IMPACT OF TRANSFORMATIONAL LEADERSHIP ON INNOVATIVE WORK BEHAVIOR: MEDIATING ROLE OF PSYCHOLOGICAL EMPOWERMENT AND MODERATING ROLE OF PROACTIVE PERSONALITY

Abstract

Purpose - This study examines the relationship between transformational leadership (TL) and employee innovative work behavior (IWB) in small and medium-sized enterprises (SMEs). The research explores psychological empowerment (PE) as a mediator and proactive personality (PP) as a moderator to understand their collective influence on fostering innovation.Design/Methods/Approach- A quantitative research design was employed, involving a structured survey of 400 employees from SMEs using simple random sampling. The sample size was determined via G-Power, with an effect size of 0.25. SPSS v25 was used for descriptive and inferential analysis, while Hayes’ Process Models 1 and 7 were applied to examine mediation and moderated mediation effects. Validity and reliability were established through confirmatory factor analysis, ensuring a robust research framework. Findings- The results reveal that TL significantly and positively impacts IWB by fostering creativity and innovation. Psychological empowerment plays a critical mediating role, enabling employees to take initiative and propose innovative solutions. Proactive personality strengthens the positive relationship between TL and IWB, with proactive individuals exhibiting greater creativity and adaptability. These findings emphasize the importance of transformational leadership in empowering employees and cultivating innovation, especially within SMEs. Practical Implications- This study makes a practical contribution to the existing body of literature about the interaction between leaders and employees. The present research makes a contribution to the expanding body of literature that demonstrates how enterprises may encourage innovative in their workers and how motivate individuals to engage in activities that include innovative behavior that might potentially improve the performance of the business. Originality/Value- The research shows how psychological empowerment and proactive personality traits work together with social cognitive theory and social exchange theory to drive innovation in small and medium enterprises. The study demonstrates how leadership and empowerment together with personality traits interact to provide managers with methods to boost their organizations' innovative capabilities.

Keywords Transformational leadership, proactive personality, innovative behavior, Psychological empowerment, Small medium enterprises