Transactional and transformational leadership impacts on organizational learning
Transactional and transformational leadership impacts on organizational learning*
Hugo Zagor?ek, Vlado Dimovski, Miha ?kerlavaj**
This study empirically relates two important areas of management research: the full-range theory of leadership and the organizational learning process. Specifically, this contribution addresses three issues: (1) the impact of transformational leadership and (2) of transactional leadership on the organizational learning process and (3) whether the influence of transformational leadership is stronger than of a transactional type of leadership. The results show that transformational leadership has a strong impact on all four constructs of organizational learning. A direct impact is evident only regarding information acquisition and behavioural and cognitive changes.
Die vorliegende Studie bezieht sich auf zwei wichtige Bereiche der Managementforschung: Die Führungstheorie und den Prozess des organisationalen Lernens. Insbesondere befasst sich der Beitrag mit drei Themen: (1) der Auswirkung transformationalen Führung und (2) der Auswirkung transaktionaler Führung auf den organisatorischen Lernprozess sowie (3) ob der Einfluss der transformationalen Führung st?rker ist als der Einfluss einer transaktionalen Führung. Die Ergebnisse zeigen, dass die transformationale Führung einen starken Einfluss auf alle vier Kontrukte organisationalen Lernens hat. Ein direkter Einfluss wird nur im Hinblick auf Informationsbeschaffung und Verhaltens- und Kognitionsver?nderungen sichtbar.
Key words: Transactional leadership, organizational learning process
transformational
leadership,
* Manuscript received: 24.09.08, accepted: 22.12.08 (0 revision)
** Hugo Zagor?ek, Assistant Prof., Faculty of Economics, University of Ljubjana, Slovenia.Main research areas: Cross-cultural aspects of leadership in organizations.
Vlado Dimovski, Prof., Faculty of Economics, University of Ljubjana, Slovenia. Main research areas: Learning organization, competitiveness, corporate strategy, developing knowledge-based organizations and labor markets.
Miha ?kerlavaj, Assistant Prof., Faculty of Economics, University of Ljubjana, Slovenia. Main research areas: Knowledge and learning networks, the impact of organizational learning and information technologies on performance and learning organization. Corresponding address: miha.skerlavaj@ef.uni-lj.si.
In memoriam: We would like to dedicate this article to Hugo Zagor?ek (1977-2008), who tragically passed away shortly after the completion of this work.
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1. Introduction
Organizational learning is one of the most important sources of sustainable competitive advantage that companies have (de Geus 1988), as well as an important driver of corporate performance (Stata 1989). Given the turbulent environments that organizations work within, continuous learning is a key driver of their ability to remain adaptive and flexible – that is, to survive and effectively compete (Burke et al. 2006). Studies have shown that organizational learning affects competitive advantage (Jashapara 2003), financial and non- financial performance (Bontis et al. 2002; ?kerlavaj/Dimovski 2004; Dimovski/?kerlavaj 2005; Jimenez-Jimenez/Cegarra-Navarro 2006), tangible and intangible collaborative benefits in strategic alliances (Simonin 1997), the unit cost of production (Darr et al. 1995), and innovation (Llorens et al. 2005). Given the significance of organizational learning for corporate performance, understanding ways in which managers can influence the learning process in organizations is becoming increasingly important. Lei et al. (1999), Llorens et al. (2005), Senge (1990), and Swieringa/Wierdsma (1992) emphasize the importance of leadership for organizational learning. Maani/Benton (1999), Slater/Narver (1995), and Snell (2001) describe capability with regard to transformational leadership as one of the most important means of developing learning organizations, while recent theoretical developments emphasize the importance of a contingent approach toward leadership and organizational learning (Vera/Crossan 2004).
Other than the above mentioned, the literature rarely addresses the relationship between leadership and organizational learning, particularly in the context of a transitional economy outside North America. Only a few empirical studies exist to date and even in these, the impact of leadership on organizational learning was not the primary research focus. Hence, Vera/Crossan (2004) call for an empirical investigation of both transformational and transactional leadership styles and organizational performance. Nevertheless, the scarce empirical evidence does indicate that certain kinds of leadership behaviours, such as supportive, empowering, and transformational leadership, do have a positive influence on learning in organizations (Aragon-Correa et al. 2005; Burke et al. 2006; Kurland/Hertz-Lazarowitz 2006; Llorens Montes et al. 2005; Shin/Zhou 2003).
The study empirically investigates the relationship between leadership and organizational learning in the context of a transitional economy. More specifically, the study examines the influence of transformational and transactional leadership on learning in organizational units drawn from a wide range of organizations. The basic research questions are: (1) whether transformational leadership contributes to learning in organizations, (2) whether transactional leadership contributes to organizational learning, and (3) whether
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the influence of transformational leadership is stronger than the influence of the traditional, transactional type of leadership.
The article consists of four sections. The first section provides an overview of the concepts used in the study: organizational learning and transformational leadership. It also reviews existing research on the relationship between leadership and learning in organizations, develops a theoretical model, and proposes hypotheses to be tested. The second section deals with the methodology and discusses the research instrument, research design and data collection, characteristics of the sample, and the statistical methods used. The third section presents the results pertaining to the four main hypotheses tested in the study. The last section discusses the theoretical and practical implications of the study, reviews its contributions and limitations, and concludes by proposing some future research challenges.
Theoretical background
Organizational learning
Numerous definitions of organizational learning exist (Bontis et al. 2002; Dimovski 1994; Shrivastava 1983). Huber (1991) defines organizational learning as the processing of information with the aim to store knowledge in the organizational memory. According to Huber (1991), organizational learning consists of four constructs: (1) information acquisition; (2) information distribution; (3) information interpretation; and (4) organizational memory. Kim (1993), Dimovski (1994), Crossan (1995), and Sanchez (2005) extend Hubers? information-processing perspective to include behavioural and cognitive changes which should, in turn, have an impact on organizational performance. The article builds upon the above-mentioned definitions and considers organizational learning as a process consisting of four consecutive constructs: (1) information acquisition; (2) the distribution of information; (3) information interpretation; and (4) the resulting behavioural and cognitive changes. The first three constructs together represent the information-processing stage, which can be understood as the transformation of information into knowledge. While we might expect these constructs to be highly related in empirical terms, they are theoretically distinct and treated as such.
Together with the organizational-learning process in general, information processing starts with information acquisition. Organizational members collect information from sources inside the company and outside the company, while in modern learning organizations an important aspect of information acquisition occurs through employee training. Obviously, there are at least three sub- dimensions to information acquisition: (1) “information acquisition from internal sources” and (2) “information acquisition form external sources”, and
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(3) “employee training”. When assigned adequate importance, these three sub- dimensions allow employees to continuously update their work-related information base.
Information distribution. The information one gathers through various sources and ways needs to be distributed to those members of an organization that might require it (Huber 1991). Several channels and conduits exist that allow for information distribution. Brown and Duguid (1991) and Koffman and Senge (1993) rely more on “people” (employees are acquainted with goals, take part in more cross-functional teams, etc.), while others rely on “systems” (e.g. the information system, organized meetings to inform employees, formalized mechanisms, and systems to facilitate the transfer of best practices).
Information interpretation is understood as the process of translating events, of developing models for understanding, of bringing out meaning, and of assembling conceptual schemes (Weick/Daft 1984). The purpose of interpreting information is to reduce the ambiguity related to information. Organizations use different media for interpreting the information: personal contacts, telephone conversations, written memorandums, letters, special reports, the formal chain of command, (Daft/Lengel 1986), as well as some modern media such as videoconferences, electronic mail, or an intranet. Information interpretation also differs in the way people get together in order to understand the information acquired and distributed (?kerlavaj et al. 2006). Some vehicles might be “formal” such as official memorandums, expert reports, seminars, and similar events. Other might be more “informal” and involve team and personal meetings.
Behavioural and cognitive changes
Organizational learning is reflected in accompanying changes (Garvin 1993). Spector and Davidsen (2006) claim that “learning is fundamentally about change”. If no behavioural or cognitive changes occur, organizational learning has not in fact happened and the only thing that remains is unused potential for improvement (Fiol/Lyles 1985; Garvin 1993; Sanchez 2005).
Transformational and transactional leadership
This study applies the “full-range leadership theory” as conceptualized by Bass (1985) and developed by Avolio and Bass (1991). They distinguish between three major types of leadership behaviour: laissez-faire (non-leadership), transactional, and transformational leadership. This article focuses on the latter two.
The transactional leadership process builds upon exchange: the leader offers rewards (or threatens punishments) for the performance of desired behaviours and the completion of certain tasks. This type of leadership may result in
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followers? compliance, but is unlikely to generate enthusiasm for and a commitment to task objectives. Transformational leadership lies in the leader?s ability to inspire trust, loyalty, and admiration in followers, who then subordinate their individual interests to the interests of the group. Rather than analyzing and controlling specific transactions with the followers by using rules, directions and incentives, transformational leadership focuses on intangible qualities such as vision, shared values, and ideas in order to build relationships, give larger meaning to separate activities, and provide common grounds in order to enlist followers in the change process.
Transactional leadership has three dimensions. Contingent reward leadership refers to leader behaviours focused on clarifying role and task requirements and providing followers with material or psychological rewards contingent on the fulfilment of contractual obligations. “Active management by exception” refers to the active vigilance of the leader, whose goal is to ensure fulfilment of the standards. Passive management by exception occurs when the leader waits to take action until mistakes are brought to his or her attention – the leader fails to intervene until problems become serious (Antonakis et al. 2003).
Leadership styles and organizational learning
By the nature of their status, leaders serve as the information centres of their units or teams. They therefore have a strong influence on the acquisition and distribution of information. Transformational leaders encourage open, honest, and timely communication, and foster dialogue and collaboration between team members. They encourage the expression of different views and ideas. They act as catalysts, speeding up knowledge acquisition and distribution. By allowing the expression of different views and ideas, by challenging old assumptions and beliefs, and by stimulating new perspectives they enhance the process of information interpretation, as well. On the other hand, transformational leaders may facilitate the cognitive and behavioural changes in organizational members resulting from previous phases of organizational learning.
The empirical evidence, although scarce, generally supports these assertions. In their meta-analysis, Burke et al. (2006) examined the relationship between leadership behaviour in teams and team performance outcomes. They found that, out of 50 empirical studies (up to 2004), only three included organizational learning as the outcome variable and none of them examined the relationship between transformational leadership and organizational learning. From more recent studies, Aragon-Correa et al. (2005) used data from 408 large Spanish firms and found that transformational leadership facilitates the organizational members? ability to create and use knowledge. Similarly, a study of 202 Spanish companies established a strong and positive impact of support leadership on learning in organizations (Llorens Montes et al. 2005). Recent research in the Israeli non-profit sector (schools) showed that transformational leadership has a
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