Digital Leadership, Innovation Capability and Sustainable Growth of SMEs in Nigeria: Evidence from Emerging Technology-Driven Businesses

Abstract

This research examined how digital leadership affects sustainable growth in technology-based small and medium enterprises (SMEs) in Nigeria. It considers innovation capability as a mediator and environmental dynamism as a potential moderator. Based on Dynamic Capabilities Theory and Contingency Theory, the study used a quantitative survey involving 252 owner-managers and senior managers from sectors like fintech, e-commerce, agritech, and other digital services. The data analysis employed partial least squares structural equation modeling with 5,000 bootstrap resamples. The results showed that digital leadership had a strong positive impact on innovation capability (β = 0.588), and innovation capability positively influenced sustainable growth (β = 0.391). Additionally, digital leadership directly affected sustainable growth significantly (β = 0.161). Innovation capability partially mediated the relationship between digital leadership and sustainable growth (β = 0.230), suggesting that digital leaders contribute to growth both directly and by enhancing their firms' ability to innovate. However, environmental dynamism did not significantly moderate the link between innovation capability and sustainable growth, so the moderated mediation effect was not supported. The model accounted for 34.6% of the variance in innovation capability and 27.1% in sustainable growth. These findings emphasize that digital leadership and innovation capability are key internal factors driving sustainable growth in Nigerian technology-focused SMEs. Managers should therefore focus on strengthening their digital strategies, encourage experimentation, and ensure that innovation aligns with sustainable business goals.