Vissanu Zumitzavan, Ph.D, Sarinthree Udchachone, and Varit Intrama, Ph.D
An Improved Organizational Performance Influenced by Leadership Styles and Innovation: A Case Study of Hotel
Industry in Thailand
VissanuZumitzavan, Ph.D.
Mahasarakham Business School, Mahasarakham University
Mahasarakham Business School (MBS), Mahasarakham University, Kantharawichai, Khamriang ,Mahasarakham, 44150, Thailand.
SarinthreeUdchachone
Department of Management, Essex Business School, University of Essex, UK
VaritIntrama, Ph.D.
Mahasarakham Business School, Mahasarakham University
Mahasarakham Business School (MBS), Mahasarakham University, Kantharawichai, Khamriang ,Mahasarakham, 44150, Thailand.
Vissanu Zumitzavan, Ph.D, Sarinthree Udchachone, and Varit Intrama, Ph.D
Abstract - This research aims to investigate the relationship between leadership styles, innovation and organisational performance. A quantitative approach will be applied to analyse the data. This research seeks to investigate the relationship between leadership styles, innovation, and organisational performance. In addition, the mediation will also be analysed to understand to what extents the leadership styles and innovation may be related to the organisational performance. Hence, this research aim to designate the effective leadership styles of the managers and how they should contribute to creating a conductive environment to encourage innovation in the organisation, and in turn improve organisational performance.
Keywords - Organisational Performance, Leadership styles, Innovation.
I. INTRODUCTION
Welcome to the digital age, the success of an organisation in a world of tentative market is directly associated with ways of innovative leaders managing in the digital economy. Business requires managers composing impacts by competing successfully in the context of globalisation [1]. Scholars have proposed the concept of organisational learning to enhance organisational performance [2, 3] in which managers encourage a learning environment within their organisations; knowledge therefore needs to be distributed at every level of the organisation. In addition, in small firms, managers are the key persons in making day-to-day decisions, and they are considered as the most imperative drivers of success in enabling firms to achieve their organisational goals [4-9]. This strengthens that the decisiveness of the manager is an essential contribution towards organisational success [10].In particular, managers are instrumental in creating an organisational ethos of learning for each member of the organisation [11]. Furthermore, establishing and sharing a company ethos and culture is seen as a desirable outcome for organisational success. This is that attempting to secure the best from employees through direct supervision is at best costly and often simply unattainable[12]. A number of researchers have emphasised that leadership is most significant in organisations seeking to transform themselves through organizational learning [13]. Handy [14]highlighted that managers play an important role in contributing knowledge and encouraging a learning environment in the organisation. Similarly, Senge[15]said that the sort of changes needed in the creation of organisational learning are extremely challenging and would need “real leadership”.
II. LITERATURE REVIEWS
Based on the Resources Based View -RBV, internal capabilities enhance competitive advantage and performance.
For example, a system of knowledge and a system of learning increase competitive advantage through innovation and strategic linkage of products [16]. Georgellis et al. [17]discovered that innovation in products and services are connected to providing competitive advantage. While the system may be restricted by the managers’ prior experience, Brush and Chaganti[18]emphasise that the managers’ human capital is expanded through the introduction of systems of organising. Occasionally these systems are adopted from formal training to address specific problems such as quality, from customers or business support agencies, or from specific techniques such as HRM policies [19].
One of the challenges in the tourism and hospitality is a people-business requiring a large number of organisational members committed to penetrating customers’ needs [20]. Furthermore, the manager is the key person who can make an impact to compete successfully in the dynamic world economy. Especially in Asia, where regulations are not as stringent in others developed economies [20]p. 218. According to Williams, he predicted that in 2017 the most jobs in voyage and tourism industry are from Asia: China, India, Japan, Indonesia and Thailand in respectively [20]. It clearly sees since Thailand is gaining business opportunities for service sector under ASEAN Economic Community: AEC. Thai businesses have good prospects following the gradual reductions in goods, services, trade facilitation, although the pace of liberalisation is slower than targeted [21].
Chung-Herrera et al. [22]verified that leadership is often raised as a core competency in the hospitality arena. They believed that leadership interconnections can be asserted by the development of the competency model. Moreover, Michie and Sheehan [23]found that different leadership styles may lead to different levels of organisational performance. At the same time, Mabey[24]found that different leadership styles may create different levels of the innovation. Hence, this may indicate that different leadership styles with different levels of creating innovation in the organisation may lead to different levels of organisational performance.
More specifically, scholars have indicated that leadership styles, innovation and performance are important and interrelated variables contributing to organisational performance and thus there is a critical need to examine these relationships [25-27]. Leadership may be observed as part of a learning process taking place through carrying out day-to-day responsibilities and in turn influencing to create innovation and leading to increase the organisational performance. Hence, adopting appropriate Leadership Styles may help to relocate and hearten learning in the organisation and this would lead to creating the innovation and improving employees’ skills, which in turn could improve organisational performance overall.
III. LEADERSHIP STYLES
It is widely accepted that the managers, as leaders, play key parts in ensuring organisational learning. Highlighting this key role, Senge[15]p. 321asserted that “the neglected leadership role is that of the designer of the ship; no one has a more sweeping influence on the ship than the designer”. Leaders also face the task of developing and sustaining fundamental change in order to encourage learning in the organisation. Daft [13]suggested that the leader’s role in the process of organisational learning can be divided into three distinct roles: to create and share vision; to design an appropriate horizontal structure to help to achieve this vision; and to act as “servant leaders”; servant leadership facilitates the growth, goals, and empowerment of followers. Additionally, research underlined that transformational forms of leadership are particularly important in promoting organisational learning (Bass 1985b; Bass and Avolio, 1989, Gleue, 2002).
It has been suggested that the transformational leadership approach is more effective than others in creating change in an organisation compared with transactional leadership. In recent literature, Bass and Avolio are widely acknowledged for developing these new leadership concepts. According to Bryman[28], their basic ideas are heavily influenced by Burn’s work. Burn [29]believed that transactional leadership is more common place than is transformational leadership, if less dramatic in its consequences. Bass [30]however, further developed the concepts of transactional and transformational leadership. He established them as two separate theories and distinguished the different features for transformational and transactional leadership[31].
Bass [30] proposed that transformational leaders are likely to make their employees trust, respect, and admire them by concentrating on idealised influence, individualised consideration and inspirational motivation, which in turn, implies serving as a charismatic role model and expressing a vision that could be created. It also suggests a need for intellectual stimulation, defined as questioning old assumptions and the status quo [32, 33]. This leadership style describes the managers likely to focus on higher motivation development and motivate the subordinate’s motivation by inspiring vision of the future [34, 35].
Elaborating further, transformational leadership theory could be considered a form of behavioural theory. It is based on the premise that leadership could be learned [33, 36]. More importantly, there is substantial evidence indicating that transformational leadership helps to increase higher levels of individual performance [30, 37, 38]. For example, Judge and Piccolo (2004) established that managers at Federal Express who were rated as transformational received higher performance evaluation. However, Yukl[39]argued that Bass and Avolio’s leadership theory would be more prominent if the essential influence processes were identified more clearly and used to explain how each type of behaviour affects each type of mediating variable and outcome.
Compared to transformational leadership approach, transactional leadership is recognised as the traditional management function of leading [13]. There are three key dimensions making up transactional leadership namely contingent rewards, management by exception-active and management by exception-passive. Contingent rewards refer to the degree to which the leader sets up constructive transactions or exchanges with subordinates. Transactional leadership clarifies expectations and establishes the rewards for meeting these expectations. On the other hand, management by exception-active refers to managers who monitor subordinates’ behaviour, anticipate problems and take corrective actions before the behaviour creates serious difficulties. In contrast, management by exception-passive means that the managers will take action when the behaviours of their subordinates have already produced problems [31].
Managers who have this leadership style are less likely to support their employees in terms of developing their skills. Instead they prefer to provide appropriate rewards and focus on clarifying the role and task requirements of employees and initiate structure (Kuhert, 1994). These attributes of transactional leadership could lead to an increase in organisational performance as researchers have also suggested that managers with this leadership style are likely to be diligent and broad-minded. They are more concerned with the efficiency of the tasks than building members’ abilities. They often stress the impersonal aspects of performance such as plans, schedules and budgets. They also tend to follow the organisational norms and values (Daft, 2000). Nonetheless, some studies have found both positive and negative correlations between transactional leadership and performance (Jens and Kathrin, 2007).
In comparison to transformational and transactional leadership, laissez-faire or non-leadership describes managers who are neither task oriented nor people oriented. They let their subordinates work on their own. They avoid making decisions, often hesitating to take action and are more likely to be absent when needed. Laissez-faire leadership is also related to management by exception-passive leadership (Judge and Piccolo, 2004). It appears that they are not highly motivated, their power only comes from their position in the organisation but they are less likely to carry out their responsibilities. Almost inevitably, laissez-faire leadership is likely to result in damaging consequences for the working environment, health and well-being of employees [33].
To conclude, Bass and Avolio’s approach to leadership is arguably one of the most prominent theories in contemporary research. It provides much insight into how to create change and sustain organisational learning for the entire organisation [30, 37, 40-43]. Although a number of scholars have claimed that leadership is positively related to organisational performance, the interplay between leadership and diversity remains largely unexplored[42], p. 812. Kristy et al. (2007) strongly suggested that the demographics of managers also need to be premeditated in relation to leadership. To a large extent, the leadership style which is supportive to this particular business is in need of further investigation. Taking into account the various strengths and limitations of previous research into leadership styles, this study attempts to incorporate Bass and Avolio’s leadership theory specifically and study its relationship to organisational performance.
IV. INNOVATION
According to the study of Schumpeter (1934, 1942), innovation is influenced by firm’s sizes. the larger organisation elaborates the greater of economies, smaller risk, greater market better appropriation possibilities and on the other hands, the smaller organisation could have greater flexibility, better communication and greater specialisation possibilities, informal and strategic control. Moreover, Horowitz (1962), Lunn and Martin (1986), Braga and Willmore (1991), Henderson and Cockburn (1996) Gumbau (1997) and Arundel and Kabla (1998) also supports the relationships of organisation’s size and innovation through their empirical findings. Another factor for innovation is the level of debt, there are several academic researches expose the negative effect toward innovation (Grabowski, 1968; Elliott, 1971; Kamien and Schwartz, 1978; Hall, 1990; Long and Revenscraft 1993; Branch, 1994; Giudici and Paleari, 2000)
The intangible factors toward innovation are relatively difficult to delineate. Since intangible resources are more difficult to measure due to the difficulty of empirical literature (Cohen, 1995). Nevertheless, intangible factors for innovation are very crucial for better understanding of innovation. The works of Galende and Suarez (1998, 1999) and Martinez-Roz and Salas (1999) demonstrated the positive influence of human resources comprise a team of scientists and technicians with qualification and experience in R&D and innovative activity, towards innovation.
Excluding human resource, Freeman (1973) and Rothwell et al. (1974) proposed the significance of commercial resources, the understanding of user’s necessities and the better efforts in marketing and publicity. Thus, commercial resources could also describe the success or failure of the innovation. According to Bughin and Jacques (1994) and Dyerson and Mueller (1999), the organisational resources may generate the prodigious relationships to innovation. They found that efficiency and synergies occur between marketing and research and development (R&D), communication capability within the organisation, managing and organisational excellence, promoting of integration of knowledge through teamwork and fostering of learning from external sources, have positive association with innovation. In addition, the importance of organisational strategies may also cause the huge impact on innovation particularly diversification strategy. Several academic researches highlighted the negative association between diversification and innovation (Hoskisson, 1989; Baysinger and, Hoskisson and Johnson, 1992; Hoskissonet al., 1993; and Hoskisson and Hitt, 1998). However, McEachern and Romeo (1978), Link (1982) and Chen (1996) proposed and expressed the positive influences. Further, diversification strategy, internationalisation strategy was also premeditated. It could manifest the relationship towards the development of technology. There are a quantity of academic researches established the positive relationship between innovation and the organisational performance (Meisel and Lin, 1983; Lunn and Martin, 1986; Braga and Willmore, 1991; and Kumar and Saqib, 1996).
In sum, the findings of this research are anticipated the remaining gab to investigate whether different leadership styles may support to create the innovation occurred in the organisation. In particular, which type of the leadership styles may lead to create supportive innovation in the organisation.
Organisational Performance
Organisational learning plays a vital role in sustaining the company and achieving its organisational goals, which in turn leads to superior organisational performance. Thus, many authors consider learning to be a fundamental aspect of competitiveness and link it with knowledge acquisition and organisational performance (Lopez et al., 2005). Michie and Oughton (2003) seek to illustrate how knowledge can improve organisational performance, and they believe that the organisation should create a learning environment to encourage members to continue to learn. In pursuit of the development of learning in the organisation, recent researches confirmed that the capability of the manager to support members of the organisation should not be underestimated, including encouragement of appropriate learning in a way productive corporately and individually (Mabey, 2002).
Correspondingly, Beaver and Jennings (2001) suggested that the manager in the small organisation is in the best position to make the learning environment happen. In each small organisation, the manager may have varied perspectives, so the goals will be at different levels. Grunburg (2004) and Wall et al. (2004) suggested that subjective and objective measures are important factors in measuring organisational performance, dependent on the goals of each organisation. Objective measures can be considered in different categories, such as profits, sale volumes, market shares, and return on investment, while subjective measurement depends on, for example, the perceptions of managers.
De Hoogh et al. (2004) studied small and medium sized enterprises in the Netherlands, examining the relationship between leadership and organisational performance; they focused on the objective measure of financial performance, comprising profitability, liquidity and solvency. They found that leadership is positively related to profitability but unrelated to liquidity and solvency.
Swinney et al. (2006) considered the association between managers’ levels of education, gender and organisational performance and focused on subjective measures obtained from managers’ perception. Results indicated that level of education and the gender of the managers interact to have an impact on organisational performance. Wang and Ang (2004) applied subjective or self-reported measures in three dimensions: growth in market share, growth in cash flow, and growth in sales, to investigate how to develop organisation’s performance. Questionnaires were distributed to local organisation in Singapore. They found that there is a significant correlation between environment, resource-based capabilities, strategy, and venture capital in a organisation’s involvement and performance.
Ardichvili (2001) studied the relationship between leadership styles of entrepreneurs and managers in three large manufacturing companies in Russia. Three subjective measures were used: satisfaction (satisfaction with the managers’ leadership styles), extra effort (the extent to which managers were able to elevate employees’ motivation beyond their initial expectations), and performance meeting employees’ needs). Results indicated that there is a significant difference between entrepreneurs and managers in all three leadership styles (Transformational, Transactional, and Laissez-faire leadership) and subjective measures.
Similarly, Wall et al. (2004) suggested that it is valid to use different aspects of subjective data; however, researchers need to take care in data collection. Generally, financial records are confidential and most organisation are unwilling to provide these kind of data, so some researchers have asked respondents to rate the performance of their organisation by using a rating scale which compares them with other competitors in their business sector (Love et al., 2002; Pett and Wolff, 2007; Wiklund and Shepherd, 2005). In support of the previous concept, Eskilden and Kristensen (2006) suggested that organisational performance can be typically evaluated on a rating scale whereas importance can be either rated by the respondents or estimated on the basis of performance. Similarly, research to date has used both objective and subjective indicators, the results showing that both approaches have been highly correlated or equal (see, for example, Dess and Robinson, 1984, Pelham and Lieb, 2004; Garg et al., 2003, Ghobadian and O'Regan, 2006; Guest et al., 2003; Jennings and Young, 1990; Wall et al., 2004).