International Journal of Applied Engineering Research ISSN 0973-4562 Volume 12, Number 22 (2017) pp.

12585-12596
© Research India Publications. http://www.ripublication.com

Critical Factors on Firm’s Digital Transformation Capacity: Empirical

Evidence from Korea

1
Eun Hee Kwon and 2Min Jae Park1
1,2
Department of Business Administration, Seoul School of Integrated Sciences and Technologies (aSSIST),
46 Ewhayeodae 2-gil, Seodaemun-gu, Seoul, Republic of Korea.
1,2
Orcid: 0000-0002-1876-3802, 0000-0002-9380-2744

Abstract to respond to digital trends and have lost market due to failure
of their businesses [2].
Digital transformation affects many areas within an
organization, and many stakeholders such as marketing, IT, Firms can survive when new technologies can be developed to
product development, strategy or HR are involved in defining meet user expectations and levels in line with rapid
transformation strategies. This study suggests that related technological change [3]. Digital transformations include
factors with human, technology, strategic linkage of IT and digitization, but there are important differences between
business, and digital leadership of CEO are influential factors digitalization and digital transformation. The former refers to
of IT governance, and establish research model based on this the conversion of information from the analog to the digital
relationship. It aims to propose a method to increase the world, or the automation of processes through information and
capability of digital transformation by testing hypotheses. In communication technology (ICT). But digital transformation is
order to accomplish the purpose of research, human factors and a complex issue that affects many parts of the company. Digital
technological factors which are influential factors of IT technology can lead to fundamental changes in business models,
governance utilize the results of previous studies. Strategic products, processes and organizational structures. There are a
linkage of IT and business, CEO's digital leadership, and digital variety of options and factors to consider, such as the
transformation capacity are employed by related literatures. In organization's agility, which is a prerequisite for successful
order to empirically analyze the causal relationship among change, and a balanced approach to securing corporate
these factors, it presents a research model and hypotheses and resources, capacity building, and development. These
conduct a survey on firms’ employees and use empirical conditions, however, have characteristics that are not clearly
analysis using structural equation model based on data perceived, which can lead to difficulties in business
collection. management within a few years if a company overlooks it or
chooses a different direction.
Keywords: Digital Transformation; IT Alignment; Digital
Leadership; PLS; IT Governance Corporate IT governance is crucial to transform a company
into a digital enterprise. IT governance is a system that
establishes the responsibility and authority of decision making
INTRODUCTION to induce desirable IT use within an organization and
contributes to maximizing the strategic value of IT because it
Innovative technologies such as Mobile, Cloud computing,
is well matched to the organization's strategy and goal
Internet of Things (IoT), Artificial Intelligence (AI), and robots
achievement [4]. Weill & Ross [5] point out that firms with
have revolutionized the automation and intelligence of digital
effective IT governance can generate more than 20% of profits
technology over the last decade, helping the society to leverage
compared to firms with inadequate governance. Versteeg &
existing management approaches more effective [1]. In the
Bouwman [6] proposes the influencing factors of IT
blurry industry boundaries, innovative companies rapidly apply
governance for digital transformation. Emphasizing that human
digital new technology in each industry field to provide
factors and technological factors are important factors using
innovative customer value and efficient process to create new
both quantitative and qualitative method, they emphasize that
alternative market and customer needs and to erode the role of
these factors are the main influencing factors of digital
existing business. Companies such as Netflix and Uber are
transformation. In addition, what are the organizational factors
rapidly emerging as a digital transformation, creating new
that influence digital transformation capacity? This is the
business models or restructuring existing business models. On
beginning of this research.
the other hand, companies such as Kodak and Nokia have failed

1
Corresponding Author: [email protected] / Orcid: 0000-0002-9380-2744

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Recently, as digital technology has become more and more and Section 4 presents the results of the structural equation
applied to business, close cooperation between IT and business based on the questionnaire. Finally, Section 5 presents the
is required. The link between IT strategy and business strategy limitations of the study and future direction of the study, along
is likely to become more important in order to bring new with the empirical and academic implications of the study.
business models, process improvements and customer
experiences to life [7]. For a business to succeed in the future,
strategies for introducing and leveraging digital technologies LITERATURE REVIEW
are clearly important, but there are stakeholder disagreements
Influential Factors on IT Governance for Digital
between business and IT strategies. Bharadwaj et al. [8] argues
Transformation
that in the context of digital transformation, corporate IT
strategy can evolve from a functional strategy that is IT governance is becoming increasingly important as IT is
traditionally dependent on a business strategy to a corporate recognized as an essential infrastructure for corporate
strategy that utilizes corporate digital resources to create management and becoming a core competency. IT governance
differentiated value. is a collective term for the authority and responsibility of
internal entities in IT decision making, decision making
Digital transformation affects many areas within an
organization system and process, communication method,
organization, and many stakeholders such as marketing, IT,
decision making system, coordination and control, and post
product development, strategy or HR are involved in defining
evaluation of decision making. This is the sum of IT-related
transformation strategies. All these functions require a common
activities and efforts in the organization to identify the value of
understanding of the priorities of digital transformation
IT and reduce the risk. ITGI [10] proposes five key areas
activities [9]. Therefore, strong leadership is required for digital
covered by IT governance: delivering IT value, managing risk,
transformation success. Westerman et al. [38] emphasizes that
strategically aligning IT, managing resources, and measuring
a top-down approach is required for digital transformations in
performance. Gartner emphasized the important role of IT
their book "Leading Digital". Bottom-up approach for
decision-making (for example, setting direction, setting
successful digital transformation and that the stumbling block
principles and standards, and prioritizing investments) [11].
was at the boundary between the divisions even if it was
Weill & Ross [5] presented five key decisions related to IT
pursued in the right direction, pointing out that only top
governance: IT principles, IT architecture, IT infrastructure,
management is in a position to push for change beyond the
business application requirements, and IT investment and
divisional boundaries.
priorities. There are various discussions in this academic and
Therefore, this study suggests that related factors with human, industrial field about the areas governed by IT governance, but
technology, strategic linkage of IT and business, and digital these discussions generally refer to similar activities [8].
leadership of CEO are influential factors of IT governance
In order to cope with the environment of digital transformation,
influence, and establish research model based on this
Zhao et al. [12] developed four existing factors based on the
relationship. The purpose of this paper is to propose a method
Socio-Technical System (STS) framework (People,
to increase the capability of digital transformation by testing
Organization, Task & Technology), and proposed an Extended-
hypotheses. In order to accomplish the purpose of research,
STS framework from an integrated viewpoint by adding
human factors and technological factors which are influential
external factors, and analyzed the priorities by selecting
factors of IT governance utilize the results of previous studies.
eighteen IT governance influence factors in the public sector.
Strategic linkage of IT and business, CEO's digital leadership,
In the study, Delphi methodology by expert panel was used to
and digital transformation capacity are employed by related
prioritize the importance of the major factors.
literatures. In order to empirically analyze the causal
relationship among these factors, this study presents a research
model and hypotheses and conduct a survey on firms’ Strategic Alignment of Business with IT
employees and use empirical analysis using structural equation
model based on data collection. At this point, there are few Strategic linkage between IT and business means that business
researches on the impact factor analysis on digital strategy, goals and requirements are harmonized to apply
transformations, and this study will provide implications for information technology in a timely manner [13] and is always
companies or organizations seeking digital transformations. a fundamental concern of management. Strategic linkages
show how IT is linked to business and how business can be
The composition of the study is as follows. Section 2 presents aligned with IT [10, 14]. Many companies have adopted
the theoretical background of this study, presents the major information systems, but only emphasized a technical point of
influential factors of IT governance for digital transformation, view rather than the need for corporate management or business,
and discusses the existing research flow about IT and business and that they cannot support corporate strategy [14]. The fact
strategic linkage, digital leadership, and digital transformation. that the link between IT and business is important to reduce this
Next, Section 3 presents the research model and hypotheses, gap and achieve corporate strategic goals has been well known

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since the late 1970s and has been proven through various innovation, and analyzed the impact of the IT-business strategic
studies [15, 16, 17; 18]. Chan & Reich [19] argue that the linkage as a parameter. The results show that the higher the
strategic linkage between business strategy and IT strategy is level of strategic linkage between IT and business, the greater
an important factor in strengthening the competitive advantage the impact of IT governance on product innovation and process
of companies as a means of generating revenue and reducing innovation. However, executives' IT competencies did not
costs [20]. In a study by [21], the linkage between IT and affect product or process innovation, even at higher levels of
business has been a top concern for IT managers for nearly 30 strategic linkage between IT and business. At this time, in order
years and is always included in key industry issues. According to understand the strategic linkage between IT and business,
to a survey of UK CIOs' priorities, it ranked # 3 in 2010, # 1 in whether the IT project is connected with the business strategy
2011, and # 2 in 2012. Table 1 shows the results of the UK CIO of the company, whether IT is harmonized with the business
survey in 2015 and 2016. As shown in the table, IT and business strategy, goal and whether the requirements set by the
linkages have been recognized as important factors in the management were measured.
industry, ranking the first and the third [22].
Table 1: Priority of IT related factor by UK CIO Survey
CEO’s Digital Leadership
Top 6 2016 focuses for Top 6 2015 focuses for According to [27], an effective way to drive digital
CIOs CIOs transformation is the management-led, top-down approach. It
Driving business Aligning IT initiatives with is argued that employees should engage in a variety of ways to
1
innovation business goals (64%) make change under the strong leadership of executives, and that
Improving IT top decision makers in the enterprise should be aware of the
2 Leading change efforts operations/systems rapidly changing market conditions and have accurate
performance (61%) perception and determination do. It can create a strong vision
Aligning IT initiatives for the future and deliver this vision throughout the
3 Leading change efforts (57%)
with business goals organization. This study also points out that it is not easy to
Implementing new systems and achieve digital transformations in a bottom-up manner through
4 Simplifying IT
architecture (45%) a number of cases, and it shows that the bottom-up approach
Improving IT cannot cross the divisions between divisions. Only top
Driving business innovation
5 operations/systems management is in a position to drive change beyond the
(42%)
performance boundaries of the divisions, and leaders can engage and make
Cultivating the Cultivating the IT/business changes through digital tools that communicate with their
6
IT/business partnership partnership (41%) employees. The CEO's strong leadership can lead to a corporate
governance and transformation system for digital
Knowledge sharing between business and IT executives is transformation, leading to appropriate organizational culture
defined as the ability to deeply understand and participate in the and talent development, appropriate investment and technical
other party's core processes and to honor their own leadership [27].
contributions and challenges. The shared knowledge construct Weill & Ross [5] point out that the role of CEO and CIO is
of [23] is the same concept. On the other hand, Reich & important for harmonizing IT and business strategy. CEOs
Benbasat [24] presented hypotheses and related literature on should make governance evolve as they understand the role of
each factor, suggesting the strategic link between IT plan and IT and understand how to fulfill its responsibilities to maximize
business plan as a social aspect. Chan et al. [25] have identified IT value [5]. We need to connect IT strategy to corporate
domain knowledge sharing, planning sophistication, IS success strategy in the same direction. To succeed in this role, both the
experience, organizational size and environmental uncertainty CEO and the CIO need to understand and share knowledge
as major influencing factors, and analyzed the differences about IT and enterprise-wide. In addition, knowledge sharing
according to organizational types. The results of this study between CEOs and CIOs in IT governance decisions has a
show that strategic linkages depend on domain knowledge positive impact on the linkage of IT and business, and this
sharing and prior IS experience. Strategic linkages have a linkage affects the effectiveness of information systems
positive effect on organizational performance. We also positively. As shown above, the sharing of knowledge between
analyzed the effects of IT and business strategic linkages on CEO and CIO is also an important factor in the strategic linkage
innovation and organizational performance in order to estimate between IT and business [23, 25]. Bass & Stogdill [28]
the effect of strategic linkage between IT and business on developed and developed leadership in two different styles:
digital transformation. Digital transformation is ultimately transformational leadership and transactional leadership.
represented by organizational performance. Transactional leadership is based on mutual attitudes between
Willcocks et al. [26] defined IT governance and the IT leaders and employees [29]. Transformative leadership can be
capabilities of executives and the board as factors influencing viewed as an extension of transactional leadership, particularly

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as to how the leader affects employees [30]. Transformational Digital Transformation, Digital Disruption, and Digitalization
leadership is defined as "the act of a leader that broadens and are used in combination as approaches for various changes and
enhances the objectives of the organization to achieve the goals innovations due to digital. However, digitization and digital
of the organization, and assures the performance that was transformation strategies differ in their inclusion of vision,
expected" [31]. Amabile [32] suggests that this planning and implementation of organizational change
transformational leadership affects the organizational culture processes [34]. The definition of digital transformation depends
and work environment, influencing the organizational attitudes on the company, the leader and the industry. But most of studies
and motivations for interaction and thus affecting the emphasize that digital transformations use technology as a
organization as a whole. means, not as a purpose.
What digital features does affect digital transformation? How
does digitization change the business model, operational
Firm’s Digital Transformation Capacity
processes, and user experience? Brennen & Kreiss [35]
‘Transformation' means a fundamental change of strength that conducted literature research on digital transformation and
is higher than the change that has been pursued by change and digitization. As part of this research, it appears that most of the
transformation. Digital Transformation has a lot of definitions, existing papers on digital technology deal with technological
but in summary, it can be said that 'Digitalization of all kinds innovations (eg, mobile technology, analytical solutions, etc.)
of changes', which is caused by all things digital, is based on while digital transformations actually cover a broader range.
the digital strategy, organization, process, business model, Therefore, digital transformations should be studied from a
culture, A fundamentally changing management strategy. different angle, and analysis of existing research (eg, [36], [37])
Table 2 shows the definition of digital transformation. suggests that digital transformation affects all aspects of an
organization.
Table 2: Definition of digital transformation
Westerman et al. [38] surveyed large companies in traditional
Source Definition
industries such as finance, manufacturing, and pharmaceuticals
To redefine the digital enterprise industry as a in his book 'Leading Digital', and found that the following four
Bain &
digital foundation and to make a difference by (better customer experience, improved digitization of
Company
fundamentally reversing the laws of the game.
operations, digital vision presentation and structure) to utilize
Responding to changes in the business digital technology to create strategic advantages. Forbes Insight
environment triggered by new digital technologies has leveraged the potential of corporate strategy, investment,
AT such as mobile, cloud, big data, AI and IoT, and innovation-driven business, and data analysis as the key
Kearney dramatically increase the competitiveness of elements of a company-wide approach, a balance between
current business or new growth through new
business. Corporate activities to pursue. people and technology. The study of other companies, such as
Cisco and Oracle, focuses primarily on what new technologies
A series of processes that apply the expectations are being used. Research on digital transformations is still in its
PWC of digital consumers and ecosystems in business infant stage. Some studies have been done on the maturity
management to business models and operations.
assessment of digital transformations [39, 40], but few research
The process of embracing new ways to create new has been done on how to get started with digital transformations
value for customers, new ways of thinking of and what is important.
Microsoft existing business models through intelligent
systems, and new ways of combining people, data
and processes.
RESEARCH MODEL AND HYPOTHESES
Entrepreneurs integrate digital physical elements Research Model
IBM to transform business models and establish new
directions for industry. In this study, the main factors influencing digital
transformation capacity are human (trust, devotion / sacrifice),
A series of processes that make new business
technology (IT expertise, strategic role of IT) and IT-business
models and product services based on digital
capabilities in accordance with changes in alignment. We propose a strategic link among the factors. Also,
IDC we study the relationship between CEO's digital leadership
customers and the market (external environment),
apply them to management and lead them to ability and digital transformation ability. The research model is
sustainability. presented in Figure 1. [26] presented the results of the study on
World A set of activities that transform the organization the impact of IT governance and IT competence on innovation
Economic by leveraging the business model to improve as a controlling variable of IT-business strategic linkage as an
Forum digital skills and performance. independent variable. On the other hand, this study extracts the
Source: [33] major influential factors of IT governance and suggests CEO's
digital leadership as a control variable with strategic linkage

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between IT and business as independent variable. This is based following hypothesis was set.
on previous studies in which leadership competence can be
H1: The human factor have a positive impact on the digital
influenced by digital transformation.
transformation capacity.
H2: The technological factor have a positive effect on the
digital transformation capacity.
H3: Strategic linkage between IT and business has a positive
impact on digital transformation capacity.

This study suggests that CEO digital leadership plays a

moderator role in adjusting the relationship between
explanatory variables and dependent variables as a moderating
variable in relation to human factors, technology factors,
strategic linkage between IT and business and digital
transformation capacity. It is presented as follows.
H4: Positive effects of human factors on digital transformation
capabilities will be reinforced by CEO's digital leadership.
H5: Positive effects of technology elements on digital
transformation capability will be reinforced by CEO's digital
leadership.
H6: Positive effects of IT-business strategic link to digital
Figure 1: Research Model transformation capability will be reinforced by CEO's digital
leadership.

Hypotheses
In this study, to analyze empirically the effects of human
In the previous research, human factors and technology factors factors, technology factors, IT-business strategic linkage and
were found to be the most important factors affecting the CEO's digital leadership on digital transformation capacity,
establishment of IT governance for digital transformation. In which are major influential factors of IT governance for digital
this study, we hypothesized that these factors also affect the transformation, we set up the CEO's digital leadership as a
digital transformation capacity. We will test this model by moderating variable, set the digital transformation capacity as
survey data. Digital transformation is an enterprise-wide a dependent variable, and develop the measurement items
approach, and strategic alignment of business strategy with IT through operational definition. The operational definition of the
strategy is critical, especially as IT tends to lead the business. research variables is shown in Table 3.
In the study of [19], directivity and strategic linkage of business
and IT strategy have a significant effect on information system
effect and organizational performance. Empirical research and ANALYTICAL RESULTS
case study shows that when firm has good strategic relationship Method and Data Collection
between IT and business performance. This can explain why IT
can be used more intensively and strategically to improve Based on the above researches, it is necessary to consider the
organizational performance when strategic linkages are well purpose of the research for the evaluation of the superiority of
established. [26] also found that the strategic linkage between the corporate human resources, the excellence of the technical
IT and business is highly correlated with both IT governance factors, strategic linkage between IT alignment with business
and innovation. Therefore, the strategic linkage between IT and and CEO's digital leadership. The questionnaire was composed
business will affect digital transformation capacity. Since the of Likert scale questionnaires for structural equation model
ultimate goal of digital transformation is innovation and (SEM)
organizational performance, it can be assumed that the CEO's
digital leadership has a positive impact on digital
transformation. Based on the above literature studies, the

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Table 3: Model constructs with measurement items

Related
Construct Definition Measurement Items
Reference
Trust in IT governance means mutual reciprocal
belief that organizations that make up the network for
information technology development benefit each
The degree of trust and Trust other when they cooperate [41]. The quality of the
dedication / responsibility that inter-organizational relationship may depend on the
enables us to boldly challenge degree of trust, but trust building is time-consuming
each other and to boldly and requires accountability and accountability [42]
Human [41]
challenge the risks of
Resource Commitment and accountability in IT governance [42]
cooperation between our
organization members and refers to the degree of participation of network
departments. organizations [41]. In the case of IT-led business,
Commitment especially, the responsibility and enthusiasm of
corporate organization members are often required
because decisions move from one or a small number
of people to all organizations of the enterprise.
In IT governance, IT expertise refers to the skills,
experience, and knowledge available to members of
IT Expertise network organizations to make the right decisions and
to make effective corporate informatization
Achievement of new technology developments [43]
and success experience for [43]
Technological The strategic role of IT in IT governance implies how
business innovation, IT expertise [44]
Excellence networking organizations use IT strategically to
for effective enterprise IT [45]
development, and strategic role improve service quality, introduce new services,
Strategic
of IT enhance competitiveness, enhance participation, and
Role of IT
improve their sense of duty [44, 45]. This role
requires participation and accountability at various
organizational levels.
IT Alignment Applying IT appropriately in a timely manner to meet corporate goals, business strategies and requirements,
[46]
with Business and sharing information
CEO’s Digital Appropriateness of decision making for digital transformation such as vision setting, organization, human
[38]
Leadership resource development, technology investment, etc.
Digital Digitizing customer experience by using digital technology in business, digitizing operating processes, and [34]
Transformation the ability to drive a digitized business model [38]

analysis is a flexible analytical methodology that combines results were derived using the PLS-graph 3.0 program.
factors analysis and regression analysis among multivariate
analysis methods, such as pre-setting, model verification, latent Demographic profile of sample respondent
variable measurement, and analysis of the relationship between Of the 362 respondents surveyed, 77.9% were male and 22.1%
variables simultaneously. In this study, PLS (Partial Least were female. The distribution of the respondents by age group
Square) methodology which is one of the well-known SEM is as follows: 26 in 20 ~ 30, 62 in 30 ~ 39, 104 in 40 ~ 49, 126
analysis tools is introduced for path analysis. Unlike the in 50 ~ 59, and 44 in over 60 of the age distribution of the
existing structural equation analysis methodologies such as employees. In terms of company work, less than three years
AMOS and LISREL, the parameters are estimated by PLS accounted for 13.0% of the respondents, 47 of them, and 15.8%
method [47]. In order to verify the causal relationship of of the respondents for 3 ~ 7 years. The number of people in the
complex business environments, PLS has been applied in 7-11 years group was 8.6%. In the 11-15 year group, 46 people
various fields [48, 49]. were 12.7%. In the 15-19 years, 32people were 8.8%. Over 19
The questionnaire was conducted for domestic companies in years, 149 people were 41.2%. Lastly, when we look at the
various industries. Sample collection was conducted online characteristics of survey respondents, 30.1% of the survey
from mid-August to mid-September, 2017. The items related to respondents were engaged in marketing / sales, and 9.7% of
the research contents of this study were measured using the them were in finance/accounting. The number of personnel
Likert 7 point scale. As a result, a total of 398 questionnaires engaged in product planning / development is 44, accounting
were collected. Of the collected questionnaires, 362 were for 12.2% of the total, while HR is 10.8%, 7.5% for IT and 9.9%
selected as valid samples after elimination of data with no for customer service. Other tasks not covered by the above
response and duplicate response data. The frequency analysis
fields are composed of 19.9% of the total. The detailed
and the reliability analysis were performed using the SPSS 23
version of the collected survey data, and the path analysis demographic distribution of respondents is shown in Table 4
below.

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Table 4. Demographic profile of sample

Item Number Percent (%)

Male 282 77.9
Gender
Female 80 22.1
20 ~ 30 26 7.2
30 ~ 39 62 17.1
Ages 40 ~ 49 104 28.7
50 ~ 59 126 34.8
Above 60 44 12.2
Under 3 47 13.0
3~7 57 15.8
Working Experience 7 ~ 11 31 8.6
(Unit: Year) 11 ~ 15 46 12.7
15 ~ 19 32 8.8
Over 19 149 41.2
Marketing/Sales 109 30.1
Finance/Accounting 35 9.7
Product Development 44 12.2
Job Responsibility Human Resource 39 10.8
IT 27 7.5
Customer Service 36 9.94
Etc. 72 19.9

Test for model reliability and validity Extracted (AVE) values were verified by data to measure
convergence validity. As a result of the analysis, CR values of
This study measured the validity and reliability of the
all variables were found to be 0.7 or more, which is the standard
measurement variables according to the analysis process
value of convergent validity [52] and the AVE value was over
suggested by [50]. First, Cronbach's alpha and Composit
0.5, which exceeded the standard of validity proposed in
reliability (CR) were measured to verify the validity of the
previous studies [53]. Information on specific details is given
measured variables and the consistency of the measurements.
in Table 5.
The results of the analysis show that both Cronbach's alpha and
CR exceed 0.7 [51], which is above the standard of validity
presented in previous studies. Next, CR and Average Variance

Table 5. Results of reliability test

Average Variance
Construct Cronbach’s Alpha Composite Reliability (CR)
Extracted (AVE)

Human Resource 0.7447 0.8658 0.6829

Technological Excellence 0.7666 0.8651 0.6813

IT Alignment with Business 0.8676 0.9164 0.7855
CEO’s Digital Leadership 0.9112 0.9445 0.8504
Digital Transformation 0.8441 0.9061 0.7631

In order to verify the validity of the discrimination between verified by using the square root of AVE of each variable. If
variables, the analysis was performed according to the the square root of AVE is larger than the correlation coefficient
methodology proposed by [53]. The discriminant validity is with other variables, it can be said that the discriminant validity

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of the research model is secured. As shown in Table 6, the than the correlation coefficient between the corresponding
results show that the AVE square root of all variables is larger variable and other variables in the study model.
Table 6. Validity test for measurement items

Human Technological IT Alignment CEO’s Digital Digital

Resource Excellence with Business Leadership Transformation

Human Resource 0.89 0.8264

Technological
0.4089 0.92 0.8254
Excellence

IT Alignment with
0.3896 0.4441 0.81 0.9222
Business

CEO’s Digital
0.4202 0.4566 0.4495 0.82 0.8088
Leadership

Digital
0.2433 0.2235 0.2335 0.1632 0.83 0.8736
Transformation

In addition, cross validation can be used to measure intensive thus the intensive validity and discriminant validity of the study
validity and discriminant validity [47]. The results of the model are secured through the above analysis process. The
analysis show that the factor loadings of the measurement items results are presented in Table 7 .
of each variable are higher than those of the other variables, and

Table 7. Cross loading value

Human Technological IT Alignment CEO’s Digital Digital

Resource Excellence with Business Leadership Transformation
HR1 0.9172 0.3884 0.3111 0.3272 0.3594
HR2 0.8924 0.3606 0.3469 0.3694 0.4476
HR3 0.9081 0.3326 0.3037 0.3020 0.3809
HR4 0.8209 0.3651 0.3114 0.3734 0.3541
TE1 0.4120 0.9514 0.3702 0.3971 0.4267
TE2 0.3858 0.9412 0.3676 0.4151 0.4207
TE3 0.3329 0.8719 0.3747 0.4153 0.4156
TE4 0.3129 0.8377 0.3876 0.3662 0.3732
AL1 0.3293 0.2818 0.8115 0.3294 0.3684
AL2 0.2467 0.3232 0.8268 0.2938 0.3358
AL3 0.3418 0.4422 0.8704 0.3414 0.3913
AL4 0.3590 0.3927 0.8609 0.2987 0.4118
DL1 0.3231 0.3257 0.3061 0.7862 0.3852
DL2 0.2217 0.2553 0.3118 0.7069 0.3764
DL3 0.3673 0.3862 0.3377 0.8285 0.4133
DL4 0.3982 0.4197 0.4061 0.9034 0.3672
TC1 0.3836 0.3902 0.3974 0.3926 0.8871
TC2 0.3718 0.3961 0.4550 0.3815 0.8643
TC3 0.3596 0.3856 0.3947 0.3717 0.7965
TC4 0.2920 0.3322 0.3534 0.3459 0.7885
TC5 0.2149 0.2310 0.1149 0.1979 0.8416

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Path analysis and hypotheses test Stepwise-moderation methodology [54] to examine the
moderating effect between each explanatory variable and
As a result of the path analysis through Model # 1, the
dependent variable in digital leadership. As a result of the
excellence of the human factor showed a positive effect on the
analysis using Model # 3, it was found that leadership plays a
digital trans- formation capacity (β = 0.238, p-value <0.01) (β
significant role as a control effect when all three explanatory
= 0.132, p-value <0.001), respectively. IT-business strategic
variables influence digital transformation. The results of the
linkage also positively affects the digital trans- formation
path analysis are shown in Table 8
capacity (β = 0.157, p-value <0.01). Next, we apply the

Table 8. Path analysis

Dependent Variable Digital Transformation Capacity
Model #3
Path analysis Model #1 Model #2
(Stepwise analysis)
Human Resource 0.238** 0.196** 0.162** 0.139* 0.154*
Technological
Excellence 0.132*** 0.117** 0.081* 0.090* 0.088*
IT Alignment with
Business 0.157** 0.121** 0.101** 0.101** 0.062**
CEO’s Digital
Leadership 0.121** 0.113* 0.102* 0.098*
HR * Leadership 0.082*
TE * Leadership 0.068*
AL * Leadership 0.097*
R2 0.413 0.462 0.498 0.485 0.509
Notes:
*: p<0.05|**: p<0.01 | ***: p<0.001 | n.s.: not significant.

Based on the above analysis, hypothesis 1, hypothesis 2, and First, the human factor has a big influence in strengthening the
hypothesis 3 were adopted. Furthermore, hypothesis 4, capacity of digital transformation in the enterprise. In this study,
hypothesis 5, and hypothesis 6 were found to be statistically it is analyzed that the effect of digital transformation capacity
significant. is the most positive among factors set as independent variables.
Human factors have confirmed that they have communication
and trust among employees, commitment in business
CONCLUSION cooperation, and spirit of challenge, which is directly related to
corporate culture. Companies should strive to form an open
Implications
culture within the company to foster and secure human
The purpose of this study is to investigate the factors affecting resources suitable for digital transformation.
digital transformation in the global industry due to the
Second, the technological factor has positive (+) effect on
development of new technologies such as mobile, artificial
digital transformation. However, it is interpreted as a low
intelligence, and big data, and to identify the moderating effects
priority factor rather than a human factor or a strategic link
of digital leadership. And this study aims to empirically analyze
between IT and business. Technological factors are also
the influencing factors to enhance the digital transformation
important factors in IT governance, and efforts to acquire new
capability of companies and to draw policy implications as well
technology, strategic role of IT, and experience in applying it
as theoretical implications. There are a variety of factors that
to business influence digital transformation capacity. In
affect the capacity of a company's digital transformation.
particular, as shown in Table 1, the strategic role of IT becomes
However, in order to strengthen competencies efficiently
more important as the most demanding part of the CIO in the
within limited resources, it is important to select and to find out
current era drives business innovation. Third, as the linkage
what factors to focus on. In addition, we point out that CEO's
between IT and business strategy is strengthened, it is analyzed
digital leadership is more important than previous management
that firm's digital transformation capacity is strengthened.
in digital transformation, and it was also interested in how this
Information sharing is important in the strategic linkage
affect with each factor. A summary of the research results and
between IT and business. From the business planning stage, the
implications can be presented as follows.
business unit must have a system that cooperates with the IT

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© Research India Publications. http://www.ripublication.com

department and ensure that the IT department understands the Transformation Strategy,” MIS Quarterly
company's strategy and business. Executive, 15(2).
Finally, the moderating effect of CEO's digital leadership [2] Wang, J., Hedman, J., and Tuunainen, V. K., 2016,
affects positively (+) on all independent variables. This result “Path creation, path dependence and breaking away
can be interpreted as a strengthening of the digital trans- from the path: re-examining the case of
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and IT-business. In particular, CEO's digital leadership is a
[3] Cohen, W. M., and Levinthal, D. A., 1990,
strategic link between IT and business. The biggest interaction
“Absorptive capacity: A new perspective on learning
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importance. This study will help you determine which
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