Fostering Sustainable Innovation through Digital Competence: The Effect of Generation Z’s Work Engagement and Inclusive Leadership in Technology Companies

This study explores the impact of digital competence on the innovation behavior of Generation Z employees in Chinese technology firms, emphasizing the mediating role of work engagement and the moderating influence of inclusive leadership. Drawing on Social Cognitive Theory, the research develops and tests a model to explain how technological capabilities lead to innovative outcomes. Data were collected from 406 Generation Z employees in R&D departments of leading Chinese technology firms. The results revealed that digital competence positively influences innovation behavior, both directly and indirectly, by enhancing work engagement, which in turn boosts innovation. Work engagement was found to be a partial mediator, suggesting that digital competence promotes innovation by increasing employees' vigor, dedication, and absorption in their tasks. Additionally, inclusive leadership was shown to moderate the relationship between digital competence and work engagement, with stronger effects observed when inclusive leadership practices were high. This study highlights the importance of integrating human capital development, psychological resources, and organizational practices to foster innovation. For firms seeking sustainable competitive advantage in dynamic technological environments, the findings suggest strategies focusing on digital skills, work engagement, and inclusive leadership.