STRATEGIC INNOVATION AND PERFORMANCE OUTCOMES: MODERATING IMPACT OF TRANSFORMATIONAL LEADERSHIP IN AN EMERGING MARKET

The relationship between organisational innovation and firm performance was investigated in this study with transformational leadership as a moderator. Data were collected from 79 respondents across manufacturing firms listed on the main market of Bursa Malaysia using a stratified random sampling approach. Organisational innovation was conceptualised as a second-order construct comprising management, product and process innovation. Structural equation modelling was employed to test the proposed relationships. Results show that organisational innovation has a positive and significant effect on firm performance, whilst transformational leadership strengthens the relationship between organisational innovation and firm performance. These findings support the theoretical premise that firm-level capabilities and leadership behaviours jointly enhance firm performance. For firms seeking to enhance their competitive position, their innovation strategies must be supported by leadership styles that inspire, motivate and stimulate innovation. The empirical insights in this study are taken from an emerging market, making the results particularly relevant to policymakers and industry leaders in the Malaysian manufacturing sector.