The Effect of Transformational Leadership on Company Innovation Culture: Perspectives from the Service Sector of an Emerging Economy

Abstract

Focusing on the importance of innovation culture to the growth of firms, the study examined the effect of transformational leadership on the innovation culture of firms in the service industry in Ghana. The study further assessed the moderating role of organizational learning capability and market dynamism. A sample of 210 employees in the telecommunication, banking and insurance, tourism and hospitality sectors were surveyed. A quantitative research approach was employed to test the various relationships. The findings indicated that transformational leadership had a significant and positive relationship with innovation culture. The findings further revealed that the relationship between transformational leadership and innovation culture was positively enhanced by market dynamism. Organizational learning capability which had two dimensions, that is, interaction with external environment and dialogue had a partial moderating effect on innovation culture. The study provides executives with critical insights on the need to allow employees to make some decisions where necessary and also trust in their decision and not always control the work tightly from the top; as such micromanaging could have adverse impact on the firm’s innovation drive and culture. The researcher contributes to extant literature by finding the moderating role of market dynamism and learning capability on the effect of transformational leadership and innovation culture in an organisation specifically in the service industry of an emerging country.