Elsevier

The Leadership Quarterly

Volume 14, Issues 4–5, August–October 2003, Pages 525-544
The Leadership Quarterly

The role of transformational leadership in enhancing organizational innovation: Hypotheses and some preliminary findings

https://doi.org/10.1016/S1048-9843(03)00050-XGet rights and content

Abstract

A wide range of factors has been found to affect organizational innovation. Of these, top managers' leadership style has been identified as being one of the most, if not the most, important. Yet, few studies have empirically examined the link between this factor and innovation at the organizational level. This study builds on the extant literature to propose four hypotheses about how top managers' leadership styles directly and indirectly (via empowerment and organizational climate) affect their companies' innovation. A multisource approach is used to collect survey data from 32 Taiwanese companies in the electronics/telecommunications industry. The findings support a direct and positive link between a style of leadership that has been labeled as “transformational” and organizational innovation. They also indicate that transformational leadership has significant and positive relations with both empowerment and an innovation-supporting organizational climate. The former is found to have a significant but negative relation with organizational innovation, while the latter has a significant and positive relationship. The implications of the findings and possible directions for future research are discussed.

Introduction

In today's globalized economic environment, customers' vastly increased access to information and suppliers has empowered them to demand ever-increasingly arrays of product features, higher quality, better service, and favorable price/cost ratios Brett & Okumura, 1998, Yukl, 2001. These realities of the marketplace have put tremendous pressures on companies to increase their efficiency and effectiveness and, even more fundamentally, the creativity that they bring to product/process improvements and development Andriopoulos & Lowe, 2000, Cummings & Oldham, 1997, Tierney et al., 1999. This development also has motivated efforts by practitioners and scholars to identify factors that can stimulate creative behaviors in groups and organizations. For example, Amabile (1998) has identified three factors as being important: individuals' intellectual capacity (creative thinking skills), expertise based on past experience, and a creativity-conducive work environment. Oldham and Cummings (1996) also have identified creativity-relevant personal attributes as well as characteristics of the organizational context like job complexity, supportive supervision, and controlling supervision.

Among the factors that influence employees' creative behaviors and performance, leadership has been identified by many researchers as being one of the most, if not the most, important Amabile, 1998, Jung, 2001, Mumford & Gustafson, 1988. These scholars suggest that leaders can affect followers' creativity in both direct and indirect ways. An example of a direct effect is leaders catering to followers' intrinsic motivation and higher level needs, which are known to be important sources of creativity (Tierney et al., 1999). Indirectly, leaders can support creativity by establishing a work environment that encourages employees to try out different approaches without worrying about being punished just because outcomes are negative (Amabile, Conti, Coon, Lazenby, & Herron, 1996).

While extant research has contributed useful insights into the determinants of employee creative behaviors and performance, its ability to guide practice is limited by the predominance of studies with a focus on the individual employee level. Although understanding individual employees' creativity and creative work processes is worthwhile, a more important concern for organizations is how to mobilize creativity among employees for the development and production of novel, socially valued products and/or services (Mumford & Gustafson, 1988). Unless the creative behaviors of individual employees can be coordinated and their creative outputs and ideas are harnessed to yield such organizational-level outcomes, the company still would be left without effective responses to the challenges of a competitive marketplace. As for the role of leadership, empirical studies also have tended to examine its effects at the individual level rather than that of the organization. A further limitation on the generalizability and external validity of extant findings is the predominant use of experimental settings and/or subjective measures of creativity (e.g., subjective supervisor ratings).

In view of the current state of the literature, this study explores how leadership affects creativity at the level of the organization. The type of leadership considered in this study is a set of behaviors that has come to be labeled “transformational leadership.” Transformational leadership emphasizes longer-term and vision-based motivational processes (Bass & Avolio, 1997) and has been the subject of extensive research in the past decade. Yet, despite the potential for a transformational leader to positively impact organizational creativity, little empirical research has investigated the existence and nature of this link (Mumford, Scott, Gaddis, & Strange, 2002). Because leaders define the context in which their followers interact and work toward a common goal, we believe that previous findings of a positive link between transformational leadership and individual creativity can be extrapolated to an organizational level. Ultimately, this is an empirical question, and we provide some preliminary findings bearing on the efficacy of our expectation.

The remainder of this article is organized as follows. The next section provides an overview of the relevant literature as the basis for specifying four hypotheses. Then, the method is discussed followed by presentation of the findings. The final section provides a summary and discusses implications for future research.

Section snippets

The role of leadership in creativity and organizational innovation

Research on the determinants of creativity has identified a wide set of factors. These range from ones at the level of the individual, such as personality, technical knowledge, expertise, motives, and the supervisor's feedback style, to ones at the group level, such as task structure, communication types, and task autonomy, to organizational level factors, such as strategy, organizational structure, culture and climate, and available resources. Damanpour (1991) and Mumford et al. (2002) provide

Sample and procedures

Thirty-two Taiwanese companies participated in the present study. To eliminate common response biases, three senior managers were randomly chosen from each company to complete different survey instruments (A, B, and C). The manager who completed Survey A had to be one who regularly interacted with the CEO/President of the firm. The questions in the survey measured his/her CEO's (President's) transformational leadership behaviors. A second manager was given Survey B, which measured empowerment

Measurement component

We first ran a preliminary PLS analysis with all of the survey items to test the scales' psychometric properties. Three criteria were used to determine whether any item indicator should be retained. First, the factor loadings of indicators associated with each construct had to be 0.60 or above to ensure adequate reliability (Bagozzi & Youjae, 1988). Second, the composite scale reliability for each construct (an internal consistency estimate similar to α) had to exceed the recommended cutoff of

Discussion and conclusions

Prior research has suggested that top managers' leadership styles can significantly impact an organization's creativity and innovative ability. A major avenue whereby this positive impact arises is held to be the establishment of an organizational climate that empowers employees and provides support for innovation. We have integrated extant discussions of leadership to propose four sets of hypotheses about how transformation leadership shown by top executives directly and indirectly affects

Uncited reference

Osborn et al., 2002

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