Transformational Leadership, Sustainable Human Resource Practices, Sustainable Innovation and Performance of SMEs

Abstract

Enterprises of small and medium size have a major role in innovation and play a key role in the economic development of developing countries. Therefore, their sustainability and their sustainable practices need to be catered. In this paper, it is argued that transformational leadership has a significant role on sustainable human resource practices. Transformational leadership and sustainable human resource practices have a significant role in promoting innovation which helps enterprises in gaining performance. Therefore, the study identified the sequential mediating roles of sustainable human resource practices and sustainable innovation between transformational leadership and the performance of small and medium enterprises, by utilizing the theoretical support of resource-based view and ability motivation opportunity. For the said purpose, the data was collected from the owners and managers of 100 small and medium-sized manufacturing enterprises operating in Sialkot, Pakistan. The data was collected through adopted questionnaires and structural equation modeling was used to identify the relationships and mediating roles. The findings of the study revealed that transformational leadership has a significant impact on sustainable human resource practices, sustainable human resource practices have a significant impact on sustainable innovation, and sustainable innovation has a significant impact on the performance of small and medium enterprises. The analysis also proved the mediating impact of sustainable human resource practices between transformational leadership and sustainable innovation, and the mediating role of sustainable innovation between sustainable human resource practices and performance of small and medium enterprises. The study suggests the future researchers to involve external stakeholders for getting their opinion about the variables and suggested replicating the same model in other countries to validate the framework.