Transformational Leadership and Innovation for Competitive Advantage in Large Firms and SMEs

Research Background And Research Problem

Over the years, numerous research results have pointed out the positive relationship between leadership and producing innovation in organizations. Thus, understanding how firms can encourage the role of leadership in facilitating innovation is crucial for survival in a competitive environment (Al Ahmad et al., 2019; Le and Lei, 2019). With the increased use of leadership model concepts in firms, the question naturally arises as to what style of leadership is most suitable to what outcome; in this case what style is appropriate for promoting innovation (Zuraik and Kelly, 2019; Al-Husseini et al., 2019; Currie et al., 2009). Bass (1985) points out that TL is considered an essential element in displaying creative behaviors, serving as role models for innovation. In addition, they have the ability to provide intellectual stimulation that may positively influence their followers to think differently (Jung et al., 2003). Furthermore, the theory of TL focuses on the major role that leaders can play in encouraging both personal and organizational change, and in supporting followers to meet and exceed expectations regarding performance (Avolio et al., 2005). For this reason, many authors in the innovation literature such as Nemanich and Keller (2007) and Gumusluoglu and Ilsev (2009) note the direct role that TL can play in contributing to innovative behavior within organizations, as well as their role in indirectly encouraging an organizational climate conducive to producing innovation. In this sense, TL can be defined as: “Style of leadership in which the leader identifies the needed change, creates a vision to guide the change through inspiration, and executes the change with the commitment of the members of the group” (Jung, Chow, and Wu, 2003, p. 529).

Innovation in organizations can be viewed as an outcome of individual, team, and organizational efforts connected to producing a new product, process, or service that is potentially required by a market. Hence, innovation can be seen as the outcome of a number of activities and practices performed at different levels of the organization (Silvestre and Tirca, 2019; Aagaard, 2017). Innovation is viewed and appreciated as a core competence for contemporary organizations to maintain or enhance effectiveness in rapidly changing and challenging environments (Chan et al., 2019; Owusu-Agyeman, 2019; Bledow et al., 2009; Hansen and Levine, 2009). Conventionally, innovation can be classified as either radical or incremental depending on the processes used, extent and nature of the change (Tidd et al., 1997). Radical innovation leads to major technological, economic and social change (Toner, 2011) and it has been designed to meet the needs of customers and markets (Benner and Tushman, 2003). Conversely, incremental innovation is achieved by exploiting present abilities of a firm and looking for continuous developments that create positive and solid returns (Neito et al., 2013).

Despite the significant relationship between innovation outcome and TL, there is a dearth of studies that investigate how TL actually invests and promotes processes through which followers are positively influenced to create and adopt innovative outcomes (Yang et al., 2018; Aagaard, 2017; Perra, Sidhu and Volberda 2017; Birasnav et al. 2013; Eisenbeiss et al. 2008; Zhang et al. 2013). In a similar vein, Chan et al. (2019) also point out this lack, and note the need for additional research especially into the factors and processes that explain how TL can influence and sustain higher levels of innovation capability. This study will attempt to fill the above gaps by deeply interrogating and investigating how TL practically facilitates innovation to sustainable competitive advantage.

To fill these research gaps, this study will propose and test a framework to answer the following research questions:

• 1.

  To which extent do practices executed by TL affect the degree of innovation?

• 2.

  To which extent does social capital influence tacit knowledge sharing for innovation?

• 3.

  To which extent does training provided by TL influence innovation?