Transformational leadership and organizational performance companies in vietnam

VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY - NGUYEN MINH HANG TRANSFORMATIONAL LEADERSHIP AND ORGANIZATIONAL PERFORMANCE: COMPANIES IN VIETNAM MASTER'S THESIS BUSINESS ADMINISTRATION Hanoi, 2018 VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY NGUYEN MINH HANG TRANSFORMATIONAL LEADERSHIP AND ORGANIZATIONAL PERFORMANCE: COMPANIES IN VIETNAM MAJOR: BUSINESS ADMINISTRATION CODE: 60340102 RESEARCH SUPERVISORS: DR PHAM THI LIEN PROF DR DANIEL ARTURO HELLER Hanoi, 2018 TABLE OF CONTENTS ACKNOWLEDGEMENT ABSTRACT LIST OF TABLES LIST OF FIGURRES LIST OF ABBREVIATIONS INTRODUCTION .1 Background to the research problem Research objectives and contributions The scope of the study Research design .3 The structure of the paper .3 CHAPTER LITERATURE REVIEW 1.1 Overview .5 1.2 Leadership styles 1.2.1 Transactional leadership 1.2.2 Transformational leadership 1.3 Organizational learning 1.3.1 Organizational learning: Definitions and classification 1.3.2 Organizational learning: Measurements 11 1.4 Innovation 12 1.4.1 Innovation: Definitions 12 1.4.2 Innovation: Measurements 15 1.5 Organizational performance 15 1.5.1 Organizational performance: Definitions 15 1.5.2 Organizational performance: Measurements 17 1.6 The relationship 18 1.7 The conceptual framework of the study 20 1.7.1 Transformational leadership, Organizational learning and Innovation 20 1.7.2 Organizational learning, Innovation and Organizational performance 22 1.7.3 Transformational leadership and organizational performance 23 CHAPTER RESEARCH MODEL AND DATA COLLECTION .26 2.1 Overview .26 2.2 Research model 26 2.2.1 Variables and measures in the research model 26 2.2.2 Research issues, hypotheses, and questions 28 2.3 Data collection process 29 2.4 Questionnaire design and administration 30 2.5 Sample demographics 31 CHAPTER DATA ANALYSIS AND MEASUREMENT MODELS 32 3.1 Overview .32 3.2 Data preparation 32 3.3 Descriptive statistics 32 3.4 Measurement tests .34 3.4.1 Reliability 34 3.4.2 Validity 34 3.4.3 Pearson Correlation Analysis 35 3.4.4 Harman’s single factor test 36 3.4.5 Regression Analysis 36 CHAPTER CONCLUSIONS AND IMPLICATIONS .39 4.1 Overview .39 4.2 Research findings 39 4.3 Contributions and implications 42 4.4 Limitations and further research 43 4.5 Conclusion 44 REFERENCES 46 APPENDIXES 57 Appendix 1: Questionnaire 57 Appendix 2: Invitation letter 61 ACKNOWLEDGMENT I would like to express my gratitude to my advisors Associate Professor Doctor Pham Thi Lien and Professor Daniel Arturo Heller for their enthusiastic guidance and support They accompanied with me over different phases of my master thesis and gave me a helping hand whenever I need their advice Also, I would like to thank my family who always encourages me to complete this research I appreciate the support of my dear friends who are enthusiastically willing to help me over difficulty I thank all people, acquaintance, and strangers who helped me to accomplish this research survey ABSTRACT The study aims to investigate the relationship between transformational leadership and organizational performance, with the mediating roles of organizational learning and innovation Data were collected from 86 respondents who are currently CEOs/ Directors/ Founder of the Vietnamese companies to analyze the model of the research Based on the factor analysis, the 15 variables of the data collected were demonstrating the positive and significant influence that transformational leadership has on business performance, consequently gain some implications for practice in the Vietnamese context Keywords: transformational leadership, organizational learning, innovation, organizational performance LIST OF TABLES Table 1.1 Comparison between transformational and transactional leadership… Table 1.2 A summary of OL concepts……………………………………………10 Table 1.3 OL dimensions…………………………………………………………11 Table 1.4 The mainstreams of innovation typologies…………………………….14 Table 1.5 The mainstreams of innovation measurements……………………… 15 Table 1.6 Summary of TL and OP in the literature……………………………….24 Table 2.1 Constructs of the measurement scale of the study…………………… 27 Table 2.2 Frequency of the respondents’ profile………………………………… 31 Table 3.1 Variables code names………………………………………………… 32 Table 3.2 Descriptive statistics of all variables in this study………………………33 Table 3.3 Cronbach’s Alpha of the variables evaluated………………………… 34 Table 3.4 Factor Loadings ……………………………………………………… 35 Table 3.5 Pearson Correlation Analysis………………………………………… 35 Table 3.6 Regression Analysis (Dependent variable: Organizational learning)… 36 Table 3.7 Regression Analysis (Dependent variable: Innovation)……………… 36 Table 3.8 Regression Analysis (Dependent variable: Organizational performance)37 Table 3.9 Regression Analysis (Dependent variable: Organizational performance)38 Table 4.1 Summary of the results of hypotheses testing………………………… 41 LIST OF FIGURES Figure 1.1 The research framework by (Orabi, 2016)…………………………….18 Figure 1.2 The research framework by (Mutahar, Rasli, & Al-ghazali, 2015)… 19 Figure 1.3 The research framework by (García‐Morales, Matías‐Reche, & Hurtado‐Torres, 2008)…………………………………………………………… 19 Figure 1.4 The research model for the study…………………………………… 20 LIST OF ABBREVIATIONS IN innovation OL Organizational Learning OP Organizational Performance TL Transformational leadership INTRODUCTION Background to the research problem Transformational leadership (TL) places a great impact on the ethical attitudes and behavior of an organization’s individuals, providing a common purpose to achieve goals of organizations According to Bass (2000), TL normally leads to better performance than transactional leadership Previous researchers show that the transformational leaders emphasize a crucial influence on firms’ performance, comprehension of the processes in which followers have more freedom and decisionmaking capability is still theoretical (Gary Yukl, 1999) In the time of information creation, knowledge learning and innovation capability are elements to create, renew and apply knowledge to establish core competencies for firms improvements (Barrett & Sexton, 2006), (Nonaka & Takeuchi, 1995) Although learning about TL and OP has existed in previous research overseas, there are a few papers researching about this topic in Vietnamese enterprises In the past few years, there have been some research on leadership styles, and so is transformational leadership style in the Vietnamese context, they are: - Changing leadership style in the Vietnamese Commercial Banks before and after Vietnam joins the WTO (Cuong & Minh, 2017) - Leadership styles of Vietnamese higher educational leaders: Transformational, transactional, or laissez-faire (Thu, Pillay, & Mergler, 2017) - Transformational and transactional leadership styles and employees’ job satisfaction in Vietnamese local companies (Ho & Le, 2016) - The influence of leadership behaviors on employee performance in the context of software companies in Vietnam (Ha & Nguyen, 2014) - Leadership styles and generational effects: examples of US companies in Vietnam (Cox, Hannif, & Rowley, 2014) - Educational leadership in the Vietnamese context (Dung, 2014) - Effective leadership in joint – ventures in Vietnam: a cross-cultural perspective (Quang, Swierczek, & Chi, 1998) According to the author’s research, the number of study about TL in Vietnam is very limited, so is the study on the relationship between two aspects This motivates research in the situations of Vietnamese companies Research objectives and contributions The study aims to research on the relationship between transformational leadership and business performance in Vietnamese companies, in the current context of developing stage of business, opening many opportunities for small and medium-size companies to start up and to grow In this context, leadership style is one of the most important elements that influence the business strategy of the companies, organization's performance, reputation, and image (Conger & Kanungo, 1988) It is also considered to create the difference for the organization’s image, supporting the achievement of business performance as well as the strategic development and maintaining the competitive advantages for the company (Bass, 1985) (Bass, 1990) also reported that an appropriate leadership style is confirmed to explain 45 to 60 percent of the organizational performance Regarding the effectiveness of transformational leadership style on business performance, based on the previous studies by researchers all around the world, this study was aimed to investigate the following objectives: - To study the impact of transformational leadership on organizational learning and innovation - To identify the influence of organizational learning and innovation on business performance in the Vietnamese context empirically The research objectives are transformed into research questions and hypotheses to be explained in this 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What is your gender? What is the population of your company in Vietnam?  Under 200 employees  Male  Over 50  Female  200 to 300 employees Over 300 employees What is your current position in your company?  Staff  Manager How long have you been in your current position? Under year  to years  to 10 years  Over 10 years  to years Please rank the following statements from (1) totally disagree to (7) totally agree = totally disagree = disagree = tend to disagree = neither disagree nor agree = tend to agree = agree = totally agree Section 2: This section is about transformational leadership style in your company, please circle a position that best fits your opinions Statements Totally disagree The firm’s management is always on the lookout for new opportunities for the unit/ department/ organization 57 Totally Agree The firm’s management has a clear common view of its final aims 7 7 The firm’s management succeeds in motivating the rest of the company The firm’s management always acts as the organization’s leading force The organization has leaders who are capable of motivating and guiding their colleagues on the job (masters) Section 3: This section is about the organizational learning in your organization Please circle a position that best fits your opinions Statements Totally disagree Totally Agree The organization has acquired and used much new and relevant knowledge that 7 provided competitive advantage over the last three years The organization’s members have acquired some critical capacities and skills that provided competitive advantage over the last three years Organizational improvements have been influenced fundamentally by new knowledge entering the organization over the last three years During the last three years: (a) What are the main and most relevant kinds of knowledge acquired and used by 58 the organization? What competitive advantage have they provided? (b) What are the main critical capacities and skills acquired by the organizational members? What competitive advantage have they provided? (c) What have organizational improvements been influenced fundamentally by new knowledge entering the organization? (d) What shows that the organization is becoming a learning organization? Section 4: This section is about the innovation capability in your organization Please circle a position that best fits your opinions Statements Totally disagree Totally Agree The rate of introduction of new products or services in the organization has grown 7 7 rapidly The rate of introduction of new production methods or services rendered in the organization has grown rapidly In comparison to its competitors, the organization has become much more innovative The rate of introduction of new products or services in the organization has grown rapidly Section 5: Answer the following questions, taking into account your organizational performance in the last three years, compared to your main competitors Statements Totally disagree 59 Totally Agree Our financial performance has exceeded 7 that of our competitors Our productivity has exceeded that of our competitors Our market share of main products and market has exceeded that of our competitors Thank you for your cooperation and participation! 60 Appendix 2: Invitation letter Vietnam Japan University Faculty of Business Administration (+84) 936 262 408 16115023@st.vju.ac.vn INVITATION LETTER I am Nguyen Minh Hang, presently the second year master student in the Program of Business Administration at Vietnam Japan University, Vietnam National University Currently, I am doing a research for the master thesis on the topic "Transformational leadership and organizational performance: Companies in Vietnam" The study aims to investigate the relationship between transformational leadership and business performance in the Vietnamese companies, and the target respondents of my study are CEO/ Founders/ Directors of companies in Vietnam I really hope to have your cooperation in answering this questionnaire, the data will only be used for data analysis for this study I really look forward to your reply and wish the firm achieves sustainable goals in the future Best regards, Hang Nguyen 61 ... examine the relationship between transformational leadership and organizational learning, transformational leadership and innovation; organizational learning and innovation and organizational performance, ... 1.7.1 Transformational leadership, Organizational learning and Innovation 20 1.7.2 Organizational learning, Innovation and Organizational performance 22 1.7.3 Transformational leadership and organizational. .. Reviewing the literature on transformational leadership, organizational learning and innovation and its impact on business performance - Establishing and confirming the model of transformational leadership