Transformational and transactional leadership and employee’s entrepreneurial behavior in knowledge–intensive industries

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.