From Digital Readiness to Employability: Mediating Role of Artificial Intelligence Competence and the Moderating Influence of Policy Support among Malaysian Graduates DOI: https://doi.org/10.33093/ijomfa.2026.7.2.2
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Abstract
The fourth industrial revolution (4IR) emphasises the demand for graduates with both digital readiness and artificial intelligence (AI) skills, which are aligned with labour market demands. Although prior studies link digital skills to employability, empirical evidence is scarce, and there is little research on how digital readiness translates into employment outcomes in AI-driven, particularly developing, economies. Hence, considering AI competence as a mediating mechanism and government policy support as a moderator, this study investigates the effects of digital literacy, technological self-efficacy, and digital learning engagement on graduate employability. Grounded in human capital theory, social cognitive theory, and institutional theory, this study employed a quantitative, cross-sectional design and collected data from 400 final-year students and recent graduates at Malaysian universities. PLS-SEM were used examine the proposed relationships among variables. The findings revealed that digital literacy has a direct impact on employability, whereas technological self-efficacy and digital learning engagement have indirect impacts on employability through AI competence. AI competence emerges as a central mechanism that converts digital readiness into labour market value. Additionally, government policy support strengthens the relationship between AI competence and employability, emphasising the importance of an enabling institutional environment. This study extends employability research by emphasising applied AI skills within a policy-supported framework and highlights the roles of universities, students, and policymakers in establishing graduate employability in the 4IR era.
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