METHODOLOGY - The Effect of Transformational Leadership on Innovation and Business Performance:

This chapter outlines the methodology. The chapter contains the Research Framework, Hypothesis, research procedure, data collection, instrumentation, reliability and validity of instruments and data analysis.

Research Framework

Based on the literature review, the adopted and subsequently modified framework of perceived transformational leadership behaviors, perceived empowerment of employees, perceived climate for innovation, perceived unit innovation and perceived business performance (TECIP) shown in Figure 3.1 was used to address the purposes of the study. The TECIP model was modified by Cheng-Ping Shih, Ph. D and Olga Peña Orochena. The framework shows the hypothesis being tested and the variables under study. This framework was adopted and represents the modifications made to Jung et al. (2003) Model.

Perception of

Figure 3.1 Integrated model of transformational leadership, empowerment, climate for innovation, innovation and business performance (TECIP Model). Adapted from “The role of transformational leadership in enhancing organizational innovation: Hypotheses and some preliminary findings” by D. Jung, C. Chow and A. Wu, 2003, The Leadership Quarterly, 14(4), p. 525-544. Copyright 2003 by Elsevier Inc.

Few researchers have attempted to create an integrated model of transformational leadership, organizational climate’s elements, innovation performance and business performance. The major differences between Jung et al. (2003) Model and TECIP model are:

1. The TECIP Model proposes the introduction of business performance outcome, into Jung, Chow & Wu’s original framework. Since business performance is the core objective of every firm, the researcher intents to present a more complete picture of interrelationship among these variables.

2. The variable organizational innovation is measured with a different instrument used in Jung, Chow and Wu’s study. Two reasons are presented: firstly, the present research intent to address one limitation stated in their study which was that “attention should be devoted to expanding and refining measurement of the dependent variable” (Jung, Chow & Wu, 2003, p.540); and secondly, because the dominant approach to innovation within the targeted industry, which the organization belongs to, is more related to intangible products, there are no patents obtained.

Hypotheses

Based on the framework presented in Figure 3.1 and the research questions, the following hypotheses were posited:

H1: Perceived transformational leadership behaviors are positively related to the three aspects of perceived innovation performance.

H2: Perceived transformational leadership behaviors are positively related to employees’

perceptions of (a) empowerment and (b) climate for innovation.

H3: Employees’ perceptions of (a) empowerment and (b) climate for innovation have a positive relationship with the three aspects of innovation performance.

H4: Perceived innovation performance is positively related to the five aspects of business performance.

Research Procedures

A research procedure has been outlined in order to have a direction for this study.

Review of Literature:

A literature review of transformational leadership, empowerment, support for innovation, innovation, and business performance was conducted in order to understand the relationship between these concepts. Literature Jung et al. (2003) model was collected.

Identify Research Questions and Hypothesis:

Based on the purposes developed for this research and the literature review, four major guiding research questions were identified and four hypotheses based on these research questions were developed.

Develop Framework of Study:

Based on previous work done by Jung, Chow and Wu (2003) and some limitations of their model, a new model was developed. This model enhanced Jung, Chow and Wu (2003) model by adding the outcome variable, business performance. This model is shown in section research framework of chapter three.

Choose Research Method for Study:

This research design was based on a non experimental, quantitative, survey approach. Justification for this approach is given in the research approach section of this paper.

Instrument Development:

The section below Instrument development details each instrument was adopted in this study.

Translation of Instrument:

The initial instrument was translated by one native speaker of Spanish and then it was back translating into English by two others independent professional who were themselves proficiency in English.

Identify Research Subjects:

During the course of the development of the major purposes of this study, a suitable research case was sought.

Conduct a Pilot Study:

A pilot study was conducted using a random sample of 40 participants to determine whether the survey instrument was able to capture the information for which it was designed.

Adjust Survey Instrument and conduct main study:

The questionnaire was adjusted based on the initial results of the internal consistency and validity of the instrument. The instrument was revised by one expert Human Resource practitioner

and the final questionnaire was used to conduct the main study of this research. The survey instrument was administered to the participants online.

10.

Analysis of Data:

The data was analyzed, using SPSS 17, Microsoft Excel and Smart-Partial Least Square (PLS) 2.00. SPSS 17 was used to do descriptive statistics, such as univariate. Likewise, was used to perform, Exploratory Factor Analysis, Correlation Analysis. Smart-PLS was used to analyze the path relationship between the variables (perceived transformational leadership behaviors, perceived empowerment of employees, perceived climate for innovation, perceived unit innovation and perceived business performance), the factor loadings and also gave the R² of the proposed model.

11.

Report Findings and Drawing Conclusions:

Descriptive and Inferential statistics were used to report the findings and any new information will be further discussed in Chapter IV of this research. These findings were then used to make appropriate conclusions that answer the research questions posed in the study.

32 The research timeline is shown:

Review of literature July 2013

Identify Research Questions and Hypothesis September 2013

Instrument content Analysis September 2013

Develop Framework of Study September 2013

Develop Research Method for Study September 2013

Instrument Development October 2013

Translation of Instrument October 2013

Identify Research Subjects November 2013

Conduct a Pilot Study January 2014

Adjust Survey Instrument and Conduct Main Study

February 2014

Analysis of Data March 2014

Report Finding and Draw Conclusions April 2014

Figure 3.2.Research process and timeline

Data Collection

Because of the purpose of this study was to measure the effect of transformational leadership on innovation and business performance, while analyzing other variables such as empowerment and climate for innovation, a quantitative approach was the appropriate methodology. Specifically a survey was chosen, to gather the data, for two main reasons.

Firstly, to determine the degree of association between variables which are being studied, and secondly after specifying the hypotheses and then collection of data this study will support or refute those hypotheses (Creswell, 1994).

Online questionnaire was used to gather data from business unit’s employees in Casa Pellas. Firstly, the research sent an invitation letter to participate in this study to the Casa Pellas’ chairman, which was approved; thereafter, the Casa Pellas’ chairman notified to the employees about the study. Secondly, the respondents were approached by the researcher through a survey web with proper instructions to complete the online questionnaires. The final survey was delivered as web links to the chosen respondents. The employees were able to complete the online questionnaires and send out their responses through the designated web link and then every response was automatically recorded in the database. This method was chosen due to online questionnaire offer anonymity and avoids interviewer bias and can achieve acceptable response rates. The researcher assured the chairman and subordinates that their responses would remain confidential and as a part of the confidentiality the researcher decided not to include name nor specific position into the online questionnaire, allowing the subordinates to complete the survey anonymously.

Target Population

This research was aimed at targeting employees in Casa Pellas in Nicaragua.

Approval and support to conduct data gathering and analysis were granted by Casa Pellas for this study. Casa Pellas is a suitable choice for this research because this company is a leading company in the business development in Nicaragua and also this company has considered innovation as an important key to maintain their excellence. As of January 2014, Casa Pellas comprised was of 945 employees, and 83 senior and middle managers at a national level;

however this study only chose employees who belong to business unit (N=730). Employees who belong to general administration (215) were not included in the main study. The reason

was because the items of business performance measure were merely focused on business unit performance.

Pilot Test

The instrument was initially undergone pilot test on a group of 40 employees who work in Casa Pellas. Once the instrument was revised and validated, it was utilized to collect data for the main research. The detailed information on how the pilot test was validated will be explained above, at the end of this Chapter III.

Sample Size

When we sample, we select some cases to examine in detail, and then we use what we learn from them to understand a much larger set of cases (Neuman, 2005). A confidence level C, gives the probability that the interval will capture the true parameter value in repeated samples (Moore, McCabe, Duckworth, & Alwan, 2009). For the main study, the researcher chose to use a confidence interval of 95%, and margin of error of 5%, and the sample size was calculated by using this website http://www.raosoft.com/samplesize.html, by considering 50% of expected proportion, total number of business unit employees in the targeted company (730), confidence interval of 95 %, and margin of error of 5%.

The targeted company provided a list of the total workforce (1028), with name, position, business unit and email. The total list of workforce was broken, in two strata:

leaders (83) and employees (945). Data of leaders were not used in this research. Employees who belong to general administration (215) were not included in the main study (N=730).

The reason was because the items of business performance measure were focused on business unit performance. The estimated sample size was 252 employees. However, because of the availability of emails, the researcher sent out questionnaires to 594 subordinates, which were selected with simple random sampling using SPSS version 17.

Sampling

In order to reduce bias, this research used simple random sampling for both pilot test and main study. The researcher created a sampling frame and used a pure random process, which was calculated by using SPSS version 17, to select cases so that each sampling element in the population had an equal probability of being selected (Neuman, 2005). The targeted company provided a list of the total workforce (1028), with name, position, business unit and email. The total list of workforce was broken, in two strata, leaders (83) and employees

(945). As stated before, employees who belong to general administration (215) were not included in the main study (N=730). Within subordinates list, 594 subordinates were selected with simple random sample using SPSS version 17.

Instrumentation

In order to test the research hypotheses five scales were adopted. The questionnaires were based on the literature. According to our research model, the instrument of 73 questions were adopted and made up of the six parts, which included demographic questions. The parts were divided into six sections, which sections were: section I) perceptions of transformational leadership behaviors; section II) perceptions of empowerment; section III) perceptions of climate for innovation within the business unit; section IV) perception of innovation within the business unit; section V) perception of business performance within the business unit and section VI) demographics. Those question items were validated by an expert Human Resource practitioner. Items of the factors of each dimension were in the form of statements and responses were designed to be on a 5-Point Likert-type scale, ranging from (1) “strongly disagree” to (5) “strongly agree”. From Table 3.2 to Table 3.6 it is shown the variables used in the present research, their codes, and the corresponding construct of each dimension. The following section explains how the researcher obtains each score per variable. The originals instruments were in English; however it was translated into Spanish.

Instrument development.

Perceptions of transformational leadership behaviors.

To measure leadership behaviors, the most widely accepted instrument to measure transformational leadership was applied, which is the Multifactor Leadership Questionnaire (MLQ), this instrument has been validated across cultures and at all types of organizations.

This study used a 20 item from the Multifactor Leadership Questionnaire, 4 items assessing each of the five transformational leadership dimensions. Table 3.2 shows the items which represents each of these dimensions. Each item was with a 5 point scale. Each person’s responses to each dimension were summed and a mean calculated to obtain one dimension value per person. Two forms of the MLQ have been developed. The first is the Leader Form (self evaluation) and the Rather Form (applied to employees). Because the target population of this research were employees, this study used the rather form, refer to Questionnaire used in the main study (Appendix A).

The instrument has been used to study leaders in a variety of organizational settings for instance manufacturing, the military, educational and religious institutions, and at various levels in the organization including first line supervisors, middle managers, and senior managers (Lowe, Kroeck, & Sivasubramaniam, 1996). The validity and reliability of the items were then tested in the pilot study which is explained at the end of this Chapter III.

Perceived empowerment.

To measure, empowerment was used a 12-item scale developed by Spreitzer (1995).

This scale measured followers’ perception of empowerment based on the dimensions of meaningfulness, competence, self-determination, and impact. Table 3.3 shows the items which represents each of these dimensions. Each item was with a 5 point scale. Each person’s responses to each dimension were summed and a mean calculated to obtain one dimension value per person. The validity and reliability of the 12 items were also being tested in the pilot study which is explained at the end of this Chapter III.

Perceived climate for innovation.

To measure perceived climate for innovation was used a 22-item scale containing two subscales (support for innovation and supply of resources). Table 3.4 shows the items which represents each of these dimensions. Each item was with a 5 point scale. Each person’s responses to each dimension were summed and a mean calculated to obtain one dimension value per person. The climate for innovation scale was originally developed by Siegel and Kaemmerer (1978) and later modified by Scott and Bruce (1994). The validity and reliability of the 22 items were also being tested in the pilot study which is explained at the end of this Chapter III.

Perceived innovation performance.

To measure Innovation, was adopted a 6-item scale containing three subscales (process innovation, organizational innovation and technical innovation). The present scale was enhanced by Tzeng and Shih (2009). Although this instrument has not been published, the validity and reliability of the 6 items were also being tested in the pilot study, obtaining satisfactory results which will be show at the end of this Chapter III. Table 3.5 shows the items which represents each of these dimensions. Each item was with a 5 point scale. Each person’s responses to each dimension were summed and a mean calculated to obtain one dimension value per person.

37 Perceived Business Performance.

Perceived business performance was measured by looking at firm market performance and financial performance. Table 3.6 shows the items which represents each of these dimensions. Specifically, was adopted a 5-item from Zu, Fredendall and Douglas (2008), which are sales, market share, operating income, profit and return on assets. The most important reason to choose this scale, it is because the scale and items provided are more comprehensive and validated than other measures observed in the existing literature. The validity and reliability of the 5 items were also being tested in the pilot study which is explained at the end of this Chapter III.

Peer review and one HR expert review revised the validity of the instrument of 73 questions used in this study. Pilot study was initially conducted to ensure the reliability of the items in each factor, before gathering the data for the main study.

Table 3.1 provides a summary of instrument used in this study.

Table 3.1.

Summary of Instrument Used in This Study

Variable

Number of Items

Coding of

Variables Adopted From Transformational

Leadership- 20 TFL Bass and Avolio (1995)

Empowerment Instrument 12 EMP Spreitzer (1995; 1996) Climate for innovation 22 CLI Scott and Bruce (1994) Innovation performance 6 INN Tzeng and Shih (2009)

Business performance 5 BP Zu, Fredendall, Douglas, (2008) Note. TFL= perception of transformational leadership; EMP= perception of empowerment;

CLI= perception of climate for innovation; INNO=perception of innovation; BP= perception of business performance.

38 Constructs Coding and Scales

Table 3.2.

Perception of Transformational Leadership Constructs/Code and Questionnaire Items.

Code Items

TLIC8 My direct supervisor spends time teaching and coaching.

TLIC10 My direct supervisor treats others as an individual rather than just as a member of a group.

TLIC15 My direct supervisor considers an individual as having different needs, abilities and aspirations from others.

TLIC17 My direct supervisor helps others to develop their strengths.

TLIS1 My direct supervisor re-examines critical assumptions to question whether they are appropriate.

TLIS3 My direct supervisor seeks differing perspectives when solving problems.

TLIS16 My direct supervisor gets others to look at problems from many different angles

TLIS18 My direct supervisor suggests new ways of looking at how to complete assignments.

TLIM4 My direct supervisor talks optimistically about the future.

TLIM6 My direct supervisor talks enthusiastically about what needs to be accomplished

TLIM14 My direct supervisor articulates a compelling vision of the future.

TLIM20 My direct supervisor expresses confidence that goals will be achieved.

TLIIA5 My direct supervisor instills pride in me for being associated with me.

TLIIA9 My direct supervisor goes beyond self-interest for the good of the group.

TLIIA11 My direct supervisor acts in ways that builds my respect.

TLIIA13 My direct supervisor displays a sense of power and confidence.

(continued)

39 Table 3.2. (continued)

Code Items

TLIIB2 My direct supervisor talks about their most important values and beliefs.

TLIIB7 My direct supervisor specifies the importance of having a strong sense of purpose.

TLIIB12 My direct supervisor considers the moral and ethical consequences of decisions

TLIIB19 My direct supervisor emphasize the importance of having a collective sense of mission.

Note. TLIC= transformational leadership individualized consideration;

TLIS=transformational leadership-intellectual stimulation; TLIM= transformational leadership-inspirational motivation; TLIIA=transformational leadership-idealized influence attributes; TLIIB=transformational leadership idealized influence behaviors.

Table 3.3.

Perception of Psychological Empowerment Constructs/Code and Questionnaire Items.

Code Items

EMPM30 The work I do is meaningful to me.

EMPM22 The work that I do is important to me.

EMPM25 My job activities are personally meaningful to me.

EMPC21 I am confident about my ability to do my job.

EMPC32 I am self-assured about my capabilities to perform my work activities.

EMPC29 I have mastered the skills necessary for my job.

EMPD27 I can decide on my own how to go about doing my own work.

EMPD28 I have considerable opportunity for independence and freedom in how I do my job.

EMPD26 I have a great deal of control over what happens in my department.

EMPI24 My impact on what happens in my department is large.

EMPI31 I have significant influence over what happens in my department.

EMPI23 I have significant autonomy in determining how I do my job.

Note. EMPM=empowerment-meaningfulness; EMPC=empowerment-competence;

EMPD=empowerment-determination; EMPI=empowerment-impact.

40 Table 3.4.

Perception of Climate for innovation Constructs/Code and Questionnaire Items.

Code Items Obs.

CLIS33 In our business unit creativity is encouraged.

CLIS34 In our business unit our ability to function creatively is respected by the leadership.

CLIS35 In our business unit, people are allowed to try to solve the same problems in different ways.

CLIS36 In our business unit the main function of members is to follow

orders which come down through channels. RC

CLIS37 In our business unit, a person can get in a lot of trouble by being

different. RC

CLIS38 Our business unit can be described as flexible and continually adapting to change.

CLIS39 In our business unit, a person can't do things that are too different

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