Transformational and transactional leadership and

The International Journal of Human Resource Management

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Transformational and transactional leadership and employee’s entrepreneurial behavior in knowledge–intensive industries Bilal Afsar, Yuosre F. Badir, Bilal Bin Saeed & Shakir Hafeez To cite this article: Bilal Afsar, Yuosre F. Badir, Bilal Bin Saeed & Shakir Hafeez (2016): Transformational and transactional leadership and employee’s entrepreneurial behavior in knowledge–intensive industries, The International Journal of Human Resource Management, DOI: 10.1080/09585192.2016.1244893 To link to this article: http://dx.doi.org/10.1080/09585192.2016.1244893

Published online: 17 Oct 2016.

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Date: 17 October 2016, At: 06:36

The International Journal of Human Resource Management, 2016 http://dx.doi.org/10.1080/09585192.2016.1244893

Transformational and transactional leadership and employee’s entrepreneurial behavior in knowledge–intensive industries Bilal Afsara, Yuosre F. Badirb, Bilal Bin Saeedc and Shakir Hafeezc a Department of Management Science, Hazara University Mansehra, Mansehra, Pakistan; bSchool of Management, Asian Institute of Technology, Pathum Thani, Thailand; cDepartment of Management Science, COMSATS Abbottabad, Abbottabad, Pakistan

ABSTRACT

Leaders play a vital role in encouraging and supporting the initiatives of individual employees to explore new opportunities, to develop new products or to improve work procedures for the benefit of the organization. Entrepreneurial behavior is imperative for innovation, growth, and organizational success. Transformational leadership, in contrast to transactional leadership, has been argued to be particularly effective in engendering entrepreneurial behavior. However, empirical evidence for this relationship is scarce and inconsistent. Addressing this issue, the current study examines the moderating role of psychological empowerment on the relationship among transformational leadership, transactional leadership, and entrepreneurial behavior. Data were gathered from a cross-industry sample of 557 employees and 64 leaders from eight different knowledge-intensive organizations. The results show that transformational leadership is positively related to entrepreneurial behavior, whereas transactional leadership negatively influences it. We found that transformational leadership is positively related to entrepreneurial behavior only when psychological empowerment is high, whereas transactional leadership has a negative relationship with entrepreneurial behavior only under these conditions.

KEYWORDS

Transformational leadership; transactional leadership; entrepreneurial behavior; psychological empowerment

1. Introduction The global economy is creating deep and rapid changes for knowledge-intensive organizations all over the world. The answer to today’s competitive and fastchanging environment is risk taking, proactiveness, and innovativeness – in one word: entrepreneurial behavior. Successful knowledge-intensive organizations gain competitive advantage from entrepreneurial activities of their human capital

CONTACT Bilal Afsar

[email protected]

© 2016 Informa UK Limited, trading as Taylor & Francis Group

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(Von Nordenflycht, 2010; Wisse, Barelds, & Rietzschel, 2015). Entrepreneurial behaviors are high on the agenda of contemporary knowledge-intensive firms due to intangible, heterogeneous, and perishable nature of the services (Hislop, 2005; Pina & Tether, 2016). Owing to a strong need for minor improvements in products, services, and processes, the critical role of employees’ entrepreneurial behavior to keep pace with rapid changes has become pivotal. Entrepreneurial behavior has been defined as the identification and exploitation of opportunities and the extent to which employees take business-related risks and proactively engage in the conception, recognition, and realization of opportunities at workplace (de Jong & Den Hartog, 2007; de Jong, Parker, Wennekers, & Wu, 2015). Work in organizations has become more knowledge based and less rigidly defined. In this context, employees through their ability to identify and exploit opportunities can improve business performance by introducing new and better products, services, and work processes (de Jong et al., 2015). The question arises how management can help employees to display entrepreneurial behaviors. Leaders do have a strong influence on employee behavior (Müceldili, Turan, & Erdil, 2013), and entrepreneurial behavior is no exception. Previous work has indicated that employees’ entrepreneurial activity and opportunity pursuit depend greatly on leadership style (Krause, 2004; Moriano, Molero, Topa, & Mangin, 2014; Saeed & Wang, 2014). Therefore, management should try to identify which leadership style can stimulate entrepreneurial behavior/intentions among their employees. Despite agreement on the importance of leaders in triggering entrepreneurial behavior, little integration of leadership and individual intrapreneurship research is found in the literature (Chang, Bai, & Li, 2015). To understand what engenders entrepreneurial behavior remains a crucial research question to be investigated (Prabhu, McGuire, Drost, & Kwong, 2012). The core leadership function of transformational and transactional leadership is to encourage individuals to take risks and stimulate their proactive and innovative abilities (Yukl, 2002). Bass (1999) and Howell and Avolio (1993) integrated transactional and transformational leadership styles and found them to complement each other in achieving desired goals and outcomes. That is why this study has incorporated both transactional and transformational leadership styles to better understand the effects of these leadership theories on entrepreneurial behavior, as both lead people in contrasting ways and construct reality in different dimensions (Reuvers, van Engen, Vinkenburg, & Wilson-Evered, 2008; Saeed & Wang, 2013). The impact of transformational leadership on innovation is stronger than transactional leadership (Saeed, Wang, & Peng, 2014; Waclawski & Church, 2002); but these results do not provide evidence about the impact of transactional and transformational leadership on the entrepreneurial behavior of employees. We believe that the impact of transformational and transactional leadership to engender entrepreneurial behavior among employees and the psychological mechanism which surround these relationships would address one of the many issues which are still unresolved.


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Prior research has not investigated the impact of the influential processes of employee’s psychological mechanisms on transformational leadership (e.g. Jaiswal & Dhar, 2015; Shalley, Zhou, & Oldham, 2004). One particularly promising psychological mechanism that may moderate the relationship between transformational and transactional leadership styles and entrepreneurial behavior is psychological empowerment – an employee’s cognitive state characterized by increased intrinsic task motivation, perceptions of competence and self-determination to initiate and implement work behaviors (Deci, Connell, & Ryan, 1989). Pieterse, Van Knippenberg, Schippers, and Stam (2010) studied the interaction effect of psychological empowerment on the relationship between transactional leadership and employee creativity and suggested to further explore this interaction effect on other employee behaviors. Transformational leaders inspire and motivate employees to display positive work behaviors; and psychological empowerment being a motivational construct would affect the employee’s work outcomes. Theoretically, this study contributes to the past literature in two ways. First, our finding contributes to the leadership literature by showing that transformational leadership promotes employee’s entrepreneurial behavior. Second, our study also enriches the intrapreneurship literature that transformational leadership is contingent on employees’ perceptions of psychological empowerment to affect the level of entrepreneurial behavior. Practically, findings of our study provide clearer guidelines to practitioners on what leaders can do and how psychological empowerment may account for different level of employees’ entrepreneurial behavior. Accordingly, this study has two objectives: first, to examine the effect of transformational and transactional leadership styles on employee’s entrepreneurial behavior; second, we seek to add to the ongoing development of the transactional– transformational leadership paradigm by testing a new and important moderator, psychological empowerment. 2. Theoretical framework and hypotheses 2.1. Transformational leadership and entrepreneurial behavior

Leadership theory distinguishes between two leadership styles: transformational and transactional (Bass, 1985; Bass & Riggio, 2006). Transformational and transactional leadership are often presented as being at opposing ends of a spectrum. Wang, Tsui, and Xin (2011) noted that transactional leadership better predicted individual task performance (behavior prescribed by the job role), while transformational leadership predicted better contextual performance (organizational citizenship behavior, which describes performance above and beyond what is delineated by job requirements alone). Both styles of leadership augment each other to achieve higher levels of employee’s performance but the difference lies in goal setting and motivation methods (Tyssen, Wald, & Spieth, 2014). As such, followers are inspired and intrinsically motivated to reach highest levels of

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achievement and self-identification to strive beyond the call of duty rather than thinking about rewards or punishments. Research shows that transformational leaders are more effective in increasing discretionary behaviors (Wang et al., 2011) and innovative work behavior of employees (Afsar, Badir, & Saeed, 2014) than transactional leadership. Since entrepreneurial behavior is discretionary, vision-directed, organizationwide action that purposefully and continuously rejuvenates an organization (Mair, 2005; Saeed & Wang, 2013), therefore it describes performance above and beyond what is delineated by job requirements alone. Given our broad, behavior-based definition, we identified three features of entrepreneurial behavior for investigation: innovation, proactivity, and risk taking. These features are discretionary and they represent a range of behaviors that entrepreneurial workers may engage in – including generating and searching out ideas, identifying opportunities and threats, championing ideas and selling those to peers in the company, putting effort in making it happen, and boldly moving forward in the pursuit of opportunities while accepting the risk of potential losses. Transformational leadership is imbued with inspirational motivation, collective sense of mission, heightened awareness of goals, and exciting vision and aspiration (Avolio, Bass, & Jung, 1999; Kark, Shamir, Avolio, & Yammarino, 2002). It aims to transform the personal values and self-concepts of followers and shift them to a new level of needs and aspirations. Transformational leaders ensure that individuals challenge the status quo and are stimulated intellectually by transcending their own self-gains for higher collective gains. Transformational leaders inspire and motivate followers to pursue entrepreneurial intentions to influence their creative behaviors (Dvir, Eden, Avolio, & Shamir, 2002). They quite often change organizational processes and systems to achieve an exciting future; delegate authority to employees to come forward and accept responsibility; and seek them to a higher level of commitment by providing flexibility to make decisions about their work contexts (Boehm, Dwertmann, Bruch, & Shamir, 2015). Leaders with transformational style understand that to foster followers’ innovativeness, they should provide a clear vision, inner-strength, and self-confidence to the followers so that they can argue successfully for the right course of action instead of popular or established procedures (Malloch, 2014). Transformational leaders transform existing systems, plan new ways to address problems, and exhibit optimism and excitement about these novel perspectives (Elkins & Keller, 2003; Müceldili et al., 2013). This heightened level of motivation is likely to stimulate entrepreneurial behavior. Transformational leaders articulate a compelling vision, engage in creative process development, initiate and implement novel ideas, and facilitate diffused learning to bring changes. Bass and Riggio (2006) and (Jung, Wu, & Chow, 2008) found that followers of a transformational leader often show desire to engage in creative endeavors when they experienced supportive and non-controlling work environment where personal and organizational transformations and changes


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are promoted. Moreover, articulation and alignment of follower’s personal value systems with the interests of the organization may increase followers’ understanding and commitment toward attainment of such desired collective values and performance expectations (Boehm et al., 2015). Transformational leaders encourage employees to craft new ways of doing things, to initiate creative ideas and exploratory thinking, and to identify and commit to long-term goals and mission (Qu, Janssen, & Shi, 2015). Entrepreneurial behavior requires employees to have high need for achievement and low need for conformance which is facilitated by transformational leaders. Transformational leaders facilitate risk-taking behaviors of individuals to try new ways of working, to change existing processes and systems for long-term benefits, and to exploit opportunities effectively (Pearce et al., 2003). Transformational leaders help followers to strive for more difficult and challenging goals by changing follower’s propensity for creative perspectives (Whittington, Goodwin, & Murray, 2004). This individualized support helps followers to become more proactive and hence explore new opportunities with a better focus on important organizational issues and processes leading to value addition and goal alignment instead of initiating random irrational ideas. Transformational leaders help to balance short-term goals with opportunity exploitation and motivate employees to take risks associated with trying out new processes. Based on above arguments, the following hypothesis is proposed: Hypothesis 1: Transformational leadership is positively related to employees’ entrepreneurial behavior.

2.2. Transactional leadership and entrepreneurial behavior

Transactional leadership is based on marginal improvement and maintenance of the quantity of performance on an exchange or bargain relationship. Bass (1985) defined transactional leadership as behavior that is based on reward and punishment. Transactional leaders plan goals to be achieved with an emphasis on clarifying roles, task requirements and expectations to followers. Hence, they increase compliance, reduce resistance, reward contributions and support mutual dependence (Deichmann & Stam, 2015). Cheng, Yang, and Sheu (2014) suggested that transactional leadership is positively related with creativity of middle-level managers, whereas Öncer (2013) study showed that there was no association between transactional leadership and innovativeness or risk-taking dimensions of entrepreneurial orientation. The contradictory results may be explained by the power distance, organizational culture, structure, and individual’s psychological empowerment perceptions. In transactional leadership, managers and followers meet to exchange valued outcomes by clarifying roles and expectations, and both are rewarded on the basis of desired contributions and performance (Epitropaki & Martin, 2013).

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Leaders transact with followers and monitor their performance through bilateral disclosures and management-by-exception. Transactional leaders avert risks, do not challenge the status quo quite often, operate within specified boundaries, concentrate on operational efficiency and effectiveness, prefer time constraints, and maintain control through mutual exchange value systems of performance against expectations (Si & Wei, 2012). In a knowledge intensive context, this might inhibit employee’s motivation to take risks, and create and implement new and useful ideas. Transactional leaders usually try to maintain the status quo and control their subordinates instead of envisioning an exciting and challenging future. Thus, transactional leadership can be argued to be negatively related to entrepreneurial behavior because it does not stimulate individuals to explore and exploit opportunities as it is based on risk aversion and maintenance of the status quo. Moreover, followers try to restrict themselves to conformance and doing exactly what the leaders have told them instead of exploring and exploiting opportunities (Boerner, Eisenbeiss, & Griesser, 2007; Moss & Ritossa, 2007; Ryan & Tipu, 2013). Transactional leaders establish clear structures and roles for their followers. The relationship between leader and followers is ‘transactional’ (i.e. ‘if you give me that, I will give you this’), where rewards and contingencies are in control of the leader (Deichmann & Stam, 2015). In order to preserve stability in the organizations, a transactional leader closely monitors performance of the followers and checks for any deviances, mistakes, and errors. As a result, the followers might consider it as rigid, inflexible, bureaucratic, centralized, and less-empowering scenario, inhibiting entrepreneurial behavior. Transactional leaders perform better under conditions of certainty, stability, routine tasks, and less dynamic contexts. Instead of introducing change, trying out new solutions, and envisioning continuous innovations, they seek consistency, stability, status quo, and steadiness (Deichmann & Stam, 2015). They develop understanding with their followers on the basis of mutual exchange; where good deeds and fulfillment of goals is rewarded and bad deeds and inability to achieve goals are punished. Transactional leaders reward performance which is according to clear expectations communicated to followers. Followers of a transformational leader are motivated extrinsically to perform better. Lack of intrinsic motivation in transactional leadership might stall followers in generating new ideas and innovate. Mostly, transactional leaders are concerned with operational effectiveness and improving efficiency of the processes within the boundaries of existing systems (Jung, 2001). The followers in such an environment strive only to achieve the negotiated level of performance on which their rewards or punishments would be decided. They feel that thinking entrepreneurially is the responsibility of their leaders (Rea & Parker, 2012) and they will not be rewarded for bringing out of the box, novel and useful ideas to their organizations. In such a highly structured and controlled environment, the creative abilities of employees


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Psychological empowerment H3 Transformational leadership

Transactional leadership

H1 H4 H2

Entrepreneurial behavior

Figure 1. Research model.

stagnate and they become demotivated to engage in entrepreneurial activities (Moriano et al., 2014). Therefore, we propose the following hypothesis: Hypothesis 2: Transactional leadership is negatively related to employees’ entrepreneurial behavior.

2.3. The moderating role of psychological empowerment

Many researchers used psychological empowerment as a moderator to determine the impact of transformational leadership on various employee behaviors, such as organizational commitment (Avolio, Zhu, Koh, & Bhatia, 2004), job satisfaction and turnover intention (Barroso Castro, Villegas Periñan, & Casillas Bueno, 2008), workplace aggression (Hepworth & Towler, 2004), and motivation (Epitropaki & Martin, 2013). However, there is a paucity of research on the analysis of moderating effect of psychological empowerment on the relationships among transformational, transactional leadership and work outcomes with respect to entrepreneurial behavior. This research examines the effect of an employee’s perception of psychological empowerment on the entrepreneurial behavior through transformational and transactional leadership. Psychological empowerment is defined as ‘increased intrinsic task motivation manifested in a set of four cognitions (competence, impact, meaning, and selfdetermination), reflecting an individual’s active orientation to his or her work role’ (Spreitzer, 1995; Thomas & Velthouse, 1990). It is quite different from traditional empowerment which comprised a set of managerial practices solely focusing on delegation principles (Leach, Wall, & Jackson, 2003). There have been mixed empirical results of the relationship between transformational–transactional leadership and work outcomes (Afsar et al., 2014). One possible explanation of these conflicting results may be the dynamic nature of leader’s behavior which should balance followers’ beliefs and circumstances (Reicher, Haslam, & Hopkins, 2005; Shamir, 2007). Leader effectiveness is usually moderated by other factors such as environmental dynamism, task context, culture, organizational structure, job autonomy,

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and follower characteristics (Osborn & Marion, 2009). As leader effectiveness is dependent on circumstances, therefore, we argue that the direct effect of transformational and transactional leadership styles on entrepreneurial behavior of employees may not give us a better understanding, unless we investigate the role of moderating variables. Transformational leaders often emphasize cooperation, collective task accomplishment (Liu & DeFrank, 2013), learning by sharing experiences, control and freedom in decision-making, and delegating authority to execute ideas which fosters employees’ participation in novel idea initiation and implementation (Gong, Huang, & Farh, 2009). Basu and Green’s (1997) analysis of 225 employees, and Krause’s (2004) examination of 339 managers found that transformational leadership affected employees’ ability and willingness to innovate and suggested that this relationship might be mediated by some individual level processes. Afsar et al. (2014) found that psychological empowerment moderated the relationships of transactional and transformational leadership with creativity and innovative work behaviors. Thus, transformational leadership builds a work environment in which employees feel internal empowerment, motivation, meaning, inspiration, self-development, competence, and self-management, without direct supervision or intervention conducive to exploit opportunities and give creative solutions (Afsar et al., 2014) and self-organizing behavior (Nicholls-Nixon, 2005). High level of psychological empowerment is essential to act on the inspirations of transformational leaders (Yukl, 2002). When employees feel that they have personal decision-making control, ability to influence others, freedom, flexibility, meaning of the work, inspiration to achieve an envisioned attractive future, they tend to produce more creative endeavors to enhance job performance (Lan & Chong, 2015). Transformational leaders strongly inspire employees high on psychological empowerment to propose new dynamic solutions, take risks, exploit opportunities, and engage in entrepreneurial behaviors (Deichmann & Stam, 2015). On the other hand, employees low in psychological empowerment fear uncertainty and become demotivated. In such case, inspiration from transformational leaders becomes less effective and lack of motivation hinders entrepreneurial behavior of such employees. Generally, an individual with psychological empowerment feels autonomy and freedom to engage in ‘trial and error’ and develop new ideas to carry out organizational processes efficiently and effectively (Ramamoorthy, Flood, Slattery, & Sardessai, 2005; Spreitzer, 1995). The success and failure of searching, exploring and exploiting new opportunities and proposing creative solutions of problems involve trial and error. Empowered employees may engender higher level of entrepreneurial behavior as the organization expects them to reciprocate without fearing about bureaucratic rules and regulations. Another important trait of transformational leaders is their ability to encourage in-depth intellectual processing, questioning norms, concepts, practices and processes. This would help followers to approach old problems in new ways


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(Deichmann & Stam, 2015). Transformational leaders do influence entrepreneurial orientation and behaviors of employees by acting as mentors, and personalizing their interactions with followers by listening effectively, identifying different needs, desires and behaving in ways that demonstrates an acceptance of individual differences. Thus, the leader delegates tasks based on individual ability and qualities (Tyssen et al., 2014). Empowered employees have positive emotional support to find meaning in their work; they are more likely to be motivated intrinsically to have an impact on value systems, which in turn may promote intrapreneurship and task accomplishment (Afsar et al., 2014). Transformational leadership prepares employees to take more responsibility and enhances beliefs about their capabilities to perform activities and accomplish tasks with novelty and creativity (Sun, Zhang, Qi, & Chen, 2012). Such leaders pay close attention to their employees’ sense of accomplishment which is expected to enhance employees’ innovativeness (Afsar et al., 2014). Based on the above arguments, we hypothesize that: Hypothesis 3: Employees’ perceptions of empowerment moderate the relationship between transformational leadership and entrepreneurial behavior such that the relationship is positive with high psychological empowerment and weaker with low psychological empowerment.

Transactional leadership is focused on close monitoring of subordinates against specific performance criteria in which goals accomplished are rewarded and performance deficiencies are punished (Antonakis & House, 2014). When employees are empowered in organizations, they exhibit creative behaviors because they find worth in their work roles (Jung et al., 2008). According to empowerment theory, psychologically empowered individuals see themselves as self-determined and competent and that their work has organizational impact and is meaningful (Sun et al., 2012). This would enhance employees’ motivation and results in an energized state to engage in entrepreneurial behavior. Psychological empowerment is regarding perception and belief of an individual that s/he can make a difference by having autonomy in decision-making and initiating changes, having self-efficacy, having skills and abilities to achieve goals, being self-determined, and feeling meaning in job (Spreitzer, 1995). As transactional leadership controls the environment, is less flexible, is restrictive in nature and relies on existing systems, the feeling of psychological empowerment moderates the negative effect of transactional leadership on entrepreneurial behavior of followers. Schaufeli and Salanova (2008) argued that psychological empowerment enhances felt responsibility and flexible role orientations which encourages employees to devote more effort to bring change to the workplace. Leaders can effectively influence follower’s behaviors but it is constrained by many factors, such as HRM policies, external environment, support for innovation and culture, to name a few. These factors shape perceptions of employees about psychological empowerment independent of leadership style.

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We argue that the effect of transactional leadership on employees’ creativityrelated outcomes such as entrepreneurial behavior is explained through enabling them to make their own decisions and feel empowered at the work place (Deichmann & Stam, 2015). The detrimental effect of transactional leadership on entrepreneurial behavior of employees can worsen if they are unable to realize meaning and purpose in the work, minimal control over work roles and diminished determination to make a difference. Low level of psychological empowerment might make followers view transactional leadership as restrictive, controlling and demotivating, and therefore causing less innovative behavior. Si and Wei (2012) study suggested that highly empowered employees under less flexible systems and strict reward and punishment contingencies display greater feelings of respect, more self-determination, more sense of common values, and more harmonious work climate, leading to more intrinsic motivation and more innovative behaviors. Transactional leadership emphasizes in-role task performance, conformity, risk-aversion, formal and organized systems, and strict control mechanisms. Highly empowered employees might view such controlled and inflexible environments as detrimental to their creative abilities (Afsar et al., 2014; Pieterse et al., 2010), causing decreased entrepreneurial intentions. Under conditions of low psychological empowerment, employees lack meaning, self-efficacy, determination and impact to their work roles. Such employees operate better in controlled environments with contingent rewards. According to Pieterse et al. (2010), the negative effect of transactional leadership on innovative work behavior is moderated by psychological empowerment. As employees high on psychological empowerment have higher sense of mastery, self-efficacy over their tasks and work environments, and influence over strategic, functional, administrative, and operating outcomes at work, the negative effect of transactional leadership on entrepreneurial behavior is much stronger as compared to employees low in psychological empowerment. Based on the above arguments, we hypothesize that (Figure 1): Hypothesis 4: Employees’ perceptions of empowerment moderate the relationship between transactional leadership and entrepreneurial behavior such that the relationship is negative with high psychological empowerment and weaker with low psychological empowerment.

3. Research method 3.1. Participants and procedures

Data were gathered from employees of eight different knowledge-intensive organizations in China. The organizations were chosen from the banking and insurance industries. China has realized that apart from human capital, it needs to invest heavily on education and research, R&D, entrepreneurship, and innovation among individuals (Chang et al., 2015; Sun et al., 2012). Research in the West suggests


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that the transformational leadership model contributes to individual creativity, innovation, and entrepreneurial activities (e.g. Jung & Sosik, 2002; Kark et al., 2004). If the same holds true in China, encouraging transformational leadership may constitute one element of the country’s strategy to innovate continuously through its public. We collected data from multiple industries and firms for better and deeper understanding of the relationship structure among these constructs, particularly in context of knowledge-intensive industries. Our respondents were subordinates and their direct supervisors mainly from Marketing, Administration & HR, Operations & Customer Care and IT departments of these eight organizations. Respondents varied in hierarchical position and level of experience. The study included employees and their direct leaders. The anonymity and confidentiality of this survey were ensured to employees. We started by fixing appointments with top level managers of these organizations. A total of 160 supervisors (20 in each firm) and 800 subordinates (100 in each firm) was administered a questionnaire. The measures of psychological empowerment, transformational leadership, and transactional leadership were rated by the subordinates. To avoid common source bias, direct supervisors were asked to rate the entrepreneurial behavior of their subordinates. Subordinates were asked to place their names on the completed questionnaire, so that responses could be matched with the supervisory ratings of innovative work behavior. Of the 800 surveys distributed to subordinates, 592 surveys were returned, for a response rate of 74%. Of those 592 surveys, matching supervisory surveys (a supervisor rated a subordinate who had also turned in a survey) were returned for 557 individuals. A total of 64 out of 160 supervisors rated innovative work behavior of their subordinates thus the usable matched data consisted of nine subordinates’ ratings per supervisor, on average. The average age of respondents was 35.2 years with a standard deviation of 8.57. The average tenure with the organization was 7.46 years with a standard deviation of 4.14 years. Approximately, 61% of the sample consisted of males. 3.2. Measures 3.2.1. Transformational and transactional leadership A 20-item scale for transformational leadership and a 12-item scale for transactional leadership were taken from the Multifactor Leadership Questionnaire (MLQ) Form 5X (Bass & Avolio, 1995; Hartog, Muijen, & Koopman, 1997), including idealized behaviors, idealized attributes, inspirational motivation, intellectual stimulation, and individualized consideration (Bass & Avolio, 1995). The employees were asked to rate the frequency with which their direct leaders display behaviors, on a five-point Likert-type scale ranging from 1 (not at all) to 5 (frequently, if not always). Sample items are ‘My leader talks optimistically about the future’ (transformational leadership) and ‘my leader provides assistance in exchange for

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my effort’ (transactional leadership). The Cronbach’s alphas for ‘transformational leadership’ and ‘transactional leadership’ were .82 and .87, respectively. 3.2.2. Psychological empowerment The 12-item Empowerment at Work Scale, developed by Spreitzer (1995), using the four cognitive aspects of empowerment (meaning, competence, selfdetermination, and impact) was used in this study. Employees were asked to rate the extent to which they believe they are empowered in their jobs on a five-point scale (one-strongly disagree to five-strongly agree). Sample item: ‘I have considerable opportunity for independence and freedom in how I do my job’. Responses to the items were averaged to form an overall psychological empowerment score with a reliability of .89. 3.2.3. Entrepreneurial behavior The nine-item scale developed by (Pearce & Sims Jr., 2002) validated by other researchers (e.g. de Jong et al., 2015; Kuratko, Ireland, Covin, & Hornsby, 2005; Zampetakis & Moustakis, 2007) was used to measure employee’s level of entrepreneurial behavior. The leaders were asked to rate the frequency with which their subordinates displayed different behaviors (e.g. ‘This employee displays an enthusiasm for acquiring new skills’) on 5-point scale ranging from 1 (never) to 5 (always). The reliability of entrepreneurial behavior scale was .81. 3.3. Control variables

Based on previous research, we controlled for several relevant demographic factors to better estimate the effect sizes of the hypothesized variables. In all our analyses, we included age, job tenure, and gender as control variables. Job tenure, as years in the current job, has been found to be negatively related to creative outcomes (Pieterse et al., 2010). Prior studies have demonstrated that gender was not related to proactive behavior (Jung et al., 2008; Pieterse et al., 2010). We find that gender is not related to entrepreneurial behavior (β = .09, p = .37). Therefore, gender was not incorporated in our final model. 4. Results 4.1. Confirmatory factor analysis

We used AMOS 17.0 to conduct a confirmatory factor analysis (CFA) of the variables. For transformational leadership, we used items to form four firstorder dimensions, which were used as indicators of the overall transformational leadership construct. For all other variables, we used the items themselves as indicators of their corresponding latent variables. The results showed that


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the four-factor model (transformational leadership, transactional leadership, psychological empowerment, and entrepreneurial behavior) fit the data well (λ² (327) = 925.41, p