Impacts of Procedural Justice and Ethical Leadership on Organizational Innovation

Introduction

Organizational innovation is an important strategy to help companies lead the market and better meet diverse customer demands (Yang et al., 2018). As the IT industry faces rapidly changing technology and business environment, innovation should be integrated into the organizational strategy to achieve sustainable development. In 2021, the scale of the Chinese digital economy increased to 45.5 trillion yuan and ranked second in the world (Ma & Ge, 2022). The recent 20th National Congress of the Communist Party of China (CPC) stated that innovation would remain at the heart of China’s modernization drive (Youth.cn, 2022). The word innovation appears often in the report of the 20th National Congress of the Communist Party of China (CPC). It continues to be the primary driving force highlighted by Chinese President Xi Jinping (China Government Bank, 2022). Chinese IT industry development should be based on consistently enhanced innovation.

In the future, the Chinese IT industry needs to integrate well with other industries, according to Wu He Quan (Ma & Ge, 2022). Thus, innovation for this type of industry is critical. Employee creativity has attracted many previous scholars’ attention (Chaubey & Sahoo, 2021; Hughes et al., 2018). Small and medium-sized enterprises (SMEs) support and contribute to the Chinese national economy as the primary market entities with the most potential for economic growth (Hafeez et al., 2020). SMEs play an important and active role in the Chinese national economy, accounting for 99% of the enterprises and 60% of gross industrial output. SMEs highlight 75% of technological innovation and 80% of the new products in the Chinese market (Chen et al., 2017). Hence, this research targets the innovative performance of Chinese IT SMEs. In 2020, the number of employees in the Chinese IT industry reached 7.05 million. IT industry belongs to one of the hottest industries in China. Creativity is regarded as the core position of organizational innovation, which decides the organizational competitive advantages and surviving capability (Katila & Ahuja, 2002). To promote an innovative organization, the initiative engagements and participation of individual employees are the driving factors (Chaubey & Sahoo, 2021). Among the factors linked to organizational innovation, human resource practices (HRP) are often considered (Cao et al., 2021). There is a broad acknowledgment of the associations between work engagement and positive organizational outcomes (Alazmi & Alenezi, 2020; Karatepe et al., 2021; Kaya & Karatepe, 2020; Wang & Chen, 2020). However, few empirical studies have explored the potential impact of work engagement on organizational innovation via employee trust and fair and ethical perceptions (Shafique et al., 2019). Ethical leadership emphasizes ethical role models and organizational norms promotion through two-way communication between leaders and subordinates (Brown et al., 2005). Previously, ethical leadership has been linked with innovative climate and green innovation behavior (Liu & Zhao, 2019). However, ethical leadership as an imperative element for organizational innovation facilitation still needs more attention (Shafique et al., 2019). In the current study, the research framework would draw attention to organizational innovation facilitation from fair perspectives (ethical leadership and procedural justice adoptions) through the mediators of organizational trust and work engagement in Chinese IT companies.