The Pathway to Improve Innovation Capacity for Lao Firms: The Roles of Transformational Leadership and Psychological Resources of Employees

Abstract

Innovation is the key and fundamental forces for firms to survive and grow in a competitive environment. The paper aims to examine the correlation between Transformational Leadership (TL) and employees' psychological sources and how they affect an organization's Innovation Capability (IC). Structural Equations Modeling (SEM) is utilized to elaborate the relationship among the proposal factors using survey data gathered from 315 participants of 65 medium and small-sized firms in Vientiane, Laos. The findings show that employees' psychological sources, namely optimism and self-efficacy, act as mediating roles in the effects of TL on IC. The findings revealed that TL's Idealized Influence (TII) brings employees greater optimism, while individualized consideration creates a stronger self-efficacy among employees. In addition, it highlighted the extreme importance of self-efficacy in stimulating IC compared with optimism's effect. From a practical view, the paper highlights the importance and need to apply TL style in organization management to develop employees' positive psychological capital and improve IC actively. The paper's findings also bring deeper understanding and theoretical initiatives that can be applied to clarify the correlation among TL, forms of employees' psychological capital, and IC.

Influences of Organizational Factors on Organizational Capability for Innovation: An empirical Study from Vietnamese Firms

“…Bass (1999) defined transformational leadership (TL) with four characteristics including (1) idealized influence: ability to provide a vision and perception of mission, instilling pride, gaining respect and trust); (2) intellectual stimulation: ability to promote intelligence, rationality and attentive problem solving); (3) inspirational motivation: interested in communicating high expectations, using symbols to focus efforts, expressing important purposes in simple ways); and (4) individualized consideration: interested in personal attention, treating each employee individually, coaching and advising. The theory of TL has attracted much observation from scholars and emerged as one of the most powerful leadership theories (Le & Lei, 2017;Le & Lei., 2018a,b,c;Van et al, 2018;Hui et al, 2018;Le et al, 2018a,b;Phong et al, 2018;Lei et al, 2019a,b,c,d;Sengphet et al, 2019;Le & Tran, 2019;Ha et al, 2019). Consequently, investigating the relationship between TL and innovation capability of Vietnamese firms will enrich the understanding and knowledge of new leadership style and innovation management in Vietnamese context.…”

Probing the impact of transformational leadership on job embeddedness: the moderating role of job characteristics

“…Thus, a better evaluation of job content and job context by the employees leads to a sense of obligation and commitment toward the organization (Ahmad, 2018). Leaders can develop positive employee morale by redesigning and enriching jobs (Liu et al, 2013;Sengphet et al, 2019). Knowing these attributes of job characteristics theory, the leaders can use this information for work with the subordinates to ensure their job satisfaction is intact and positive that can lead them to feel embedded toward their job and organization.…”

Transformational Leadership, Knowledge Sharing and Innovation Capability: An Empirical Study from Lao Firms

“…Scholars recognized that innovation capability of firms allows them to adapt effectively with the lack of certainty of both external and internal environment, and bring firms the success in the dynamic markets in long term Yang et al, 2018;Lei et al, 2019). In the context of small and medium enterprises (SMEs), prior studies indicated that because SMEs are limited resources, their innovation capability becomes very important to compete successfully in the marketplace (Sengphet et al, 2019). However, it is not easy for SMEs to develop it properly due to lack of understanding on antecedents of innovation Sengphet et al, 2019).…”

“…In the context of small and medium enterprises (SMEs), prior studies indicated that because SMEs are limited resources, their innovation capability becomes very important to compete successfully in the marketplace (Sengphet et al, 2019). However, it is not easy for SMEs to develop it properly due to lack of understanding on antecedents of innovation Sengphet et al, 2019). To fill the theoretical gaps, this study will clarify the influence of transformational leadership (TL) on innovation capability of SMEs via the mediating role of knowledge sharing.…”