Digital Leadership as a Mediating Variable in the Relationship Between Artificial Intelligence and Institutional Excellence in Government Institutions

Abstract

Institutions in the public sector worldwide are increasingly required to modernize their service delivery and AI is increasingly recognized as a strategic tool for institutional excellence. However, the mechanisms and boundary conditions through which AI can contribute to excellence are not yet sufficiently understood. This study used an explanatory sequential mixed-methods design to investigate the extent to which digital leadership mediates the relationship between AI capability and institutional excellence in government institutions and to explore whether AI governance moderates this relationship. The quantitative part of the study used survey data from 314 middle- and senior-level managers. PLS-SEM with 5,000-resample bootstrapping was used to analyze the data. The qualitative part of the study consisted of semi-structured interviews with 20 senior executives, chief digital officers and digital transformation specialists. The interview data were used to interpret and enrich the quantitative results. Objective performance indicators (processing time, automation rate, citizen satisfaction, cost per transaction) were gathered from 24 institutions to provide cross validation with the self-reported survey data. The results show that AI had a significant positive effect on digital leadership ( = 0.512, p < .001) and institutional excellence ( = 0.276, p < .01), that digital leadership positively influences institutional excellence ( = 0.487, p < .001) and partially mediates the effect of AI on institutional excellence (indirect effect = 0.249, VAF = 47.4%), and that AI governance had a significant positive moderating effect on the relationship between digital leadership and institutional excellence (interaction term = 0.187, p < .01), i.e. High AI governance strengthened the impact of digital leadership on institutional excellence. Interview responses and objective indicators corroborated and complemented the quantitative findings. The entire model explained 54.1% of institutional excellence. The study provides insights for public sector decision-makers on how to pair AI investments with development of digital leadership and on implementation of effective AI governance.
Keywords: Artificial Intelligence; Digital Leadership; Institutional Excellence; AI Governance; Government Institutions; PLS-SEM.