by enabling organizations to innovate, streamline operations, and respond more efficiently to market changes [56,57]. By integrating advanced technologies such as artificial intelligence, big data, and cloud computing, companies can enhance their operational capabilities and customer service, creating value for both the business and its customers. Digital transformation allows organizations to adapt quickly to shifts in technology and customer expectations, positioning them as leaders in a rapidly evolving digital landscape [58,59].
The adoption of digital technologies fosters sustainable competitive advantage by increasing operational agility, reducing costs, and improving decision-making processes. Through enhanced data analytics, businesses can gain valuable insights into market trends and customer behavior, enabling them to make informed, proactive decisions [60]. This agility ensures that organizations can not only react to changes but also anticipate market shifts, allowing them to secure a first-mover advantage and create barriers to entry for competitors.
Moreover, digital transformation helps companies personalize customer experiences, streamline internal processes, and innovate product offerings. By leveraging technology to optimize the customer journey and improve service delivery, companies build long-term customer loyalty and trust, which are critical to maintaining a competitive edge. In this way, digital transformation not only enhances immediate operational performance but also drives sustainable competitive advantage by fostering continuous innovation, operational resilience, and customer engagement.
H4. 
Digital transformation positively influences sustainable competitive advantage.

2.5. Organizational Agility on Sustainable Competitive Advantage

Organizational agility is increasingly becoming critical to achieving sustained competitive advantage [61,62]. Organizations with high levels of agility can swiftly adjust to market fluctuations, including shifts in customer preferences, emerging technologies, regulatory modifications, and competitive dynamics [63]. Agile organizations promptly detect and react to these changes, enabling them to capitalize on new opportunities and mitigate potential risks. By effectively responding to market fluctuations, organizations can sustain a competitive advantage over their competitors and position themselves favorably in the market [64,65].
Organizational agility enables firms to reach the market expeditiously, allowing them to capitalize on emerging trends and meet customer demands. This agility secures a first-mover advantage and establishes a robust market position. The ability to promptly deliver value to customers contributes to a sustainable competitive advantage by creating barriers to entry and fostering customer loyalty [64,65].
H5. 
Organizational agility positively influences sustainable competitive advantage.
Based on the RBV theory and organizational transformation theory, this study introduces organizational agility to construct a theoretical model of the impact mechanism of transformational leadership and digital transformation on sustainable competitive advantage. The theoretical model is shown in Figure 1 below.

3. Research Methods

3.1. Sample Selection and Data Collection

This research targets work units within Indonesia’s regional banking industry, encompassing 185 units in total, which include head offices, branch offices, and sub-branch offices. The entire population has been taken as the sample for this study, utilizing a census or saturated sampling method where every unit is represented, resulting in a sample size of n = N = 185 work unit leaders. Data were collected through the WhatsApp contact list of these leaders, which was chosen as the distribution medium to streamline the process of employing Google Docs or Google Forms for online questionnaire dissemination.

3.2. Variables Measure

This study employs a 5-point Likert scale for all measurements, with 1 representing “strongly disagree” and 5 representing “strongly agree”.
  • Independent variable
Transformational Leadership refers to the leadership approach within regional banks, where leaders at various levels—head offices, branch offices, and sub-branch offices—exhibit charismatic qualities, provide inspirational guidance, intellectually stimulate their teams, and show personalized attention to each member. The construct is measured through four key dimensions: idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration, as defined by Bass [17].
Digital Transformation involves the adoption and integration of digital technologies, processes, and organizational culture aimed at fostering innovation and generating new value propositions. Drawing on Putritamara et al. [66], this concept is viewed as critical to maintaining business growth and competitiveness. The measurement follows the frameworks of Putritamara et al. [66] and Abhari et al. [67], with three key indicators: IT readiness, strategic alignment, and digital culture.
  • Mediating variable
Organizational Agility is defined as the capability of a regional bank to swiftly adapt to changes and seize emerging business opportunities. This variable is measured using the model proposed by AlNuaimi et al. [18], which includes three indicators: responsiveness to customer needs, adaptability, and problem-solving capability related to customer issues.
  • Dependent variable
Sustainable Competitive Advantage represents the ability of regional banks to maintain long-term superiority over competitors by optimizing costs, products, and services. The measurement of this variable is based on the work of Kaleka [68] and includes three indicators: cost advantage, product advantage, and service advantage.
Our research employs SEM-PLS using SmartPLS 3.2.4 with second-order constructs. Table 1 below presents the results of the outer model examination, specifically convergent validity using outer loadings and AVE and reliability using Cronbach’s alpha and composite reliability scores.

4. Empirical Analysis

4.1. Validity and Reliability Test

Based on Table 1, all items have outer loading values > 0.7. Therefore, all items are valid and ideal for measuring their latent constructs. Furthermore, all indicators have AVE scores exceeding 0.5. All items for all variables have confirmed their validity and are ideal choices for measuring their latent constructs. Additionally, the results show that all variables and measurement indicators meet the required reliability standards, both Cronbach’s alpha and composite reliability. All variables and indicators have Cronbach’s alpha scores exceeding 0.6 and composite reliability scores exceeding 0.7, thus meeting validity and reliability standards [69].
After examining convergent validity and reliability, the next step in construct evaluation is the discriminant validity test using the Fornell–Larcker criterion. The Fornell–Larcker criterion scores can be found in Table 2.
Based on the results, it is evident that each variable is more strongly associated with its own construct than with other constructs in the model. Therefore, it can be concluded that all variables meet the discriminant validity criteria and are suitable for use in the subsequent testing stages.

4.2. Hypothesis Testing

Our research employs PLS-SEM analysis using SmartPLS 3.2.4 to test the hypotheses. Additionally, we use second-order reflective–reflective constructs for all variables. SmartPLS [version 3.2.4] [70] was used to examine the significance and relevance of indicator weights. To test the research hypotheses, a bootstrapping procedure using 1000 resamples was employed [71].
Table 3 and Figure 2 below present the results of hypothesis testing using the second-order construct PLS-SEM.
Figure 2 shows that all reflective indicators had significant t-values, providing empirical support for retaining all the indicators [72]. Furthermore, Table 3 presents the results of hypothesis testing for each relationship between variables. The findings reveal that two direct hypotheses were rejected, while three others were accepted. Specifically, transformational leadership significantly influences organizational agility (β = 0.368, p < 0.001), indicating that strong leadership positively affects an organization’s ability to adapt and respond to changes. Similarly, digital transformation has a significant positive impact on organizational agility (β = 0.552, p < 0.001), supporting the idea that technological advancements enhance flexibility and responsiveness within the organization.
However, the direct effects of both transformational leadership and digital transformation on sustainable competitive advantage were found to be insignificant, as transformational leadership (β = 0.099, p = 0.146) and digital transformation (β = 0.056, p = 0.543) did not show a meaningful impact on sustainable competitive advantage. This indicates that these factors alone do not directly contribute to a company’s ability to sustain a competitive edge.
On the other hand, organizational agility showed a strong positive relationship with sustainable competitive advantage (β = 0.746, p < 0.001), suggesting that an organization’s ability to swiftly adapt to market and environmental changes is a key driver of long-term competitiveness. In terms of indirect effects, both transformational leadership (β = 0.275, p < 0.001) and digital transformation (β = 0.412, p < 0.001) were found to significantly influence sustainable competitive advantage when mediated by organizational agility. This implies that while transformational leadership and digital transformation may not directly impact competitive advantage, their effects become significant when channeled through an agile organization.

5. Discussion

The findings of this study provide a comprehensive and nuanced understanding of the complex relationships between transformational leadership, digital transformation, and sustainable competitive advantage, with organizational agility emerging as a crucial mediator. This integrative view challenges some of the direct effects assumed in prior research, highlighting that the true value of transformational leadership and digital transformation in achieving competitive advantage lies in their ability to enhance organizational agility.

5.1. Transformational Leadership, Digital Transformation, and Organizational Agility

The findings of this study are significant in terms of the factors that influence organizational agility, with a particular emphasis on transformational leadership and digital transformation. Both transformational leadership [18,39,40] and digital transformation [73,74] were found to have a significant positive impact on organizational agility. These findings are consistent with earlier studies demonstrating the major effects of transformational leadership and digital transformation on organizational agility.
Transformational leadership, identified by idealistic influence, inspiration, intellectual stimulation, and individual consideration [17], represents a critical intangible resource that drives organizational adaptability and agility. Leaders with transformative qualities excel at matching strategic goals with changing market conditions and technological breakthroughs. The large coefficient revealed in this study emphasizes the deep impact of transformational leadership behaviors on improving organizational responsiveness and agility in the banking sector.
In the age of digital transformation, the banking industry must use technology to remain competitive and adaptable. Digital transformation entails the widespread integration of digital technologies into banking operations, radically altering service delivery and customer interaction techniques [75]. The study’s findings reveal a beneficial relationship between digital transformation and organizational agility in financial firms. Banks that successfully deploy digital projects are better positioned to streamline operations, improve client experiences, and quickly respond to changing market needs.

5.2. Organizational Agility and Sustainable Competitive Advantage

Organizational agility stands out as one of the crucial elements impacting sustainable competitive advantage in the banking industry’s competitive landscape. The findings of the research highlight the strong correlations that exist between organizational agility and sustained competitive advantage. These findings are consistent with earlier research showing that organizational agility [24,25,26,76] is essential for obtaining and maintaining a competitive edge.
According to the organizational transformation theory, agility is a result of intentional changes in an organization’s structures and processes, allowing firms to reconfigure themselves to meet market demands and secure sustained competitive advantage. Enhancing organizational agility—which is the capacity to quickly adjust to changes in the market and new opportunities—is essential to banks’ ability to maintain a sustained competitive advantage [77]. In order to stay relevant and competitive, banks need to be able to react quickly to changes in the market, regulations, and technology. An improved sustainable competitive advantage is closely correlated with an increase in organizational agility, according to the significant coefficient. Organizations with agility can quickly enact intentional strategic changes to their structures, processes, and outputs to adapt, survive, and even gain a competitive advantage in such conditions. This emphasizes how crucial agility is in an industry where meeting changing consumer expectations and financial market fluctuations requires quick thinking and flexibility.

5.3. Transformational Leadership, Digital Transformation, and Sustainable Competitive Advantage

Contrary to the initial hypotheses, the study reveals that neither transformational leadership nor digital transformation has a direct, significant effect on sustainable competitive advantage. This finding challenges the assumption often made in earlier studies that these factors alone are sufficient to secure a lasting competitive edge.
Previous research has positioned transformational leadership as a key driver of superior organizational performance, innovation, and competitive advantage [26,78]. According to the RBV, effective leadership can help manage resources strategically, ultimately leading to a competitive advantage [79,80]. However, this study reveals that while transformational leadership can positively influence an organization’s internal environment and its employees’ motivation and engagement, these effects do not directly translate into a sustained competitive advantage in the absence of other supporting factors.
Similarly, digital transformation is widely recognized for its potential to revolutionize operational processes and enhance competitiveness [81], but the results of this study suggest that the mere adoption of digital technologies does not automatically guarantee competitive superiority. Although digital transformation can improve efficiency and introduce innovative business models, it requires additional organizational capabilities—such as agility—to fully realize its competitive potential.
While the previous literature has highlighted the importance of both transformational leadership and digital transformation in driving competitive advantage [26,78], the present study shows that their direct effects on competitive advantage are limited. Instead, organizational agility serves as the necessary mechanism that transforms these leadership and technological efforts into tangible competitive advantages. As Sharifi & Zhang [77] noted, agility enables organizations to enact strategic changes to their structures and processes, ensuring that they can quickly adapt, survive, and gain a competitive edge in dynamic environments.
In this regard, organizational agility serves as a vital mediator. The study reveals that while transformational leadership alone may not directly enhance sustainable competitive advantage, it significantly influences competitive advantage when mediated by organizational agility. This finding implies that transformational leadership is most effective when it strengthens the organization’s ability to respond quickly and adapt to market changes. In other words, leaders who foster an agile organizational culture are more likely to see their efforts translated into long-term competitive success, reflecting the idea that agility is key to leveraging leadership potential for sustained competitive advantage. Additionally, the study challenges the conventional view that digital transformation directly drives competitive advantage. While digital transformation is critical for enhancing operational efficiencies and innovating business models [81], the findings indicate that its impact on sustainable competitive advantage only becomes significant when organizational agility mediates the relationship.

6. Implications and Limitations

6.1. Implications

The results indicate that digital transformation and transformational leadership are critical factors in improving organizational agility in regional banks. A culture of agility can be fostered by leaders who possess transformative traits such as inspiration, vision, and intellectual stimulation. These leaders can also encourage proactive responses to opportunities and changes in the market. Similarly, banks can increase their agility by investing in digital transformation, which helps them enhance client experiences, streamline operations, and rapidly adopt new technologies.
Furthermore, the beneficial impact of digital transformation on corporate resilience emphasizes the importance of incorporating cutting-edge technologies to reduce risks and enhance operational robustness. Regional banks can more effectively resist disruptions caused by changes in regulations and economic conditions by utilizing digital solutions for cybersecurity, operational continuity planning, and adaptive strategies. Additionally, integrating transformational leadership attributes with resilience-promoting qualities could result in a more comprehensive leadership profile, given that transformational leadership does not significantly influence organizational resilience. Regional bank leaders are better positioned to guide their organizations through turbulent market conditions if they can stimulate innovation while skillfully navigating uncertainties and disruptions. Additionally, there are the following theoretical, methodological, and practical contributions:
  • Theoretical Contributions
This research enriches the theory of transformational leadership by demonstrating that transformational leaders not only enhance employee motivation but also significantly strengthen organizational agility in the banking sector. It extends the existing literature by applying transformational leadership in organizations operating in highly dynamic, technology-driven environments. Furthermore, the finding that digital transformation directly influences organizational resilience provides new insights into how technology plays a central role in creating more resilient organizations capable of facing crises. This study also expands the RBV theory by confirming that unique internal resources, such as digital capabilities and transformational leadership, are key to achieving sustainable competitive advantage.
b.
Methodological Contributions
Methodologically, this study contributes through its application of Partial Least Squares Structural Equation Modeling (PLS-SEM) to test complex relationships between variables, including mediation analysis. This method is well-suited for research that involves data that may not meet the classical assumptions of other statistical methods. By using PLS-SEM, this research provides a deeper understanding of the impact of transformational leadership, digital transformation, organizational agility, and corporate resilience on sustainable competitive advantage. Moreover, the rigorous testing of the validity and reliability of the scales ensures that the variables are accurately and consistently measured, providing a strong foundation for future research in the banking industry or other sectors.
c.
Practical Contributions
The practical implications of this research are highly relevant for leaders in the banking industry, particularly in regional banks in Indonesia. Digital transformation has proven to be a critical tool for enhancing both resilience and agility within organizations. Therefore, bank management should prioritize investment in digital technologies to ensure that banks can adapt quickly to regulatory changes and shifting market demands. Transformational leadership, which inspires and motivates, should also be adopted to ensure that the organization has the internal capacity to respond effectively to new opportunities and challenges. In the long run, strategies that focus on improving agility and resilience through digital transformation will help banks achieve sustainable competitive advantage, build stakeholder trust, and maintain consistent profitability.

6.2. Limitations

These results should, however, be taken in light of a number of caveats. First off, the study’s exclusive emphasis on Indonesian regional banks may make it less applicable to other banking industries or international settings. The findings may not apply to other banking environments due to specific factors found only in Indonesia, including regulatory frameworks, economic conditions, and market dynamics. Second, although it was shown that digital transformation and transformational leadership had a good impact on organizational agility and, in turn, sustained competitive advantage, the precise mechanisms by which these benefits functioned were not well investigated. Subsequent investigations may explore more thoroughly the contextual elements and mediation mechanisms that either support or undermine these connections within regional banks; conduct comparative studies across industry sectors other than banking, such as manufacturing, healthcare, or information technology, to test whether similar results can be found in different contexts; or describe research across countries with different levels of economic development to see how cultural and economic contexts influence the relationships between transformational leadership, digital transformation, organizational agility, and sustainable competitive advantage.

Author Contributions

Conceptualization, W.P., H.N.U., A.P. and M.F.R.; methodology, W.P., H.N.U., A.P. and M.F.R.; software, W.P.; validation, H.N.U., A.P. and M.F.R.; formal analysis, W.P.; investigation, W.P.; resources, W.P.; data curation, W.P.; writing—original draft preparation, W.P.; writing—review and editing, W.P.; visualization, W.P.; supervision, H.N.U., A.P. and M.F.R.; project administration, W.P.; funding acquisition, W.P. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

The study was conducted in accordance with the institutional ethical standards of Brawijaya University number 453/UN10.F03/PP/2024.

Informed Consent Statement

Informed consent was obtained from all subjects involved in the study.

Data Availability Statement

The data presented in this study are available on request from the corresponding author due to confidentiality agreements with the participants involved in the research. This ensures the privacy and protection of sensitive information provided by the participants, in accordance with ethical guidelines and institutional regulations.

Acknowledgments

The authors would like to express their sincere gratitude for the support and resources provided during the course of this research.

Conflicts of Interest

The authors declare no conflicts of interest.

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Sustainability 16 08327 g001
Figure 1. The hypothesis model of this research.
Figure 1. The hypothesis model of this research.
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Figure 2. Hypothesis testing using the second-order construct PLS-SEM.
Figure 2. Hypothesis testing using the second-order construct PLS-SEM.
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Table 1. Variables measure.
Table 1. Variables measure.
VariablesIndicatorsItemsOuter LoadingsCronbach’s AlphaComposite ReliabilityAVE
Transformational Leadership (X1)Idealized Influence (X1.1)Be honest (X1.1.1)0.8880.8540.9120.775
Be a role model (X1.1.2)0.909
Help each other (X1.1.3)0.842
Inspirational Motivation (X1.2)Articulation (X1.2.1)0.9260.8650.9180.788
Inspiration (X1.2.2)0.875
Participation (X1.2.3)0.861
Intellectual Stimulation (X1.3)Creative (X1.3.1)0.8950.8770.9160.732
Innovative (X1.3.2)0.900
Ability (X1.3.3)0.779
Skills (X1.3.4)0.842
Individualized Consideration (X1.4)Needs (X1.4.1)0.8750.8630.9160.785
Support (X1.4.2)0.916
Relationships (X1.4.3)0.867
Digital Transformation (X2)IT Readiness (X2.1)Network (X2.1.1)0.8030.8760.9250.806
Infrastructure (X2.1.2)0.940
Integration (X2.1.3)0.943
Strategic Alignment (X2.2)Role of digital technology (X2.2.1)0.8100.7750.8690.690
Alignment (X2.2.2)0.808
Benefits of digital technology (X2.2.3)0.872
Digital Culture (X2.3)Agile (X2.3.1)0.9030.8250.8970.744
Dynamic (X2.3.2)0.907
Collaborative (X2.3.3)0.772
Organizational Agility (Y1)Customer Needs (Y1.1)Convenience (Y1.1.1)0.9120.8680.9190.792
Transparency (Y1.1.2)0.893
Security (Y1.1.3)0.864
Adaptability (Y1.2)Process adaptation (Y1.2.1)0.8330.8800.9260.808
Customer demand adaptation (Y1.2.2)0.927
Market changes (Y1.2.3)0.933
Problem Solving (Y1.3)Customer complaints (Y1.3.1)0.8930.8800.9260.806
Empathy (Y1.3.2)0.919
Solutions (Y1.3.3)0.882
Sustainable Competitive Advantage (Y2)Cost Advantage (Y2.1)Costing (Y2.1.1)0.8340.8620.9160.785
Competitive cost (Y2.1.2)0.910
Cost vs benefit fit (Y2.1.3)0.912
Product Advantage (Y2.2)Product quality (Y2.2.1)0.8280.8520.9100.772
Product compliance (Y2.2.2)0.900
Product benefits (Y2.2.3)0.906
Service Advantage (Y2.3)Service coverage (Y2.3.1)0.8440.8580.9140.779
Service reliability (Y2.3.2)0.908
Service accountability (Y2.3.3)0.895
Table 2. Variables correlation.
Table 2. Variables correlation.
X1X2Y1Y2
Transformational Leadership (X1)0.803
Digital Transformation (X2)0.6630.795
Organizational Agility (Y1)0.7430.7900.866
Sustainable Competitive Advantage (Y2)0.6950.7550.7880.818
Table 3. Hypothesis testing results.
Table 3. Hypothesis testing results.
Direct EffectCoefficientsp-ValueDecision
Relationship
IndependentDependent
Transformational Leadership (X1)Organizational Agility (Y1)0.368<0.001Accepted
Transformational Leadership (X1)Sustainable Competitive Advantage (Y3)0.0990.146Rejected
Digital Transformation (X2)Organizational Agility (Y1)0.552<0.001Accepted
Digital Transformation (X2)Sustainable Competitive Advantage (Y3)0.0560.543Rejected
Organizational Agility (Y1)Sustainable Competitive Advantage (Y3)0.746<0.001Accepted
Indirect EffectCoefficientsp-ValueDecision
IndependentMediationDependent
Transformational Leadership (X1)Organizational Agility (Y1)Sustainable Competitive Advantage (Y3)0.275<0.000Accepted
Digital Transformation (X2)Organizational Agility (Y1)Sustainable Competitive Advantage (Y3)0.412<0.001Accepted
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Probojakti, W.; Utami, H.N.; Prasetya, A.; Riza, M.F. Building Sustainable Competitive Advantage in Banking through Organizational Agility. Sustainability 2024, 16, 8327. https://doi.org/10.3390/su16198327

AMA Style

Probojakti W, Utami HN, Prasetya A, Riza MF. Building Sustainable Competitive Advantage in Banking through Organizational Agility. Sustainability. 2024; 16(19):8327. https://doi.org/10.3390/su16198327

Chicago/Turabian Style

Probojakti, Wiweko, Hamidah Nayati Utami, Arik Prasetya, and Muhammad Faisal Riza. 2024. "Building Sustainable Competitive Advantage in Banking through Organizational Agility" Sustainability 16, no. 19: 8327. https://doi.org/10.3390/su16198327

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