The relative contributions of transformational and transactional leadership to team climate and innovation performance

Abstract

The effects of transformational and transactional leadership on team climate and innovation performance were examined using data from 456 Quality Control Circles belonging to a large government organisation in Southeast Asia. The aim was to develop and empirically test a framework linking Bass' theory of leadership and West's theory of group innovative behaviour across the stages of Deming's Plan-Do-Check-Act (or PDCA) cycle, and overall innovation performance.

Zero-order correlation tests found components of transformational leadership (i.e., charisma, individualised consideration, intellectual stimulation) and active transactional leadership (i.e., contingent reward, and active management-by-exception) to be positively related to team vision and participative safety at the Plan stage, and support for innovation at the Do stage of the PDCA cycle. Additionally, charisma, individualised consideration, intellectual stimulation, and contingent reward were found to be positively associated with task orientation at the combined Check/Act stage of the PDCA cycle, whereas a negative relationship existed between passive management-by-exception and the climatic construct.

Further correlation tests showed that charisma, intellectual stimulation, and contingent reward did not exert any significant influence across all measures of innovation performance, whereas individualised consideration, active and passive management-by-exception were found to be negatively related to two of the three measures of innovation (i.e., the number of suggestions submitted and the amount of money awarded to innovative suggestions). All the climatic constructs (i.e., team vision, participative safety, support for innovation and task orientation) were positively related to the innovativeness ratings provided by the facilitators of the teams.

The results of the present study highlight the need to manage innovation as a process, and to recognise the role of leadership in influencing group processes across various stages of the innovation process. Leadership appeared to produce an indirect impact on innovation performance by influencing the climate in the team and hence the innovative behaviour of members. Specifically, transformational leadership was found to augment transactional leadership in explaining the unique variance associated with the climatic constructs across the PDCA cycle. However, no such augmentation effect was found when the focus was shifted to the innovation performance of the teams. Nevertheless, the findings indicate that effective leaders in quality control circles possess behaviours associated with transformational and active transactional leadership. Results of the study also provide preliminary support for the validity of West's scales in assessing team climate.

The study highlights the importance of considering the influence of context (i.e. cultural norms, organisational characteristics, and situational determinants) when conducting leadership and innovation studies. Such contextual influences are likely to moderate the perceived effectiveness of leaders in the organisation, and their impact on innovation outcomes. The results of this study argue for caution in the interpretating the results of earlier studies on charismatic and transformational leadership, and call for more longitudinal research designs and diverse samples in future undertakings. Finally implications for developing effective leaders for innovation are provided.