Impact of Transformational Leadership on Innovative Behavior: Mediation via Psychological Empowerment (Study of Banking Sector of Pakistan)

Abstract

The objective of this empirical research IS to study mediation between transfonnational leadership (composite variable) & innovative behavior through psychological empowerment and also to study transfonnational leadership 's dimensional (i.e. idealized consideration, inspirational motivation, intellectual stimulation and individualized consideration) role on employee innovative behavior in Pakistani banking sector settings. In the current competitive global market, businesses are constantly seeking continuous improvement of their processes, products and services through innovation. Transformational leadership with the ability to encourage innovation is considered vital for a business· s survival. In addition, the job of psychological empowerment in enhancement of innovative behavior of employees is also considered vital by researchers. Nevertheless, function of psychological empowerment as mediator between the linkage of transformational leadership (independent variable) & innovative work behavior (dependent variable) remained unexplored. Moreover, past studies primarily conceptualize transfonnational leadership as a single-factor and relate it with innovations of varied types. However, the dimensional effect of transfonnational leadership remained unexamined. Primary data collection methodology was adopted for this study. To facilitate the large-scale data collection and also because of lockdown due NCOVID-19 pandemic, an online survey was carried out. Data from 450 middle managers from banking sector of Pakistan was collected. The research model was then tested using structural equation modeling (SEM). The results indicate that the relationship between transformational leadership (as a composite variable) & innovative behavior is mediated by psychological empowennent. Moreover the results also confirm that each component of transformational leadership impacts employee innovative behavior differently