A Mediated Moderated Analysis of Psychological Safety and Employee Empowerment between Sustainable Leadership and Sustainable Performance of SMEs

Abstract

Nowadays enterprises are highly concerned about their sustainability. Sustainability of SMEs in a developing country is highly dependent over the performance. Sustainable performance of SMEs in developing countries is highly linked with the satisfaction of stakeholders. Likewise for sustainable performance and catering of stakeholders can be made possible with the help of sustainable leadership. Therefore, the purpose of the current study Is to examine the mediating role of psychological safety among the relationship between sustainable leadership and sustainable performance of SMEs. Furthermore, considering the importance of employee empowerment which is considered as a major resource for employee performance this study further analyzed the moderating impact of employee empowerment. For this said objective data was gathered from owners and managers of 100 small and medium-sized manufacturing enterprises in operating in Lahore, Sialkot, Faisalabad, Karachi, Gujranwala, Gujrat, and Rawalpindi/Islamabad through cluster sampling. The data was gathered through surveys, and structural equation modeling was run to analyze the relationships. The findings revealed that sustainable leadership has a significant impact on psychological safety and sustainable performance of SMEs, whereas psychological safety showed an insignificant effect over sustainable performance of SMEs, but the mediating role of psychological safety was found to be significant. Likewise, employee empowerment direct influence sustainable performance and holds a significant moderating role. The findings of the research are significant for practitioners as well as academicians because it revealed that owners and managers should design strategies to encourage employee empowerment and to provide them psychological safety. The findings of the study are limited on the data collected from owners and managers without involving any other stakeholders. Therefore, in future researchers are guided to involve other stakeholders as well in the study.