CEO transformational leadership and firm innovation: the role of strategic flexibility and top management team knowledge diversity

Kui Yin, Can Li, Oliver J. Sheldon, Jing Zhao

Research output: Contribution to journalArticlepeer-review

Abstract

Purpose: Drawing upon a dynamic managerial capabilities perspective, this study aims to unpack how and when chief experience officer (CEO) transformational leadership influences firm innovation. Specifically, a moderated mediation model linking CEO transformational leadership to firm innovation, which includes strategic flexibility as a mediator and top management team (TMT) knowledge diversity as a moderator, is theorized and empirically tested. Design/methodology/approach: The authors conducted a survey of 354 TMT members and 62 CEOs from 62 firms in China’s construction industry to explore these relationships. Path analysis using Mplus 7.4 was undertaken to test our proposed moderated mediation model. Findings: The results revealed that strategic flexibility mediates the positive relationship between CEO transformational leadership and firm innovation. Additionally, TMT knowledge diversity positively moderates the relationship between CEO transformational leadership and strategic flexibility. Research limitations/implications: Taken together, these findings help advance and deepen our understanding of the mechanisms through which CEO transformational leadership influences firm innovation and boundary conditions under which CEO transformational leadership influences strategic flexibility. At the same time, this study also contributes to the literature on strategic flexibility and the CEO-TMT interface by revealing the interactive effect of CEO transformational leadership and TMT knowledge diversity on strategic flexibility. Originality/value: Although the positive influence of CEO transformational leadership on firm innovation has been widely recognized, the specific mechanisms underlying this effect have yet to be fully theorized. This study proposes and tests a nuanced theoretical framework linking CEO transformational leadership to firm innovation via a firm’s strategic flexibility. It also argues that TMT knowledge diversity enhances the indirect effect of CEO transformational leadership on firm innovation through strategic flexibility; that is, this indirect effect is significant when TMT diversity is high, but not when TMT diversity is low.

Original languageEnglish (US)
Pages (from-to)933-953
Number of pages21
JournalChinese Management Studies
Volume17
Issue number5
DOIs
StatePublished - Nov 13 2023

ASJC Scopus subject areas

  • General Business, Management and Accounting

Keywords

  • Firm innovation
  • Strategic flexibility
  • TMT knowledge diversity
  • Transformational leadership

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