The effect of transformational leadership on innovation : evidence from Lebanese banks

Abstract

Purpose: Transformational leadership (TL) has been recognized as one of the most important factor influencing innovation. It is argued that this style plays an essential role in developing the process, structure and climate for organizations to become innovative. This research aims to examine the impact of TL on two aspects of innovation namely product and process innovation. Design/Methodology/Approach: The quantitative and explanatory analysis was taken by using the Structural equations modeling (SEM) with AMOS 20 to examine the relationship between TL and innovation. Research data were collected through a survey method. The sample result was determined by the probability stratified sampling technique of about 310 employees at 27 banks in Lebanon. Findings: The findings confirmed the importance of TL in enhancing innovation in banking sector. The main implication of the research highlights that individualized consideration is the most important predictor of product and process innovation followed by, inspirational motivation and idealized influence, respectively, whereas, intellectual stimulation has insignificant influence on product and process innovation. Practical Implications Findings point to how transformational style of leadership produce better outcomes for the banks by mobilizing employees to engage in innovative products and processes. Originality/Value: These findings extends the understanding of the processes through which transformational styles of leadership stimulate innovation, and also highlight the benefits gained by cultivating more transformational styles of leadership to generate more innovative outcomes.