Linking Transformational Leadership to Sustainability Outcomes: The Mediating Roles of Digital Transformation and Innovation

ABSTRACT Sustainability remains a critical challenge for micro, small, and medium‐sized enterprises (MSMEs) in emerging economies, where the adoption of digital transformation (DT) and innovation is often limited. This study aims to examine how transformational leadership (TL) influences sustainability performance (SP) through DT and innovation in the context of Mexican MSMEs. A quantitative, cross‐sectional design was employed, using a self‐administered questionnaire and simple random sampling to collect data from 360 business owners and managers in the state of Guanajuato, Mexico. Structural equation modeling was applied to test the proposed relationships. Results indicate that TL significantly enhances DT and innovation but does not exert a direct effect on SP. Instead, DT and innovation serve as mediators, with DT demonstrating the strongest indirect impact. These findings highlight the critical role of leadership in enabling digital and innovative capacities that drive sustainability, offering theoretical contributions and practical implications for leadership development and policy interventions.