The Role of Digital Literacy in Leadership

The study reported in this chapter integrates the theory of communication and uncertainty management (TCUM) with the notion of transformational leadership (TFL) to examine how the uncertainty over the adoption of artificial intelligence (AI) technologies affects employees. Drawing on TCUM’s tenets, it is posited that TFL leaders need context-relevant expertise to effectively inspire and motivate their followers. Structural equation modeling analyses with the data collected in Japan (N = 1,318 employee–supervisor dyads) have revealed that uncertainty is negatively associated and TFL is positively associated with employees’ job performance. Consistent with TCUM’s proposition, the digital literacy of leaders is found to moderate the effects of TFL. Specifically, the positive association between TFL and job performance has disappeared when the employees simultaneously sense high uncertainty and low digital literacy of their supervisors. Implications of these findings are discussed with reference to the relevant literature. The current study provides empirical evidence on an important boundary condition of TFL effectiveness in the context of AI-driven digital transformation. Organizations should recognize and work on the imperative to develop talents with both robust leadership and digital skills to successfully drive DX.