How and when CEO servant leaders fuel firm innovation: the role of social capital and knowledge absorptive capacity
- Open Access
- 26.04.2024
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Abstract
Introduction
Most firms currently find themselves immersed in the dramatic socio-political, environmental and human effects of the complex post-pandemic period, being forced to be enterprising and innovate continuously (Shipway et al., 2023) to meet the new formulas and experiences demanded by customers (González-Padilla et al., 2023). Drucker’s (1985) words from over 30 years ago could not be truer today, with academics and practitioners continuing to focus on determining the elements that foster an innovative workforce (de la Fernández-Pérez et al., 2020), as it is key for firms to become entrepreneurial (Kusa et al., 2019) and achieve high innovation, as a result (Palacios-Marques et al., 2017).
CEO leadership is among the multiple antecedents to recently receive the greatest attention as primary drivers of firm innovation (Kiss et al., 2022). This is unsurprising, as CEOs are the main actors in building environments and designing procedures aimed at promoting innovation (Ruiz-Palomino et al., 2019). Thus, if their personal characteristics match those that are conducive to building an innovative culture, firm innovation is likely to result. Leadership styles identified as principal drivers in fostering firm innovation include facilitative (Denti & Hemlin, 2012), relational (Wang et al., 2022), empowering (Rohlfer et al., 2022) and transformational leadership (Yin et al., 2023), which have common characteristics, such as encouraging interactions in the workplace and supporting and empowering employees.
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Servant leadership is another example of a leadership approach that can foster firm innovation. Coined by Greenleaf (1977), and subsequently developed as a theory over time (Van Dierendonck, 2011), servant leadership shares many of the characteristics of the abovementioned leadership styles and is practised by leaders whose primary purpose is to serve their followers by developing their full potential in numerous areas, such as self-motivation and empowerment (Eva et al., 2019). In doing so, servant leaders help enhance the human capital talent of their employees, which should ultimately engender the ability to respond and react to change and new demands (Ruiz-Palomino et al., 2019). However, despite the apparent benefits servant leaders bring to firms in terms of innovation, servant leadership remains an under-researched area at firm level (Bavik, 2020; Eva et al., 2019), with few studies having been conducted on whether and how servant leadership fosters firm innovation (Bavik, 2020). One exception is Yoshida et al. (2014), who demonstrated this at team level, and Hernández-Perlines and Araya-Castillo (2020), Mallén-Broch et al. (2020), and Ruiz-Palomino et al. (2019), who showed a positive effect of CEO servant leadership on a firm’s innovative culture or capacity. Thus, although these previous findings are encouraging, the discussion remains open as to whether, how and when CEO servant leadership fosters firm innovation (Bavik, 2020).
Defined as “the process that involves the generation, adoption and implementation of new ideas or practices” (Wan et al., 2005: 261), firm innovation is an important part of the entrepreneurial orientation firms need to succeed (Palacios-Marques et al., 2017), which greatly depends on employees’ human capital and their active participation in the process (Chen & Huang, 2009). Hence, there is potential for CEOs who adopt servant leadership to emphasize certain practices or processes that foster voluntary participation in decision-making, without fear of erring and seeking to serve and meet society’s needs or interests, which should result in a type of internal functioning (i.e., “how things are done here”) that helps enhance innovation (Ruiz-Palomino et al., 2019). The theories of upper echelons (UET, Hambrick & Mason, 1984) and servant leadership (Greenleaf, 1977; Van Dierendonck, 2011) can help support this notion. Indeed, while upper echelons theory (UET) indicates that firm outcomes are reflections of the personal qualities of powerful actors within firms and suggests CEOs might affect the inner functioning of the firm (Nishii et al., 2007), servant leadership theory (SLT) posits that servant CEOs prioritize, over other things, value creation for society, as well as community building inside and outside the company and employee self-development (Van Dierendonck, 2011). Thus, there are sound arguments to believe that CEOs who adopt servant leadership approaches in their firms are likely to drive them towards higher levels of innovation performance. However, as Ruiz-Palomino et al. (2019, 2021) highlight, there is an imperious need to clarify how and when servant leadership may foster firm-level variables such as firm innovation.
A potential explanatory mechanism of this relationship could be knowledge absorptive capacity (KAC), i.e., the firm’s ability to acquire, assimilate, transform and exploit new knowledge to produce value-added changes in routines, systems and processes (Cohen & Levinthal, 1990; Zahra & George, 2002). This capability and internal functioning is linked to innovation (Xie et al., 2018), which may be fostered by the practice of servant leadership at the head of firms, given the strong emphasis this leadership style places on the need to create value for society, empower employees and support and listen attentively to all stakeholders’ needs, including those of employees. Furthermore, given that innovation emerges as a process of interaction between the relationships that occur inside and outside the firm (Shalley et al., 2009), firm KAC and innovation could also require processes of social interaction for their correct formation. Furthermore, drawing on Kerr and Jermier’s (1978) substitutes for leadership theory, inaccurate conclusions about the impact of servant leadership on firm innovation are possible if researchers fail to consider the contexts in which leadership behaviours occur. Thus, the extent to which social capital (internal, external) is present in firms may help strengthen the relationship between CEO servant leadership and firm innovation via KAC that we seek to explore in this study.
By surveying 176 CEOs of large and medium-sized hotels in Spain and using structural equation modelling analysis (Smart PLS 4, Ringle et al., 2022), we aim to determine (1) whether CEO servant leadership enhances firm innovation by fostering firm KAC, and (2) whether it is more likely to occur in firms with high levels of internal and external social capital, i.e., whether internal and external social capital reinforce the positive impact of CEO servant leadership on KAC and KAC on firm innovation, respectively. In doing so, this study adds two more outcomes (i.e., innovativeness, KAC) to the short list of firm-level outcomes positively impacted by servant leadership (Eva et al., 2019). It also aims to analyse whether firm-level mechanisms like KAC can help explain how CEO servant leadership triggers firm innovation, complementing previous studies that have revealed the positive effect of CEO servant leadership on a firm’s innovation culture or innovative capacity (Hernández-Perlines & Araya-Castillo, 2020; Mallén-Broch et al., 2020; Ruiz-Palomino et al., 2019), but have failed to identify mechanisms that explain this relationship (Hernández-Perlines & Araya-Castillo, 2020) or have limited it to practices that enhance employee well-being and potential (High Performance Human Resource Management practices, Ruiz-Palomino et al., 2019; Corporate Social Responsibility towards employees; Mallén-Broch et al., 2020). Finally, this study seeks to reveal the conditions (i.e., social capital) that make CEO servant leadership more effective in enhancing firm innovation. While previous studies have connected CEO servant leadership to innovation-related outcomes (innovativeness, Mallén-Broch et al., 2020; Ruiz-Palomino et al., 2019, innovation capacity, Hernández-Perlines & Araya-Castillo, 2020), none have addressed whether this relationship might be moderated by other factors. As a novelty, this study analyses whether internal social capital enhances the effect of CEO servant leadership on KAC, and the role of external social capital in leading firm KAC to drive firm innovation more strongly.
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The paper is organized as follows. After this introduction, we present the theoretical background and hypotheses, before describing the research methods in the next section. Subsequently, the results of the study are presented. Finally, the main conclusions are described, along with contributions, practical implications and avenues for future research.
Theoretical framework and hypotheses
From CEO servant leadership to firm outcomes: the upper echelons theory (UET) and servant leadership theory (SLT)
The UET (Hambrick & Mason, 1984; Hambrick, 2007) states that CEO characteristics are strongly linked to firm performance and strategic firm-level outcomes. This is because, according to UET, the personal characteristics of CEOs are critical in shaping the internal workings and functioning of the firm as well as the strategic decisions made at the upper echelons, which ultimately have effects on firm-level outcomes (Cortes & Herrmann, 2021; Kiss et al., 2022). In this regard, a servant leader, who has a conscious, genuine concern for helping and creating value for society (Meuser & Smallfield, 2023), may make decisions directed towards making the firm more innovative in order for society’s needs and expectations to be met (Ruiz-Palomino et al., 2023). More specifically, according to the servant leadership theory (Greenleaf, 1977; Van Dierendonck, 2011), the humility and active listening of servant leaders makes them highly likely to ask questions to create knowledge (Rai & Prakash, 2012), recognize the value of any feedback or opinion received, and actively seek feedback input and new ideas, giving them the attention and reflection they deserve (Liden et al., 2014). Thus, such leaders become oriented towards designing practices and policies focused on assimilating the new knowledge obtained and applying it to benefit the society (Kahn et al., 2020). Therefore, servant CEOs will likely emphasize the design and development of corporate practices enhancing the capability of the firm to absorb new knowledge, meaning the levels of corporate innovation of the firm are more likely to be increased. In short, UET (Hambrick & Mason, 1984), in conjunction with SLT (Greenleaf, 1977), apparently helps articulate the connection between CEO servant leadership and firm innovation, as described below.
CEO servant leadership and firm innovation
Firm innovation, the process by which new ideas and input are transformed into opportunities of practical utility to society (Wan et al., 2005), is complex, as it requires firms to provide the necessary resources and processes that enable an orientation towards supporting and generating new ideas, novelty and experimentation in manufacturing processes (Lumpking & Dess, 1996). Thus, drawing on UET, which suggests that firm strategy, structure and other outcomes may reflect the leadership qualities and behaviours of top leaders (Hambrick., 2007; Hambrick & Mason, 1984), the leadership style of CEOs is said to play a fundamental role in the process of innovation at firm level (Cortes & Herrmann, 2021). Through different mechanisms (i.e., behaviour, procedures, practices) and in accordance with UET, top leaders embed their beliefs, values and assumptions in the shared “thinking, behaviour, and feelings” of all organizational members (cf., Schein, 2010), which should play a significant role in greatly enhancing firm innovation.
Servant leadership might be such a leadership approach. From an SLT perspective (Greenleaf, 1977), we know these leaders put great emphasis in service to others, namely towards followers, firm and society (Van Dierendonck, 2011), such that servant leaders may provide employees with a global vision of the environment (Sendjaya et al., 2008) that enables them to work towards innovative ideas (Kahn et al., 2020). Furthermore, a servant leader actively seeks input from employees (Eva et al., 2019), providing opportunities for employees to present their new ideas, and giving them support and encouragement to implement them (Kahn et al., 2020). In fact, servant leaders commonly establish working practices within the organization designed to foster autonomy and participation (Ruiz-Palomino et al., 2019), shared decision-making (Eva et al., 2019) and empowerment (Newman et al., 2017), all of which are key elements to enhance the innovative possibilities in process, product and service (De Jong & Den Hartog, 2007). Indeed, from an SLT perspective, the servant leader enables employees to actively seek new ways of working and gives them the confidence to embark on innovative ideas without fear of their failing to develop them (Kahn et al., 2020). Additionally, these leaders tend to show a genuine interest in learning from others (Van Dierendonck, 2011), and so are able to step aside to facilitate the performance of followers, allowing for a climate that fosters experimentation and the flow of ideas (Van Dierendonck & Rook, 2010). In other words, because servant leaders do not consider it important to have power or status but use their power as a means to serve others (Ruiz-Palomino et al., 2019), servant CEOs may develop environments where innovative ideas can be engaged in without worries or concerns that may inhibit the innovation process (Liu et al., 2017).
To sum up, drawing on UET (Hambrick & Mason, 1984), the leadership qualities of CEOs are expected to shape the internal functioning and other outcomes of their organizations. Thus, if these qualities match those that characterize a servant leader (i.e., other-oriented, humility, active listener, empathetic), SLT (Greenleaf, 1977) predicts that all organizational members may experience (1) less anxiety about whether what they are doing in relation to proposing and implementing process improvements is right or wrong (Cable, 2018), (2) greater confidence that they can take risks and offer novel ideas for improving current processes and products or services (Yoshida et al., 2014), and (3) more intellectual encouragement and continuous support throughout the innovation process they are involved in (Kahn et al., 2020). Therefore, following UET (Hambrick & Mason, 1984) and SLT (Greenleaf, 1977), servant CEOs might enhance firm innovation, which, accordingly, leads us to propose the following hypothesis:
H1. CEO servant leadership has a positive effect on firm innovation.
The mediating role of knowledge absorptive capacity (KAC)
As part of our effort to understand the mechanisms that enable a CEO servant leader to generate higher levels of firm innovation, we are interested in the possible mediating role of KAC, which incorporates the concept of dynamic capabilities proposed by Teece et al. (1997). This is a key element for obtaining higher levels of firm innovation (Xie et al., 2018) and is defined as a set of organizational routines and processes through which firms acquire, assimilate, transform and exploit knowledge to produce dynamic organizational capability, as well as change, in an organization’s routines, systems, and processes (Cohen & Levinthal, 1990; Zahra & George, 2002). This concept is of interest here because it reflects the nature of the firm’s inner workings (Debrulle et al., 2014), which is likely shaped by CEOs who have servant qualities, and because of its clear connection to a firm’s innovation performance (Xie et al., 2018). Indeed, on the one hand, UET (Hambrick, 2007) clearly supports the servant qualities of CEOs of creating value for society, active listening to people’s interests, prioritizing of others’ development, and/or humility (Liden et al., 2014), translating these into greater capabilities of all organizational members to acquire new knowledge and facilitate its assimilation and transformation for the betterment of society. On the other hand, KAC, i.e., acquiring, digesting, and exploiting (internal, external) knowledge, is key for firms to identify market opportunities and realize innovation (Xie et al., 2018). Thus, KAC may mediate the relationship between CEO servant leadership and firm innovation, especially given that UET (Hambrick, 2007) suggests that the way for CEO characteristics, values, and behaviours to impact firm outcomes (e.g., innovation) is by previously shaping the internal workings or capabilities of the firm (Ruiz-Palomino et al., 2019). Thus, we propose the following hypothesis,
H2. Knowledge absorptive capacity mediates the relationship between CEO servant leadership and firm innovation.
Our prediction of KAC being a mediator in the servant leadership-firm innovation relationship fills a gap in the literature on how servant leadership might influence firm-level outcomes from a dynamic perspective (Eva et al., 2019). Bridging this gap involves two strands from which the expected positive firm-level relationships between CEO servant leadership and KAC and between KAC and firm innovation are implicitly derived, as argued and justified in detail below.
First, in forming KAC, CEOs’ or general managers’ perceptions of the challenges facing their organization and how knowledge formation can help in this regard are useful (Randall et al., 2011). In fact, for Uhl-Bien and Arena (2018), leaders must continually balance the need to produce today while scanning the environment to acquire and transform knowledge to anticipate tomorrow’s needs. As such, it is unsurprising that a leadership approach like servant leadership can help form KAC at firm level. Indeed, Ehrhart (2004) argues that servant leaders tend to apply broad knowledge in a way that balances day-to-day needs with projections for the future, and such orientation, as described above, is crucial for forming KAC in firms (cf., Randall et al., 2011). As leaders model this concern, in line with the premises of UET (Hambrick & Mason, 1984), it must be reflected across the firm through, for example, multiple practices and processes (Randall et al., 2011),. Indeed, the privileged position of CEOs allows them to nurture the strategies, policies, procedures and behaviours developed within the company, thereby affecting the possibility of the firm having higher or lower levels of KAC (Ali et al., 2017).
Reinforcing our arguments that CEO servant leadership should foster KAC, these leaders also encourage information sharing (Ruiz-Palomino et al., 2023), another crucial component of KAC (Tsai, 2001). Indeed, servant leaders seek to emphasize the importance of community (internal and external to the organization) (Ehrhart, 2004; Jiménez-Estévez et al., 2023), and their inclination towards personal development and empowerment of followers (Ruiz-Palomino et al., 2019) should therefore enable both individuals and teams to take timely action to acquire and transform information without being unduly restricted by bureaucratic controls designed to maintain the status quo. Importantly, the great focus on fostering information sharing and collaboration of these leaders, all of which are aspects considered crucial to KAC (Tsai, 2001), cannot be taken for granted; some firms strictly regulate the type of information that is passed down to lower-level staff and fail to share organizational charts with employees (Wells et al., 2022). Finally, other qualities of these leaders, such as their humility (the recognition that things can be done better), active listening, empowerment and concern for creating value to the society, should orient internal firm processes and behaviours towards identifying, assimilating and exploiting new knowledge (KAC) that creates value for society, which, according to Zou et al. (2018), should ultimately boost firm innovation.
In short, drawing on UET, the behaviour of all organizational members and all internal processes in the firm, will tend to reflect a CEO’s qualities (Hambrick, 2007). As such, CEOs that develop a leader’s “serve as leader” attitude will easily shape the firm’s internal working in a way that fosters learning and the creation of new knowledge (Rai & Prakash, 2012) and/or the search for, and exploitation of, new knowledge to create value for society (i.e., KAC). Thus,
H2a. CEO servant leadership is positively associated with knowledge absorptive capacity.
Support for our mediation hypothesis also requires a positive link between KAC and firm innovation. This is likely to occur because a firm committed to absorbing external knowledge has a greater capacity to detect opportunities that appear in the market and a better capacity to understand and anticipate the needs of the firm and its potential customers (Sancho-Zamora et al., 2022), which should enhance product, process, organizational and marketing innovations (Schmidt & Rammer, 2006). Indeed, KAC enables firms to acquire and use external and internal knowledge effectively, by adjusting the internal organization to changes in the environment (Daghfous, 2004), which should lead to KAC helping firms develop new product models with information or technology they capture from outside (Zahra & George, 2002). Therefore, KAC may affect the effectiveness of innovation activities (Chen & Huang, 2009) and, in turn, foster firm innovation, as indicated in previous research. For example, the study by Müller et al. (2021) on a sample of 221 German firms showed that firms that acquire, assimilate, transform and exploit external knowledge are better prepared to develop innovation strategies and implement new business models. In the same vein, the studies by Cohen and Levinthal (1990) and Daghfous (2004) underlined that a firm’s KAC is beneficial for organizational learning and R&D activities. Thus, when firms have a higher KAC, their innovation performance is likely to increase, as reported in previous research on high-tech firms (e.g., Xie et al., 2018), and industrial firms (e.g., Müller et al., 2021), as well as in multi-sector studies (e.g., Liao et al., 2007). In all, we expect to replicate the positive firm-level effect of KAC on innovation in the hospitality industry. Thus,
H2b. Knowledge absorptive capacity is positively associated with firm innovation.
The moderating role of social capital
Kerr and Jermier’s (1978) substitutes for leadership theory postulates that the impact of leadership behaviour on certain work outcomes may depend on a number of factors. Since both KAC and firm innovation require the interaction between the work context and the relationships the firm establishes inside and outside the firm (Soo et al., 2017), this theory may help explain the emergence of KAC and innovation in firms. Social capital, formed through the combination of three dimensions, namely, structural, relational and cognitive (Nahapiet & Ghoshal, 1998), which can be studied from an internal and external perspective to the firm (Leana & Pil, 2006), is often considered closely related to KAC (Rodrigo-Alarcón et al., 2018) and firm innovation (Xie et al., 2018). Thus, it might help explain the formation of these variables.
Indeed, from an internal perspective, social capital refers to an asset rooted in the social relationships (formal, informal) within a firm, facilitating the acquisition, exchange and transfer of resources (Pérez-Luño et al., 2011) such as information, trust and emotional support (Ruiz-Palomino et al., 2023), through which “employees [can better] find, use, and combine their skills, knowledge, and experience” (Linuesa-Langreo et al., 2018: 899). Similarly, from an external viewpoint, social capital refers to a set of external resources accessible to the firm, thanks to the inter-relationships of the firm with other agents (Nahapiet and Ghosal, 1998), which are likely to provide access to different experiences, valuable resources, and new knowledge, all making and incorporating organizational changes that favour new ideas, and, especially, their application (Martínez-Pérez et al., 2016). Hence, it is reasonable to think that internal and external social capital may reinforce the positive impact of CEO servant leadership on KAC and of KAC on firm innovation, as described in detail below.
The enhancement of the direct effect of CEO servant leadership on KAC
Although CEO servant leadership may explain the development of a firm’s KAC, the valuable organizational resources that can be provided through internal social capital (Leana & Pil, 2006) are also important for firms to develop KAC (Ortiz et al., 2021). Indeed, while servant CEOs’ emphasis on building a sense of community, as well as their interest in empowering organizational members, can foster KAC, internal social capital generates the structure for this to occur in a more consistent and agile way. For example, with increased internal social capital, workers will be connected, know each other and frequently share information (structural social capital), trust each other, identify with and feel an obligation to help each other (relational social capital), and have a common understanding of collective goals (cognitive social capital) (Linuesa-Langreo et al., 2018). As such, the sense of community will be more easily established and empowered employees in the organization will find it simpler to acquire, assimilate, transform and exploit external knowledge (KAC). Indeed, firms that develop higher levels of internal social capital increase the likelihood of organizational members generating and finding the knowledge and information required to solve problems (Leana & Pil, 2006), such as those related to adapting to the complex environment. This is because higher levels of social interaction, trust and shared understanding within the organization (i.e., internal social capital) promote the exchange of information and the establishment of shorter network paths between units and persons (Tsai & Ghosal, 1998). Therefore, internal social capital enables firms to build capabilities that allow them to acquire, assimilate, transform and exploit externally/internally acquired information (Hughes et al., 2014), such that internal social capital is likely to strengthen the positive impact of CEO servant leadership on KAC. Thus,
H3a. Internal social capital moderates the relationship between CEO servant leadership and KAC such that this relationship is stronger under high rather than low internal social capital.
The enhancement of the direct effect of KAC on firm innovation
As noted, KAC drives firms to develop higher innovation, which is manifested through their ability to acquire, assimilate, transform and effectively use knowledge, adjusting it appropriately to address changes in the environment in the form of new processes, products or services (Sancho-Zamora et al., 2022). However, even when a firm has this capability, innovation is so complex that it may require resources that the external social capital of the company can provide, such as distinctive abilities, specialized know-how, technological resources and even risk sharing (Albort-Morant et al., 2018). Indeed, the extensive literature shows that external social capital can affect a firm’s ability to actively exploit opportunities derived from the market, thus enabling them to carry out innovations (Leana & Pil, 2006). Firms with access to diverse and innovative social networks and, therefore, to the resources these networks provide, are in better conditions to develop multiple conceptualizations, experience new combinations and apply solutions from one domain to problems in another (Martínez-Pérez et al., 2016), leading to innovations in processes, products and services (Ahuja & Lampert, 2001). Given the above, and the fact that strong external social capital enables firms to achieve the actions needed for the objectives planned (Nahapiet & Ghosal, 1998), this set of resources should help lead a firm’s KAC to innovation performance. By allowing firms to obtain more possible solutions, and by facilitating the creation, diversification and reconfiguration of new ideas and perspectives (Reagans & Zuckerman, 2001), external social capital should make it easier for firms to better assimilate and transform knowledge into innovation (Kallio et al., 2010). Studies (Albort-Morant et al., 2018) have revealed the important role of the learning acquired through the firm’s frequent relationships with other agents in making KAC more positively impactful on their innovation performance. Therefore, considering this evidence, we believe external social capital is likely to be a resource capability that strengthens the positive impact of KAC on firm innovation. Thus,
H3b. External social capital moderates the relationship between KAC and firm innovation such that this relationship is stronger under high rather than low external social capital.
In short, the present study first hypothesizes that CEO servant leadership is positively related to firm innovation. Next, it predicts that CEO servant leadership positively impacts firm innovation (H1) and that KAC mediates this relationship (H2). Furthermore, this study predicts (1) a positive link between CEO servant leadership and KAC (H2a), which is enhanced by internal social capital (H3a); and (2) a positive link between KAC and firm innovation (H2b), strengthened by external social capital (H3b). Figure 1 shows the conceptual model tested in this study.
Fig. 1
Research model and hypotheses
Methodology
Sample and data collection
Our sampling drew on several databases (SABI, Camerdata, INE), such that large and medium-sized hotels with more than 30 employees in the Canary and Balearic Islands (Spain) were targeted (average number of employees = 101.07; SD = 57.83). After eliminating duplicate cases and entities no longer in business, 597 hotels remained. Complete information was, however, obtained for 176, which is our final sample size (response rate: 29.48%, sampling error: 6.2%, for a confidence level of 95%, p = q = 0.5). All the hotels were of a high category, i.e., three, four or five stars (31.8%, 48.9% and 19.3%, respectively) with 89 being family businesses and 87 being non-family ones.
Because the scales to assess the targeted constructs were originally in English, back-translation (Brislin, 1986) was used to translate them to Spanish. The initial translations were pilot-tested using seven CEOs of Spain-based hotels and ten team supervisors. Follow-up interviews were used as a further check. The final questionnaires (one for the CEO, another for other managers, specifically, team supervisors) was reviewed by five scholars with expertise in the field of hospitality using the Delphi method, which resulted in questionnaires that included the most possible clear, valid and understandable items possible.
The process followed for data collection required receiving the consent of the hotel CEOs, whom we interviewed to obtain information on the different teams in the hotel. Subsequently, questionnaires were distributed to the supervisors of all the hotel teams (e.g., kitchen, room service, front desk, restaurant), to obtain information on the degree of servant leadership practised by the CEO. Questionnaires were also distributed to the CEOs to obtain information on the other study variables, namely, the company’s internal and external social capital, KAC and innovation. Finally, once the fieldwork was completed, usable data were obtained from 176 CEOs and 393 team supervisors (input was obtained from at least two team supervisors, and the mean team supervisor evaluations per hotel was 2.23). Supervisor evaluations were averaged and aggregated to form a single evaluation of CEO servant leadership for each hotel (n = 176 hotels), once all the established criteria had been met to ensure proper data aggregation (Bliese, 2000; James et al., 1984). In our case, the rwg index (James et al., 1984), which measures the level of equality of response among supervisors, was above 0.70 (rwg = 0.75), and the intra-class correlation indices -ICC(1), ICC(2)- were above 0.5 (ICC(1) = 0.57, ICC(2) = 0.78), and so there was a strong intragroup agreement and a high level of reliability of the data. Additionally, the analysis of variance indicated significant across-firm differences in the average level of servant leadership among CEOs (F = 8.63, p < 0.01), which confirmed that these responses could be aggregated.
Because the research design was cross-sectional and involved self-report measures, common method variance (CMV) and social desirability bias were potential concerns, such that several recommended procedural remedies were used (cf., Podsakoff et al., 2003, 2012). For example, the cover letter prepared to survey our respondents emphasized there were no right or wrong answers and guaranteed total anonymity, the latter being clear to respondents as at no point were they required to reveal their names, job positions, or employers. In addition, we ensured a psychological separation between predictors and outcome variables to make them seem unrelated, meaning we also included distracter items, and used simple, specific, and concise measures as a consequence of the pilot test implemented. Additionally, we selected the most appropriate respondents for the constructs; CEOs assessed the items referring to the firm-level variables (Internal Social Capital, External Social Capital, KAC, firm innovation) and team supervisors rated the level of servant leadership of their CEOs. Finally, findings using the marker test (e.g., Khosravi et al., 2020) showed our efforts to reduce method variance when designing the questionnaire and the data collection process were successful. Specifically, a marker item (i.e., level of the respondent’s familiarity with a particular film) was unrelated to any of our targeted constructs. The mean correlation of the marker item with each of the study variables was 0.03, below the 0.05 threshold (Rönkkö & Ylitalo, 2011). Moreover, there were no significant changes in parameter estimates in a model in which the marker was free to relate to the study variables, confirming that CMV was unlikely to be a serious concern in our data and findings.
Finally, regarding the sociodemographic profile of respondents (Table 1), most CEOs and supervisors had been with the hotel for more than 5 years and, whereas most supervisors were relatively young (66.4% below 45), hotel CEOs were aged between 36 and 55 years old (72.73%). As for gender, CEOs were mostly male (55.68%), whereas there was gender parity among team supervisors (50.64% male, 49.36% female). Finally, as Table 1 shows, more than 90% of CEOs and supervisors had a permanent employment contract (95% in the case of CEOs) and a level of higher education equal or comparable to that of a university student, although the education level was lower among supervisors (85.22% among CEOs, 55.22% among supervisors).
Table 1
Socio-demographic characteristics of respondents
Variables | Hotel CEO | Team supervisors | ||
|---|---|---|---|---|
Frequency | % of total | Frequency | % of total | |
Age | ||||
< 20 years old | 0 | 0 | 16 | 4.07 |
20–25 years old | 9 | 5.11 | 75 | 19.08 |
26–35 years old | 23 | 13.07 | 78 | 19.84 |
36–45 years old | 79 | 44.89 | 92 | 23.41 |
46–55 years old | 49 | 27.84 | 83 | 21.12 |
> 55 years old | 16 | 9.09 | 49 | 12.48 |
Gender | ||||
Male | 98 | 55.68 | 199 | 50.64 |
Female | 78 | 44.32 | 194 | 49.36 |
Type of contract | ||||
Temporary | 9 | 5.11 | 36 | 9.16 |
Permanent | 167 | 94.89 | 357 | 90.84 |
Educational level | ||||
Primary studies | 2 | 1.14 | 32 | 8.14 |
Secondary studies | 17 | 9.66 | 67 | 17.05 |
Intermediate vocational training | 7 | 3.98 | 77 | 19.59 |
Higher vocational training | 28 | 15.91 | 122 | 31.04 |
Undergraduate degree | 87 | 49.43 | 78 | 19.85 |
Master’s degree | 35 | 19.88 | 17 | 4.33 |
Length of service in the organization | ||||
1–5 years | 14 | 7.95 | 56 | 14.25 |
6–10 years | 45 | 25.57 | 99 | 25.19 |
11–15 years | 52 | 29.54 | 107 | 27.23 |
16–20 years | 27 | 15.34 | 87 | 22.14 |
> 20 years | 38 | 21.60 | 44 | 11.19 |
N = 176 | N = 393 | |||
Measures
Mode A composites (linear combinations of reflective indicators; see Appendix) were used for all the study variables (Hair et al., 2022). Furthermore, in responding to the questionnaire, a seven-point Likert response format was selected but with different semantic endpoints depending on the scale in question (1 = strongly disagree; 7 = strongly agree; 1 = none, 7 = many).
CEO servant leadership
Team supervisors at each hotel rated the extent to which they agreed (1 = strongly disagree, 7 = strongly disagree) on whether their CEO had a servant leadership approach, using Ehrhart’s (2004) 14-item scale. A firm-level measure was subsequently created by averaging the ratings as previously described.
External social capital
Hotel CEOs used the 9-item scale designed by Martínez-Cañas et al. (2012) to assess the extent of agreement (1 = strongly disagree; 7 = strongly agree) on whether their firms had structural, relational and cognitive external social capital. Subsequently, all these three social capital dimensions were combined to form a Mode A second-order construct.
Internal social capital
The reliable scale proposed by Pastoriza and Ariño (2013) was used to assess the extent to which internal social capital was present in the hotel firm. Thus, hotel CEOs were required to assess their level of agreement (1 = strongly disagree; 7 = strongly agree) on whether the structural, relational, and cognitive dimensions of internal social capital were present in their hotels. As in the previous case, these three dimensions were subsequently combined to form a Mode A second-order construct.
Knowledge absorptive capacity (KAC)
Hotel CEOs responded to the 14-item scale proposed by Flatten et al. (2011), through which each of the key dimensions of this variable, namely, knowledge acquisition (i.e., use of external resources to obtain information, 3 items), assimilation (i.e., internal communication structure, 4 items), transformation (i.e., knowledge processing, 4 items) and exploitation (i.e., commercial exploitation of new knowledge, 3 items), could be captured. Hotel CEOs were asked to assess the extent to which they agreed (1 = strongly disagree; 7 = strongly agree) with each of the items used to capture each of these dimensions, with these dimensions being subsequently combined to form a Mode A second-order construct.
Firm innovation
To measure innovation, we used 14 items adapted from Doloreux and Shearmur (2010), through which hotel CEOs evaluated the number of innovations developed by their firm over the last 5 years, on a 7-item Likert scale (1 = none, 7 = many). The first seven items measured radical innovation (completely new improvements) and the last seven assessed incremental innovation (significant incremental improvements), all of which were combined to produce, as in the previous cases, a reflective Mode A second-order construct.
Control variables
In our initial analysis, firm size (number of employees), firm age (number of years in the industry), hotel category (three, four, or five stars), and family/non-family businesses were controlled for. Our final analysis is reported without these controls, as their inclusion had no impact on our findings (see Bernerth & Aguinis, 2016).
The items of the scales are included in the Appendix. There are no missing values in our database, and we analysed the normal distribution by using absolute values of skewness and kurtosis. Following Kline’s (2011) criteria for normality, all items had adequate values (skewness < 3; kurtosis < 8), indicating there was no evidence of non-normality (see Appendix).
Data analysis
To test our hypotheses, structural equation modelling (SEM) based on partial least squares (PLS) and Smart PLS 4.0 (Ringle et al., 2022) was used. PLS-SEM is a robust statistical technique that allows for mediation and moderation (Hair et al., 2022). A power analysis conducted using G*Power 3 (Faul et al., 2007) for the regression with the greatest number of independent variables in our model (i.e., 4 in the relationships between the four distinct dimensions of KAC and the firm innovation variable in a model without second-order factors) yielded a power ranging from 97.4 to 99.99%. Thus, our sample was sufficient to test the proposed relationships and detect medium effect sizes (Cohen, 1988) without committing Type II errors (Cohen, 1988). Finally, our PLS analysis used 10,000 subsamples to generate standard errors and bootstrap t-statistics with n – 1 degrees of freedom to evaluate the statistical significance of the path coefficients (cf., Hair et al., 2022).
Results
Measurement model evaluation
Item reliability was satisfactory as the values were generally above the recommended 0.707 threshold (Hair et al., 2022, Table 2). The composite reliability indices and Cronbach alphas also exceeded the 0.70 cut-off (Hair et al., 2022, Table 2), revealing the good internal consistency of all the study variables. Convergent validity was also supported since the average variance extracted (AVE) for the constructs was above 0.5, as recommended (Hair et al., 2022, Table 2). Finally, discriminant validity was supported, as the AVE exceeded the square correlations between the composites in all cases (Hair et al., 2022, see Table 3). Moreover, the HTMT indices were significantly below 0.85, as recommended (Hair et al., 2022, see Table 3).
Table 2
Item loadings and weights, construct reliability and convergent validity
Construct | Item/First order construct | Loading | Construct reliability | AVE | ||
|---|---|---|---|---|---|---|
Cronbach’s Alpha | Dillon-Goldstein (ρc) | Dijkstra-Henseler (ρA) | ||||
CEO Servant leadership (SL) | .97 | .98 | .97 | .78 | ||
SL1 | .90 | |||||
SL2 | .90 | |||||
SL3 | .83 | |||||
SL4 | .91 | |||||
SL5 | .87 | |||||
SL6 | .91 | |||||
SL7 | .89 | |||||
SL8 | .88 | |||||
SL9 | .89 | |||||
SL10 | .83 | |||||
SL11 | .90 | |||||
SL12 | .92 | |||||
SL13 | .83 | |||||
SL14 | .84 | |||||
External Social Capital (ESC) | .93 | .94 | .93 | .63 | ||
Structural ESC | .79 | |||||
ESC1 | .79 | |||||
ESC2 | .83 | |||||
ESC3 | .82 | |||||
Relational ESC | .78 | |||||
ESC4 | .71 | |||||
ESC5 | .83 | |||||
ESC6 | .82 | |||||
Cognitive ESC | .80 | |||||
ESC7 | .87 | |||||
ESC8 | .78 | |||||
ESC9 | .72 | |||||
Internal Social Capital (ISC) | .95 | .96 | .95 | .57 | ||
Structural ISC | .77 | |||||
ISC1 | .79 | |||||
ISC2 | .72 | |||||
ISC3 | .72 | |||||
ISC4 | .70 | |||||
Relational ISC | .79 | |||||
ISC5 | .70 | |||||
ISC6 | .76 | |||||
ISC7 | .75 | |||||
ISC8 | .77 | |||||
ISC9 | .78 | |||||
ISC10 | .72 | |||||
Cognitive ISC | .81 | |||||
ISC11 | .79 | |||||
ISC12 | .82 | |||||
ISC13 | .73 | |||||
ISC14 | .84 | |||||
ISC15 | .77 | |||||
ISC16 | .73 | |||||
Firm Innovation (FI) | .96 | .96 | .96 | 0.64 | ||
Radical Innovation | .78 | |||||
FI1 | .77 | |||||
FI2 | .76 | |||||
FI3 | .81 | |||||
FI4 | .81 | |||||
FI5 | .84 | |||||
FI6 | .79 | |||||
FI7 | .75 | |||||
Incremental Innovation | .80 | |||||
FI8 | .84 | |||||
FI9 | .85 | |||||
FI10 | .84 | |||||
FI11 | .77 | |||||
FI12 | .80 | |||||
FI13 | .79 | |||||
FI14 | .72 | |||||
Knowledge absorptive capacity (KAC) | .94 | .95 | .94 | .57 | ||
KAC1 | .71 | |||||
KAC2 | .79 | |||||
KAC3 | .72 | |||||
KAC4 | .73 | |||||
KAC5 | .80 | |||||
KAC6 | .77 | |||||
KAC7 | .71 | |||||
KAC8 | .82 | |||||
KAC9 | .78 | |||||
KAC10 | .79 | |||||
KAC11 | .78 | |||||
KAC12 | .80 | |||||
KAC13 | .75 | |||||
KAC14 | .72 | |||||
Table 3
Descriptive statistics, correlation matrix and discriminant validity
Constructs | Mean | SD | 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|---|---|---|
1. CEO servant leadership | 4.91 | 1.09 | 0.88 | 0.35 [0.22,0.46] | 0.33 [0.19,0.44] | 0.35 [0.23,0.46] | 0.27 [0.14,0.41] |
2. External SC | 5.10 | 0.88 | 0.34** | 0.79 | 0.56 [0.42,0.68] | 0.76 [0.68,0.84] | 0.51 [0.39,0.63] |
3. Internal SC | 5.38 | 0.82 | 0.32** | 0.53** | 0.75 | 0.74 [0.65,0.82] | 0.38 [0.22,0.52] |
4. KAC | 5.05 | 0.98 | 0.27** | 0.53** | 0.55** | 0.75 | 0.58 [0.46,0.70] |
5. Firm Innovation | 4.89 | 1.01 | 0.61** | 0.45** | 0.42** | 0.47** | 0.80 |
Structural model evaluation for the overall sample
H1 was supported since, in an unmediated model, CEO servant leadership, as judged by the team supervisors of the hotel (the aggregated scores were used), was positively associated with firm innovation (β = 0.278, p < 0.01, see Fig. 2a). CEO servant leadership was also positively related to KAC (β = 0.296, p < 0.01, H2a; Fig. 2b). As anticipated, KAC was also positively linked to firm innovation (β = 0.356, p < 0.001, H2b; Fig. 2b). Finally, the mediation effect of KAC on the positive link between CEO servant leadership and firm innovation was significant (indirect effect = 0.105 p < 0.05; see Fig. 2b), thus supporting H2. Although the size of both individual betas was substantial, the mediation linked to KAC was significantly larger (f2 = 0.524; Table 4), which, combined with the null effect of CEO servant leadership on firm innovation when KAC is included in the equation, leads to the conclusion that the relationship is fully mediated by KAC.
Fig. 2
Hypothesis testing
Table 4
Mediation effect size of absorptive capacity
Indirect effect of CEO servant leadership on Firm Innovation | Variance explained | Size of the Multigroup effect | ||
|---|---|---|---|---|
R2 included | R2 excluded | Δ variance explained | (f2) | |
CEO Servant leadership → Knowledge Absorptive Capacity → Firm Innovation | 0.456 | 0.171 | 0.285 | 0.524 (large effect) |
f2 = (R2 included – R2 excluded) / (1 – R2 included); effect sizes of f2 ≥ 0.02, ≥ 0.15, and ≥ 0.35 are small, medium, and large, respectively (Cohen, 1988) | ||||
The findings also provided support for H3a, that is, the enhancing role of internal social capital in the relationship between CEO servant leadership and KAC. The results revealed that, after mean-centring the independent variable and the moderator (Aiken et al., 1991), the resulting interaction term was positive and significant (β = 0.126, p < 0.05; Fig. 2b). The graph resulting from plotting high versus low internal social capital regression lines (Aiken et al., 1991) confirmed this question, as it shows the positive impact of KAC was stronger in high (the slope is more pronounced) than in low internal social capital conditions (Fig. 3). Thus, H3a can be confirmed.
Fig. 3
Interactive effect of CEO servant leadership and internal social capital on knowledge absorptive capacity
We proceeded similarly in the analysis of H3b. First, as predicted, the relationship between KAC and firm innovation was strengthened by the existence of external social capital (β = 0.167, p < 0.05; Fig. 2b). Second, when we plotted high versus low external social capital regression lines, the positive relationship between KAC and firm innovation was stronger (the slope is more pronounced, Fig. 4) when firm external social capital was high rather than low, in support of H3b.
Fig. 4
Interactive effect of knowledge absorptive capacity (KAC) and external social capital on firm innovation
Thus, all the relationships hypothesized in our research model could be accepted. Furthermore, our hypothesized research model substantially increased the R2 explained of firm innovation, which was approximately 0.46, considerably higher than the minimum 0.10 threshold (Falk & Miller, 1992) and indicative of a moderate size (very close to R2 = 0.50), according to Hair et al.’s (2022) criteria.
Discussion and conclusions
General discussion
Echoing Peter Drucker’s (1985) words on the importance of firms being entrepreneurial and, therefore, innovative in order to avoid decline, as well as recent findings revealing the role of CEO leadership in driving firm innovativeness (Kiss et al., 2022), this study analysed whether, how and when servant CEOs foster firm innovation. In addressing this question, we provided evidence that a servant emphasis in leading firms is critical in fostering firm innovation, with this being made possible by improving the level of a firm’s ability to recognize the value of new information, as well as to acquire, assimilate and apply it for business purposes (KAC). More importantly, we found that, for this process of increasing KAC through the practice of servant leadership at the top to make the firm innovative, it is indeed important that firms also already have internal and external social capital in place. In light of these findings, the study provides important contributions and implications, which are described below.
Theoretical contributions
Theoretical and empirical studies in the servant leadership literature have shown that this style has positive effects at both employee (e.g., affective well-being, Ruiz-Palomino et al., 2022; personal growth satisfaction, Jiménez-Estévez et al., 2023; empathy, Elche et al., 2020) and team level (team performance, Ruiz-Palomino et al., 2023; service climate, Elche et al., 2020). It is still, however, an under-researched area at firm level (Bavik, 2020; Eva et al., 2019). Many previous studies have evaluated the potential strong role of servant leadership at the managerial level in fostering creative thinking in firms (Ruiz-Palomino & Zoghbi-Manrique-de-Lara, 2020), but few have addressed whether and how the servant leadership of CEOs can foster employee creativity or its application in processes, products or services (firm innovation). Exceptions are the works of Hernández-Perlines and Araya-Castillo (2020), Mallén Broch et al. (2020), and Ruiz-Palomino et al. (2019), although these only demonstrated this effect on a firm’s innovativeness or capacity to innovate, which differs from innovation in that the former describe the orientation and capability of the firm rather than its actual innovative performance. Therefore, by demonstrating that CEO servant leadership enhances firm innovation, we enrich the limited research on servant leadership at firm level (Eva et al., 2019) and advance on previous findings, suggesting that the previously reported potential positive influence of CEO servant leadership on the firm’s overall performance (Huang et al., 2016) and strategic service differentiation (Ruiz-Palomino et al., 2021) may be due to the greater innovation achieved.
Another important contribution to the literature is the confirmation that the positive effects of CEO servant leadership on firm-level outcomes arise from other organizational processes or capabilities (KAC) that are initiated as a consequence, or as a reflection, of the practice of servant leadership at the head of the firm. This is in line with the premises of UET (Hambrick & Mason, 1984) and other theoretical underpinnings (Ruiz-Palomino et al., 2019, 2021). Despite the previous literature having also suggested that KAC is a potential mediator between the leadership practised by top managers and firm innovation (e.g., ambidextrous leadership, Rezaei-Zadeh et al., 2022), our study broadens the list of potential leadership styles associated with KAC. Furthermore, our finding that KAC, which requires information scanning and collective learning to emerge (Rezaei-Zadeh et al., 2022), acts as a full mediator in the relationship studied is consistent with SLT (Greenleaf, 1977), in that it states such leaders are concerned with creating value for society or building a sense of community (Eva et al., 2019). These aspects are related to scanning the firm’s and society’s challenges and fostering collective learning, respectively.
Last but not least, our finding that internal social capital strengthens the positive relationship between CEO servant leadership and KAC is consistent with Kerr and Jermier’s (1978) view that the effect of leadership approaches may be contingent on (reinforced by) other variables. Furthermore, these findings are especially relevant to the existing literature as they reveal that internal social capital is not only an outcome of practicing servant leadership (Linuesa-Langreo et al., 2018; Ruiz-Palomino et al., 2023) or an antecedent of firm KAC (Ortiz et al., 2021), but may also help bolster the positive impact of servant leadership on other valuable aspects. In our case, we demonstrated that when CEO servant leadership (i.e., serving others, support provider, empathetic, interest in community building and empowering employees; Bavik, 2020) is combined with access to a set of resources derived from the interrelationships internally produced in the firm, the capacity of the firm to acquire, assimilate, transform and exploit new knowledge gained from external sources (i.e., KAC) is greater. Thus, our findings advance the literature by adding another moderator to those already reported (e.g., culture where power distance is low; Flatten et al., 2015) in this relationship. Finally, our finding that external social capital has a strengthening role in driving KAC to have a stronger positive impact on firm innovation also aligns well with the notion that KAC allows for greater innovations to be generated when undertaken in collaboration with other external actors who provide valuable information and resources (Rodrigo-Alarcón et al., 2018). Furthermore, our finding goes beyond the existing literature, which has failed to identify this moderating role (Ul zia et al., 2023) or has found it only for the cognitive dimension of external social capital (García-Villaverde et al., 2018).
Practical implications
Our findings suggest important practical implications. First, in nurturing firm innovation, a CEO’s leadership is key. Specifically, CEOs should do their best to display features of servant leadership, such as servanthood, trust-building and community focus, as well as empowerment and others-supportive orientation (Bavik, 2020), as these characteristics may be positive in fostering capabilities such as KAC (cf., Khoja & Maranville, 2010) and, in turn, in developing innovative ways to do things and/or new products and ways of providing unique services to internal and external customers. As such, CEOs should enrol in training programs to improve their servant leadership skills. Additionally, policymakers should strive to raise awareness among CEOs (e.g., with communication campaigns) of the importance of receiving training in servant leadership skills and help them (e.g., with subsidies) enrol in such training programs.
In addition, our findings suggest that CEOs should pay special attention to building KAC if both incremental and radical innovation in process, product and services are an aim. For example, having a servant leader at the head of the firm should be sufficient to promote a community climate in which two aspects critical to fostering KAC, namely, cooperation and open communication (Khoja & Maranville, 2010), can be enhanced (cf., Bavik, 2020). However, CEOs should know that these two aspects, and therefore KAC, can also be built if periodical discussion meetings (both face-to-face and virtual) in which goals, achievements and initiatives can be shared across all departments and units, are implemented and strongly encouraged in the firm.
Lastly, our findings also suggest that CEOs should foster social relationships both inside and outside the firm, to activate KAC and increase the possibilities of the firm innovating in process, product and/or service, respectively. In this sense, CEOs who are servant or CEOs concerned and committed to training themselves in servant leadership skills have an advantage, as their focus on creating a sense of community in their immediate environment (Jiménez-Estevez et al., 2023) or their interest in attentively listening to others’ needs, including those of stakeholders (Bavik, 2020; Elche et al., 2020), should help their firms enhance both types of social capital.
Limitations and further research directions
Like any research, our study is not without limitations that suggest future research lines. For example, our study was carried out in a single cultural context, namely, Spain, in which power distance is relatively high and therefore, authoritative leadership is more acceptable (Hofstede Center, 1967–2010). This is important, as most research on servant leadership has been conducted in the US, where the low power distance of this society could be seen as a particularly favourable context for servant leadership (Eva et al., 2019). In any event, future studies could advance the generalizability of our findings by proposing similar or related research in other sectors and cultural contexts. Finally, while the approach of KAC as a mediator and social capital (both internal and external) as a moderating mechanism, has allowed us to advance in understanding the relationship between CEO servant leadership and firm innovation, the study of other mediators (e.g., supportive climate for innovation, Ruiz-Palomino et al., 2019) and moderators (e.g., knowledge generation processes, Martínez-Cañas et al., 2012) could help us better understand how CEO servant leadership combines to enhance firm innovation. Furthermore, we analysed the moderating role of internal social capital here, but Table 3 reflects a positive correlation between CEO servant leadership and both types of social capital. Moreover, previous research reveals that servant leadership is a potential source of internal social capital (Linuesa-Langreo et al., 2018; Ruiz-Palomino et al., 2023) and suggests that servant leaders’ strong orientation towards building community could favour the development of strong interrelationships with other agents, both internal and external (cf., Bavik, 2020; Ruiz-Palomino et al., 2022; Zoghbi-Manrique-de-Lara & Ruiz-Palomino, 2019). Future research might conduct longitudinal studies to confirm whether CEO servant leadership is a potential source of both internal and external social capital, thus helping make our model watertight and illustrative of the important role of practicing servant leadership at the head of the firm to achieve firm innovation.
Conclusions
The main aim of this research was to explain the mechanisms and contingencies of the relationship between CEO servant leadership and firm innovation. Our analysis revealed a group of findings that lead to three main conclusions. First, the level of servant leadership displayed by hotel CEOs positively influences firm innovation. Second, this link is fully mediated by firm KAC, indicating that servant leadership at the strategic apex of the company is critical to enhance the recognition of the value of new information, as well as assimilate and apply it for new products, processes or services to be developed. Finally, contingent effects are found, such that the positive relationships observed between CEO servant leadership and KAC, and between KAC and firm innovation, are enhanced when the firm possesses strong social capital (internal and external). Specifically, the firm’s internal social capital strengthens the relationship between CEO servant leadership and KAC, while its external social capital serves to strengthen the link between KAC and firm innovation, all of which makes it necessary that, in addition to practicing servant leadership, CEOs strive to develop strong internal and external social capital if they are to pioneer the development of new processes, products or services in the market.
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