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Article Excerpt
Research has called for organizations to be more flexible, adaptive, entrepreneurial, and innovative in meeting the changing demands of today's environment. Appropriate leadership to effect such change is required; however, there has been little empirical analysis of the theoretical relationships among the key components that make up such change strategy, including transformational leadership, organizational culture, and organizational innovation. This study examines these linkages in terms of their relationships with climate for organizational innovation in Australian private sector organizations. Structural equation modeling based on responses to a survey of 1,158 managers explores the relationship between transformational leadership and climate for organizational innovation and the extent to which a competitive, performance-oriented organizational culture mediates this relationship. Strategies for building innovative organizations are discussed.
Keywords: transformational leadership; organizational culture; innovation
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Leadership and organizational culture are widely believed to be linked in the process of change (Afsaneh, 1993; Kotter, 1998; Schein, 1984). As Kotter (1998) stated, "Only through leadership can one truly develop and nurture culture that is adaptive to change" (p. 166). Ostroff, Kinicki, and Tamkins (2003) identified leadership as an emergent process that acts on both organizational climate and culture. Similarly, Denison (1990) claimed that management behaviors reinforce principles of the culture. Organizational culture has been conceptualized as a mediator of the relationship between transformational leadership and organizational innovation (Amabile, Conti, Coon, Lazenby, & Herron, 1996; Deshpande, Farley, & Webster, 1993; Jassawalla & Sashittal, 2002; Prather & Turrell, 2002) and performance (Ogbonna & Harris, 2000; Xenikou & Simosi, 2006). Nonetheless, although empirical research supports the proposition that transformational leadership and organizational innovation are related (Waldman & Bass, 1991), the inclusion of organizational culture as an intervening variable has yet to be examined comprehensively. And although Ogbonna and Harris (2000, p. 780) found a link between participative leadership and innovative culture as a predictor of organizational performance, this leadership approach was not fully sympathetic with existing models of transformational leadership. Accordingly, this study examines these theoretical linkages in terms of their relationships with climate for organizational innovation in a large sample of managers in private sector organizations in Australia.
Organizational Innovation
Research has called for organizations to be more flexible, adaptive, entrepreneurial, and innovative to effectively meet the changing demands of today's environment (Orchard, 1998; Parker & Bradley, 2000; Valle, 1999). Appropriate leadership to effect such change has equally been called for (Bass, personal communication, December 15, 1998, 1998; Brown, 1992; Kotter & Heskett, 1992; Prajogo & Ahmed, 2006; Schein, 1992). However, despite this attention, there has been little empirical analysis of the theoretical relationships among the key components that make up such change strategy, including transformational leadership, organizational culture, and organizational innovation. Much of the research undertaken, although valuable, is conceptual in nature (Miner, 2000; Shane & Venkataraman, 2000), although recent studies are now exploring these relationships in more detail (Damanpour & Schneider, 2006; Kavanagh & Ashkanasy, 2006; Mumford & Licuanan, 2004).
Organizational innovation refers to the introduction of any new product, process, or system into an organization (Suranyi-Unger, 1994). The word innovation is derived from the Latin word novus, or new, and is alternatively defined as "a new idea, method or device" or "the process of introducing something new" (Gopalakrishnan & Damanpour, 1994, p. 95). The first definition views innovation as an outcome (e.g., Damanpour, 1991, 1992; Damanpour & Evan, 1984; Kimberly & Evanisko, 1981) and the second as a process (e.g., Cooper & Zmud, 1990; Ettlie, 1980; Rogers, 1983). Reviews of the organizational innovation literature have identified three emergent categories: the determinants of innovation, the process of intrafirm diffusion, and the interfirm diffusion research streams. Consistent with Wolfe (1994), we view innovation as an outcome of various antecedent organizational factors or determinants, namely, transformational leadership and organizational culture. This perspective supports Ahmed's (1998) claim that "innovation is the engine of change ... [and] culture is a primary determinant of innovation" (p. 31). These determinants also feature in the meta-analyses of innovation conducted by Damanpour (1991) and King (1990), and in Scott and Bruce's (1994) model of innovative behavior.
In this study, we examine climate for innovation as an indicator of the capacity of organizations to become innovative. That is, the degree of support and encouragement an organization provides its employees to take initiative and explore innovative approaches is predicted to influence the degree of actual innovation in that organization (Martins & Terblanche, 2003, pp. 67-68; Mumford & Gustafson, 1988, p. 37). This view takes up the challenge from Ostroff et al. (2003) that only a few "climates-for" studies have been undertaken empirically and is consistent with Barrett and Sexton's (2006, p. 333) view that innovation is both an end and a means in achieving sustainable competitiveness. We also believe climate for organizational innovation is a useful proxy when it is difficult to get direct behavioral measures of innovation across diverse organizations and industry sectors. Throughout this article, we use the term organizational innovation when referring to the extant literature, and we refer to the term climate for organizational innovation more specifically in the framing of our research hypotheses. This approach is consistent with Damanpour and Schneider (2006), who asserted that strategic leadership research indicates that top managers influence organizational outcomes by establishing organizational culture, influencing organizational climate, and building the capacity for change and innovation. In this context, the climate for innovation is a direct result of top managers' "personal and positional characteristics" (Damanpour & Schneider, 2006, p. 220).
Transformational Leadership
As stated above, the leaders of organizations help define and shape work contexts that contribute to organizational innovation (Amabile, 1998), and there is evidence that individual leadership style is an important determinant of innovation (Dess & Picken, 2000). In particular, transformational leadership has been shown to support and promote innovation, which in turn can ensure the long-term survival of an organization (Ancona & Caldwell, 1987). Zahra (1999) stated that "participation in the emerging global economy requires--in fact, demands--innovation and entrepreneurial risk taking" (p. 38). Participative leadership is associated with cultures of innovation and high-performing companies (Ogbonna & Harris, 2000). Transformational leadership refers to behaviors of leaders who motivate followers to perform and identify with organizational goals and interests and who have the capacity to motivate employees beyond expected levels of work performance. As a result, employees feel engaged and personally rewarded through work, and work outcomes such as satisfaction and extra effort are enhanced (Bass & Avolio, 1994, 1997; Gardner & Avolio, 1998; Howell & Avolio, 1993; Lowe, Kroeck, & Sivasubramaniam, 1996; Sosik, Kahai, & Avolio, 1998).
Transformational leadership, as examined in this article, uses the six factors proposed by Podsakoff, MacKenzie, Moorman, and Fetter (1990): articulating a vision for the future, providing an appropriate role model, fostering the acceptance of goals, setting high performance expectations, providing individual support, and providing intellectual stimulation. In this study we were interested in the effects of the six transformational factors on organizational culture and climate for organizational innovation. Consequently, the six transformational leadership factors were treated as a set of distinct but related dimensions rather than as a single construct (Edwards, 2001). This approach is consistent with research that indicates some individual leadership styles, such as inspiring others and creating and communicating a vision, take prominence when dealing with organizational culture and change imperatives (Avolio & Bass, 2002).
Leadership and Organizational Innovation
Transformational leadership has been theoretically and empirically linked to a range of organizational outcomes (Howell & Avolio, 1993; Kavanagh & Ashkanasy, 2006; Ogbonna & Harris, 2000; Waldman, Ramirez, House, & Puraman, 2001). Specifically, Jung, Chow, and Wu (2003) argued that transformational leadership enhances innovation by (a) engaging employees' personal value systems (Bass, 1985; Gardner & Avolio, 1998) and thereby heightening levels of motivation toward higher levels of performance (Shamir, House, & Arthur, 1993) and (b) encouraging employees to think creatively (Sosik, Avolio, & Kahai, 1997). In addition, Elenkov and Manev's (2005) study of 270 top managers' influence on innovation in 12 European countries found that sociocultural context was important in the leadership-innovation relationship and confirmed that leaders and top managers positively influence innovation processes in organizations, consistent with other research (e.g., Henry, 2001 ; Howell & Higgins, 1990; West et al., 2003).
The study by Jung et al. (2003) of 32 Taiwanese companies found that transformational leadership had significant and positive relationships with organizational innovation as it was mediated by "an organizational culture in which employees are encouraged to freely discuss and try out innovative ideas and approaches" (p. 539). However, their study did not identify specific transformational behaviors and their effects on organizational innovation, although they did suggest that intellectual stimulation and the capacity to constantly challenge workers encourage innovation (Jung et al., 2003, p. 539). This suggestion makes good intuitive sense as...
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