The Nature of the Relationship Between Leadership Styles, Organisational Climate, Innovation and Organisational Performance

The purpose of this paper is to examine the nature of the relationship between leadership styles, organisational climate, innovations and organisational performance. The study on which this paper based was quantitative in nature, using questionnaires submitted by 231 participants from various companies in South Africa. The statistical analysis was based on structural equation modelling (SEM) using path analysis. The results from SEM revealed that a transformational leadership style influences the climate for innovation and organisational performance directly and innovation indirectly. Similarly, a direct relationship between a transactional leadership style and organisational performance was found, but no direct or indirect relationship was found between transactional leadership style and innovation. These findings should assist managers to better understand which leadership style to adopt when the aim is to increase organisational performance using innovation as an enabler. This was the first study to have investigated the nature of the relationship between leadership styles, organisational climate, innovations and organisational performance taking into account the nature of innovation (i.e. incremental and radical).