Transformational leadership and organizational performance companies in vietnam

ABSTRACT The study aims to investigate the relationship between transformational leadership and organizational performance, with the mediating roles of organizational learning and innova

VIETNAM NATIONAL UNIVERSITY, HANOI

VIETNAM JAPAN UNIVERSITY

-

NGUYEN MINH HANG

TRANSFORMATIONAL LEADERSHIP

AND ORGANIZATIONAL PERFORMANCE: COMPANIES IN

VIETNAM

MASTER'S THESIS BUSINESS ADMINISTRATION

Hanoi, 2018

VIETNAM NATIONAL UNIVERSITY, HANOI

VIETNAM JAPAN UNIVERSITY

-

NGUYEN MINH HANG

TRANSFORMATIONAL LEADERSHIP

AND ORGANIZATIONAL PERFORMANCE: COMPANIES IN

TABLE OF CONTENTS

ACKNOWLEDGEMENT

ABSTRACT

LIST OF TABLES

LIST OF FIGURRES

LIST OF ABBREVIATIONS

INTRODUCTION 1

Background to the research problem 1

Research objectives and contributions 2

The scope of the study 3

Research design 3

The structure of the paper 3

CHAPTER 1 LITERATURE REVIEW 5

1.1 Overview 5

1.2 Leadership styles 5

1.2.1 Transactional leadership 5

1.2.2 Transformational leadership 6

1.3 Organizational learning 9

1.3.1 Organizational learning: Definitions and classification 9

1.3.2 Organizational learning: Measurements 11

1.4 Innovation 12

1.4.1 Innovation: Definitions 12

1.4.2 Innovation: Measurements 15

1.5 Organizational performance 15

1.5.1 Organizational performance: Definitions 15

1.5.2 Organizational performance: Measurements 17

1.6 The relationship 18

1.7 The conceptual framework of the study 20 1.7.1 Transformational leadership, Organizational learning and Innovation

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1.7.2 Organizational learning, Innovation and Organizational performance

22

1.7.3 Transformational leadership and organizational performance 23

CHAPTER 2 RESEARCH MODEL AND DATA COLLECTION 26

2.1 Overview 26

2.2 Research model 26

2.2.1 Variables and measures in the research model 26

2.2.2 Research issues, hypotheses, and questions 28

2.3 Data collection process 29

2.4 Questionnaire design and administration 30

2.5 Sample demographics 31

CHAPTER 3 DATA ANALYSIS AND MEASUREMENT MODELS 32

3.1 Overview 32

3.2 Data preparation 32

3.3 Descriptive statistics 32

3.4 Measurement tests 34

3.4.1 Reliability 34

3.4.2 Validity 34

3.4.3 Pearson Correlation Analysis 35

3.4.4 Harman’s single factor test 36

3.4.5 Regression Analysis 36

CHAPTER 4 CONCLUSIONS AND IMPLICATIONS 39

4.1 Overview 39

4.2 Research findings 39

4.3 Contributions and implications 42

4.4 Limitations and further research 43

4.5 Conclusion 44

REFERENCES 46

APPENDIXES 57

Appendix 1: Questionnaire 57

Appendix 2: Invitation letter 61

ACKNOWLEDGMENT

I would like to express my gratitude to my advisors Associate Professor Doctor Pham Thi Lien and Professor Daniel Arturo Heller for their enthusiastic guidance and support They accompanied with me over different phases of my master thesis and gave me a helping hand whenever I need their advice

Also, I would like to thank my family who always encourages me to complete this research I appreciate the support of my dear friends who are enthusiastically willing to help me over difficulty I thank all people, acquaintance, and strangers who helped me to accomplish this research survey

ABSTRACT

The study aims to investigate the relationship between transformational leadership and organizational performance, with the mediating roles of organizational learning and innovation Data were collected from 86 respondents who are currently CEOs/ Directors/ Founder of the Vietnamese companies to analyze the model of the research Based on the factor analysis, the 15 variables of the data collected were demonstrating the positive and significant influence that transformational leadership has on business performance, consequently gain some implications for practice in the Vietnamese context

Keywords: transformational leadership, organizational learning, innovation, organizational performance

LIST OF TABLES

Table 1.1 Comparison between transformational and transactional leadership… 8

Table 1.2 A summary of OL concepts………10

Table 1.3 OL dimensions………11

Table 1.4 The mainstreams of innovation typologies……….14

Table 1.5 The mainstreams of innovation measurements……… 15

Table 1.6 Summary of TL and OP in the literature……….24

Table 2.1 Constructs of the measurement scale of the study……… 27

Table 2.2 Frequency of the respondents’ profile……… 31

Table 3.1 Variables code names……… 32

Table 3.2 Descriptive statistics of all variables in this study………33

Table 3.3 Cronbach’s Alpha of the variables evaluated……… 34

Table 3.4 Factor Loadings ……… 35

Table 3.5 Pearson Correlation Analysis……… 35

Table 3.6 Regression Analysis (Dependent variable: Organizational learning)… 36

Table 3.7 Regression Analysis (Dependent variable: Innovation)……… 36

Table 3.8 Regression Analysis (Dependent variable: Organizational performance)37 Table 3.9 Regression Analysis (Dependent variable: Organizational performance)38 Table 4.1 Summary of the results of hypotheses testing……… 41

LIST OF FIGURES

Figure 1.1 The research framework by (Orabi, 2016)……….18 Figure 1.2 The research framework by (Mutahar, Rasli, & Al-ghazali, 2015)… 19 Figure 1.3 The research framework by (García‐Morales, Matías‐Reche, &

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INTRODUCTION

Background to the research problem

Transformational leadership (TL) places a great impact on the ethical attitudes and behavior of an organization’s individuals, providing a common purpose to achieve goals of organizations According to Bass (2000), TL normally leads to better performance than transactional leadership Previous researchers show that the transformational leaders emphasize a crucial influence on firms’ performance, comprehension of the processes in which followers have more freedom and decision-making capability is still theoretical (Gary Yukl, 1999)

In the time of information creation, knowledge learning and innovation capability are elements to create, renew and apply knowledge to establish core competencies for firms improvements (Barrett & Sexton, 2006), (Nonaka & Takeuchi, 1995)

Although learning about TL and OP has existed in previous research overseas, there are a few papers researching about this topic in Vietnamese enterprises In the past few years, there have been some research on leadership styles, and so is transformational leadership style in the Vietnamese context, they are:

- Changing leadership style in the Vietnamese Commercial Banks before and after Vietnam joins the WTO (Cuong & Minh, 2017)

- Leadership styles of Vietnamese higher educational leaders: Transformational, transactional, or laissez-faire (Thu, Pillay, & Mergler, 2017)

- Transformational and transactional leadership styles and employees’ job satisfaction in Vietnamese local companies (Ho & Le, 2016)

- The influence of leadership behaviors on employee performance in the context

of software companies in Vietnam (Ha & Nguyen, 2014)

- Leadership styles and generational effects: examples of US companies in Vietnam (Cox, Hannif, & Rowley, 2014)

- Educational leadership in the Vietnamese context (Dung, 2014)

Research objectives and contributions

The study aims to research on the relationship between transformational leadership and business performance in Vietnamese companies, in the current context of developing stage of business, opening many opportunities for small and medium-size companies to start up and to grow In this context, leadership style is one of the most important elements that influence the business strategy of the companies, organization's performance, reputation, and image (Conger & Kanungo, 1988) It is also considered to create the difference for the organization’s image, supporting the achievement of business performance as well as the strategic development and maintaining the competitive advantages for the company (Bass, 1985) (Bass, 1990) also reported that an appropriate leadership style is confirmed to explain 45 to 60 percent of the organizational performance Regarding the effectiveness of transformational leadership style on business performance, based on the previous studies by researchers all around the world, this study was aimed to investigate the following objectives:

- To study the impact of transformational leadership on organizational learning and innovation

- To identify the influence of organizational learning and innovation on business performance in the Vietnamese context empirically

The research objectives are transformed into research questions and hypotheses to be explained in this study Therefore, the study makes contributions as follows:

- Reviewing the literature on transformational leadership, organizational

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learning and innovation and its impact on business performance

- Establishing and confirming the model of transformational leadership impact

on organizational performance

- Implying the practice of transformational leadership in the Vietnamese context, to support the growth and sustainability of business development in Vietnam

The scope of the study

This study investigated the perception of managers in Vietnamese companies currently, about transformational leadership and its impact on business performance, with the mediating roles of organizational learning and innovation A total of 86 CEOs/ Founders/ Directors were providing their understanding and insight of their companies

The structure of the paper

The thesis provides knowledge of the relationship between transformational leadership and organizational performance, with the mediating roles of organizational learning and innovation, in theory, and practice There are four chapters, including a chapter of literature review, three chapters of data collection and analysis and a conclusion

The introduction provides the summary and introduction of the entire research,

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background, and objectives of the thesis were included

Chapter 1 reviews and summarizes the previous research related to the theory of TL and OP, with the study of mediating variables including organizational learning and innovation

Chapter 2 discusses the research model and data collection process

Chapter 3 discusses the data analysis, basing on the data collected using methodology mentioned in the previous chapter, summarizes the result of the study

Chapter 4 concludes the work with the discussion on the problems stated throughout the research and discusses implications for theory and practice, with limitations of the study, implying for further research orientation

1.2 Leadership styles

Human resource development theory concentrated on leadership characteristics, as it focused on the relationship between leaders and followers in organizations (Bass & Avolio, 1991), (Bass & Avolio, 1993) The types of such connections exist in both transformational and transactional leadership styles (Rowold, 2008) Both of these two styles were developed by Burns (1978) and then developed by Bass and Avolio (1991), the concepts of the two leadership styles aforementioned will be presented in the following sections

1.2.1 Transactional leadership

Transactional leadership can also be called managerial leadership, is the leadership style that concentrates on the supervision capability of the leaders In the original meaning of the transactional leadership, leaders promote compliance of their subordinates by rewards and punishments, basing on the transactions between leaders and followers (Sultana, Darun, & Yao, 2015) This leadership style is considered to

be effective when firms are unstable that requires careful supervision According to Burns (1978), transactional leaders have the short-term relationship with followers Some previous researchers criticized this leadership style because it is considered to

be a one – size – fits – all characteristics of the leaders (McCleskey, 2014) Sultana, Darun & Yao (2015) considered the human relationship in this leadership style is

"nothing but a chain of transactions" This leadership style rooted from rewards,

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penalties, economic status and anything of "transactions" (Sultana et al., 2015) Odumeru & Feanyi (2013) summarized the three characteristics of a transactional leader: they are more directive and action-oriented, inside-the-box-thinking, and generally passive

1.2.2 Transformational leadership

Transformational leadership is acknowledged as a leadership style exercise that causes changes for both individual and society In the original ideally definition, TL creates priceless and significant changes for the followers’ behavior with the end goals of transforming ordinary employees into leaders, which can be considered motivational and encouraging (Bass, 1999) In its authentic form, TL was demonstrated to increase the morale and motivation of subordinates using different mechanisms, including attaching the subordinates’ personality and objectives to the organizational development; becoming a role model for employees, inspiring and challenging them to take greater ownership of their own positions, understands the strengths and weaknesses of each staff to align subordinates with tasks that help them

to standardize and optimize their working performance (Choi, Goh, Adam, & Tan, 2016)

James Mac Gregor Burns (1978), in his explanatory study on political leaders, was the first author to introduce the definition of transforming leadership He introduced two concepts of leadership, “transformational leadership” and “transactional leadership” Burns explained that transforming leadership means that “leaders and followers help each other to advance to a higher level of morale and motivation” He also linked this to the difficulty in clarification between leaders and managers, while claiming that the differences exist in behaviors and characteristics TL creates significant changes in people’s lives and in the entire firms (Hanaysha et al., 2012)

A transformational leader is someone who motivates his or her subordinates with outstanding results (Robbins & Coutler, 2007) While transactional leadership is based on “give and take” philosophy, TL is based on the leaders’ characteristics, traits and capability to make a breakthrough for the organization through example,

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courageous visions and challenging results Transformational leaders are idealized because they have become an example of working for teams’, firms’ or communities’ benefits Burns also conceptualized that transformational leaders can strive to change their organizational culture for the better, while transactional leaders do not usually challenge themselves for the cultural change toward the better

In 1985, Bernard M Bass developed the research of Burns (1978) by proving the psychological theory of transforming and transactional leadership, he expressed

“transformational leadership” instead of “transforming leadership” Bass introduced the theory that a leader is considered transformational or not is by their impact on the followers Their employees feel trust, loyalty, respect, and admiration to them, and because of that, they are willing to perform exceptionally harder and more enthusiastic at work These results happen because the transformational leaders offer their subordinates a lot more than individual improvement, they transform and motivate their employees with his or her idealized influence, intellectual stimulation and individual consideration Furthermore, transformational leaders motivate followers to invent new and unique ways of problem-solving and support for their individual success

Regarding the transformational leadership, four elements are introduced, they are Idealized influence, Inspirational motivation, Intellectual stimulation, and Individual consideration

Idealized Influence – Leaders behave in the ways that employees feel trust and

respect, using the sensitivity to understanding others needs and wants

Inspirational Motivation – The leader provides a vision that is attractive and

motivational to his or her subordinates Leaders with inspirational motivation challenge their followers with high standards, communicate optimism about their objectives, while also introducing to them meaningful guidelines for their tasks Followers, in this case, need to have a strong sense of purpose, purposes, and meaning help the group drive forward The leaders' visionary is supported by communication skills which help explain that vision comprehensive, precise, powerful and engaging The employees are willing to pay more effort while at work, feel more encouraged

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and confident about their future and improve confidence in themselves

Intellectual Stimulation – The leaders challenge, take risks and encourage

employees’ ideas Leaders with Intellectual Stimulation will appreciate creativity in their followers, establish and propose for creative and independent staff For them, learning is precious and unexpected outcomes are considered opportunities to learn Following them, their subordinates are independent and challenge themselves with better ways of solving problems and implement their methodology

Intellectual Consideration – The leaders behave as a mentor for their followers, give

them empathy and support, keep the relationship with employees open and comfortable, while still place challenges for them to grow In this case, the followers also need to have a determination for their individual growth and intrinsic motivation for their own work

Table 1.1 Comparison between transformational and transactional leadership

Transactional Leadership Transformational Leadership

Leaders are responsive;

Leaders work within the

organizational culture;

Followers achieve rewards and

punishment basing on performance;

Leaders motivate employees by

focusing on their individual

objectives;

Leaders maintain the working

conditions, emphasize on actions to

improve performance;

Leaders are proactive;

Leaders always strive for cultural changes for the better;

Followers achieve objectives through their personal perception of value and knowledge sharing;

Leaders motivate employees by focusing on the achievement of the entire group; while still understand strengths and weaknesses of each subordinate;

Leaders promote new ideas and encourage followers to think outside the box, establish a creative and innovative working environment Source: Adopted from Odumeru & Feanyi (2013)

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Understanding the characteristics of Transformational and Transactional leadership, and from the literature review, this study will focus on the Transformational leadership style

1.3 Organizational learning

1.3.1 Organizational learning: Definitions and classification

OL was introduced for the first time in 1963 by Cyert & March (1963), both authors believed that organizations’ determination to challenge the external environment to match with their aims of conditions and procedures, will help them to pursue more of their final business objectives (Saadat & Saadat, 2016)

According to Jain & Moreno (2015), OL can be viewed as a vital prescriptive process that enables an organization to grow as well as to develop their core competencies

OL has been broadly explained in the literature as a learning process within an organization which involves the interaction of multi-levels of analysis which are individual, group, internal and external environmental factors (Dodgson, 1993) According to Wang and Ahmed (2003), there are five focuses of OL concepts, which are: Collectivity of individual learning, process or system, culture or metaphor, knowledge management, continuous improvement and incremental innovation (Wang & Ahmed, 2003)

The first focus is the collectivity of individual learning The learning concept rooted from different perspectives, mostly concentrated in the psychology research, the process of individual learning places an effect on OL concept because a learning organization is built from the personal learning process in the organization However, previous researchers also pointed out that individual learning does not always cause organizational learning

Table 1.2 A summary of organizational learning concepts

Focus The concept of organizational learning

Individual “Organizational learning occurs when individuals within an

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learning organization experience a problematic situation and inquire into

it on the organizational behalf” (Argyris & Schön, 1978) Process of

system

Organizational learning is the procedure in which organizations comprehend and reproduce with their experience (Glynn, Milliken, & Lant, 1992)

Culture of

metaphor

“A learning organization should be viewed as a metaphor rather than a distinct type of structure, whose employees learn conscious communal process for continually generating, retaining and leveraging individual and collective learning to improve performance of the organizational system in ways important to all stakeholders and by monitoring and improving performance” (Drew & Smith, 1995)

Source: Adopted with update from Wang and Ahmed (2003)

Organizational learning classification:

Although there are various types and levels of learning researched by previous authors, there can be classified with the three-fold typology of learning by Argyris & Schön, (1978):

Single – loop learning (Following the rules) The traditional template description

for the concept is the thermostat which has one mode function Similarly, the single

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– loop learning includes one automatic and limited type of reaction – little or no learning occurs and little or no sight is required Previous researchers asserted that most organizations follow this single – loop learning, which can be linked with tasks that broaden the knowledge base or firms’ capability without having to change the nature of their basis (Dodgson, 1993)

Double – loop learning (Changing the rules) Members of the organization are

capable of reflecting whether the rules should be changed and how to change the rules, not only when deviations have occurred This learning style involves more of the “thinking outside the box”, creative and critical thinking Regarding this learning type, members of the organization understand better about why a particular solution

is more effective than others, and they are more capable of solving problems or pursue

a goal Experts asserted that double – loop learning is essential to the organizational successful rate This is also regarded as a higher level of learning, generative learning

or exploration learning

Triple – loop learning (Learning about learning) Members of the organizations

learn how to learn, by reflecting on and inquire into previous contexts for learning

In this situations, participants express their thoughts and opinions about regulations, not only whether they should be adjusted

1.3.2 Organizational learning: Measurements

According to Gomes & Wojahn (2017), the OL capability has four dimensions, as described in table 1.3:

Table 1.3 Organizational learning dimensions

Dimension Variables and Indicators Authors

Take risks that do not harm the company Resources for projects that involve new situations

Making decisions without having all the information

Dialogue

Encourage employees to communicate

(Torres, 2011) Free and open communication within

work teams Facilitation of communication within the company

Presence of cross-functional work team

Source: Adapted from Gomes & Wojahn (2017)

According to Kale, P.; Singh, H.; Perlmutter (2000), learning capability can be defined as the ability to acquire new and important information from others In this study, the construct will be applied from the study abovementioned, to explain the learning capability of the Vietnamese enterprises

1.4 Innovation

1.4.1 Innovation: Definitions

Innovation currently is considered at the top of the strategic agendas for organizations (Tzeng, 2009) Innovation is broadly regarded as determining factor

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affecting the economic growth because it generates high productivity and competitiveness (Abrunhosa & Sa, 2008) According to many researchers, innovation is an analytical source of competitive advantage for any organization (Abidin, Sanuri, Mokhtar & Zien, (2013), Hansen (2014), Gunday, Ulusoy, Kilic & Alpkan (2009)

Previous researchers have demonstrated several definitions of innovation, which can

be summarized as follow:

“Innovation is the commercial or industrial application of something new – a new

product, process or method of production; a new market or sources of supply; a new form of commercial business or financial organization” (Schumpeter, 1934)

According to the European Commission, Innovation is the alternations and improvements of products, services and market ranges, the development of productions methods, supply chain management and distribution of products and services; the introduction of new management method alternatives, working environment and human skills (CEC, 1995)

Bona & Mustafa (2013) conceptualized innovation as the creation of behaviors or ideas that bring the organization to a new level of production Consequently, innovation is not exclusively the definition of R&D field; it is the multidimensional procedure, with multiple inputs which come from different interactions among individuals, departments, and organizations

Innovation is crucial for any organization because, in the knowledge creation time, companies see it as a strong indicator of business achievement, a way to create profitable growth, increase competitive advantage and improve organization’s performance (Potters, 2009)

According to previous researchers, innovation has various types that are related to different characteristics, as described in the table below:

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Table 1.4 The Mainstreams of Innovation Typologies

Innovation typology Key features Authors

- Incremental innovations are innovations that involve revisions of alternations to the existing products or services;

(Abrunhosa & Sa, 2008)

(Lin & Chen, 2007) (Forsman & Temel, 2011)

- Marketing innovations are associated with internal processes supporting the delivery

of a service or product;

(Bona & Mustafa, 2013)

(Damanpour, Walker, & Avellaneda, 2009) (Auken, 2008)

- Process innovations are focusing

on improving the effectiveness and efficiency of production;

(Gunday et al., 2011a)

(Singh & Smith, 2004)

(Prajogo & Sohal, 2006)

Source: Adopted from Suroso & Azis (2015)

Key characteristics Authors

Input and Output

(Bona & Mustafa, 2013) (Singh & Smith, 2004) (Prajogo & Sohal, 2006) (Auken, 2008)

(Gunday et al., 2011a)

methodologies

measurements

Surveys, questionnaires, balance scorecards, various mathematical models and other methods Different standards and methodologies are used in different situations and organizations

(Damanpour et al., 2009) (Lin & Chen, 2007) (Abrunhosa & Sa, 2008)

Source: Adopted from Suroso & Azis (2015) Although there have been numerous researchers on analyzing organizations’ innovations with reliable measurement scales (Kusunoki, Nonaka, & Nagata, 1998), (Miller & Friesen, 1983) In this study, the previously used measure developed by Miller & Friesen (1983) will be applied

1.5 Organizational performance

1.5.1 Organizational performance: Definitions

Successful organizations represent a key ingredient for developing countries OP is considered one of the most crucial indicators in the management and strategic

an organization presents the outcome from their limited inputs (Seashore & Yuchtman, 1967) Between the 80s and 90s, the definition became complex as the development and objectives of organizations are constructed to the extent that the organizations carried out their goals effectively and efficiently, within their limited resources (Lusthaus & Adrien, 1998)

According to Reichard (2002), performance is a broader indicator that includes human productivity, consistency and product and service quality It also measures results, behaviors, and relative measures, education, and training concepts and instruments, gathering management development and leadership training for establishing essential skills and attitudes of performance management

Many previous researchers have conceptualized firm performance by return on investment, return on assets, return on equity, market share, sales growth, revenue growth, stock price, sales volume, and profit before tax (Droge, Vickery, & Markland, 1994) Organizations established strategic goals after carefully considering the internal and external factors as they tried to match that capability with opportunities and challenges (Nyenze & Kaleli Kyongo, 2017)

According to Lebas & Euske (2006), organizational performance concept can be illustrated as follow:

- Performance is a set of both non – financial and financial variables that provide information to the degree of outcomes and results;

- Performance is a dynamic criterion, critical for evaluation and translations;

- Performance may be viewed differently from the different point of view;

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- Performance can be described using a causal model that illustrates the effect

of present activities on the future outcomes of the organization;

- The definition of the concept of performance requires knowing its elements features of each responsibility;

- The level of organizational performance requires knowledge of results evaluation and translations

1.5.2 Organizational performance: Measurements

Baird (1986) argued that performance is action – oriented Similarly, Lebas & Euske (2006) also agreed in saying that performance referred to actions, results of actions and the success of organizations Viewing performance as a complex judgment will capture some of this characteristics

Measuring the results of an organization, profitability ratios and business productivity are often used (Regev, 1998) In addition, financial outcomes are usually used to quantify results of an organization These are return on investment, return on equity,

or using the factors of efficiency and service quality (Gopalakrishnan & Damanpour, 2001) Although organizational performance theory and research have been widely studied and reviewed, and it is considered one of the core objectives of research in both entrepreneur and strategic management studies (Venkatraman & Ramanujam, 1986), there is still no consensus regarding the measures of this definitions (Pham & Jordan, 2006) Schriesheim, Castro, Tracy & Dechurch (2006) also agree that measuring organizational performance is a persistent source of argument and critique over the past centuries Organizational performance studies have inconsistent outcomes because of the differences of the sample that researchers used in their studies, the variance in the measurement applied and the lack of consensus of the goals of evaluating performance (Pham & Jordan, 2006) Performance has been conceptualized in numerous ways by various researchers It can be measured by historical data of the organization (Bharadwaj, 2000) or perception of respondents who are working in the organization, regarding their working expectations and objectives or in comparison with their companies’ competitors (Ravichandran &

1.6 The relationship

There are numbers of research about the relationship between transformational leadership, organizational learning, organizational innovation and business performance

Orabi (2016), in a study about the TL and OP, has conceptualized a research model,

in which he studied the impact of four dimensions of TL (idealized, inspirational, intellectual stimulation and individual) to the OP with two dimensions (organizational effectiveness and efficacy) The research model is as follow:

s

Figure 1.1 Research framework by Orabi (2016)

Transformational leadership Organizational performance

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Mutahar, Rasli, & Al-ghazali (2015) in their study in 2015, conceptualized and found that there is positive impact between TL, OL, and OP when studying about this relationship in telecom sector of the Kingdom of Saudi Arabia The conceptual model

Figure 1.3: Research framework by García‐Morales et al., (2008)

Basing on the abovementioned frameworks and other previous studies, it has been confirmed to have a great relationship between these variables In this study, the author wants to investigate this relationship again, in the new context of Vietnamese organizations, aiming to contribute useful and practical implication for managers of the Vietnamese enterprises, in applying transformational leadership, learning and

Organizational learning

Transformational

leadership

Organizational performance

Organizational Innovation

Transformational

leadership

Organizational performance

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innovation to improve better performance, for sustainable growth of the firms

1.7 The conceptual framework of the study

After reviewing the literature of TL, OL, IN and OP, as well as studying the relationship and research models that have been proposed in the previous study, the author finalized the research model for this study as follow, to examine the relationship between TL and OP, with the mediating roles of OL and IN This part will propose the research model, as well as reviewing the relationship between these variables, that have been studying thoroughly in the literature and in empirical examinations

A research model is proposed as follow:

Figure 1.4 The research model for the study

In this conceptual framework, transformational leadership affects organizational learning and innovation, also, the three dimensions have an impact on organizational performance The above conceptual model will be developed in detail and will be tested to gain knowledge for the study:

1 To test the relationship between TL and OL and OP;

2 To test the relationship between TL and IN and OP

3 To test the relationship between TL and OP

1.7.1 Transformational leadership, Organizational learning and Innovation

Transformational leadership and Organizational learning

The responsibility of organizational learning belongs to leaders (Imran, Ilyas, & Aslam, 2016) TL is an ingenious style of leadership that leaders always encourage

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personal emphasis, provide subordinates with the approval of decision – making process, motivate inspirationally and support followers with intellectual stimulations (Bass, Avolio & Jung (2003), (Gary Yukl, 1999) Because of its successful ratio over the transactional leadership style, TL has been used massively and effectively all over the world (Bono & Judge, 2004) TL has been found to be visionary and effective in inspiring and motivate followers for the better work performance (Rasool, Arfeen, Mothi, & Aslam, 2015) According to Bass (1999), transformational leaders develop teams and offers followers with directions, energy, and support, so that the change process and organizational learning can be induced Basing on the study by (Víctor Jesús García-Morales, Jiménez-Barrionuevo, & Gutiérrez-Gutiérrez, 2012), the transformational leadership capacity is regarded as one of the most influenced factors

of maintaining and developing organizational learning in firms

In addition, previous empirical research also found the positive relationship between transformational leadership and organizational learning (Purushothaman, 2015) Consequently, in this study, the link between transformational leadership and organizational learning will also be tested

H1: Transformational leadership places a positive influence on organizational learning

Transformational leadership and Innovation

Eisenbeiß & Boerner (2013) revealed that TL provided the environment for product innovation Simultaneously, García-Morales et al., (2008) in their research about the effect of TL on OP with CEOs of over 400 companies with the greatest turnover rate

in Spain, expressed the similar result, which showed the positive relation between TL and Innovation in surveyed firms Theoretically, Bass & E.Riggo (2006) emphasized that transformational leaders are effective for the establishment of new and creative ideas, thus provided an impact on innovation achievement, besides that, they may also motivate the whole team with action-oriented and making new thing spirits (Howell & Boies, 2004) Similarly, Gary Yukl (2013) in her latest book “Leadership

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in Organizations” (8th edition) also clearly stressed that transformational leaders consist of characteristics and qualities that encourage and promote the innovative thinking in their followers Both theory and practice showed the great impact on Innovation that TL has on its own, this study will also clarify the relationship, with more evidence and demonstration, in Vietnam context Consequently, in this study, the author has hypothesized:

H2: Transformational leadership places a positive influence on innovation

1.7.2 Organizational learning, Innovation and Organizational performance

Organizational learning and Organizational performance

Organizational learning has been considered as the key condition to the organizational success, played a vital role in enabling faster learning ability and can

be the input of sustainable competitiveness for any firm (Kevin & Wang, 2011) However, not all the previous research results showed a significant relationship between OL and OP, meaning that not always an increase in OL results in an increase

in OP, since learning may not always result in a breakthrough in an organization’s outcomes The results from a research by Gomes & Wojahn (2017) showed that the relation between OL and OP occurs only indirectly, that is, OL has an impact on the firms' innovation capability, and in turn, influences OP However, previous researchers supported for the theory that OL and OP have positive associations (Gunday, Ulusoy, Kilic, & Alpkan, 2011b), (Kevin & Wang, 2011) According to Bhaskar & Mishra (2016), OL at the level of individual or global, both results in better financial indicators The organization’s ability to define and solve problems, with their numerous dimensions, are necessary to the outcome of “lessons learned” strategies (Visser, 2016) In general, studies supported an affirmative connection between OL and OP This attribute will also be investigated in this study

H3: Organizational learning places a positive influence on organizational performance

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Innovation and Organizational performance

Previous researchers found that the number of innovations achieved by firms had a positive relationship with firms’ operating profit margin, and innovative organizations are more profitable than non – innovative enterprises (Geroski, Steve Machin, & Reenen, 1993) Organizations which have greater innovation will receive better feedback from the internal and external environment, easily obtain knowledge and information to increase the OP and improve a sustainable competitive advantage (Calantone, Cavusgil, & Zhao, 2002) Similarly, Han, Kim, & Srivastava (1998) and Roberts (1999) both agreed that organizations' administrative and technical innovativeness had significant effects on organizational performance and produced a superior profit According to a cross-nation study by Deshpandé & Farley (2004), firms' innovative capability was the critical indicators to compare performance between firms from developed and developing nations, industrial and industrializing countries Following the result, the author strongly highlighted the importance of innovations in organizational performance Gomes & Wojahn (2017) simultaneously supported the idea that innovation has positive and significant effects on OP A recent study of the supporting industries in Hanoi, Vietnam by Tuan, Nhan, Giang, & Ngoc (2016) revealed that the higher the level of innovation activities is, the greater the innovative performance is, and the higher level of process, organization, and marketing innovative performance is, the better level of firm performances is likely

to be

Consequently, numerous researchers have stressed the positive relationship between

IN and OP The research model of this study will include this attribute

H4: Innovation places a positive influence on organizational performance

1.7.3 Transformational leadership and organizational performance

Many researchers investigated the relationship between TL and OP, summary of the

TL and OP studies in the literature is described as below:

x Compared to other leadership styles, TL has a stronger

effect on firm performance

(Orabi, 2016) x The results of the investigation supported the use of TL

to positively influence OP

(Erkutlu, 2008) x All the TL transformational leadership that is idealized

influence (attributed), idealized influence (behavior), inspirational motivation, intellectual stimulation, and individualized consideration are related positively to both leadership and organizational effectiveness

(Choudhary,

Akhtar, &

Zaheer, 2013)

x TL has more impact on OL than servant leadership Both

TL and servant leadership promote OP through the mediating effect of OL

(Bass et al.,

2003)

x TL was more predictive of unit performance than the

platoon leader’s transactional leadership, although this difference was not significant

x TL helps to develop a foundation of organizational

knowledge in the organization

(García‐Morales

et al., 2008)

x TL achieves greater influence on IN and OP through the

correct management of OL

25

(Víctor Jesús

García-Morales

et al., 2012)

x A management style of TL through OL and IN

simultaneously influences OP

Source: Author’s summary Therefore, this study formed a hypothesis as follow:

H5: Transformational leadership places a positive influence on organizational performance

The chapter consists of five sections, the first one introduces the variables of the model and its measurements, then proposes research model with its hypotheses; the following sections provides information of data collection process, with the analysis

of sample demographics in the final part

Innovation

Basing on the study by Miller & Friesen (1983), three items of innovation in organizations have been applied in this study, to evaluate the respondents’ perception