CEO transformational and transactional leadership and organizational innovation: The moderating role of environmental dynamism

Abstract

Purpose

Organizational innovation is critical for firm competitive advantage. Yet, we do not know enough about the relationship between leadership and organizational innovation. The purpose of this paper is to examine the influence of chief executive officer (CEO) transformational and transactional leadership on organizational innovation. The authors examine the moderating role of environmental dynamism.

Design/methodology/approach

The authors collected survey-based data from top management team members in 163 companies in services, construction, manufacturing and other industries in the USA. The authors used multiple regression analyses to test the study hypotheses.

Findings

The empirical findings indicate that CEO transformational and transactional leadership behaviors positively influence organizational innovation. However, organizations benefit more from transformational leadership in dynamic environments.

Originality/value

This study highlights the role of CEO leadership behavior in the pursuit of organizational innovation. Significantly, the study shows that both transformational and transactional leadership can enhance organizational innovation. However, their effectiveness is contingent on environmental dynamism. This contributes to the firm innovation literature by clarifying how specific types of CEO leadership influence organizational innovation in different environmental conditions.

Citation

Prasad, B. and Junni, P. (2016), "CEO transformational and transactional leadership and organizational innovation: The moderating role of environmental dynamism", Management Decision, Vol. 54 No. 7, pp. 1542-1568. https://doi.org/10.1108/MD-11-2014-0651