How ethical leadership influences creativity and organizational innovation

Purpose - The purpose of this paper is to answer two questions. What is the impact of ethical leadership on followers’ creativity and organizational innovation? What are the mechanisms through which ethical leadership influences creativity and organizational innovation? Design/methodology/approach - Considering a market-oriented criterion to measure organizational innovation, the data were collected from 322 small-sized information technology firms working in Pakistan. Multilevel modeling and hierarchical regression analyses were used to explore the direct and indirect effects of ethical leadership on creativity and innovation, respectively. Findings - The results show that ethical leadership is an important predictor of both individual and organizational creativity. For the individual level, the results of multilevel modeling indicate that there is a positive link between ethical leadership and employee creativity. Furthermore, ethical leadership affects employee creativity through knowledge sharing and psychological empowerment. At the organizational level, the results reveal that ethical leadership is positively associated with organizational innovation directly. Practical implications - The findings imply that ethical leadership is an important tool to promote creativity and for the advancement of innovation for developing countries as well as for newly developed industries. Originality/value - This study is first to highlight the role of ethical leadership for organizational innovation. The main contribution of the study is to explore creativity as potential mediator for ethical leadership–organizational innovation nexus; where a market-oriented criterion is taken as proxy of organizational innovation.