Psychological ownership (PO) as positive organizational psychology possesses a sense of ownership that reflects one’s beliefs, thoughts and awareness upon the target of ownership. Digital Transformation (DT) and employee engagement are disruptive phenomenon that have caused tremendous effects to organizations. Previous researches identified favorable and unfavorable impact of DT, however very few research literatures indicated its impacts on employee engagement. This study investigated mediating effect of PO in relationship between leadership and DT on employee engagement and evaluated which one had more influences on employee engagement using survey data of 160 respondents from pharmaceutical, F&B, chemicals and life science companies in Indonesia. The results show Psychological Ownership strongly mediated the relationship of DT and leadership and had positive impacts on employee engagement. Leadership had stronger influence than DT. Self-efficacy, self-identity and sense of belongingness were PO’s characters that had significant role toward employee engagement. These enrich knowledge on how PO can be triggered in DT process to improve employee engagement and provides valuable insights for managers that psychological ownership was essential to build employee engagement in DT processes.

Keywords: Employee engagement, digital transformation, psychological ownership, self-efficacy, self-identity