A Study of Digital Start-Ups: The Mediating Effect of Employee Dynamic Capability on Change Leadership and Sustainable Employee Performance

Abstract

This study addresses the challenge of sustaining employee performance in digital start-ups, where rapid technological change, uncertainty, and highly dynamic work environments often affect employees’ productivity, engagement, and well-being over time. Despite the growing importance of sustainable employee performance, limited attention has been given to the mechanisms through which leadership influences long-term employee outcomes in digital start-ups. In particular, the role of employee dynamic capability as an adaptive mechanism linking change leadership and sustainable employee performance remains underexplored. Therefore, this study examines the effect of change leadership on sustainable employee performance in digital start-ups, with employee dynamic capability as a mediating variable. This study employs a quantitative research design, where data were collected from 329 employees working in digital start-ups and analyzed using Partial Least Squares Structural Equation Modelling (PLS-SEM). The results reveal that change leadership has a strong and significant positive effect on sustainable employee performance. The mediation analysis indicates that employee dynamic capability partially mediates the relationship between change leadership and sustainable employee performance. These findings highlight the importance of leadership practices that not only drive immediate performance outcomes but also strengthen employees’ long-term adaptive capabilities. The study contributes to the literature by integrating leadership and dynamic capability perspectives in explaining sustainable employee performance within the context of digital start-ups. Practical implications suggest that organizations should invest in change-oriented leadership development and foster environments that support continuous learning and flexibility.