Doctoral thesis of philosophy the role of authentic leadership and ethical leadership in an organisational setting – predictors for ethical climate, organisational citizenship behaviour, affective organisational commitment and in role per

The role of authentic leadership and ethical leadership in an organisational setting – predictors for ethical climate, organisational citizenship behaviour, affective organisational commitment and in-role performance A thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy Brad Predrag Nikolic B.A (Universität Karlsruhe TH), 2005 MBus in Sport Management (Griffith University), 2006 RMIT College of Business School of Management RMIT University December 2015 DECLARATION I certify that except where due acknowledgement has been made, the work is that of the author alone; the work has not been submitted previously, in whole or in part, to qualify for any other academic award; the content of the thesis is the result of work which has been carried out since the official commencement date of the approved research program; any editorial work, paid or unpaid, carried out by a third party is acknowledged; and, ethics procedures and guidelines have been followed Brad Predrag Nikolic 22nd December 2015 ii ACKNOWLEDGEMENTS I would like to sincerely thank all those who have been involved in my journey to successfully complete this thesis I have met many amazing individuals who have inspired, encouraged and supported me along this journey I appreciate their dedication, precious time and patience they have invested into the development and progression of this thesis There were countless lengthy academic, philosophical and technical conversations needed to continually tease out, elaborate, refine, and ultimately keep pinpointing the essence of each component part of this thesis First of all, I would like to thank my original supervisor A/Prof David A Robinson who transformed my strong interests in leadership and management into a belief in myself to the point where I commenced this journey to my PhD Not long into this thesis journey, our mutual professional circumstances changed, which were beyond our control, which further meant that A/Prof David A Robinson could no longer continue being my supervisor Dr Michael Muchiri became my second supervisor as well as the primary supervisor, along with Prof Adela McMurray Both Dr Michael Muchiri and Prof Adela McMurray willingly took on being supervisors mid-thesis, and this is always a very difficult and challenging leadership task when they were not privy to the original foundation stones to this project I am especially indebted to them for their tenacity and resilience with coming on board mid-project and being able to lead and bring this thesis through to completion Additionally, I would like to thank them for their encouragement, support and dedication to me personally and in the thesis itself, as without their supervision and expertise, I doubt this thesis would have found completion There were many other academic colleagues who gladly engaged with me as researchers, and have consequently made a direct or indirect contribution with support to me personally, or with contributing in some way to embellishing this thesis In particular I would like to mention Dr Raymond Trau, Dr Warren Staples, Dr Jason Downs, Dr Ivan Butarbutar, and Prof Giles Hirst I want to thank them for their time, energy and expertise for making this thesis journey and my personal thesis experience richer for their involvement A big thank you to my other fellow research students, your companionship made this last year of my thesis a truly memorable experience All the chats, coffee breaks, and jokes iii were a fundamental support and a refreshing way of having a balance between being highly concentrated and being human Outside of the direct University setting, I have had lengthy mentor support from Paul Collins over a number of years Paul also had incredible belief in me, my research and to not give up before the finish line His practical experience related to all aspects of my research and he happily shared this experience with me along the way Finally, I want to thank my parents Djordje Nikolic and Zorica Steinseufzer-Nikolic for their belief and support in me, and being able to follow my dreams to accomplish a PhD The unconditional love and support given to me during this incredible challenge has been invaluable Also, my partner Debbie for her loving support and encouragement during some of the difficult times towards the end of this journey iv ABSTRACT The purpose of this study was to investigate the direct and indirect effects of leadership behaviours on organisational outcomes within the context of organisations from the private industry sector in Australia Specifically, this study was interested in examining the influence of authentic leadership and ethical leadership on perceived ethical climate, subordinates’ organisational citizenship behaviours, affective organisational commitment, and in-role performance A conceptual research framework was developed and several hypotheses were postulated and tested Potential moderating and mediating relationships that could explicate the relationship between authentic leadership and organisational outcomes were assessed This thesis applied a survey methodology to gather quantitative data from medium to large size organisations in the private sector in Australia These organisations were identified as workplaces that are committed to delivering an ethical and innovative work environment, good leadership practices and good culture according to an annual industry survey conducted by the Business Review Weekly The sample comprised a total of 112 fulltime employees from various job levels The questionnaire comprised of Authentic Leadership Questionnaire, Ethical Leadership Scale, Ethical Climate Questionnaire, Organisational Citizenship Behaviour Questionnaire, Affective Organisational Commitment Questionnaire, and In-role Performance Questionnaire The thesis revealed several substantive findings First, the study found that each leadership construct, authentic leadership and ethical leadership, had unique and positive effects on follower criterion variables Authentic leadership was significantly and positively related to ethical climate, organisational citizenship behaviours, affective organisational commitment and in-role performance Ethical leadership was also significantly and positively related to ethical climate, organisational citizenship behaviour, affective organisational commitment and in-role performance Second, this study revealed that ethical climate mediated the relationship between authentic leadership and organisational citizenship behaviour Subordinates demonstrated higher levels of organisational citizenship behaviours when authentic leadership was supported by a perceived ethical climate In addition, this study showed that ethical climate mediated the relationship between authentic leadership and in-role performance Subordinates exhibited higher levels of in-role performance when authentic leadership was supported by a perceived ethical climate Third, this study demonstrated that ethical leadership moderated the relationship between authentic v leadership and organisational citizenship behaviour and the relationship between authentic leadership and subordinates’ performance This thesis proposes several theoretical and managerial implications First, the study expands our understanding of the unique and direct effects of both authentic leadership and ethical leadership, examined through an integrative model of both leader behaviours in explaining various organisational outcomes Second, the integrative examination of both leadership constructs advances our theoretical understanding of the ability of ethical leadership to complement authentic leadership behaviours in impacting organisational outcomes Third, this study adds to our theoretical understanding of the mediation mechanisms of ethical climate in the explanation of the effectiveness of authentic leadership behaviour Finally, and relating to managerial implications, the study highlights the importance of developing and cultivating authentic leadership behaviours and ethical leadership behaviours in the workplace to attain positive organisational outcomes vi PUBLICATIONS AND CONFERENCES Publications: Nikolic, B 2014, ‘Cognitive Moral Development – its relevance to authentic leadership and organizational citizenship behavior: A conceptual illustration’, The Journal of American Business Review, Cambridge, vol 3, no 1, pp 111-121 Robinson, DA & Nikolic, BP 2014, 'A stairway to the stars-monitoring sustainability performance in SMBs', Journal of Business Systems, Governance and Ethics, vol 9, no 1, pp 23-38 Nikolic, B & Robinson, D 2013, 'A pathway to sustainable business success in SMEs through innovative leadership processes and synergizing principles', Journal of American Business Review, Cambridge, vol 1, no 2, pp 1-11 Nikolic, B & Robinson, DA 2013, 'Vortex leadership for small and medium businesses', International Journal of Scientific Research, vol 2, no 2, pp 72-5 Nikolic, B & Robinson, D 2012, 'An exploration of the applicability of the FACT-Vortex Leadership Model in SMEs', The Business Review, Cambridge, vol 20, no 1, pp 100-8 Conference Presentations: Nikolic, B 2014, ‘Cognitive moral development – its relevance to authentic leadership and organizational citizenship behavior: A conceptual illustration’, The Finance, Economics, MIS, and Global Business Research Conference, Miami, USA December 11th-14th Nikolic, B & Muchiri, M 2014, ‘Relating cognitive moral development to ethical leadership and ethical climate: An illustrative conceptual model and some propositions’, 4th Annual Australasian Business Ethics Network (ABEN) Conference, Sydney, Australia December 1st-2nd Nikolic, B & Robinson, DA 2013, ‘A pathway to sustainable business success in SMEs through innovative leadership processes and synergizing principles’ The Global Business, MIS, Economics and Finance Research Conference, Tokyo, Japan July 25th-28th Nikolic, B & Robinson, DA 2012, ‘An exploration of the applicability of the FACT-Vortex Leadership Model in SMEs’ The Management, Finance & Accounting Research Conference, Honolulu, USA June 1st-3rd Nikolic, B & Robinson, DA 2011, ‘Leadership in SMBs: Introducing the F.A.C.T Vortex model’ 13th Westlake International Conference on SMBs, Hangzhou, China October 14th-17th vii TABLE OF CONTENTS CERTIFICATE OF AUTHORSHIP ERROR! BOOKMARK NOT DEFINED ACKNOWLEDGEMENTS III ABSTRACT V PUBLICATIONS AND CONFERENCES VII LIST OF TABLES XI LIST OF FIGURES XIII LIST OF ACRONYMS XIV CHAPTER – INTRODUCTION 1.1 INTRODUCTION 1.2 BACKGROUND OF THE STUDY 1.3 PROBLEM STATEMENT 1.4 RESEARCH AIM AND OBJECTIVE 1.5 RATIONALE FOR THE RESEARCH 1.6 THE CONTEXT OF THE STUDY 10 1.7 SIGNIFICANCE OF THE STUDY 10 1.8 STRUCTURE OF THE THESIS 11 1.9 SUMMARY 12 CHAPTER – LITERATURE REVIEW 13 2.1 INTRODUCTION 13 2.2 THEORETICAL BACKGROUND 13 2.2.1 The relevance of Organisational Leadership 13 2.2.2 Authentic Leadership and its construct development 16 2.2.3 Ethical Leadership 30 2.2.4 Organisational Outcomes 35 2.2.5 Theoretical framework 45 2.3 IDENTIFYING OVERSIGHTS IN THE LITERATURE 46 2.4 HYPOTHESIS DEVELOPMENT 48 2.4.1 Linking Authentic Leadership to Ethical Climate 48 2.4.2 Linking Authentic Leadership to Organisational Citizenship Behaviour 49 2.4.3 Linking Authentic Leadership and Affective Organisational Commitment 50 2.4.4 Linking Authentic Leadership to In-role Performance 52 2.4.5 Linking Ethical Leadership to Ethical Climate 53 2.4.6 Linking Ethical Leadership to Organisational Citizenship Behaviour 55 2.4.7 Linking Ethical Leadership to Affective Organisational Commitment 56 2.4.8 Linking Ethical Leadership to Performance 57 2.4.9 Moderating effect of Ethical Leadership on the relationship of authentic leadership and organisational outcomes 58 2.4.10 Mediating effect of Ethical Climate on the relationship of authentic leadership and organisational outcomes 62 2.5 CONTROL VARIABLES 65 2.6 CONCEPTUAL FRAMEWORK 66 2.7 SUMMARY 67 CHAPTER – RESEARCH METHODS 68 3.1 INTRODUCTION 68 3.2 RESEARCH PARADIGM 68 3.3 OVERVIEW OF RESEARCH METHOD AND DESIGN 69 3.4 RESEARCH INSTRUMENT DEVELOPMENT 72 3.4.1 Demographic Information 75 3.4.2 Authentic Leadership 76 viii 3.4.3 Ethical Leadership 77 3.4.4 Ethical Climate 78 3.4.5 Organisational Citizenship Behaviour 79 3.4.6 Affective Organisational Commitment 80 3.4.7 Subordinates In-role Performance 81 3.5 SAMPLING 82 3.5.1 Population 83 3.5.2 Sample Size 84 3.6 ETHICAL CONSIDERATION 85 3.7 MODE OF DATA COLLECTION 87 3.8 VALIDITY AND RELIABILITY 89 3.9 PRE – TEST 91 3.10 PILOT - STUDY 92 3.11 MODE OF DATA ANALYSIS 93 3.11.1 Data screening 93 3.11.2 Preliminary analysis 94 3.11.3 Exploratory Factor Analysis (EFA) 95 3.11.4 Hierarchical Multiple Regression Analysis 96 3.11.5 Approach to Testing Mediation and Moderation effects 97 3.12 SUMMARY 99 CHAPTER – DATA ANALYSIS 100 4.1 INTRODUCTION 100 4.2 DATA SCREENING AND DATA PREPARATION 100 4.2.1 Missing Data 100 4.2.2 Sample demographics 102 4.2.3 Assessing Normality Distribution 106 4.2.4 Assessing for Outliers 108 4.2.4 Assessing for Homoscedasticity 109 4.3 RELIABILITY OF SCALES 109 4.4 CONSTRUCT VALIDITY 111 4.4.1 Exploratory Factor Analysis 112 4.4.2 Correlation 118 4.5 HYPOTHESIS TESTING 120 4.5.1 Section - Testing for the main effects of authentic leadership and ethical leadership on organisational outcomes 122 4.5.2 Section - Testing for mediation and moderation effects on the relationship between authentic leadership and organisational outcomes 135 4.6 SUMMARY 154 CHAPTER – DISCUSSION AND IMPLICATIONS 155 5.1 INTRODUCTION 155 5.2 MAJOR CONCLUSIONS 157 5.1.2 Scale dimensionalities 157 5.2.2 Demographic Characteristics 158 5.2.3 Authentic leadership behaviour and its influence on perceived ethical climate 159 5.2.4 Authentic leadership behaviour and its influence on subordinates’ organisational citizenship behaviours 160 5.2.5 Authentic leadership behaviour and its influence on affective organisational commitment 162 5.2.6 Authentic leadership behaviour and its influence on in-role performance 163 5.2.7 Ethical leadership behaviour and its influence on perceived ethical climate 164 5.2.8 Ethical leadership behaviour and its influence on subordinates’ organisational citizenship behaviours 166 5.2.8 Ethical leadership behaviour and its influence on affective organisational commitment 167 ix 5.2.9 Ethical leadership behaviour and its influence on in-role performance 169 5.2.10 Mediating effect of ethical climate on the relationship of authentic leadership and organisational outcomes 170 5.2.11 Moderating effect of ethical leadership on the relationship of authentic leadership and organisational outcomes 174 5.3 IMPLICATIONS FOR THEORY 180 5.4 IMPLICATIONS FOR MANAGERIAL PRACTICE 181 5.5 LIMITATIONS AND FUTURE RESEARCH 184 5.5.1 Sample 184 5.5.2 Method 186 5.5.3 Conceptual Clarity 188 5.6 SUMMARY 189 CHAPTER – CONCLUSION 190 REFERENCES 196 APPENDICES 213 APPENDIX A 213 APPENDIX B 214 APPENDIX C 215 APPENDIX D 216 APPENDIX E 217 APPENDIX F 221 x References Parry, KW 1998, 'Grounded theory and social process: a new direction for leadership research', The Leadership Quarterly, vol 9, no 1, pp 85-105 Passmore, C, Dobbie, AE, Parchman, M & Tysinger, J 2002, 'Guidelines for constructing a survey', Family Medicine, vol 34, no 4, pp 281-6 Paxton, JM 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