Digital Transformation Capability as a Boundary Condition Linking Employee Empowerment and Internal Service Quality to Performance General Insurance Firms
Keywords:
Employee Empowerment, Internal Service Quality, Digital Transformation Capability, Company Performance
Abstract
This study tests an explanatory model of performance in Indonesian general insurance firms by positioning employee empowerment and internal service quality as organizational resources and digital transformation capability as both a main effect and a boundary condition. The framework integrates the resource-based view, dynamic capabilities view, and service-profit chain. Cross-sectional data from 200 managerial respondents were analyzed using PLS-SEM in SmartPLS 3. The measurement model met indicator reliability, convergent validity, and discriminant validity requirements; substantive construct loadings ranged from 0.778 to 0.879, AVE from 0.660 to 0.714, and the maximum HTMT was 0.575. The model explained 54.5% of the variance in company performance. Employee empowerment (beta = 0.287), internal service quality (beta = 0.314), and digital transformation capability (beta = 0.281) had positive and significant effects on performance. Digital transformation capability also strengthened the effects of employee empowerment (interaction beta = 0.186) and internal service quality (interaction beta = 0.243). The findings indicate that the value of employee discretion and internal service support increases when firms can sense digital opportunities, seize them through decisions and investments, and transform processes and data architectures. The study extends capability-based research by identifying digital transformation capability as a boundary condition linking internal resources to performance. Managerially, digital investments should prioritize data access, cross-functional workflows, analytics, and decision mechanisms that amplify empowerment and internal service quality.
References
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Kustiawan, U., Marpaung, P., Lestari, U. D., & Andiyana, E. (2022). The effect of affective organizational commitment, job satisfaction, and employee engagement on job happiness and job performance on manufacturing company in Indonesia. WSEAS Transactions on Business and Economics, 19, 573-591. https://doi.org/10.37394/23207.2022.19.52
Lin, M., Ling, Q., Liu, Y., & Hu, R. (2021). The effects of service climate and internal service quality on frontline hotel employees' service-oriented behaviors. International Journal of Hospitality Management, 97, 102995. https://doi.org/10.1016/j.ijhm.2021.102995
Liu, M., Yang, H., & Zheng, S. (2024). Index construction and application of digital transformation in the insurance industry: Evidence from China. PLOS ONE, 19(1), e0296899. https://doi.org/10.1371/journal.pone.0296899
Memon, M. A., Ting, H., Cheah, J.-H., Thurasamy, R., Chuah, F., & Cham, T. H. (2020). Sample size for survey research: Review and recommendations. Journal of Applied Structural Equation Modeling, 4(2), i-xx. https://doi.org/10.47263/JASEM.4(2)01
Mustakman, F., Arafah, W., & Anggiani, S. (2025). The influence of work efficiency, strategic leadersip, and organizational change mediated by digital transformation on the organizational performance of Indonesian Army hospitals. International Journal of Business, Economics, and Social Development, 6(2), 271-281. https://doi.org/10.46336/ijbesd.v6i2.899
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Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1988). SERVQUAL: A multiple-item scale for measuring consumer perceptions of service quality. Journal of Retailing, 64(1), 12-40.
Ramadhan, R., Faisal, A., & Arafah, W. (2024). The role of digital innovation in mediating the influence of digital leadership and digital capability on business performance in the event/MICE industry in Indonesia. Dinasti International Journal of Education Management and Social Science, 5(6), 1908-1917. https://doi.org/10.38035/dijemss.v5i6.2950
Ringle, C. M., Wende, S., & Becker, J.-M. (2015). SmartPLS 3. SmartPLS GmbH. http://www.smartpls.com
Sandhi, A. F., Usman, B., & Santosa, W. (2024). The influence of corporate entrepreneurship, Industry 4.0 adoption, digital transformation capability on business performance mediated by employee engagement in the telecommunication industry in Indonesia. International Journal of Economics, Business and Management Research, 8(6), 57-74. https://doi.org/10.51505/IJEBMR.2024.8605
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Shmueli, G., Sarstedt, M., Hair, J. F., Cheah, J.-H., Ting, H., Vaithilingam, S., & Ringle, C. M. (2019). Predictive model assessment in PLS-SEM: Guidelines for using PLSpredict. European Journal of Marketing, 53(11), 2322-2347. https://doi.org/10.1108/EJM-02-2019-0189
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Sulivyo, L., Siswoko, R., & Tegor. (2019). The effectiveness of holistic marketing and word-of-mouth communication on purchasing decision at PT Asuransi Central Asia Branch Office of Tiang Bendera West Jakarta. International Journal of Multicultural and Multireligious Understanding, 6(1), 187-199. https://doi.org/10.18415/ijmmu.v6i1.562
Susananto, P. H., Arief, M., Usman, B., & Tiarapuspa, T. (2023). Employee performance model based on e-HRM: Employee green behavior as a performance indicator in the coal mining company. Journal of Social Science, 4(1), 16-29. https://doi.org/10.46799/jss.v4i1.459
Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13), 1319-1350. https://doi.org/10.1002/smj.640
Vargo, S. L., & Lusch, R. F. (2008). Service-dominant logic: Continuing the evolution. Journal of the Academy of Marketing Science, 36, 1-10. https://doi.org/10.1007/s11747-007-0069-6
Venkatraman, N., & Ramanujam, V. (1986). Measurement of business performance in strategy research: A comparison of approaches. Academy of Management Review, 11(4), 801-814. https://doi.org/10.5465/amr.1986.4283976
Verhoef, P. C., Broekhuizen, T., Bart, Y., Bhattacharya, A., Dong, J. Q., Fabian, N., & Haenlein, M. (2021). Digital transformation: A multidisciplinary reflection and research agenda. Journal of Business Research, 122, 889-901. https://doi.org/10.1016/j.jbusres.2019.09.022
Vial, G. (2019). Understanding digital transformation: A review and a research agenda. Journal of Strategic Information Systems, 28(2), 118-144. https://doi.org/10.1016/j.jsis.2019.01.003
Warner, K. S. R., & Wäger, M. (2019). Building dynamic capabilities for digital transformation: An ongoing process of strategic renewal. Long Range Planning, 52(3), 326-349. https://doi.org/10.1016/j.lrp.2018.12.001
Zhu, X., Ge, S., & Wang, N. (2021). Digital transformation: A systematic literature review. Computers & Industrial Engineering, 162, 107774. https://doi.org/10.1016/j.cie.2021.107774.
Bowen, D. E., & Lawler, E. E. III. (1992). The empowerment of service workers: What, why, how, and when. Sloan Management Review, 33(3), 31-39.
Chikazhe, L., Chavunduka, D., Chinofunga, S., Marere, R. P., Chifamba, O., & Kaviya, M. (2023). Promoting perceived service quality and organisational performance through customer retention strategies: The moderating role of ICT. European Journal of Management Studies, 28(3), 193-211. https://doi.org/10.1108/EJMS-01-2023-0003
Cosa, M., & Torelli, R. (2024). Digital transformation and flexible performance management: A systematic literature review of the evolution of performance measurement systems. Global Journal of Flexible Systems Management, 25, 445-466. https://doi.org/10.1007/s40171-024-00409-9
Cummins, J. D., & Weiss, M. A. (2014). Systemic risk and the U.S. insurance sector. Journal of Risk and Insurance, 81(3), 489-528. https://doi.org/10.1111/j.1539-6975.2012.01501.x
Elibol, F. (2024). The effect of internal service quality on employee performance and the mediation role of digital transformation in this effect. Journal of the Human and Social Science Researches, 13(2), 1032-1052. https://doi.org/10.15869/itobiad.1335425
Fadil, H., Singh, K., & Joseph, C. (2016). The influence of organizational innovation towards internal service quality in MBKS. Procedia - Social and Behavioral Sciences, 224, 317-324. https://doi.org/10.1016/j.sbspro.2016.05.491
Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2022). A primer on partial least squares structural equation modeling (PLS-SEM) (3rd ed.). Sage.
Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2-24. https://doi.org/10.1108/EBR-11-2018-0203
Hair, J. F., Sarstedt, M., Ringle, C. M., & Gudergan, S. P. (2024). Advanced issues in partial least squares structural equation modeling (PLS-SEM) (2nd ed.). Sage.
Hanelt, A., Bohnsack, R., Marz, D., & Antunes Marante, C. (2021). A systematic review of the literature on digital transformation: Insights and implications for strategy and organizational change. Journal of Management Studies, 58(5), 1159-1197. https://doi.org/10.1111/joms.12639
Hayes, A. F. (2022). Introduction to mediation, moderation, and conditional process analysis: A regression-based approach (3rd ed.). Guilford Press.
Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science, 43, 115-135. https://doi.org/10.1007/s11747-014-0403-8
Hermaen, D., Arsadi, Subandriyo, Dewi, F. M., & Sulivyo, L. (2024). The influence of work-life balance, employee engagement, and job satisfaction on improving job performance of manufacturing company employees. JOURNAL INTELEKTUAL, 3(2), 225-233. https://doi.org/10.61635/jin.v3i2.207
Heskett, J. L., Jones, T. O., Loveman, G. W., Sasser, W. E. Jr., & Schlesinger, L. A. (1994). Putting the service-profit chain to work. Harvard Business Review, 72(2), 164-174.
Kanjanakan, P., Wang, P. Q., & Kim, P. B. (2023). The empowering, the empowered, and the empowerment disparity: A multilevel analysis of the integrated model of employee empowerment. Tourism Management, 94, 104635. https://doi.org/10.1016/j.tourman.2022.104635
Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Harvard Business School Press.
Khin, S., & Ho, T. C. F. (2019). Digital technology, digital capability and organizational performance: A mediating role of digital innovation. International Journal of Innovation Science, 11(2), 177-195. https://doi.org/10.1108/IJIS-08-2018-0083
Kock, N. (2015). Common method bias in PLS-SEM: A full collinearity assessment approach. International Journal of e-Collaboration, 11(4), 1-10. https://doi.org/10.4018/ijec.2015100101
Kock, N., & Hadaya, P. (2018). Minimum sample size estimation in PLS-SEM: The inverse square root and gamma-exponential methods. Information Systems Journal, 28(1), 227-261. https://doi.org/10.1111/isj.12131
Kustiawan, U., Cahyadi, M. B., Lestari, U. D., & Andiyana, E. (2022). Transformational leadership and gender of the leader for government insurance worker in Covid situation. WSEAS Transactions on Information Science and Applications, 19, 63-77. https://doi.org/10.37394/23209.2022.19.7
Kustiawan, U., Marpaung, P., Lestari, U. D., & Andiyana, E. (2022). The effect of affective organizational commitment, job satisfaction, and employee engagement on job happiness and job performance on manufacturing company in Indonesia. WSEAS Transactions on Business and Economics, 19, 573-591. https://doi.org/10.37394/23207.2022.19.52
Lin, M., Ling, Q., Liu, Y., & Hu, R. (2021). The effects of service climate and internal service quality on frontline hotel employees' service-oriented behaviors. International Journal of Hospitality Management, 97, 102995. https://doi.org/10.1016/j.ijhm.2021.102995
Liu, M., Yang, H., & Zheng, S. (2024). Index construction and application of digital transformation in the insurance industry: Evidence from China. PLOS ONE, 19(1), e0296899. https://doi.org/10.1371/journal.pone.0296899
Memon, M. A., Ting, H., Cheah, J.-H., Thurasamy, R., Chuah, F., & Cham, T. H. (2020). Sample size for survey research: Review and recommendations. Journal of Applied Structural Equation Modeling, 4(2), i-xx. https://doi.org/10.47263/JASEM.4(2)01
Mustakman, F., Arafah, W., & Anggiani, S. (2025). The influence of work efficiency, strategic leadersip, and organizational change mediated by digital transformation on the organizational performance of Indonesian Army hospitals. International Journal of Business, Economics, and Social Development, 6(2), 271-281. https://doi.org/10.46336/ijbesd.v6i2.899
Nasution, H., Muafi, M., El Qadri, Z. M., & Suprihanto, J. (2025). Impact of digital business transformation on organizational ambidexterity and performance in Indonesian insurance firms. Intangible Capital, 21(1), 1-20. https://doi.org/10.3926/ic.2930
Otoritas Jasa Keuangan. (2025, June 30). OJK launches database of Indonesia insurance agents and Indonesia insurance policies to strengthen insurance companies governance. https://ojk.go.id/en/berita-dan-kegiatan/siaran-pers/Pages/OJK-Launches-Database-of-Indonesia-Insurance-Agents-and-Indonesia-Insurance-Policies.aspx
Otoritas Jasa Keuangan. (2026, June). May 2026 Board of Commissioners meeting: Financial services sector stability maintained amid increasing pressures on global economic performance. https://iru.ojk.go.id/iru/WebSite/ArticleList/View/1014
Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1988). SERVQUAL: A multiple-item scale for measuring consumer perceptions of service quality. Journal of Retailing, 64(1), 12-40.
Ramadhan, R., Faisal, A., & Arafah, W. (2024). The role of digital innovation in mediating the influence of digital leadership and digital capability on business performance in the event/MICE industry in Indonesia. Dinasti International Journal of Education Management and Social Science, 5(6), 1908-1917. https://doi.org/10.38035/dijemss.v5i6.2950
Ringle, C. M., Wende, S., & Becker, J.-M. (2015). SmartPLS 3. SmartPLS GmbH. http://www.smartpls.com
Sandhi, A. F., Usman, B., & Santosa, W. (2024). The influence of corporate entrepreneurship, Industry 4.0 adoption, digital transformation capability on business performance mediated by employee engagement in the telecommunication industry in Indonesia. International Journal of Economics, Business and Management Research, 8(6), 57-74. https://doi.org/10.51505/IJEBMR.2024.8605
Seibert, S. E., Wang, G., & Courtright, S. H. (2011). Antecedents and consequences of psychological and team empowerment in organizations: A meta-analytic review. Journal of Applied Psychology, 96(5), 981-1003. https://doi.org/10.1037/a0022676
Shmueli, G., Sarstedt, M., Hair, J. F., Cheah, J.-H., Ting, H., Vaithilingam, S., & Ringle, C. M. (2019). Predictive model assessment in PLS-SEM: Guidelines for using PLSpredict. European Journal of Marketing, 53(11), 2322-2347. https://doi.org/10.1108/EJM-02-2019-0189
Spreitzer, G. M. (1995). Psychological empowerment in the workplace: Dimensions, measurement, and validation. Academy of Management Journal, 38(5), 1442-1465. https://doi.org/10.2307/256865
Sulivyo, L., Siswoko, R., & Tegor. (2019). The effectiveness of holistic marketing and word-of-mouth communication on purchasing decision at PT Asuransi Central Asia Branch Office of Tiang Bendera West Jakarta. International Journal of Multicultural and Multireligious Understanding, 6(1), 187-199. https://doi.org/10.18415/ijmmu.v6i1.562
Susananto, P. H., Arief, M., Usman, B., & Tiarapuspa, T. (2023). Employee performance model based on e-HRM: Employee green behavior as a performance indicator in the coal mining company. Journal of Social Science, 4(1), 16-29. https://doi.org/10.46799/jss.v4i1.459
Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13), 1319-1350. https://doi.org/10.1002/smj.640
Vargo, S. L., & Lusch, R. F. (2008). Service-dominant logic: Continuing the evolution. Journal of the Academy of Marketing Science, 36, 1-10. https://doi.org/10.1007/s11747-007-0069-6
Venkatraman, N., & Ramanujam, V. (1986). Measurement of business performance in strategy research: A comparison of approaches. Academy of Management Review, 11(4), 801-814. https://doi.org/10.5465/amr.1986.4283976
Verhoef, P. C., Broekhuizen, T., Bart, Y., Bhattacharya, A., Dong, J. Q., Fabian, N., & Haenlein, M. (2021). Digital transformation: A multidisciplinary reflection and research agenda. Journal of Business Research, 122, 889-901. https://doi.org/10.1016/j.jbusres.2019.09.022
Vial, G. (2019). Understanding digital transformation: A review and a research agenda. Journal of Strategic Information Systems, 28(2), 118-144. https://doi.org/10.1016/j.jsis.2019.01.003
Warner, K. S. R., & Wäger, M. (2019). Building dynamic capabilities for digital transformation: An ongoing process of strategic renewal. Long Range Planning, 52(3), 326-349. https://doi.org/10.1016/j.lrp.2018.12.001
Zhu, X., Ge, S., & Wang, N. (2021). Digital transformation: A systematic literature review. Computers & Industrial Engineering, 162, 107774. https://doi.org/10.1016/j.cie.2021.107774.
Published
2026-08-14
How to Cite
Lod Sulivyo, Willy Arafah, & Bahtiar Usman. (2026). Digital Transformation Capability as a Boundary Condition Linking Employee Empowerment and Internal Service Quality to Performance General Insurance Firms. International Journal of Economics, Business and Innovation Research, 5(05), 1141-1162. https://doi.org/10.63922/ijebir.v5i05.5963
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