Does Transformational Leadership Promote Innovation?
November 1, 2016 • Transformational Leadership
Is there a link between CEO transformational leadership style and new product development (NPD)? The authors of a new study found strong evidence to suggest there is. They also found a connection between organizational learning and innovation culture and the NPD process. Their findings can help organizations improve their NPD processes and achieve greater new product success.
CEO transformational leadership is positively associated with organizational learning.In their study of 269 small, medium and large manufacturing companies in five industries in Thailand, Sattayaraksa and Boon-itt tested four hypotheses:
- CEO transformational leadership is positively associated with innovation culture.
- Organizational learning is positively associated with the NPD process.
- Innovation culture is positively associated with the NPD process.
Data was collected from organizational leaders (managers through CEOs/presidents) using a self-report questionnaire.
Sattayaraksa and Boon-itt found important linkages between CEO transformational leadership and the NPD process:
- Transformational leadership is strongly and positively associated with the organizational learning – those processes in which information and knowledge is acquired and managed. This translates into stronger organizational performance. (0.76 correlation was found between CEO transformational leadership and organizational learning)
- Transformational leadership also influences values and beliefs that promote communication, risk-taking and new opportunity exploration. Transformational leaders can create an innovation culture by stressing core innovation values, rewarding innovation and encouraging new approaches. (0.78 correlation was found between CEO transformational leadership and innovation culture)
- There is a strong and positive correlation between organizational learning and the NPD process.Organizations can leverage customer and market feedback and translate these insights to the NPD decision-making process. (0.64 correlation was found between organizational learning and the NPD process)
- While there is evidence that an innovation culture directly affects the NPD process, an innovation culture does not strongly influence the implementation of this process. (0.19 correlation was found between the two)
“Google CEO and founders have demonstrated transformational leadership in making Google one of the most innovative companies in the world, by creating a fun environment and a relaxed culture in which creativity thrives.” Oke et al. (2009)
A key takeaway from this new study is the finding that CEOs with transformational leadership styles indirectly influence the NPD process by way of organizational learning and innovation cultures. Sattayaraksa and Boon-itt conclude with three practical recommendations:
- CEOs should develop skills and behaviors on the four dimensions of transformational leadership. Organizations should integrate transformative leadership to their leadership development initiatives.
- Leaders should strengthen the company’s organizational learning capability, to benefit the NPD process.
- Leaders and R&D managers should foster innovation cultures by encouraging openness, risk taking, and exploring new opportunities as a benefit to the NPD process