Transformational leadership, organizational innovation, and competitive advantage in service sector organizations: A legal and corporate governance perspective

Abstract

This paper discusses the use of transformational leadership practices to improve innovation in organizations and attain sustainable competitive advantage in service sector organizations that are governed by the legal and corporate governance systems. Quantitative analytical approach was taken, and a structured questionnaire was administered to employees in 15 service organizations to collect data. The relationships between transformational leadership, organizational innovation, and sustainable competitive advantage were tested using structural equation modelling (SEM). The results show that idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration dimensions of transformational leadership have a strong positive effect on organizational innovation and sustainable competitive advantage. In addition, organizational innovation was observed to be a significant mediator of the relationship between transformational leadership and sustainable competitive advantage. The findings demonstrate the strategic value of transformational leadership in the promotion of innovation and maintenance of a competitive edge in governance-based service organizations. The paper has theoretical and practical implications for managers who aim to improve their innovation capabilities and remain competitive over time.