A conceptual study on investigating the effect of innovation, transformational leadership and work stressor on employee performance of SMEs in Pakistan

Abstract

The understanding of elements contributing to employee performance of small and medium enterprises (SMEs) in Pakistan is still deficient. As the SMEs of Pakistan have had difficulty surviving in their early years, their initial failure rate is 90% -95%. Initially, this is a concept paper to provide useful insights into the relationship between organizational innovation, transformational leadership, and work stressor on employee performance of small and medium enterprises (SMEs) in Pakistan's manufacturing sector. The relationship between organizational innovation, transformational leadership, and work stressor and their effect on overall employee performance is established through a review of the literature. The mediating role of creativity was also an attempt to explore. In order to reach the optimum level of employee performance to increase the outcome of SMEs in Pakistan, it is mandatory to provide an open and supportive environment to employees so they can cultivate their creative ideas. This study mainly focused on the factors that directly influence employee creativity to ensure progress in employee performance. This study emerged from the fact that a very limited study is being carried out on this issue, and further research should be carried out in this field, especially in Pakistan. A model is proposed, and hypotheses will be developing and discussed based on theoretical considerations. The findings of this study can contribute to business practice by informing employee performance, improvement strategies. Business leaders could gain additional insights into strategies to engage and motivate employees to improve performance.

The Effects of Transformational Leadership, Organizational Innovation, Work Stressors, and Creativity on Employee Performance in SMEs

“…Individuals become more adaptive and open to new experiences as a result of creativity, which increases novelty, usefulness independence, confidence, and willingness to take chances ( Duarte et al, 2021 ). Employee creativity has a favorable impact on employee performance and innovation ( Nasir et al, 2020a ).…”

“…Pakistan has focused on SMEs, particularly the manufacturing sector, since 2004 in order to achieve long-term economic growth. In Pakistan, however, 95 percent of SMEs fail within the first year of operation ( Nasir et al, 2020a ). Similarly, SMEs’ productivity in large industries, such as textiles, is on the decline.…”

“…Furthermore, SMEs have a poor level of innovation and technological advancement. Experts also believe that a lack of innovation, leadership, and performance competencies is a major cause of these issues ( Nasir et al, 2020a ). Despite the crucial role of employees in SMEs, there is a scarcity of in-depth study on this topic in Pakistan.…”

“…The authors Xian et al (2020) believe that further investigation is needed to better understand the elements that influence employees’ creative and organizational innovative behavior for enhancing overall employee performance. As a result, both leadership and organizational innovation are examined in this research, along with hindrance and challenge stressors ( Nasir et al, 2020a ).…”

“…In this context, Bass (1985) described a transformational leader as someone who motivates subordinates to go above and beyond their expectations. A transformational leader is dynamic, proactive, and capable of influencing themselves and their followers to embrace change ( Nasir et al, 2020a ). According to Ergeneli et al (2007) , transformational leaders encourage their employees to go beyond their own self-interests for the good of their organizations.…”