Linking Transformational Leadership and Firm Performance: The Role of Entrepreneurial Orientation

Abstract

This study aims to analyze the mediating role of entrepreneurial orientation on the relation between transformational leadership and firm performance. A survey-based quantitative study was carried out with Portuguese SMEs’ textile and clothing industry executive directors for which the questionnaire was adopted from different published sources. Data analysis was performed through the structural equation model (SEM). The findings demonstrated a positive and significant relationship between transformational leadership and entrepreneurial orientation and between entrepreneurial orientation and firm performance. On the other hand, no evidence was found that transformational leadership is a variable that influences firm performance. Nevertheless, it was possible to prove the mediating effect of entrepreneurial orientation on the relationship between transformational leadership and firm performance. These findings highlight the catalyst role of entrepreneurial orientation, leveraging transformational leadership as antecedents of firm performance. These findings are valuable inputs for managers and public entities. In the future, the Portuguese SME’s textile and clothing industry must intensify its involvement in the digital economy, allowing transformational leadership to add value to firm performance using innovative, proactive, and risk-taking digital services.