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Towards understanding the direct and indirect effects of CEOs'

transformational leadership on rm innovation


Dongil (Don) Jung
a,
, Anne Wu
b,1
, Chee W. Chow
c,2
a
Department of Management, College of Business, San Diego State University, 5500 Campanile Dr., San Diego, CA 92182, USA
b
Department of Accounting, National Chengchi University, Wenshan, Taipei, Taiwan
c
School of Accountancy, San Diego State University, San Diego, CA 92182, USA
a r t i c l e i n f o a b s t r a c t
This study seeks to advance understanding of howtransformational leadership by top managers
(CEOs) can affect their companies' innovativeness. We propose a model that includes bothdirect
effects and indirect effects moderated by aspects of organizational culture, structure, and the
external environment. The predicted effects are tested with data collected through multiple
sources on 50 Taiwanese electronics and telecommunications companies. The results support
the expectation that a positive relationship exists between CEOtransformational leadership and
organizational innovation. They also support most of the predicted moderating effects. The
implications of these ndings for practice and research are delineated.
Published by Elsevier Inc.
Keywords:
Transformational leadership
Innovation
Moderators
This study seeks to advance understanding of how transformational leadership by Chief Executive Ofcers (CEOs) affects
innovation at the organizational level. This topic is important because in today's global economy, rms are under constant pressure to
innovate their products and services (Andriopoulos &Lowe 2000; Perry-Smith, 2006; Puranam, Singh, &Zollo, 2006; Tierney, Farmer,
& Graen, 1999). Thus, for example, Leifer, O'Connor, & Rice (2001) have observed that the contemporary competitive landscape has
been and continues to be driven by technological revolution, globalization, hyper-competition, and extreme emphasis on price,
quality, and customer satisfaction, requiring an increased recognition and focus on innovation as a strategic competence (p. 102).
Numerous studies have sought to identify factors that can stimulate organizational innovation, broadly dened by Amabile &
Conti (1999) as the implementationor adoptionof new, useful ideas by people inorganizations (p. 630). Examples of factors found
to have an effect include leadership (Amabile, 1998; Mumford & Gustafson, 1998), intra-organizational networks and learning
capability (Tsai, 2001), CEO pay (Balkin, Markman, & Gomez-Mejia, 2000), a creativity-conducive work environment (Amabile,
1998), job complexity and type of supervision (Oldham & Cummings, 1996), and organizational culture and climate (Mumford &
Gustafson, 1998). Among these myriad factors, managers' leadership behavior has been identied by many researchers as being one
of the most, if not the most, important (Amabile, 1998; Jung, 2001; Mumford, Scott, Gaddis, & Strange, 2002).
Indeed, over the past two decades, many management scholars and practitioners have called for more adaptive leadership by
top business executives in responding to the rapid changes confronting today's organizations (Bass, Avolio, Jung, & Berson, 2003).
Corporate chieftains like Jack Welch of General Electric and Lou Gerstner of IBM have been cited as examples of how adaptive
leaders can successfully restructure and transform their organizations. The label transformational has been applied to a set of
adaptive leadership behaviors held to be more effective than other leadership styles in enhancing organizational innovation (Lowe,
Kroeck, & Sivasubramaniam, 1996; Gardner & Avolio, 1998; Howell & Avolio, 1993).
Despite being held to be a key driver of innovation at the organizational level, transformational leadership's effects have mostly
been studied at the levels of individual employees or organizational subunits (Mumford et al., 2002). The limitation of such a focus
The Leadership Quarterly 19 (2008) 582594
Corresponding author. Tel.: +1 619 594 0208; fax: +1 619 594 3272.
E-mail addresses: donjung@mail.sdsu.edu (D.(D.) Jung), anwu@nccu.edu.tw (A. Wu), Chow@mail.sdsu.edu (C.W. Chow).
1
Tel.: +886 2 2938 7128.
2
Tel.: +1 619 594 5331.
1048-9843/$ see front matter. Published by Elsevier Inc.
doi:10.1016/j.leaqua.2008.07.007
Contents lists available at ScienceDirect
The Leadership Quarterly
j our nal homepage: www. el sevi er. com/ l ocat e/ l eaqua
is that, unless thecreativebehaviors andoutputs of individuals andsubunits arecoordinatedtoyieldorganizational-level outcomes, the
companyas awhole still couldbeleft without effective responses tothe challenges of a competitive market place. Asecondlimitationof
extant researchis that it has mainly used subjective performance measures (e.g., self-reported andsupervisory ratings of creativity and
innovation), which are open to judgment and other biases. Although objective measures are not necessarily free of other forms of
unmeasured systematic or random error, they are less subject to cognitive biases and can more directly capture the end-products of
innovative efforts in an organization. Therefore, our empirical tests go beyond subjective assessments of organizational innovation to
also include objective measures. A further advance over prior research is that we identify and simultaneously test a number of internal
and external organizational attributes that may interact with leadership behaviors in affecting organizational innovativeness.
We focus on CEOs because they usually play key roles in determining organizational policies/processes as well as resource
allocations, yet relatively fewstudies have examined howthey affect innovation at the organizational level. Specically focusing on
transformational leadership, Waldman & Yammarino (1999) have called for more research on how this type of leader behavior
affects organizational performance through various levels of mediators and moderators. Recently, several authors have undertaken
work of this nature. Zhu, Chew, & Spangler (2005) collected company-level data from 170 rms in Singapore. They found
perception of the CEO's transformational leadership to be positively associated with perceptions of organizational outcomes (e.g.,
ability to attract essential employees), and negatively associated with absenteeism. They also found that a company's practices in
performance appraisal, stafng, training, and compensation systems fully mediated the relationship between CEO transforma-
tional leadership and perceived organizational outcomes. Similarly, De Hoogh & her colleagues (2005) studied 73 small and
medium-sized companies, and found that perception of the CEOs' transformational leadership had a positive relationship with
their direct reports' work attitude. While these studies did not focus on organizational innovativeness, they do provide support for
expecting that the CEO's leadership behavior can affect organizational level outcomes.
A prior study that did examine this relation is Jung, Chow & Wu (2003). They posited that a positive direct relation would exist
between CEO transformational leadership and organizational innovation, and that this relation would be moderated by the
organization's extent of employee empowerment and climate of support for innovation. Survey data from 32 Taiwanese electronics/
telecommunications rms supported the expected direct effect. They also revealed a statistically signicant positive moderating effect
fromclimate of support for innovation. However, Junget al. (2003) were emphatic that their results neededvalidation. Specically, they
noted as limitations their relatively small sample size and their use of only one informant per rm for each measurement scale. They
also stressed the need to expand the scope of their organizational innovation measure and to augment the set of moderating variables.
Our study is patterned after Jung et al. (2003) and advances over this prior study in several ways. First, our sample includes a
larger number of rms, and we use multiple informants in each rm. Second, we use a more encompassing measure of
organizational innovativeness. Finally, we test the moderating effects of a richer set of variables. In addition to empowerment and
climate for innovationwhich were included in Jung et al. (2003), we propose moderating effects fromtwo organizational structural
attributes (centralization and formalization) and two attributes of the external environment (competition and uncertainty). In the
following subsections, we explicate the theoretical basis for the hypothesized direct and moderating effects. Following that, the
method section will describe how we use a multi-source and multi-dimensional approach to operationalize the variables.
1. Theoretical background and hypotheses
1.1. Transformational leadership and organizational innovation
Bass et al. (2003) have characterized transformational leadership as encompassing ve theoretically distinct components:
charisma, idealized inuence, inspirational motivation, intellectual stimulation, andindividualizedconsideration. Theyexplain that
both charisma and idealized inuence have to do with serving as role models, with the former reecting followers' attributions and
the latter capturing leaders' behaviors. Leaders with idealized inuence tend to place followers' needs over their own needs, share
risks with followers, and exhibit adherence to a set of underlying principles and values. Inspirational motivation involves providing
meaning and challenge to followers' work, including inculcating visions of the future. Intellectual stimulation entails stimulating
followers to question assumptions, reframe problems, and to approach old situations in newways. Newideas and creative solutions
are solicited from followers, and there is no public criticism of individuals' mistakes. Finally, leaders who provide individualized
considerationare seenas ones who pay attentionto followers' individual needs for achievement andgrowth. They do so byacting as
coach or mentor, and by creating learning opportunities as well as a supportive climate in which to grow.
Advocates of transformational leadership maintain that by means of their behavior, transformational leaders create personal
and professional commitment from subordinates toward higher-level needs like self-esteem and self-actualization (Bass, 1985;
Gardner & Avolio, 1998). This in turn increases the latter's intrinsic motivation, which has been identied as an important driver of
employee creativity and rm innovation (Oldham & Cummings, 1996; Amabile, 1998; Zhou, 2003). In addition, a transformational
leader's intellectual stimulation can facilitate unconventional and innovative thinking and working processes that lead to new
knowledge and technology, which is fundamental to rm innovation (Dougherty & Hardy, 1996). At the opposite end of the
spectrum, transactional leadership focuses on maintaining the status quo and motivating people through contractual agreement
(Bass, 1985). This leadership style tends to emphasize extrinsic rewards, such as monetary incentives and promotion, as a means to
increase followers' motivation. Amabile, Conti, Coon, Lazenby, & Herron (1996) have specically identied transactional leadership
as being detrimental to creativity, and a recent meta-analysis by Bono & Judge (2004) has provided support for this proposition. It
found that as compared to transactional leadership, transformational leadership yielded higher employee job satisfaction and
increased their autonomous goal-directed motivation.
583 D.(D.) Jung et al. / The Leadership Quarterly 19 (2008) 582594
Along the same vein, other studies have found that leaders who display transformational behaviors are able to realign their
followers' values and norms, promote both personal and organizational changes, and help followers to exceed their initial
performance expectations (e.g., House &Shamir, 1993; Jung &Avolio, 2000. See Mumford et al., 2002 for a review). Byand large, these
studies have focused on leadership and outcomes at individual or organizational subunit levels using experimental settings and/or
subjective measures of creativity (e.g., subjective supervisor ratings). For example, Sosik, Avolio, & Kahai (1997) found that as
comparedtoother leadershiptypes, transformational leadershipwas more effective at encouragingfollowers tothink out of the box
and to adopt generative and exploratory thinking processes that yielded more creative ideas and solutions. Keller (1992) discovered
that transformational leadership displayed by project team leaders in a large R&D organization improved teamperformance. Shin &
Zhou (2003) studied 290 employees and their supervisors from 46 Korean companies, and found a positive relation between
transformational leadership and follower creativity. While Jung et al. (2003) did consider the link between CEO transformational
leadership and organizational innovativeness, the authors were emphatic that their exploratory study needed validation.
Another point to note about these prior studies is that few have gone beyond the relational aspects of transformational
behaviors. Although leaders oftentimes promote creative thoughts and encourage innovation by interacting with followers (e.g.,
challenging their long-held assumptions regarding their work approaches), CEOs may inuence innovation in yet other ways. In
particular, Upper Echelons Theory posits that organizational outcomes bothstrategies and effectiveness are reections of the
values and cognitive bases of powerful actors in the organization. (Hambrick & Mason, 1984, p. 193.) In other words, leaders in the
upper echelons of an organization inuence organizational performance directly through their characteristics and behaviors and
indirectly through the strategic choices they make. As the top executive and a powerful actor, the CEO is in a unique situation to
determine the organization's strategies in responding to the challenges of the environment, and CEOs with transformational
leadershipare likely to choose strategies that are change- andgrowth-orientedinnature. Thus, we specify the following hypothesis:
Hypothesis 1. Organizational innovation is positively related to the CEO's extent of transformational leadership.
1.2. Moderating effects
Although we have made the case for CEOs' leadership behavior to directly inuence organizational innovation, it must also be
recognized that such behavior occurs within the larger context of the organization. As such, the analysis would be incomplete
without also considering attributes of the organizational and environmental contexts inwhich rminnovation occurs (Damanpour,
1991; Scott &Bruce, 1994; Mumford et al., 2002; Jung et al., 2003). Amabile &her colleagues (1996) have labeled this the context of
creativity. In the following subsections, we develop expectations of howspecic attributes of organizational climate, structure, and
the external environment would moderate the relationship between CEO transformational leadership and rm innovation.
1.3. Attributes of organizational climate
1.3.1. Climate for innovation
Organizational climate is widely dened as organizational members' shared perceptions of organizational policies, practices, and
procedures, both formal and informalindicative of the organization's goals and appropriate means to goal attainment. (Reichers &
Schneider, 1990, p. 22). Scott & Bruce (1994) have further explained that climate represents signals individuals receive concerning
organizational expectations for behavior and potential outcomes of behavior (p. 582). By serving as the gel that ties together
employees from different units and levels, an organization's climate can work for or against particular goals (Daft, 2001). Since
innovation typically requires long-term investments and risk-taking (Balkin et al., 2000), employees need to perceive that the
organization supports working on innovative yet more risky ideas and products rather than focusing on short-term prot and
immediate nancial results (Kanter, 1983). Thus, Mumford & Gustafson (1998) have argued that even when individuals have
developed the capacity for innovation, their willingness to undertake productive efforts may be conditioned by beliefs concerning the
consequences of such actions in a given environment (p. 37). As such, when there is not a climate that supports or values innovative
initiatives, a CEO's transformational leadership behaviors alone may only marginally stimulate employee efforts towards innovation.
Consistent with this view, a study of 78 managers by Howell & Avolio (1993) found that when there was a climate of support for
innovation within the organizational unit, there was a signicant positive relationship between the intellectual stimulation
provided by the leader and the unit's innovative performance. But when support for innovation was absent, the relationship was
insignicant. Jung et al. (2003) have provided preliminary evidence consistent with climate for innovation moderating the link
between CEO transformational leadership and organizational innovation.
1.3.2. Empowerment
Allowing subordinates autonomy and exibility in carrying out their duties can create a sense of ownership and control over the
work to be performed (Mumford et al., 2002), and Amabile et al. (1996) and Quinn (1985) have suggested that employees produce
more creative work when they perceive more personal control over howto accomplish given tasks. Empirical support for this view
has been provided by Zhou (2003), who found that individuals generated the most creative ideas when they worked in a high task
autonomy environment. Jung & Sosik (2002) also have argued that people need to be empowered before they could develop
intrinsic motivation, which in turn promotes creative endeavors, while Damanpour (1991) has suggested that empowering
employees facilitates innovation by increasing their awareness, commitment, and involvement. More specically related to
transformational leadership, Avolio, Zhu, Koh, & Bhatia (2004) have found that the effect of such leadership on employee
commitment depended on employees' sense of empowerment. Taken as a whole, the preceding discussion suggests that for the
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CEO's transformational leadership to stimulate organizational innovation, employees must feel that they have freedom to choose
what they work on and how to go about accomplishing their goals.
Prior studies of empowerment have mainly dened and measured this construct at the individual level (e.g., Liden, Wayne, &
Sparrowe, 2000; Spreitzer, 1995). However, some recent studies (e.g., Kirkman, Rosen, Tesluk, & Gibson, 2004) have used
empowerment as a team construct and argued that it increased task motivation due to team members' collective, positive
assessment of their organizational task (p. 176). Additionally, Klein, Conn, Smith, & Sorra (2000) have shown that the referent does
not invalidate aggregating data to a higher level as long as a high level of within-group agreement is ensured. Thus, we believe
there is a sufcient basis for treating empowerment as an organizational level construct, representing employees' shared and
collective assessment of the degree to which they are granted autonomy and exibility at work. While Jung et al. (2003) failed to
nd a signicant moderating effect from empowerment at the organizational level, the extent of literature support for this effect
suggests that further empirical tests, using larger samples and improved measurement, are desirable. Thus, we hypothesize:
Hypothesis 2. Climate for innovation and empowerment moderate the relationship between CEO transformational leadership
and organizational innovation such that the relationship is more positive among companies with higher levels of (a) climate for
innovation and (b) empowerment.
1.4. Organizational structure
Since the idea was introduced by classic writings like Burns and Stalker (1961) and Lawrence and Lorsch (1967), researchers
have examined how an organization's structure affects its ability to implement creative ideas and to come up with innovative
products (Frambach & Schillewaert, 2002). Below, we consider how two attributes of organizational structure centralization and
formalization may moderate the relationship between the CEO's transformational leadership and organizational innovation.
1.4.1. Centralization
Centralization refers to the degree to which top management delegates decision-making authority to lower-level personnel
(Daft, 2001), and mostly relates to what types of decisions an employee is allowed to make. As such, this construct is distinct from
empowerment, which primarily concerns the latitude to decide howto undertake given tasks. In a highly centralized organization,
employees below the top level have limited autonomy. This can impede efforts at innovation because, as was noted earlier, people
tend to become more creative when they feel that they have control over their work (Damanpour, 1991; Amabile et al., 1996; Quinn,
1985). Additionally, organizational innovation typically requires coordination and collaboration across departments and functional
specialties (Miller, Droge, & Toulouse, 1988). A highly centralized organizational structure can obstruct such collaborative efforts
even when top managers are supportive of innovation.
1.4.2. Formalization
Formalization differs from centralization in that it is the extent to which an organization regulates employees' work-related
activities with written rules and formal procedures (Grinyear & Yasai-Ardekani, 1980). Empirically, Damanpour (1991) has found
that formalization impedes organizational innovation. One reason for this negative impact may be that a highly formalized
organization tends to be bureaucratic, and its employees are more likely to resist change (Hage, 1988; Kanter, 1989). A formalized
organizational structure also can constrain deviations from established practices that leverage employees' creative potential, or
hinder collaborative or uid work processes needed to develop innovative products (Dougherty & Hardy, 1996). Thus, as with
centralization, formalization can hinder transformational leaders' efforts at increasing organizational innovation.
Based on the preceding discussion, we hypothesize a moderating role for the two structural variables in the relationship
between CEO transformational leadership and organizational innovation:
Hypothesis 3. Centralization and formalization moderate the relationship between CEO transformational leadership and
organizational innovation such that the relationship is more positive among companies with lower levels of (a) centralization and
(b) formalization.
1.5. Environmental attributes
Finally, we hypothesize that two environmental variables uncertainty and competition would moderate the relationship
between CEO transformational leadership and organizational innovation. This effect is expected to arise through these variables'
impacts on the context in which innovative work processes occur, and/or the costs and benets of organizational innovation.
1.5.1. Uncertainty
When the environment is uncertain and turbulent, and/or customers have shifting preferences, organizational innovation
becomes more important to survival (Miller et al., 1988; Drazin & Schoonhoven, 1996). Thus, when members of an organization
perceive a high level of environmental uncertainty, a sense of crisis or urgency is created, and the need for innovation becomes
more widely accepted (Frambach & Schillewaert, 2002). Consistent with this view, a number of early studies found a positive
relation between environmental uncertainty and rm innovation (e.g., Hambrick, 1981). More recently, Song & Montoya-Weiss
(2001) have reported that perceived technological uncertainty moderates new product development in Japanese companies.
Specically, Japanese project managers' perceived level of technological uncertainty affected how they manage the new product
585 D.(D.) Jung et al. / The Leadership Quarterly 19 (2008) 582594
development process by selectively focusing on different competitive advantages such as marketing prociency, cross-functional
integration, and technical synergy. Taken together, the preceding literature provides the basis for expecting a positive moderating
effect of uncertainty on the relationship between CEO transformational leadership and organizational innovation.
1.5.2. Competition
We also expect competition to have a positive moderating effect. When an organization operates in a highly competitive
market, or when its members perceive that they are operating under competitive market conditions, they are more likely to accept
the need for innovation (Frambach & Schillewaert, 2002). In a highly competitive industry such as computers and consumer
electronics, for example, the value and uniqueness of knowledge-intensive resources can be swiftly lost to competitors (Balkin
et al., 2000, p.1118). As such, just like the case of environmental uncertainty, competition can increase subordinates' responsiveness
to stimuli for innovation.
However, competition also may reduce the slack resources (e.g., via reduced prot margins) for supporting experimentation
and innovation initiatives. Nohria & Gulati (1996, p.1246) dened such resources as the pool of resources in an organization that is
in excess of the minimumnecessary to produce a given level of organizational output, and found an inverse U-shaped relationship
between slack resources and innovation. In total, then, while competition can increase attention to innovation, its net impact may
be dampened by a lower availability of resources for supporting long-term and risky initiatives.
Taken as a whole, our discussion above suggests our fourth hypothesis:
Hypothesis 4. Uncertainty and competition moderate the relationship between CEO transformational leadership and
organizational innovation such that the relationship is more positive among companies with higher levels of (a) environmental
uncertainty and (b) competition.
2. Method
2.1. Participants
We focused on a single industry so as to limit extraneous inuences due to different industry types. Our sample was comprised
of 50 Taiwanese companies from the electronics and telecommunications industry. This industry was selected because new
product development and creative R&D efforts are critical for company survival due to the industry's rapid technological advances
and highly competitive markets (Carey & Nahavandi, 1996; Balkin et al., 2000; Schilling & Hill, 1998).
To generate the sample, we used a database of published nancial statements (the Taiwan Economic Journal Taiwan Data
Bank) to identify all Taiwanese electronics and telecommunications companies that were traded either on the Taiwan Stock
Exchange or over-the-counter. We randomly selected 50 of the 317 rms identied, and solicited their participation by
approaching a top manager (vice president and above) of each company with the aid of consulting and accounting rms. As
inducement, each rm was promised a report comparing it to the rest of the sample. As we encountered (initial) refusals,
replacements were randomly selected. In total, we approached 62 companies, out of which 53 (85.5%) ultimately participated. As
explained further below, three of these rms were later dropped due to inadequate data.
Multiple data sources were used to control common response biases. Three sources were used to measure each company's level
of innovation: published nancial statements, a government report on patents granted, and nancial analysts specializing in the
Taiwanese electronics and telecommunications industry. Information on leadership behavior and the contextual variables was
obtained from surveying managers with at least three years' work experience in their companies. Three top-level managers
representing various functional areas from each company were asked to complete Survey A, which measured their company's
demographic characteristics (e.g., age, size) and the CEO's extent of transformational leadership. The respondents were selected
from those who worked closely with, and/or had frequent interaction with the CEO. This group also answered questions on their
organizations' environmental uncertainty and degree of competition. A second group of three mid- to top-level managers per rm
was given Survey B that contained measures of empowerment and climate for innovation. A third group of managers (four mid- to
top-level managers per rm) was given Survey C containing measures of centralization and formalization. In total, there were 141,
144, and 200 completed responses to Surveys A, B, and C.
2.2. Procedures
Each company provided a contact person (typically vice president or above). This person was visited personally by the second
author, whoexplainedthe general nature of the study without revealing thespecic hypotheses. Thenthecontact personwas provided
with copies of the three surveys and givenexplicit instructions on the number and type of managers neededto complete eachversion.
Without exception, the contact persons expressed enthusiasm for the study and committed to following the instructions.
To encourage truthful responses in light of many questions' sensitive nature (e.g., the CEO's leadership behaviors, organizational
structureandclimate), completecondentialityandanonymitywas guaranteedfor bothrespondents andtheir companies, andapostage-
paid, self-addressed envelope was provided for direct return of completed surveys to us. Since responses were obtained from multiple
managers in each company, all surveys provided to a company had a common identication code. The presence and purpose of this code
was explained in the survey instructions. Participants also were given the second author's contact information in case of questions.
Because the survey was administered in Chinese, we followed Brislin's (1986) recommendation of translation and back-
translation to ensure conceptual equivalence between the original instruments (in English) and the Chinese versions. A number of
586 D.(D.) Jung et al. / The Leadership Quarterly 19 (2008) 582594
recent studies on leadership have adopted a similar approach (e.g., Shin & Zhou, 2003). All three surveys were rst translated into
Chinese by a bilingual individual who was not told the objective of the study. Then, another bilingual person back-translated these
into English without having access to the original instruments. Only a few minor changes to the Chinese surveys were triggered by
comparing the back-translated and original English versions.
2.3. Demographic statistics
Survey A contained a question on howfrequently the respondent interacted with his/her rm's CEO. The possible answers were
rarely, once in a while, sometimes, fairly often, and regularly. In three of the rms, at most one respondent had answered
with a frequency higher than rarely or once in a while. These rms were dropped to preserve the integrity of the leadership
measure and accordingly, the usable responses to Surveys A, B, and C were reduced to 132, 135, and 188, respectively.
On average, the 50 rms remaining in the sample had been in existence for about 17.7 years (range: 5.2 to 37 years). The average
tenure of the CEOs was about 10 years and all had been with their company for at least 3.5 years, which was sufcient to span the
three-year period (20002002) from which we drew our innovation measures. The companies were relatively large. Only three
had fewer than 100 full-time employees. Twenty-three had between 101 and 1000 employees, and the remaining 24 companies
had more than 1000 full-time employees.
To assess the representativeness of our sample rms, we compared their 2002 sales and R&Das a percentage of sales to those of
the 267 Taiwanese electronics and telecommunications rms not included in this study. These two measures were used because
they are available fromthe publicly disclosed nancial statements (whereas attributes like leadership behavior and environmental
uncertainty are not). There was no signicant difference on the latter (mean values of 0.042 vs. 0.04, p=0.825), but the mean size of
the sample rms was signicantly larger than that for the non-sample rms (New Taiwanese Dollars: 22.792 billion vs.
8.612 billion, pb0.0001). Thus, our sample rms are more representative of the larger, and presumably more important/inuential,
ones in the Taiwanese electronics and telecommunications industry.
The respondents' demographic proles suggest that they were well qualied to answer the survey questions. All indicated that
they were either senior- or middle-level managers. In terms of gender and age, the majority of the Survey A respondents were male
(70%), and they were quite evenly split between 30 to 40 years old (41%) and 41 to 50 years old (45%). On average, they had been
working for their company for 8.8 years (sd=6.22 years) and for the current CEO for 5.8 years (sd=5.3 years). The vast majority
(97%) had a college degree or above. Their average tenure in their current job was about 4.5 years and the majority (74%) indicated
that they interacted with their CEO either fairly often or regularly. Similarly, most Survey B respondents were male (82%). Slightly
over half (57%) were between 41 and 50 years old, with another 39% being in the 30 to 40 age bracket. On average, they had been
working for their company for 8.9 years (sd=5.8 years), with an average tenure at the current job of 4.3 years. The vast majority
(98%) had a college degree or above. The Survey C respondents were slightly younger than the other two groups. About 66% of them
were between 30 and 40 years old, and their average lengths of organizational and positional tenure were 7.9 and 3.7 years,
respectively. This group also had a more balanced gender ratio (65% male). Like the other two groups, they were well educated (97%
had college or above levels of education).
2.4. Measures
The CEO's extent of transformational leadership was measured using Bass & Avolio's (1997) Multifactor Leadership
Questionnaire (MLQ). The MLQ has been extensively used in prior research and is considered to be a well-validated measure of
transformational leadership (Awamleh & Gardner, 1999). Its construct validity has been demonstrated using Conrmatory Factor
Analysis (cf. Avolio, Bass, & Jung, 1999). Each participant was asked to rate four aspects of his/her CEO's behavior related to each of
the ve transformational leadership dimensions (total =20 items). The 5-point response scale for each item was anchored by
1=strongly disagree and 5=strongly agree. Sample items are My CEO talks optimistically about the future (for inspirational
motivation) and My CEO gets me to look at a task from many different angles (for intellectual stimulation).
Employees' perception of empowerment was measured using a 12-item scale developed by Spreitzer (1995). A sample item is
I have signicant autonomy in determining how I do my job. All items were rated using a 7-point scale anchored by 1=Very
strongly disagree and 7=Very strongly agree.
Existence of an innovation supporting organizational climate was measured with a 22-itemscale originally developed by Siegel
& Kaemmerer (1978), and later modied by Scott & Bruce (1994). It contains two subscales (support for creativity and tolerance of
differences). Sample items are This organization gives me free time to pursue creative ideas during the workday and People
around here are expected to deal with problems in the same way. All items were rated on a 7-point scale anchored by 1=Very
strongly disagree and 7=Very strongly agree.
The centralization and formalization measures were adapted fromsurveys developed by Khandwalla (1977) and Pugh, Hickson,
Hinings, and Turner (1968), and extensively used in prior research with adequate levels of reliability (Chow, Shields, & Wu, 1999;
Gordon & Narayanan, 1984). Minor modications were made to t the context of the current study. Specically, respondents were
asked to indicate the lowest managerial level to which authority has been delegated to make each of eight decisions (e.g., hiring
and ring employees, preparation of operating procedures and project calendars). All questions were based on a 7-point scale
anchored by 1=Top management; 4=Middle management; and 7=First line supervisors. The responses were reverse scored
to yield the centralization measure. The formalization question also focused on these eight decisions, and asked respondents to
identify the highest managerial level for which their companies had written manuals that specify how to make each decision.
587 D.(D.) Jung et al. / The Leadership Quarterly 19 (2008) 582594
Perceived competition and environmental uncertainty were measured by questions adapted from Khandwalla's (1977)
instrument. Specically, we asked respondents to rate the intensity of competition in their industry on (a) obtaining inputs and (b)
price. The 7-point response scale was anchored by 1=Of negligible intensity and 7=Extremely intense. For environmental
uncertainty, respondents were asked How stable/dynamic is the external environment facing your company in terms of these
aspects: (a) economic; (b) technological; and (c) political/regulatory? The 7-point response scale for each aspect was anchored by
1=Very stable (changing slowly) and 7=Very dynamic (changing rapidly).
Having an accurate measure of organizational innovation is important because if organizations are misclassied on this
attribute, then inferences about different factors' effects also will be mistaken. In developing the innovation metric, we heeded
Balkin et al.'s (2000) recommendation that a composite measure be used to capture broad aspects of innovative activities. In total,
we collected three measures to tap into different aspects of innovation. First was annual R&D expenditures as a percentage of sales
revenues over the three years prior to our survey (i.e., 2000 through 2002). Many authors (e.g., Hitt, Hoskisson, & Kim, 1997; Balkin
et al., 2000) have argued that this ratio proxies for a rm's emphasis on innovation. The data were obtained fromthe sample rms'
publicly disclosed nancial statements.
Second, sinceinputs maynot successfullyproduceoutputs, wealsoincludedthenumber of patents that acompanyhadobtainedduring
the same three-year period. This measure has been commonly used by past research as an indicator of creative performance (Oldham &
Cummings, 1996). The data came from the patent database of the Taiwanese Ministry of Economic Affairs' Intellectual Property Ofce.
Third, we contacted 20 nancial analysts in Taiwan actively following the electronics and telecommunications industry. These
analysts have a professional stake in understanding the fundamental strengths and weaknesses of each rm that they follow, and
also would have access to an extensive database for doing so (Barron, Byard, Kile, & Riedl, 2002; Barth & Hutton, 2004). The reason
for seeking their evaluations of each company was that, while the number of patents has face validity, it is limited to innovations
that are amenable to patent application, and for which rms consider patents to offer meaningful property rights protection. As
such, its scope excludes other fruits of innovation efforts, such as process and service improvements. Consider the case of Dell
Computer. The company is well known for its innovative operational processes such as a made-to-order manufacturing systemand
responsive customer services, which have fueled its market dominance in the U.S. computer industry. Yet it seems unlikely that
innovations of this nature would be manifest in the number of patents obtained.
Each analyst was asked two questions about each sample rm. The rst question was his/her familiarity with the company. The
three possible answers were 1=Not familiar with this company at all; 2=Somewhat familiar with this company; and 3=Very
familiar with this company. The second question asked for a rating of the company's innovativeness, dened as the ability to develop
new products, services, processes or systems for fullling customers' needs. The 7-point response scale was anchored by 1=Totally
lacking in innovation; 4=Average in innovation; and 7=Highly innovative. Only analysts who answered at least a 2 to the rst
question were kept for each company. All sample companies had valid ratings fromat least 10 different analysts. There was very high
agreement among their innovationratings, as indicatedby the reliabilityscore (.96). Thus, we averaged their ratings for eachcompany.
3. Results
We tested our hypotheses with the partial least squares (PLS) structural equations modeling technique (Wold, 1985), which is
increasingly being adopted by leadership researchers (e.g., Bass et al., 2003; Howell, Neufeld, &Avolio, 2005; Shamir, Zakay, Breinin,
&Popper, 1998). This methoddoes not make assumptions about (a) data distributions to estimate model parameters, (b) observation
independence, or (c) variables metrics (Barclay, Higgins, & Thompson, 1995). As compared to more traditional techniques like
regression, PLS also is less vulnerable to measurement errors in variables and the effects of outliers (Wilcox, 1998). These attributes
make PLS particularly suitable for testing multivariate mainandindirect effects models. This is especiallyso for small sample sizes as
in the present study (Chin, 1998; Sosik & Dworakivsky, 1998). The reason is that regression requires that one has more observations
than variables for sample size sufciency (e.g., at least 34 observations per variable to get reliable estimates of the errors). In
contrast, PLS converts the data into pseudo-variables which capture the variability in the data related to what one is trying to
predict. Since there are fewer pseudo-variables than variables, fewer observations are needed (Martens & Naes, 1989).
3
PLS generates estimates of standardized regression coefcients (i.e., path coefcients) for the model paths, which can then be
used to measure the relationships between latent variables (see Sambamurthy & Chin, 1994 for more information on PLS). We used
a jackkning procedure called blindfolding to evaluate the statistical signicance of the path coefcients (Sambamurthy & Chin,
1994). This procedure omits a part of the data matrix for a particular variable and then estimates path coefcients associated with
that variable. The customary omission distance of 10 was used.
Since there were multiple raters of CEOleadership as well as the moderating variables, we rst tested within-company variance
using James, Demaree & Wolfe's (1984) r
wg
procedure. We found at least 90% of the companies had a r
wg
value of .7 or higher for all
of the scales. Interrater agreement based on intraclass correlations also showed acceptable ranges for all of the measured variables
(transformational leadership=.88; empowerment =.78; climate for innovation=.84; centralization=74; formalization=.85;
competition=.74; and uncertainty=.71). Based on these results, we aggregated our data to the company level and conducted all
subsequent data analyses at this level.
4
3
A more detailed discussion of the attributes and benets of PLS is available from the rst author.
4
While most of our measures relate to the company as a whole (e.g., centralization, climate for innovation, competition), our empowerment scale focused on
the individual manager. As we had noted earlier, Klein et al. (2000) have shown that individual level measures can be aggregated to higher levels if there is a high
level of within-group agreement. Since our data satised this criterion, we believe that our aggregation approach is valid for testing empowerment as a rm-level
construct. A similar point applies to our measures of climate for innovation and CEO leadership.
588 D.(D.) Jung et al. / The Leadership Quarterly 19 (2008) 582594
Our analyses used the individual items as indicators for all scales except for transformational leadership, which used ve scale
scores (i.e., charisma, idealized inuence, inspirational motivation, intellectual stimulation, and individualized consideration) as
indicators (see Sosik & Dworakivsky, 1998 for a similar approach). Given the large number of items used to measure the constructs
of interest, we rst 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, to ensure adequate reliability, the factor
loadings of indicators associated with each construct had to be .60 or above (Bagozzi & Youjae, 1988). Second, the composite scale
reliability for each construct (an internal consistency estimate similar to alpha) had to exceed .70. Finally, the average variance
extracted by the latent constructs from their indicators had to exceed .50 (Fornell & Larcker, 1981).
Applying these criteria led to the retention of 4 items for empowerment, 8 items for climate for innovation, 4 items for
centralization, 4 items for formalization, 2 items for competition, and 3 items for environmental uncertainty. Finally, the two
output-based innovation measures (number of patents obtained and analysts' ratings) loaded onto a single construct consistently.
Table 1 shows descriptive statistics and inter-correlations among the scales.
5
3.1. Results for the measurement component
Table 2 presents the factor loadings, composite scale reliabilities and average variance extracted for constructs that contained
two or more items. Since PLS estimates its measurement and structural models simultaneously, we ran a full scale model that
contains CEO transformational leadership as well as the six moderators as independent variables predicting rm innovation.
Table 2 shows that all constructs satised all three retention criteria described earlier. Additional analyses were run to test the
constructs' convergent and discriminant validity by comparing the average variance extracted by each construct (diagonal
elements) and correlations between constructs. The results showed that the items representing a construct share more variance
with each other than with other constructs in the model, thus indicating adequate convergent and discriminant validity (Carmines
& Zeller, 1979; Wold, 1985).
6
3.2. Results for the structural component and hypotheses
In response to the ndings of past research (e.g., Miller et al., 1988), we included each company's size (number of full-time
employees) as a control variable. Additionally, the CEO's organizational tenure was used to control for the possible effects of time
sharpening or dulling the effects of his/her transformational leadership. The PLS analysis showed that the model as a whole
accounted for about 54% of the variance in rm innovation. Company size was signicantly and positively related to organizational
innovation (=.31, pb.001), while CEO tenure was signicantly and positively related to subordinates' perception of
transformational leadership (=.21, pb.001).
5
The third innovation metric, annual R&D expenditures as a percentage of sales revenues, had a loading of .50 on its own, unique factor. The R&D measure had
correlations of .09 and .03, respectively, with the patent and analysts ratings measures, while the latter two had a statistically signicant 0.50 correlation. We
conducted all of the analyses by using, alternately, the R&D measure and the aggregate of the latter two metrics (after converting each into a zero mean and unit
variance distribution). The same patterns of results were obtained, though the effects were generally smaller in absolute magnitude when the R&D measure was
used. Below, we only report the results for the aggregate measure for parsimony. Results based on the R&D measure are available from the rst author on request.
The lack of a signicant correlation between R&D and the other two innovation measures, together with the similar patterns of signicant effects, suggest that the
variables in our model are applicable to both the input and output ends of organizational innovation.
6
Tables for convergent and discriminant validity are not presented here to conserve space. They are available from the rst author upon request.
Table 1
Descriptive statistics and inter-correlations among constructs (n=50 companies)
Variable Mean SD Intercorrelations
1 2 3 4 5 6 7 8 9 10
1. CEO transformational leadership 3.74 .42 (.87)
2. Empowerment 5.54 .49 .14 (.84)
3. Climate of support for innovation 4.73 .69 .39 .24 (.90)
4. Centralization 3.24 .80 .15 .08 .35 (.70)
5. Formalization 1.98 .68 .03 .09 .02 .33 (.90)
6. Uncertainty 5.17 .77 .05 .05 .03 .03 .16 (.71)
7. Competition 6.06 .63 .37 .06 .09 .10 .14 .43 (.74)
8. Organizational innovation
a
.01 .89 .09 .26
b
.32 .20 .10 .31 .01
9. CEO tenure with his/her organization 9.95 6.68 .18 .12 .02 .01 .16 .02 .12 .16
10. Company size
c
3.07 1.23 .08 .06 .08 .01 .08 .41 .10 .52 .08
Note: values on the diagonal (in parentheses) represent Cronbach alphas. Values off the diagonal are correlations between constructs.
a
The two output-based measures of organizational innovation (# of patents and analysts' ratings) were standardized into zero mean and unit variance
distributions before they were combined into an aggregate measure of company innovativeness.
b
pb.10; *pb.05; **pb.01; ***pb.01.
c
Company size ranged from 1 (less than 100 employees), 2 (101500), 3 (5011000), 4 (10015000), and 5 (50011000) to 6 (over 10,000 employees).
589 D.(D.) Jung et al. / The Leadership Quarterly 19 (2008) 582594
3.2.1. Direct effect
The CEO's transformational leadership was positively and signicantly related to organizational innovation (=.15, t (49) =3.18,
pb.01). This nding provides support for Hypothesis 1.
3.2.2. Moderating effects
To test the moderating effects, we took each of the six moderating variables in turn, and created high and low subgroups based
on the variable's mean score. Then we reran the model used to test the direct effect of CEO transformational leadership on rm
innovation. That is, for each moderating variable, we estimated a path coefcient and standard error between transformational
leadership and innovation for each sub-sample. Then, an unpaired t-test was used to test the moderating effect (See Chin, 2000 for
more detailed information on how to test moderating effects with PLS, and Sosik, 2005 for a recent example of the identical
approach to testing a moderating effect.) The path coefcients and t-statistics for each sub-group are shown in Table 3.
Table 3 shows that all of the hypothesized moderating effects are supported except for empowerment. Specically, and
consistent with Jung et al. (2003), the path coefcient from CEO transformational leadership to rm innovation was higher in the
high climate-for-innovation group than in the low climate-for-innovation group (=.07 vs. =.09; t (48) =3.11, pb.01). Similarly,
the path coefcient was higher in the low centralization than in the high centralization group (=.44 vs. =.06; t (48) =25.54,
pb.001), and higher in the low formalization than in the high formalization group (=.28 vs. =.11; t (48) =6.99, pb.001). The
path coefcient also was higher in the high uncertainty than in the lowuncertainty group (=.23 vs. =.18) though in this case, the
difference was only marginally signicant (t (48) =1.78, pb.10). Finally, the path coefcient for the high competition group was
signicantly higher than that of the low competition group (=.24 vs. =.07; t (48) =9.05, pb.001).
While empowerment also had a signicant moderating role, the direction of its effect was opposite to that hypothesized. Rather
than being higher, the path coefcient was lower in the high empowerment group than in the low empowerment group (=.09
vs. =.11; t (48) =11.42, pb.001). The same directional difference also was found by Jung et al. (2003) though in their case, it was
not statistically signicant.
4. Discussion and implications
This study has tested the direct and moderated effects of CEO transformational leadership on rm innovation. Our results
supported a direct and positive effect of CEO transformational leadership on organizational innovation. The ndings further
Table 2
Factor loadings, weights, composite scale reliability, and average variance extracted for assessing construct reliability
Construct Item Factor loading Weights of measures Composite scale reliability Average variance extracted
1. CEO transformational leadership Charisma .89 .35 .91 .82
II .89 .27
IM .85 .35
IS .78 .12
IC .65 .10
2. Empowerment EMP1 .64 .33 .88 .75
EMP2 .82 .29
EMP3 .89 .34
EMP4 .83 .33
3. Climate of support for innovation CLIMATE1 .67 .07 .92 .78
CLIMATE2 .75 .11
CLIMATE3 .71 .17
CLIMATE4 .82 .12
CLIMATE5 .75 .16
CLIMATE6 .80 .28
CLIMATE7 .86 .21
CLIMATE8 .81 .16
4. Centralization CENTRAL1 .75 .39 .80 .71
CENTRAL2 .61 .32
CENTRAL3 .72 .34
CENTRAL4 .76 .36
5. Formalization FORMAL1 .90 .50 .85 .76
FORMAL2 .75 .34
FORMAL3 .76 .32
FORMAL4 .68 .10
6. Competition COMPETE1 .90 .59 .88 .64
COMPETE2 .86 .51
7. Uncertainty UNCERT1 .69 .24 .84 .73
UNCERT2 .92 .71
UNCERT3 .74 .34
8. Organizational innovation ZPATENT .83 .51 .81 .87
ZANALYSTS .90 .65
Note: II = idealized inuence; IM = inspirational motivation; IS = intellectual stimulation; IC = individualized consideration; EMP = empowerment; CLIMATE =
climate of support for innovation; CENTRAL = centralization; FORMAL = formalization; COMPETE = competition; UNCERT = uncertainty; ZPATENT = standardized
(zero mean, unit variance) measure of number of patents; ZANALYSTS = standardized (zero mean, unit variance) measure of analysts' innovativeness ratings.
590 D.(D.) Jung et al. / The Leadership Quarterly 19 (2008) 582594
revealed moderating effects by two attributes of the environment (uncertainty and competition) and four rm-level
characteristics: climate of support for innovation, formalization, centralization, and empowerment, though in the last case, the
effect was opposite in direction to that hypothesized.
Froma practice standpoint, our ndings not only underline the importance of managers tting their leadership behaviors to the
organizational context in which they work. They also support going beyond that to seek changes in attributes of the organizational
context. In the case of high-level managers like CEOs, they may have sufcient authority to inuence some of the variables that
moderate the link between their leadership behavior and organizational innovation, thereby amplifying the effects of their
leadership behaviors (House & Aditya, 1997; Miller et al., 1988; Pillai & Meindl, 1998). For example, a number of researchers have
suggested that top managers are the main architects of organizational climate by communicating what strategy to implement and
howthe goals of the organizationare relevant tothe employees' personal values anddesires. Inthe case of organizational innovation,
when top managers reinforce its importance by recognizing and rewarding creativity while being tolerant of mistakes, employees
are more likely to pursue new ideas and product innovation (Mumford et al., 2002; Sosik, Jung, Berson, Dionne, & Jaussi, 2004).
While environmental factors are less likely to be controllable by the managers of a company, they also can be used as leverage
for promoting change. In this regard, our nding of signicant positive moderating effects from two environmental variables is
worthy of note. Bass (1985) has argued that transformational leaders often emphasize crisis in order to bring about change, and we
had proposed that when employees perceive a high level of uncertainty and competition surrounding their organization, they are
more likely to be receptive of change and innovation initiatives. The recent turnaround of Samsung Electronics illustrates how this
may come about. When Yun Jong Young became the vice-chairman and CEO in 1997, the company had US$11 billion in debt and a
brand name that was mainly associated with low-end consumer products. Within ve years, the company had turned around
completely, earning US$5.9 billion on sales of US$33.8 billion in 2002. Many observers have attributed this transformation to
Young's leadership, with a vision to make Samsung a world-class company that could charge premium prices (Business Week,
2002). Toward this end, he continually emphasized the uncertainty in the high-tech industry as a way to motivate employees and
to promote change. Our nding of positive moderating effects for environmental uncertainty and competition is consistent with
their serving such a motivational role.
From a research perspective, our ndings underline the desirability of placing the empirical analysis of CEO leadership in its
organizational and environmental context, rather than analyzing bivariate relationships in isolation. Among possible directions for
future research, a topic worthy of scrutiny is our nding a negative moderating effect of empowerment on the relationship
between CEO transformational leadership and rm innovation. As Table 1 shows, even the zero-order correlation between
empowerment and innovation is negative and statistically signicant. Although our data precluded a search for underlying causes,
a plausible explanation is the sourcing of our data from Taiwan, where cultural values are relatively high in power distance
(Hofstede, 1997). According to Hofstede, people from a high power distance culture expect leaders to act strongly, and become
uncomfortable when leaders try to delegate heavily. In a work setting, this translates into a preference for paternalistic leaders,
with considerable dependence of subordinates on their superiors (Adler, 2002). Thus, subordinates in a high power distance
culture may feel confused and frustrated when left alone to gure out what they need to do and how to accomplish their goals.
More generally, our nding relating to empowerment may imply a need for transformational leaders to maintain a balance
between letting people feel empowered, and providing structure and control by dening goals and agenda (Mumford et al., 2002).
The optimal balance may well vary across cultures an area worthy of future research especially considering the increasing
globalization of economic activities.
Alternatively, the negative relationship between empowerment and innovation could be due to the unique nature of a high-tech
industry with rapidly changing technology. In the hyper- competitive consumer electronics industry from which our sample
companies were drawn, even top-selling innovative products can become obsolete relatively quickly (Bharadwaj &Konsynski, 1997).
The resultant need to continuously develop innovative products might require what Brown & Eisenhardt (1998) have referred to as
structuredchaos. They arguedthat there is a redenedrole of leaders as architects andcultural guardians, who need to go beyond the
traditional managerial responsibilities by carefully monitoring and controlling organizational reconguration processes. As such,
there may be a threshold past which additional empowerment would hamper managers' ability to lead change. Sosik et al. (2004)
also stressedthe importance of maintaining sucha balance inmany high-techorientedcompanies: The challenge for executives is to
also set the boundaries that help direct those creative individuals towards achieving innovation. In an R&D organization,
establishing guidelines and boundaries is important, and then giving people freedom to operate within those boundaries is
important (p. 176). It would be worthwhile to explore if, and how, this balance differs between high-tech and other industries.
Table 3
Moderating effects of cultural, structural, and environmental variables
Hypothesis and moderator Path coefcients from CEO transformational leadership to rm innovation in
each sub-group (N=25 in each sub-group)
t-value of difference in path coefcients
H2a: climate for innovation Low climate for innovation =.07 High climate for innovation =.09 3.11
H2b: empowerment Low empowerment =.11 High empowerment =.09 11.42
H3a: centralization Low centralization =.44 High centralization =.06 25.54
H3b: formalization Low formalization =.28 High formalization =.11 6.69
H4a: uncertainty Low uncertainty =.18 High uncertainty =.23 1.78
H4b: competition Low competition =.24 High competition =.07 9.05
*pb.10; **pb.01; ***pb.001 (df =48).
591 D.(D.) Jung et al. / The Leadership Quarterly 19 (2008) 582594
Yet another possibility is the sourcing of our empowerment measures. Even if the mid- to senior-level managers who supplied
the survey data perceived that they were being empowered by their CEO, they may not have in turn empowered their own
subordinates. Since major breakthroughs or innovative products often come from front-line employees and research scientists/
engineers, data fromthese other levels of the organization can shed further light on the role of empowerment in the organizational
innovation process.
In addition to delving more deeply into specic ndings of this study, there is room for expanding the scope of inquiry. First,
although the current model has managed to explain a signicant proportion (54%) of the variance in organizational innovation, it
has only included a subset of the potentially relevant cultural, structural, and environmental variables. Future research is needed to
expand the set of variables and to examine how they independently and interactively inuence organizational innovation.
Examples of other potentially relevant variables include rm strategy, performance measurement, and compensation policies, to
name just a few. In particular, we had omitted the effects of individual-level factors. Yet often, organizational innovations and
innovative products are initiated by a small group of highly creative individuals (Amabile et al., 1996; Mumford et al., 2002). Such
employees' ability to experiment and take risks may depend on attributes of the organizational context, including the resource and
time constraints at work, and how performance is measured and rewarded. As such, there is room for additional research which
examines how CEO leadership affects managers and employees at different levels in an organization, and how the latter interact
among themselves to enhance innovation. The framework proposed by Waldman & Yammarino (1999) could help to guide such an
examination of leadership effects across multiple levels of an organization.
Second, in analyzing cross-sectional data, our study can only reveal correlation but not causation. A longitudinal study that
relates changes in leader behavior to changes in outcomes is more suited for uncovering causal relationships. Furthermore, we had
suggested earlier that the effects of CEO leadership behaviors can be magnied or dampened by selected attributes of the
organization, and a longitudinal study can illuminate the extent to which transformational leaders seek to recongure these
attributes. Such a study would be further enriched by investigating the processes and pathways whereby effects arise, including
further disaggregating the variables under study. For example, are there differences in the nature of innovative efforts under more
vs. less formalized work arrangements? In the case of empowerment where we had obtained an unexpected result, what are the
various ways that employees respond to different levels of empowerment and in turn, how do these responses feed forward to
their innovation activities? Methods other than cross-sectional surveys, such as in-depth interviews and eld observation, are
more suited to answering such questions (Yin, 1989). And because innovation can occur not only in the products and services that
organizations produce, but also in the processes through which people work, tapping into these aspects of the organization can
increase the completeness and richness of our understanding.
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