Azlin Shafinaz Mohamad Arshad and Amran Rasli
2. Literature review 2.1 Leadership styles Leadership styles are referring to the behaviour that distinguishes a leader (DuBrin, 2001). The type of leadership behaviour shown could help to cultivate entrepreneurial behaviours within SMEs (Arham, Muenjohn & Boucher 2011). An effective leader is able to influence follower to act accordingly to achieve organizational goals. Firm’s effectiveness and performance would be different when leaders apply different types of leadership styles in the organization (Nahavandi, 2002). There are various leadership styles that can be used by leaders. In a recent study by Rosing, Frese & Bausch (2011), three leadership styles have been identified within a technology company which consists of transformational, transactional and ambidextrous (Rosing, Frese & Bausch, 2011). For the purpose of this study, these styles would be adopted. 2.1.1 Transformational style Transformational leadership style is about leader’s involvement to come up with strategic and clear vision and communicate it effectively with their subordinates (Bass, 1985). It consists of five main components; idealized attributes, idealized behaviour, inspirational motivation, individualized consideration and intellectual stimulation. In idealized influence, leaders will act as role models and influence employees to put the good of organization above self-interest. Leader encourages followers with a clear sense of purpose (Tracey & Hinkin, 1998). Inspirational motivation is where leaders are able to inspire and also motivate followers to behave in appropriate behaviours. According to Bass & Avolio (1994), leaders must identify objectives and goals and endlessly motivate followers to pursue new ideas. Individualized consideration leader will ensure that the followers will get individual attention, treat them separately, advise and coach each of them (Bass, 1990). Transformational leader is preferred as they are aware of the needs of employees (Tracey & Hinkin, 1998). Intellectual stimulation leaders allow employees to be creative and innovative in their work activities (Avolio & Bass, 2004). 2.1.2 Transactional style Transactional style is seen as a relationship between leader and follower for applied effort which is normally associated with rewards based (Bass, 1985; Pawar & Eastman, 1997). Robbins (2003) defined transactional leadership as directing and stimulating followers in accordance to stated goals by explaining their role and work requirement. This leadership style helps firm to achieve their objectives more efficiently by linking job performance with rewards and ensuring employees have adequate resources to get the job done. Bass (1985) and Bass & Avolio (1997, 2004) classified transactional style into two main components; contingent reward and management by exception in two forms; active and passive. Contingent reward is one way of motivation and encouragement for better performance. Employees are being rewarded for work accomplished (Bass & Avolio, 1994). Active management by exception is leader chose to be involved with subordinates to ensure all is in accordance and corrective actions taken when needed (Bass & Avolio, 1994). For passive management by exception, leader would only interfere when things go wrong (Avolio & Bass, 2004) where corrective actions are taken when mistakes are being made. 2.1.3 Ambidextrous style A combination of both transformational and transactional leadership styles is known as ambidextrous leadership (Schreuders & Legesse, 2012). Ambidextrous leaders have mastery in switching between the two styles depending on the needs of the company (Schreuders & Legesse, 2012). As an ambidextrous leaders, there is a need to switch between transactional and transformational leadership during different phases of the innovation process (Rosing, Frese & Bausch, 2011). In their recent article, innovation process refers to the conceptualization of an idea (creativity) as well as the development and implementing of the idea (Rosings et al., 2011). A leader using ambidextrous style is able to foster both explorative and exploitative innovation by encouraging increasing or reducing variance and flexibly switching between those behaviors (Rosing et al., 2011).
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