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The Pathway to Improve Innovation Capacity for Lao Firms: The Roles of Transformational Leadership and Psychological Resources of Employees

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  • Phouvong Sengphet

    (School of Business Administration, Hunan University, Changsha, Hunan, China. Faculty of Education, National University of Laos, Vientiane, Laos)

  • Lei Hui

    (School of Business Administration, Hunan University, Changsha, Hunan, China)

  • Le Ba Phong

    (School of Business Administration, Hunan University, Changsha, Hunan, China. Faculty of Business Management, Hanoi University of Industry, Hanoi, Vietnam)

Abstract

Innovation is the key and fundamental forces for firms to survive and grow in a competitive environment. The paper aims to examine the correlation between Transformational Leadership (TL) and employees’ psychological sources and how they affect organization’s Innovation Capability (IC). Structural Equations Modeling (SEM) is utilized to elaborate the relationship among the proposal factors through using survey data gathered from 315 participants of 65 medium and small-sized firms in Vientiane, Laos. The findings show that employees’ psychological sources namely optimism and self-efficacy act as mediating roles in the effects of TL on IC. The findings revealed that TL’s Idealized Influence (TII) brings employees greater optimistic, while individualized consideration creates a stronger self-efficacy among employees. In addition, it highlighted the extremely important of self-efficacy in stimulating IC compared with optimism’s effect. From a practical view, the paper highlights the importance and the need of applying TL style in organization management to actively develop employees’ positive psychological capital, and improve IC. The findings of paper also bring deeper understanding and theoretical initiatives that can be applied to clarify the correlation among TL, forms of employees’ psychological capital, and IC.

Suggested Citation

  • Phouvong Sengphet & Lei Hui & Le Ba Phong, 2019. "The Pathway to Improve Innovation Capacity for Lao Firms: The Roles of Transformational Leadership and Psychological Resources of Employees," International Journal of Business and Administrative Studies, Professor Dr. Bahaudin G. Mujtaba, vol. 5(4), pages 224-239.
    • Handle: RePEc:apa:ijbaas:2019:p:224-239
    DOI: 10.20469/ijbas.5.10004-4
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    References listed on IDEAS

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    1. Do Khoi Nguyen & Le Ba Phong & Lei Hui, 2019. "Creating Competitive Advantage for Vietnamese Manufacturing and Service Firms: The Role of Collaborative Culture and Innovation Capability," International Journal of Business Administration, International Journal of Business Administration, Sciedu Press, vol. 10(2), pages 32-42, March.
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    3. Sonja Lyubomirsky & Chris Tkach & M. DiMatteo, 2006. "What are the Differences between Happiness and Self-Esteem," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 78(3), pages 363-404, September.
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    5. Hsiu‐Fen Lin, 2007. "Knowledge sharing and firm innovation capability: an empirical study," International Journal of Manpower, Emerald Group Publishing Limited, vol. 28(3/4), pages 315-332, June.
    6. Hsiu-Fen Lin, 2007. "Knowledge sharing and firm innovation capability: an empirical study," International Journal of Manpower, Emerald Group Publishing, vol. 28(1), pages 315 - 332, April.
    7. Sapna Rijal, 2016. "The influence of transformational leadership and organizational culture on learning organization: A comparative analysis of the it sector," Journal of Administrative and Business Studies, Professor Dr. Usman Raja, vol. 2(3), pages 121-130.
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