CEO Transformational Leadership And Firm Performance

Since Burns(1978) put forward transformational leadership, it has been becoming the focus on leadership theory, its effectiveness has been proved by many researchers. However, the knowledge of "how it is" is more complicate than that of "what it is". Now, there are already some research conducting on the mechanism of transformational leadership, but most existing studies explored the effect and the mechanism of transformational leadership on subordinates, leadership-subordinates relationship from the individual or team level. (Judge & Piccolo,2004; JianXun-Chen, 2010), obviously there are lack of papers based on the firm-level variables, especially the paper focusing on the mechanism of CEO transformational leadership on the whole process of organization. Upper echelons theory suggests that CEO, as the top management, has most important influence on his organization through the strategic decision which he made (Hambrick & Mason,1984). Corporate entrepreneurship (CE), as a key strategic selection, is affected by CEO transformational leadership no doubt. In the view of resource-based theory and dynamic capability theory, CE is essentially one of effective mechanism of resource configuration, conversion and utilization. Integrate three theoretical perspectives mentioned above into one theory. This study assumes that CE is both a resource configuration mechanism and a strategic decision, CEO transformational leadership influence the firm performance through CE. That is, CEO transformational leadership promote innovation, venturing and strategic renewal, which then updating the firm performance and transforming the firm's common resource into a unique competitive advantage.According the logic above, this research attempts to open the "black box" between transformational leadership and its effects based on the strategy and resource-based theory. In the context of transition economy, we try to find out the forces of CEO transformational leadership in driving CE, and exploring the relationships of transformational leadership, CE and firm performance. This study initially proposes a theory model thatCE is a mediator between transformational leadership and firm performance. What's more, we also verify this model using 192 enterprises'data which collecting from the Pearl River Delta region. The results show that CEO's transformational leadership, CE both have a positive impact on firm performance, and that CE play a mediating role in the chain of transformational leadership-corporate entrepreneurship-business performance.