Transformational leadership, job performance, and innovation: The mediating role of psychological empowerment in Lebanese SMEs

Abstract

Type of the article: Research ArticleAbstractThe ongoing economic crisis within Lebanon underscores the urgent need to identify internal mechanisms supporting organizational resilience. The primary objective of this study is to establish the empirical pathways linking transformational managerial behaviors to individual job performance and employee innovative work behavior via the intervening mechanism of psychological empowerment within small businesses in Lebanon. Methodologically, structural equation modeling (SEM) was applied to data collected during October and November 2025 via structured electronic questionnaires, utilizing a convenience sampling method with a sample of 400 full-time SME employees across diverse industry sectors and organizational tiers. The empirical results demonstrate that transformational leadership exerts a potent direct effect on psychological empowerment (β = 0.569, p < .001) and retains a statistically significant direct relationship with job performance (β = 0.186, p = .016), establishing a partial mediation framework where the indirect pathway through empowerment (β = 0.351, p < .001) highly enhances task execution. Similarly, innovative work behavior also operates under a partial mediation framework where transformational leadership displays a significant direct impact (β = 0.280, p < .001) alongside a robust indirect effect via empowerment (β = 0.299, p < .001). The study demonstrates that under conditions of persistent macroeconomic instability, the capacity of transformational management to optimize both baseline job performance and creative adaptations is significantly amplified by cultivating internal psychological capital, establishing that employee empowerment serves as a vital structural buffer when external institutional resources are constrained.AcknowledgmentWe express our sincere gratitude to our institutions, as well as to Beirut Arab University (BAU), for the institutional support and ethical oversight provided throughout this study.Furthermore, we extend our profound acknowledgment to our families, as well as the individuals and organizations whose unwavering encouragement made this research possible despite the cascading challenges facing Lebanon. This work is dedicated to those who remain steadfast believers that Lebanese small and medium enterprises (SMEs) deserve the support and resilience necessary to reach better days. Finally, we are deeply grateful to the 400 employees and SME managers who facilitated access to data, proving that even in times of crisis, the commitment to organizational growth and scientific inquiry remains a priority.