Recent research on new managerial processes, practices and structures that can change the nature of managerial work show that this form of management innovation can be an important source of competitive advantage. Ignacio Vaccaro, Justin Jansen, Frans Van Den Bosch and Henk Volberda hone in on this research at the organization level in their paper, “Management Innovation and Leadership: The Moderating Role of Organizational Size.” Because top management has the ability to influence such management innovation within organizations, the authors investigate the role of leadership behavior.
They define two forms of leadership: transformational and transactional. They see transformational leadership as being “aimed at the followers’ identification with its purpose and common goals. It stimulates employees to attain to organizational goals by appealing to high-level needs for self-actualization.” Through its four dimensions of idealized influence, inspirational motivation, intellectual stimulation and individual consideration, transformational leadership can affect all facets of management innovation. Transactional leadership, on the other hand, involves leaders who are “primarily concerned with gaining compliance from subordinates – which they will do by targeting their self interest – by agreeing upon the conditions and rewards that will follow the fulfillment of certain requirements. With two dimensions of contingent reward and active management by exception, transactional leadership is also positively related to management innovation within an organization.
The authors further find that organizational size moderates the effectiveness of both transformational and transactional leadership on management innovation. Their results indicate that the effectiveness of transformational leadership increases with organizational size. In contrast, smaller, less complex benefit from transactional leadership when realizing management innovation.