The Journal of Asian Finance, Economics and Business

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The Effect of Knowledge Sharing and Innovativeness on Organizational Performance: An Empirical Study in Vietnam

  • Received : 2021.04.30
  • Accepted : 2021.07.15
  • Published : 2021.08.30
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Abstract

The emerging competitive environment in today's global marketplace is one where businesses no longer compete with each other as autonomous, individual firms. Global, economic, and technological development pressure forces organizations to continually enhance their performance through knowledge sharing and innovativeness. The purpose of this paper is to explore the moderating role of knowledge sharing and the mediating role of innovativeness in the relationship between transformational leadership and organizational performance. The data was collected from 389 employees in Vietnamese industrial enterprises through a questionnaire survey. The information was then analyzed by explanatory factor analysis (EFA) confirmatory factor analysis (CFA) as well as structural equation modeling (SEM). The results show that the mediating role of innovativeness and the moderating role of knowledge sharing in the relationship between transformational leadership and performance, are supported. Organizations may reap the benefits of an innovative workforce by selecting, nurturing transformational leaders. This study contributes to the field of human resources management, particularly leadership, by exploring the role of transformational leadership. Moreover, this is the first study to test the moderating role of knowledge sharing and the mediating role of innovativeness in the relationship between transformational leadership and the organizational performance.

Keywords

1. Introduction

Due to the changing economic environment, globali- zation. and growing competing demands, innovativeness has become increasingly important and an essential pre requisite for organizational survival (Kim & Koo, 2017). It is universally accepted that innovation is the key to ensure the future growth and survival of any firm. Organizations are now motivating their employees to generate and implement new ideas that may improve overall service quality and performance (Edghiem & Mouzughi, 2018). One factor that influences performance and innovativeness is transformational leadership (Suifan et al., 2018).

Transformational leadership can be described as a style of leadership that promotes the collective interest of employees, helping them to reach collective goals (García- Morales et al., 2008). Although, transformational leadership and organizational performance have been sufficiently investigated in the literature (Arif & Akram, 2018), few empirical studies have been conducted to incorporate innovativeness in organizations. This is a critical limitation since transformational leadership can enhance followers’ satisfaction and promote creativity and innovativeness. To address the limitation, we empirically test the effect of transformational leadership on organizational performance through innovativeness.

Moreover, this study proposes that the knowledge sharing behavior of employees moderates the effect of transformational leadership and innovativeness. Knowledge sharing refers to the propensity of an individual to share information with co-workers (Lin, 2007). Innovation is the result of information and knowledge processing that focuses on a particular area (Ritala et al., 2015). Therefore, sharing and exchanging information among employees would moderate the effect of transformational leadership on innovative work behavior. As individuals share knowledge, others become more resourceful and have enough information to generate and implement new ideas under transformational leadership.

Our study complements and contributes to the existing research in several ways. First, this study expands existing knowledge by being one of the first studies to examine the important link between transformational leadership and organizational performance through innovativeness. Second, to date, most of the previous studies were explored in western countries; however, little has been analyzed in the eastern context.

This paper is structured as follows: Section 2 presents a literature review and hypothesis development, resulting in the development of a research model and the proposal of hypotheses. Next, Section 3 highlights the research methodology. Section 4 reports the empirical results while Section 5 identifies the discussion as well as the limitations and future research.

2. Literature Review and Hypothesis

In this section, the author introduces the definition of each variable, reviews the literature, and examines the relationships between transformational leadership, inno vativeness, knowledge sharing behavior, and organizational performance. The mediating role of innovativeness and the moderating role of knowledge-sharing behavior are also discussed.

2.1. Organizational Performance

Organizational performance lies at the heart of a firm’s survival. In business and management research, organizational performance is recognized as a central outcome variable of interest, ranging from such disparate areas as human resources (HRs) and marketing to operations management, international business, strategy, and information systems (Hult et al., 2008). Organizational performance shows how effectively an organization operates its resources and whether it has gained a competitive advantage. This perception of performance can guide actions, and in turn, play an essential role in recognizing goals and objectives (Richard et al., 2009).

2.2. Transformational Leadership

Transformational leadership is considered one of the most important factors affecting innovation and creativity (Garcia-Morales et al., 2012). Samad (2012) proved that transformational leadership is recognized as important to organizations, as they integrated creative insights that prompt changes in management practices and processes. A transformational leader shares goals among team members and encourages them to develop innovative ways to perform, or, explore more diverse approaches and perspectives (Zheng et al., 2016).

Transformational leadership is the process in which leaders and followers exchange ideas to achieve a higher level of motivation. Transformational leadership serves to enhance the motivation, morale, and job performance of followers through a variety of mechanisms (Herrmann & Felfe, 2013). Transformational leadership develops a team attitude and spirit among members, which enhances the generation of new ideas (Zheng et al., 2016), and fosters creativity and innovation (Yildiz & Ozcan, 2014). A transformational leader is a person who creates, evolves, and commercializes and is capable of developing and exploiting talents and human capital (Kittikunchotiwut, 2020) Thus, the first hypothesis is proposed:

H1: Transformational leadership positively affects innovativeness.

Maamari and Saheb (2018) state that leadership plays an important role in impacting members to perform the desired goals and to improve performances. Transformational leadership encourages followers to explore situations differently than other leadership styles and to react quickly to the alternative visions of the leader (Subroto, 2011). This will in turn influence the followers and performance. The relationship between transformational leadership and organizational performance has been explored in many studies (Arif & Akram, 2018; Nguyen et al., 2019; Astuty & Udin, 2020). In line with these arguments, the second hypothesis is proposed:

H2: Transformational leadership positively affects organizational performance.

2.3. Innovativeness

Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services (Yildiz et al., 2014). Innovation is the essential strategic capability for survival and growth. Healy et al. (2018) defined innovation as the organization’s tendency to introduce new ideas, products, or services to satisfy the current and future demands of their customers. Innovation can be classified in various forms including products, services, techniques, design (Healy et al., 2018; Suifan, 2021). Innovativeness illustrates the attitudinal awareness and openness of people to new ideas, methods, or procedures (Bisbe & Malagueño, 2009). Rogers (2003) states that innovativeness is the extent to which an organization adopts new methods relative to its rivals. It can be the generation and acquisition of new value, and accomplishment of new methods, inter and extra organizational relational, and the transformation of mindset and business models to develop sustainability (Yidiz et al., 2014).

The significant relationship between innovativeness and performance has been proved in multiple empirical studies (Gopalakrishnan, 2000). Innovativeness is considered an important factor for the success of an organization (Healy et al., 2018). As environments continuously evolve, the organization needs to innovate over time, which can enhance performance and competitive advantage. The following hypothesis captures this relationship:

H3: Innovativeness positively affects organizational performance.

2.4. The Mediating Role of Innovativeness

There are limited studies exploring the relationship of transformational leadership, innovativeness, and performance together (Naqshbandi & Tabche, 2018; Yidiz et al., 2014).In this context, leaders or managers are recognized as motivators of innovation. A leadership style encouraging innovation activities is recognized as an important tool for success. Consequently, transformational leadership encouraging innovation activity can affect the overall performance (Zehir et al., 2011). As such, the following hypothesis is proposed:

H4: Innovativeness is a positive mediating factor in the relationship between transformational leadership and organizational performance.

2.5. Knowledge Sharing

Knowledge sharing reflects “a social interaction culture, involving the exchange of employee knowledge, experiences, and skills through the whole department or organization” (Lin, 2007). Knowledge sharing can occur in various ways, such as communicating and networking with people, documenting, organizing, and capturing knowledge, solving problems, learning new skills, assisting colleagues (Cumings, 2004). Knowledge sharing is considered important to organizations as it develops innovative capacity (Cao & Xiang, 2013; Almulhim, 2020). Singh (2008) argued that knowledge sharing is an essential instrument, as it contributes to individual learning that is essential for new practices. Organizations’ skills and competence can be enhanced through knowledge sharing (Renzl, 2008). Valipour et al. (2017) found that the exchange of employees’ skills is essential to seek creative solutions, which are critical for developing current products and processes.

H5: Knowledge sharing positively affects organizational performance.

2.6. The Moderating Role of Knowledge Sharing

One of the characteristics of transformational leaders is their ability to improve subordinates’ collective motivation (Shamir, 1990). The individual and group interests of subordinates are connected by emphasizing group tasks and sharing values or ideologies. Thus, transformational leaders can generate a collective identity that affects the collective efficacy of an organization. Moreover, transformational leaders communicate departmental prospects through public or regular discussions, motivating employees to be passionate and vigorous; consequently, teamwork performance can be improved (Wang & Howell, 2010).

In the context where knowledge sharing is the prevailing norm in a firm, there are more opportunities for employees to receive more solutions, opinions, suggestions, ideas, and information from co-workers when the leaders engage in participative decision making (Guan et al., 2018). Under such conditions, the odds are higher that an employee will arrive at the right decisions and the best solution. Leaders with transformational behaviors are also better able to inspire followers to solve problems and achieve changes when organizational members experience a high degree of knowledge sharing (Edwards et al., 2017). Thus, the following hypothesis is developed:

H6: Knowledge sharing is a positive moderating factor in the relationship between transformational leadership and innovativeness.

The conceptual framework of this study draws on the literature on transformational leadership, innovativeness, knowledge sharing, and organizational performance. As shown in Figure 1, the framework posits the mediation role of innovativeness in the relationship between transformational leadership and organizational performance, and knowledge sharing moderates the association between transformational leadership and innovativeness.

OTGHEU_2021_v8n8_503_f0001.png 이미지

Figure 1: Research Model

3. Research Method

3.1. Data Collection

Questionnaires were randomly distributed among the employees working in the industrial companies for data collection. The author assessed the managers of each company and asked for permission for collecting data from their employees. After receiving their consent, employees were informed about the purpose of data collection and assured their information would be kept confidential and only be used for the research purpose. Of 500 distributed questionnaires, 437 questionnaires were returned, illustrating the response rate of 87.4%. To ensure the validity of the data, we conduct the cleanness and screening of data. Finally, 389 useful answers have been applied for the final test.

3.2. Variables and Measures

There are four variables, including transformational leadership, innovativeness, organizational performance, and knowledge sharing. The indicators to measure those variables were adapted from previous studies. Each item was measured by 5-point Likert - type (1 = strongly disagree to 5 = strongly agree).

Transformational leadership is measured using 5 items from García-Morales et al. (2012). To measure the level of innovativeness, 10 items were adapted from the research of De Jong and Den Hartog (2010). The knowledge sharing scale was adapted from Lin (2007), which is divided into two dimensions, namely, knowledge collecting and knowledge donating, with a total of 7 items. Finally, organizational performance is measured by a six item scale of Delaney and Huselid (1996).

4. Results

4.1. Sample Characteristics

Table 1 shows the demographic profile of the respon- dents. As illustrated, the number of females and males was not equal, with 249 males (64, 01%) and 140 females (35, 98%). In terms of age, most of the respondents were between 30 and 40 years old, at 45.5%, followed by those who were under 30 years old, at 23.65%. There were 278 bachelors in the respondents who accounted for 71.47%. Employees who have work experience of 3–5 years are about 42%.

Table 1: Sample Characteristics

OTGHEU_2021_v8n8_503_t0001.png 이미지

4.2. Descriptive Statistics

To explore the nature of the data and variables, descriptive statistics were analyzed. Table 2 displays the values of minimum, maximum, mean, and standard deviation of these variables.

Table 2: Descriptive Statistics

OTGHEU_2021_v8n8_503_t0002.png 이미지

4.3. Common Method Variance

Common method variance is considered as “is the spurious “variance that is attributable to the measurement method rather than to the constructs the measures are assumed to represent.” (Podsakoff et al., 2003). Common method variance creates a false internal consistency, that is, a direct correlation between variables created by their common source. Thus, Harman’s single factor test was adopted to find out the problem (Podsakoff et al., 2003). By analyzing the result, we found that the data is free from common method bias because the total variance for a single factor is 48%, which is under the 50% threshold (Podsakoff et al., 2003).

4.4. Reliability Analysis

The study used factor analysis and Cronbach’s Alpha to test construct validity and reliability respectively. The instrument was deemed valid if the factor loading of each indicator was above 0.5, the KMO of the variables was higher than 0.5 and the value of Barlett’s test was lower than 5% (Hair et al., 2010). Moreover, the instrument was reliable only when the Cronbach’s alpha value was above 0.6 (Hair et al., 2010). After deleting item KS6 and OP1 because their item-total correlations are lower than 0.3, all measures’ values are higher than the threshold. The results of construct validity and reliability analysis are illustrated in Table 3.

Table 3: The Results of Construct Validity and Reliability Analysis

4.5. Convergent Validity

In this study, comprehensive reliability (CR) and average variance extraction (AVE) was used to test the convergent validity of the variables. From Table 4, the CR value of each variable is higher than the criterion value of 0.6 (Fornell & Larcker, 1981). The AVE scores are all above 0.5 (Fornell & Larcker, 1981). To sum up, all the variables in this study have convergent validity.

Table 4: The Results of Construct Validity and Reliability Analysis

OTGHEU_2021_v8n8_503_t0004.png 이미지

4.6. Testing of Hypotheses

To test whether all hypotheses are supported, the authors applied Smart PL3 and SPSS 25 to examine the relationship between transformational leadership, innovativeness, knowledge sharing, and organizational performance (Table 5 and Figure 2). First, transformational leadership has a significant positive effect on innovativeness (β = 0.458, p < 0.001), providing support for H1. Next, the result provides support for H2 since transformational leadership is found to have a significant effect on organizational performance (β = 0.380, p < 0.001). Moreover, innovativeness impact positively organizational performance with β = 0.669 and p < 0.001, thus, H3 is supported. Innovativeness partially mediates the relationship between transformational leadership and organizational performance. Thus, the result supports H4. H5 postulates that knowledge sharing is positively related to organizational performance. With β = 0.225 and p < 0.001, H5 is supported.

Table 5: SEM Path Analysis Results

OTGHEU_2021_v8n8_503_t0005.png 이미지

Figure 2: Structural Model
*TL: Transformational Leadership; IN: Innovativeness; KS: Knowledge Sharing; OP: Organizational Performance.

Hypotheses H6 proposes moderating effect of knowledge sharing on the relationship between transformational leadership and innovativeness. Result shows that interaction latent has a significant path coefficient (β = 0.076, p < 0.05). It implies that knowledge sharing has a moderating effect on the role of transformational leadership on innovativeness. Accordingly, hypothesis H6 is accepted.

5. Discussion and Conclusion

The main objectives of this research were to illuminate the role of transformational leadership in organizational performance and to further explore to what extent follower’s innovativeness mediates and knowledge sharing moderates the effect of transformational leadership on innovativeness. Transformational leadership has a positive effect on organizational performance. This result support previous studies (Arif & Akram, 2018).

Transformational leadership is found to positively impact innovativeness. Although previous studies have found a positive effect of transformational leadership on innovativeness (Herrmann & Felfe, 2013), this relationship between them has been minimally explored among industrial employees. Moreover, among different leadership styles, research on the effectiveness of transformational leadership in the Vietnamese context is still very limited and inconclusive.

Furthermore, knowledge sharing is found to positively impact organizational performance. This result is consistent with Song et al. (2015). Finally, the research explored the moderating effect of knowledge sharing on the link between transformational leadership and innovativeness. Our findings suggest that knowledge-sharing behavior moderates the relationship between transformational leadership and innovativeness. Unlike prior research, we operationalized knowledge sharing as a reflective construct measured by knowledge donating and knowledge collecting rather than as explicit knowledge and tacit knowledge. This was to maintain consistency with the research objective which assumes that knowledge sharing practices and norms including knowledge donating and collecting would engage employees into innovative work behavior working under transformational leader (Mittal & Dhar, 2015).

Although this research provides a number of insights regarding the mediating role of innovativeness and the moderating role of knowledge sharing in the relationship between transformational leadership and performance in the Vietnamese industry enterprises, it has its own limitations that should be identified. First, the sample of this study is constrained to the industrial sector; hence, the findings got from it cannot be generalized to other sectors. Thus, it is recommended to replicate this research in other sectors and also conduct comparative studies among sectors. Second, this study relied on self-reported data, which could bias the results. Future research could be benefit from integrating more objective data. This research was restricted by a cross-sectional design, which collected data at a specific point in time. Therefore, it is recommended to use a longitudinal design, which collects data over a period of time. Finally, the respondents in this study are in the same job (all respondents have similar jobs and are from the same work field) within the industrial sector in Ho Chi Minh City, Vietnam, therefore, the validity of the model cannot be generalized. It is expected that future research looks for respondents from different fields of work.

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