A model of the relationship between leadership styles, organisational climate, innovation and performance

Abstract

Knowledge about the antecedents to and the consequences of innovation is often studied in a fragmented way, resulting in an incomplete understanding of the dynamics that drive organisational performance. The purpose of this study is to develop a comprehensive model explaining the relationship between leadership style, organisational climate, innovation and organisational performance. The systematic literature review procedure was used to identify, analyse and critically evaluate studies that examined the relationship between leadership style, organisational climate, innovation and organisational performance. Given this information as background a cross-sectional survey design was used to test the relationship between the named variables. Firstly, a measurement model was tested with data collected from 3 180 respondents, representing 52 companies. Secondly, a structural path model was tested, with data collected from 231 employees representing 112 companies. The findings of the systematic literature review revealed that empirical studies that link the four variables are scarce; in the main, combinations of three variables are found. It also revealed that measures of innovation and performance vary vastly, inhibiting the incremental development of a comprehensive empirical body of knowledge. The results of the measurement model substantiated differentiation between leadership styles and the expected positive correlation between both transformational and transactional leadership and innovative behaviour. Furthermore, the results showed that not all components of leadership impacted positively on innovative behaviours. The structural path model showed that a transformational leadership style has a direct impact on the organisational climate, innovation and organisational performance. In contrast, a transactional leadership style had a direct impact on organisational performance, but no relationship was found between transactional leadership style and organisational climate and innovation. This study is important as it provides a unified model of innovation that focuses on both antecedents, as well as the outcomes of innovation, in a more comprehensive manner than any previous study.