Digital HRM and digital leadership: A synergistic model for organizational performance in SMEs of emerging markets

Abstract

Digital transformation has fundamentally reshaped human resource management (HRM) and leadership practices, yet limited research has examined their combined effects on organizational performance, particularly in emerging economies. This study investigates the influence of digital HRM practices and digital leadership on organizational performance through the mediating roles of employee performance and employee engagement. Drawing upon the Harvard HRM framework, Guest's HRM model, and Socio-Technical Systems Theory, the study proposes and empirically validates an integrated model explaining how technological and leadership capabilities jointly enhance organizational outcomes. Using purposive sampling technique, data were collected from 248 Vietnamese enterprises across multiple industries using a structured questionnaire sent to managers in SMEs. Partial Least Squares Structural Equation Modeling (PLS-SEM) was employed to test the proposed hypotheses. The model was proved to have strong explanatory power and can explain 69.1% of the variation in organizational performance. The results indicate that digital training and development significantly improve employee performance and employee engagement, while digital leadership positively influences both employee outcomes and exerts an additional direct effect on organizational performance. Furthermore, employee performance and employee engagement were found to significantly enhance organizational performance, confirming their mediating roles in translating digital initiatives into organizational success. These findings demonstrate that technology-enabled HR practices and digitally competent leadership are complementary strategic resources that foster organizational competitiveness through enhanced human capital. The study contributes to theory by extending the classic framework to the digital context, demonstrating that organizational performance depends on the effective integration of technological systems with human-centered leadership. Practically, the findings provide guidance for managers seeking to maximize the value of digital transformation through investments in both digital HRM capabilities and leadership development.