The Role of Digital Transformation, Corporate Culture, and Leadership in Enhancing Corporate Sustainable Performance in the Manufacturing Sector of China
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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 addressing 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 culture [13], and others. These factors’ significant impact on sustained efficiency justifies their elevated designation as critical performance indicators.
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 effectiveness, 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 transformation, transformational leadership, and corporate culture. Before commencing, it is imperative 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 [31,32,33] have provided evidence that implementing the corporate culture can facilitate and enhance sustainable development. 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 sufficiently detailed advice for firms to effectively execute cultural changes that enhance sustainable performance [34,35,36]. 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 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 corporate 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]. Digitization 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 transformation, 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 performance. 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 support 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.
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What is the impact of digital transformation, corporate culture, and transformational leadership on the sustainability performance of Chinese manufacturing companies?
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How does the ability to innovate affect the connection between digital transformation, corporate culture, transformational leadership, and sustainable performance in China’s manufacturing sector?
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Does the level of environmental dynamism have a moderating impact on the relationship between a company’s ability to innovate and its sustainable performance in China’s manufacturing sector?
5. Discussion, Conclusions, and Limitations
5.1. Discussion
By examining the sustainability performance of businesses concerning digital transformation, 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 transformation, 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, transformational 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. Hossain 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 transformation 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 sustainability 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 explicitly aimed to investigate digital transformation’s favorable impacts on the environment and the economy. Previous studies have largely arrived at comparable findings [69,70,71].
Islam, French, and Ali [72] posited that transformational leaders influence their adherents’ 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 additional visionary leaders to adjust to their changing surroundings effectively. A transformational 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 knowledge, 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 [189,190,191]. The objectives 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 corporate 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 association 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. Digital 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] 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 company. Before this investigation, most research examining the long-term relationship between corporate culture and performance [194,195,196,197,198] 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 performance 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 mechanism, 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 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 operations with overarching business plans, incorporating sustainability objectives into the process, and acknowledging the transformative potential of digital technology [197]. Businesses 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 generalizability 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 performance 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 sustainability 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 credibility 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 quantitative 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.
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