The Pathway to Improve Innovation Capacity for Lao Firms: The Roles of Transformational Leadership and Psychological Resources of Employees

Phouvong Sengphet, Lei Hui and Le Ba Phong
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Phouvong Sengphet: School of Business Administration, Hunan University, Changsha, Hunan, China. Faculty of Education, National University of Laos, Vientiane, Laos
Lei Hui: School of Business Administration, Hunan University, Changsha, Hunan, China
Le Ba Phong: School of Business Administration, Hunan University, Changsha, Hunan, China. Faculty of Business Management, Hanoi University of Industry, Hanoi, Vietnam

International Journal of Business and Administrative Studies, 2019, vol. 5, issue 4, 224-239

Abstract: Innovation is the key and fundamental forces for firms to survive and grow in a competitive environment. The paper aims to examine the correlation between Transformational Leadership (TL) and employees’ psychological sources and how they affect organization’s Innovation Capability (IC). Structural Equations Modeling (SEM) is utilized to elaborate the relationship among the proposal factors through using survey data gathered from 315 participants of 65 medium and small-sized firms in Vientiane, Laos. The findings show that employees’ psychological sources namely optimism and self-efficacy act as mediating roles in the effects of TL on IC. The findings revealed that TL’s Idealized Influence (TII) brings employees greater optimistic, while individualized consideration creates a stronger self-efficacy among employees. In addition, it highlighted the extremely important of self-efficacy in stimulating IC compared with optimism’s effect. From a practical view, the paper highlights the importance and the need of applying TL style in organization management to actively develop employees’ positive psychological capital, and improve IC. The findings of paper also bring deeper understanding and theoretical initiatives that can be applied to clarify the correlation among TL, forms of employees’ psychological capital, and IC.

Keywords: TL; positive psychological source; optimism; self-efficacy; IC (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:apa:ijbaas:2019:p:224-239

DOI: 10.20469/ijbas.5.10004-4

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