Digital Leadership and Employee Innovative Behavior in Service Firms: The Mediating Roles of Knowledge Sharing and Work Engagement

Abstract

Digital transformation has increased the importance of employee innovative behavior in service firms, where employees are expected to generate, share, and implement new ideas in technology-enabled work environments. This study examines the effect of digital leadership on employee innovative behavior and investigates the mediating roles of knowledge sharing and work engagement. Drawing on Social Exchange Theory, the Knowledge-Based View, and Job Demands–Resources Theory, the study proposes that digital leadership enhances employee innovation by fostering knowledge exchange and strengthening employees’ motivational involvement. Data were collected from 400 employees working in service firms and analyzed using partial least squares structural equation modeling. The results show that digital leadership positively affects knowledge sharing, work engagement, and employee innovative behavior. Knowledge sharing and work engagement also positively influence employee innovative behavior. Moreover, both mediating effects are significant, indicating that digital leadership promotes employee innovation directly and indirectly through knowledge sharing and work engagement. The findings contribute to digital leadership and innovation literature by clarifying the social and motivational mechanisms through which digital leadership stimulates employee-level innovation. The study also provides practical implications for service firms seeking to build digitally enabled, knowledge-sharing, and engagement-oriented workplaces.