Strategic Leadership & Business Performance- A Mediation Model.

AuthorJha, Rashmi


Extant literature reveals that competitive advantages rooted in organizational internal competencies can be safer in creating benefits for organizations, in contrast to its external opportunities (Arasa & K'Obonyo, 2012). One of the organizational internal competitive superiorities is leadership style (Safarzadeh et al., 2015). Strategic leadership (SL) has been widely accepted as popular leadership style that plays an effective and significant role in gaining competitive advantages (Yazdani, 2010). A strategic leader has the ability of perceiving, mental fictionalizing, making the flexibility continuous, thinking strategically, and being able to work with other people in order to initiate the changes that will create a viable future for the organization (Ireland & Hitt, 1999). SL is related with the ability of forming, improving, and sustaining the capacities of learning, changing, and managing mind in the organization (Boal & Hooijberg, 2000).

The transformation of firms from resource-based-view to knowledge-basedview has extended the importance of organizational learning (OL) (Chuang, 2004). OL has become the source of competitive advantage for dynamic organizations (Liao & Wu, 2010). Gong, Huang & Farh (2009) have suggested that organizations that have capacity to learn faster can get sustainable competitive advantage as compared to their rivals. Given the significance of organizational learning for business performance, understanding ways in which managers can influence the learning process in organizations is becoming increasingly important. Many organizations are convinced that organizational learning is important for achieving long-term organizational success, efficiency, and organizational effectiveness (Nold, 2012). The extensive literature stresses the importance of organizational learning for the survival of an organization and its effective performance (Schon & Argyris, 1996; Fiol & Lyles, 1985; Senge, 1990). As organizations face many environmental challenges, they need to adapt by ushering in immediate changes. Changes however have to be made through the process of organizational learning. The push for making changes is in-fact through strategic leadership, and of course an appropriate tool at the disposal of leaders to bring in changes is by transforming the old culture to a new one (Rijal, Yoshida & Umemiya, 2010; Caldwell, 2012). As organizational learning is an effective way to boost efficiency, increase productivity, and improve business performance (Garcia-Morales, Jimenez-Barrionuevo & Gutierrez-Gutierrez, 2012), businesses need to seek more innovative ways and means to anticipate and respond to change more quickly and more effectively through enhancing their learning processes (Yeo, 2007; Mallen, Chiva, Alegre & Guinot, 2016). The pace of change is only going to increase as it is the intricacy of its networks, unparalleled in any time in history, demand old leadership rules be thrown out and rewritten (Bolden & O'Regan, 2016). Extant literature has demonstrated that leadership, organizational learning, and organizational learning culture as important factors that enhance the business performance (Gusmao, Christiananta & Ellitan, 2018; Chung, Yang & Huang, 2015; Serfontein & Hough, 2011; Jyothibabu, Pradhan & Farooq, 2011; Skerlavaj, Song & Lee, 2010).

There are a few elaborated investigation considering the Indian firms which explore the influence of strategic leadership on organizational learning (e.g., Jain & Moreno, 2015; Singh, 2011; Hashim, 2013). Further, there are studies associated with the business performance but such studies lack discussion about the flexible strategic leadership (e.g., Nadkarni & Herrmann, 2010), and the impact of organizational learning on business performance in Indian firms (e.g., Vij & Farooq, 2015). Similarly the impact of organizational learning cultures has been less explored when considering the case of Indian firms (Banerjee, Gupta & Bates, 2017). Although there has been the underlying assumptions about the role of leadership in organizational learning (e.g., Nafei, Khanfar, & Kaifi, 2012), little is known about employing the explanatory role of organization learning and organizational learning culture into the relationship between SL and OL, SL and BP, SL and OLC as studied empirically in this research paper. Additionally, researchers have criticized transformational and transactional leadership theory for not considering organizational context (Yukl & Becker, 2006), therefore we believe the use of SL as an independent variable and OL and OLC as a mediator in this study addresses some of the limitations of previous studies.

Hypotheses Development

As the world continually becomes more complex, developing leaders who have the core competencies to manage and succeed in this ecosystem is essential. The high rate of failure of leadership in MNCs in the IT-sector is evident in today's VUCA -environment (Codreanu, 2016). Strategic leaders, who bring the kind of VUCA (where Volatile leads to Vision, Uncertainty yields to Understanding, Complexity yields to Clarity and Ambiguity yields to Agility), are often able to make a turnaround due to their immersive learning ability (Bennett & Lemoine, 2014; Codreanu, 2016). Organizations that survive in the future will manage their organizational structure, leadership, processes, competencies, and practices to allow sufficient flexibility/scalability to adapt to these changes. An organization needs leadership that reinforces learning. Organizational learning is strongly influenced by the behavior of leaders/ leadership style (Shao, Feng, & Hu, 2017). Such environments make it easier for managers and employees to execute concrete learning processes and practices and provide leadership that fosters learning and to cultivate a culture of learning (Santos-Vijande, Lopez-Sanchez, & Trespalacios, 2012). The creation of a learning culture depends on the strategic leader (Hurley & Hult, 1998) and how well that leader can balance transactional and transformational behaviors, authoritarian and participative systems, and task and relationship orientations (Schein, 1992).

Strategic Leadership, Organizational Learning & Organizational Learning Culture

Various studies have asserted the relationships between strategic leadership and organizational learning (Aydin, Guclu & Pisapia, 2015; Lee & Welliver, 2018; Gusmao et al., 2018). Strategic leadership empowers to create the strategic change necessary to cope with the globalized business environment (Perry-Smith & Mannucci, 2017). Serrat (2017) locates organizational learning squarely in the camp of leadership, and argues that, to be able to respond to tomorrow's challenges and opportunities, strategic leaders must initiate a process that enhances day-to-day learning. Further, organizational culture is viewed as a shared mental model that influences how individuals behave, and how they interpret behaviors (Schein, 2004). In fact, various researches have asserted the mediating effect of OLC in the relationship between leadership and OL (e.g., Hosseini, Hajipour, Kaffashpoor & Darikandeh, 2020; Syafii, Thoyib, & Nimran, 2015; Elshanti, 2017). Therefore:

Hypothesis H1: Organizational learning culture will mediate the positive relationship between strategic leadership and organizational learning.

Strategic Leadership, Business Performance & Organizational Learning Culture:

Various research works on strategic leadership have observed a positive relationship between strategic leadership and business performance (Pitelis & Wagner, 2019; Rahman et al., 2018). Sui and Wang's (2014) study on the role of strategic leadership in organizational performance suggested that strategic leadership would affect the organization's performance through work environment. Furthermore, OLC becomes more essential in the consideration of new ideas because it enables an organization to adapt to dynamic business environment. In fact, OLC is important in order to value learning and strive for high performance through the learning progression (Dixon, 2017). Therefore:

Hypothesis H2: Organizational learning culture will mediate the positive relationship between strategic leadership and business performance.

Strategic Leadership, Organizational Learning Culture, Organizational Learning and Business Performance

The significance of organizational learning for a firm's survival and effective performance has been highly emphasized in various works (e.g., Khandekar & Sharma, 2006; Jyothibabu et al., 2011; Garcia-Morales et al., 2012; Mallen, Chiva, Alegre & Guinot, 2016; Saadat & Saadat, 2016). Further, aspects emanating from organizational learning culture which is established and embedded through process of learning orientation leads to organizational learning (Yeung, Lai & Yee, 2007). The creation of a learning culture depends on the strategic leader (Joo & Park, 2010; Lin & McDonough, 2011; Hussein, Omar, Noordin & Ishak, 2016) and how well that leader can balance transactional and transformational behaviors, authoritarian and participative systems, and task and relationship orientations...

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