Demystifying the impact of CEO transformational leadership on firm performance: Interactive roles of exploratory innovation and environmental uncertainty

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Date: Mar. 2019
Publisher: Elsevier B.V.
Document Type: Report
Length: 242 words

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Byline: Jian-Xun Chen [jxunch@uibe.edu.cn] (a), Piyush Sharma [piyush.sharma@curtin.edu.au] (b,*), Wu Zhan [wu.zhan@sydney.edu.au] (c), Li Liu (d) Keywords CEO transformational leadership; Demand uncertainty; Exploratory innovation; Firm performance; Technology uncertainty Abstract This paper aims to reconcile the inconsistent findings about the effects of CEO transformational leadership (CTL) on firm performance by using upper echelon theory to hypothesize and empirically demonstrate that CTL triggers exploratory innovation in a firm, which in turn has an inverted U-shaped effect on firm performance. In other words, CTL may only lead to better firm performance at moderate levels of exploratory innovation through optimal utilization of a firm's scarce resources and may actually hurt firm performance at higher levels of exploratory innovation because of suboptimal resource utilization. We also show that CTL's most detrimental effect on firm performance occurs when the contingencies of high technology uncertainty and low demand uncertainty are combined. Data from multiple sources within 288 Chinese firms support most of our hypotheses and provide insights into the complex mechanism by which CTL affects firm performance, especially in an increasingly uncertain global economic environment. Author Affiliation: (a) Institute of International Economy, University of International Business and Economics, Beijing City 100029, China (b) Curtin Business School, Curtin University, Perth, Australia (c) Discipline of International Business, University of Sydney, Sydney, Australia (d) Department of Human Resource Management, China Women's University, Beijing 100101, China * Corresponding authors. Article History: Received 9 April 2018; Revised 27 October 2018; Accepted 29 October 2018

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Gale Document Number: GALE|A569710691