Developing a model of innovation capability and digital transformation in Indonesia’s public sector: the role of leadership and IT governance

This study aims to develop and test a model of innovation capability in the Indonesian public sector by examining the role of digital transformational leadership and the mediating effects of IT governance and digital transformation. Using a quantitative, explanatory research design, data were collected through purposive sampling from relevant units within the Ministry of Finance of the Republic of Indonesia and analyzed using Partial Least Squares–Structural Equation Modeling (PLS-SEM) with SmartPLS 4.0. The results show that digital transformational leadership has a strong positive effect on IT governance and digital transformation. In turn, IT governance significantly influences both digital transformation and innovation capability. Digital transformation also has a positive effect on innovation capability. However, the direct impact of leadership on innovation is relatively weak, indicating the importance of IT governance and digital transformation as mediators. This study contributes to the theoretical advancement of digital leadership and public sector innovation by integrating governance mechanisms within a dynamic capability framework. These findings highlight that strengthening IT governance and strategically managing digital transformation are essential for translating digital transformational leadership into innovation capability, offering clear theoretical insights into public sector innovation and practical guidance for policymakers and public managers in emerging economies.