Innovation through creativity is an important factor in the success and competitive advantage of organizations (Woodman et al., 1993) as well as for a strong economy (Drucker, 1985). Today, almost all organizations face a dynamic environment characterized by rapid technological change, shortening product life cycles, and globalization. Organizations, especially technologically-driven ones, need to be more creative and innovative than before to survive, to compete, to grow, and to lead (Jung et al., 2003 and Tierney et al., 1999).
The literature includes several definitions of creativity and innovation. A widely accepted definition states that creativity is the production of novel and useful ideas, and innovation is the successful implementation of creative ideas within an organization (Amabile, 1983, Amabile, 1998 and Amabile et al., 1996). Thus, creativity is at the individual level, while innovation is at the organizational level (Oldham and Cummings, 1996).
Interest is growing in the influence of transformational leadership on creativity and innovation. Transformational leaders raise the performance expectations of their followers (Bass, 1995) and “seek to transform followers' personal values and self-concepts, and move them to higher level of needs and aspirations” (Jung, 2001: 187). Researchers have studied the effects of transformational leadership on the performance of followers and organizations in the past decade (e.g., Dvir et al., 2002, Howell and Avolio, 1993 and Lowe et al., 1996), but only a handful of studies have examined the effects of this type of leadership on followers' creativity. The conflicting findings as well as the experimental nature of these studies prompt the present research which primarily aims to understand the effects of transformational leadership on followers' creativity in a real setting.
The intrinsic motivation perspective dominates the creativity literature. This perspective argues that people are most creative primarily via intrinsic motivation (e.g., Amabile, 1983, Amabile, 1998 and Tierney et al., 1999). Amabile et al. (1996) further suggest that an individual's perception of the work environment is a key determinant of his or her creativity. According to their model, the perceived work environment influences the creative work carried out in organizations; that is, the psychological meaning employees attach to events in their organizations affect their motivation to generate new ideas. Previous literature has examined several psychological work environment perceptions that can influence creative work in organizations. For example, studies show perceptions of support for innovation (Scott and Bruce, 1994) and psychological empowerment (Deci et al., 1989) to be important sources of creativity.
Several studies report that transformational leaders empower their followers (e.g., Jung and Sosik, 2002) and establish an innovative climate (Jung et al., 2003). However, available research does not examine the mediating roles of empowerment and innovative climate in the relationship between transformational leadership and followers' creativity. This study proposes that employees' intrinsic motivation and perceptions of the work environment, specifically perceptions of support for innovation and empowerment, are the mechanisms underlying the effects of transformational leadership on creativity.
Along with the relationship between transformational leadership and followers' individual-level creativity and the underlying potential mediating processes, this study also investigates the relationship between transformational leadership and innovation at the organizational level. Extending the model to this level of analysis should be a significant contribution to the literature because only a handful of empirical studies have looked at the effect of transformational leadership on organizational innovation (e.g., Jung et al., 2003). More importantly, since innovation at the organizational level is the result of creative efforts and achievements in commercial organizations, gaining an understanding of the effect of this form of leadership on organizational innovation is as important as understanding its effect on employees' creativity. This study aims to examine the effects of transformational leadership on creativity at the individual level and innovation at the organizational level. Fig. 1 shows the multilevel model developed for this purpose.According to the proposed model, transformational leadership positively relates to followers' creativity. Followers' intrinsic motivation, psychological empowerment, and perception of support for innovation mediate this effect. At the organizational level, transformational leadership positively relates to organizational innovation. Furthermore, individual-level creativity influences innovation at the organizational level.
This paper has both theoretical and methodological contributions to the literature. This study is the first to investigate the effects of transformational leadership on creativity-related outcomes at multiple levels within organizations. The findings suggest that transformational leadership has important effects at both individual and organizational levels. At the individual level, transformational leadership positively relates to followers' creativity. This finding is valuable for two reasons. First, previous findings were inconsistent and further research in real settings was needed to support the positive proposition in favor of this leadership (Mumford and Licuanan, 2004). In line with the findings of Shin and Zhou (2003), this research, conducted in real-work settings, finds a positive relationship between transformational leadership and followers' individual creativity. Second, this positive relationship exists in collectivist Turkey (Hofstede, 1980), supporting the arguments by Bass (1990a) that transformational leadership is more likely to emerge in collectivist cultures than in the individualist cultures of the West and that collectivists perform better under transformational leadership. A number of studies report a stronger positive effect of transformational leadership on the creative performance of collectivists as compared to individualists (e.g., Jung and Avolio, 1999 and Jung and Yammarino, 2001).
Analysis of the mediators reveals partial mediating effects for intrinsic motivation and psychological empowerment based on Baron and Kenny's (1986) criteria. Yet, the test of mediation shows that intrinsic motivation is not a significant mediator of the transformational leadership–creativity relationship. This finding seems to contradict Shin and Zhou's (2003) study that shows a partial mediating effect of intrinsic motivation. However, their research does not involve a formal test of the significance of this mediated effect, making it difficult to comment on these inconsistent results.
The mediating effect of psychological empowerment, on the other hand, is significant. This finding is an important contribution to the literature in that it shows psychological empowerment as a crucial psychological mechanism through which transformational leadership influences employees' creativity. A reason for psychological empowerment to be a stronger mediator than intrinsic motivation might be that R&D employees are already intrinsically motivated, which may act as a substitute for the influence of a transformational leader on their creative performance. This leader's effect through enabling them to make their own decisions and take initiatives might be a more powerful creativity-enhancing force for these employees than his or her effect through influencing their intrinsic motivation.
Contrary to the expectation of this study, the mediating role of perception of support for innovation is not significant. This finding might have resulted from the high correlation between transformational leadership and support for innovation (r = 0.71). In addition, the transformational leader's direct behavior on employees, such as individualized consideration and intellectual stimulation, might affect their emotional well-being and provide direct and clear cues that creative behavior is expected; whereas, employees might not take an innovation supporting climate, an organization-wide contextual factor, as personally. These arguments might apply more to a high power-distance culture, where the workers put more value on their leader's building one-to-one relationships with them. The increased enthusiasm might make them seek more innovative approaches in their work. Perhaps Turkish people, who rank high on power-distance (Hofstede, 1980), respond readily to the transformational leader who empower them, but they may not see a climate supporting innovation as important to them personally.
At the organizational level of analysis, in line with the findings of Jung et al. (2003), this study reports that transformational leadership has a significant positive association with organizational innovation. Moreover, as stated before, previous research focused on this leader's effect on the tendency of organizations to innovate. The definition of organizational innovation in this study includes the success of innovations as well as the tendency to innovate. The findings suggest that transformational leaders might not only promote innovative activity within the organization but also ensure the market success of the innovations. Furthermore, since the innovations under investigation here are related to development work, the positive influence of this form of leadership is identified on incremental innovation. This finding somewhat contradicts Keller's (1992) suggestion that developmental projects which use existing knowledge to produce incremental innovations might need more of a transactional leader to allocate and coordinate tasks, while research projects which need originality and importation of technical information in order to produce radical innovation might be better led by transformational leaders. Transactional leadership is not under investigation here, but this study suggests that as the transformational character of the leader increases, innovation in developmental work increases. This contrary result might have stemmed from the collectivist character of the Turkish participants who would expect their leaders to exhibit transformational leader behaviors (Bass, 1995) and would readily respond to transformational leadership.
The proposed relationship between individual-level creativity and organizational innovation is not significant. Several reasons might explain this finding. First, as Mumford and Gustafson (1988) suggest, employee creativity may be necessary but not sufficient for organizational innovation given that creative ideas or solutions might not be considered useful or might not be successfully implemented. In this case, they will not be converted into actual innovations in the organization. Furthermore, Perry-Smith and Shalley (2003) argue that novel information is less likely to be communicated through stronger ties (good friends or close relationships) than weaker ties (more distant relationships or distant colleagues). Given that R&D groups under investigation in this study are composed of a handful of employees stronger ties might have been in effect leading to less communication of novel information. Moreover, creative output of a collective may be a function of not only the creativity of individuals but also group processes such as group cohesion (Woodman et al., 1993), effective communication by group members (Taggar, 2002), and team integration skills such as conflict resolution and collaborative problem-solving skills (Janssen et al., 2004). The lack of these factors or even a low level of them might hinder the effects of individual creativity (Taggar, 2002). This might have been the case in the present study. Finally, the methodology employed here might have been a reason for the failure to find this relationship. In this study, there is a mismatch between the 3-year period for which innovation data were measured and the company tenures of the participants, which average 2.25 years. Therefore, participant employees might not have contributed to the innovative projects of the last 3 years.
The methodological contributions of this study are twofold. First, this study investigates transformational leadership, creativity, and innovation in Turkey, a developing country; it shows the external validity of these theories which were developed and tested in Western developed countries. Second, the market-oriented measure developed and used as a proxy for organizational innovation in this study qualifies as a methodological contribution. It can be used as a measure of innovation in newly developing industries and in entrepreneurial companies, especially in underdeveloped or developing countries where quantifiable measures such as patents or copyrights are not relevant. Furthermore, this measure differs from other measures of organizational innovation in that it reflects not only the firms' propensity to innovate but also the returns on innovations, an important indicator of competitive advantage.
This study is not without its limitations. Employees' creativity was evaluated only by their leaders and this might have led to artificially inflated ratings. Another limitation is the cross-sectional design employed; which makes it difficult to infer causality between the variables in such studies. The significant relationships reported in this study are associative and correlational, and may not be causal. For example, the positive relationship between transformational leadership and creativity might have been a spurious one due to some contextual factors that influence these variables. Thus, longitudinal studies in real-work settings can better analyze the significant relationships found here. In addition, the sample of this study might be another limitation. First, the sample is primarily comprised of males. Second, it includes small-sized entrepreneurial software development companies operating in Turkey. The findings might not be generalizable to other software development companies or to other types of organizations in different industries and/or countries. Finally, this research does not include group characteristics or processes such as group composition, cohesiveness, and communication while investigating individual creativity–organizational innovation relationships, which might have prevented capturing the complexity of this relationship.
