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1. Introduction
Despite there being various styles of leadership, transformational leadership has received much attention (Senior and Fleming, 2006) and has often been studied by researchers to predict innovation performance (Chen et al., 2012; Gumusluoglu and Ilsev, 2009a, b). According to Di Benedetto (2013), in recent years, transformational leadership has become an emerging research topic in innovation and has increasingly received attention from scholars. Many studies support the positive effect of transformational leadership on organizational innovation (Aragón-Correa et al., 2007; García-Morales et al., 2008; Gumusluoglu and Ilsev, 2009a, b; Jung et al., 2008; Matzler et al., 2008; Noruzy et al., 2013).
However, this positive relationship requires a wider analysis of the intermediate steps between transformational leadership and product innovation performance; how transformational leadership effectively influences product innovation is a complex process (Mumford and Licuanan, 2004). The mechanisms for its connection with product innovation processes and outcomes have not been explicitly studied (Crossan and Apaydin, 2010). Despite some advances, few studies (Chen et al., 2014; Gumusluoglu and Ilsev, 2009a, b) have gone beyond a simple, direct relationship between transformational leadership and product innovation performance. However, an explanation of the process through which transformational leadership affects product innovation performance is missing. In addition, most previous studies examined transformational leadership of lower management level rather than at the CEO level (Chen et al., 2014). In essence, knowledge is limited as to why CEO transformational leadership is related to product innovation performance. We aim to address this limitation.
Which theoretical mechanism explains why transformational leadership may relate to product innovation performance? We advance one theoretical explanation and propose that the link between CEO transformational leadership and product innovation performance is mediated by some organizational factors. To build our theoretical framework, we argue that transformational leading by the CEO increases a firm’s ability to recognize and exploit opportunities for product innovation. Transformational CEOs can influence social interaction and social change within the organization, which promotes a culture of innovation. CEO transformational leadership also influences the innovation strategy by focusing on tactics and pushing the strategic direction toward innovation. Davila et al. (2006) conclude that CEOs have important roles in putting the innovation strategy in place, as well as making innovation a part of the...