Transformational Leadership, Transactional Leadership, and Employee Creativity in Entrepreneurial Firms

Xifang Ma, Wan Jiang
  • The Journal of Applied Behavioral Science, March 2018, SAGE Publications
  • DOI: 10.1177/0021886318764346

Leadership and employee creativity

What is it about?

Drawing on organismic integration theory, we propose that transformational leadership and transactional leadership are most likely to predict outcomes, under uncertain social contexts, when accompanied by organizational financial and nonfinancial rewards. Using survey data from professional employees and their supervisors, from 260 Chinese enterprises, with less than 5 years of entrepreneurial experience, we found that (1) transformational leadership is not significantly related to employee creativity, while transactional leadership is positively related to followers’ creative behaviors, (2) synergy between transformational leadership and financial rewards and between transactional leadership and nonfinancial rewards accentuate the effect on employee creativity respectively, (3) psychological empowerment fully mediates the aforementioned relationship. These findings offer a new theoretical framework for future theory development of leadership.

Why is it important?

First, our findings provide evidence that the relationships of transformational and transactional leadership with employee creativity are not always self-evident; instead, as previous studies have found, the relationship between these two elements may be mixed. That is, in the context of the Confucian culture that advocates hierarchy, a fast pace of change, high levels of uncertainty, employee lack of job security, and unclear rules and regulations to guide workplace efforts magnify transactional leadership’s advantage and minimize transformational leadership’s strength. This is consistent with prior theories that assert cultural and societal factors can greatly affect leadership effectiveness (Peterson, 2004).


Xifang Ma (Author)
Shanghai Jiaotong University

When and how are transformational and transactional leadership styles effective in promoting employee creativity? The current research outlines a non-Western cultural setting and an uncertain business context that magnifies the requirements for characteristics of transactional leadership instead of transformational leadership. Under uncertainty and Confucian culture settings, where followers look to their leaders to help set goals and priorities, transactional leader behaviors may lead to greater creativity. Furthermore, this study suggests a fit between financial rewards and transformational leadership, and between nonfinancial rewards and transactional leadership. In conclusion, there is no single most suitable leadership style, but rather a match between leadership and organizational rewards under certain situations when promoting employee creativity.

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