Leadership, innovation capabilities, and SMEs’ innovation performance

Drawing upon the resource-based view (RBV) and the dynamic capabilities (DC) perspective, a model that links leadership, innovation capability, and product innovation performance is presented in this paper. Besides, two contextual factors considered to have a leveraging or hindering impact on the effectiveness of leaderships on innovation capabilities are added as moderators. Using a sample of Chinese manufacturing SMEs, the findings reveal that transformational leaders promote both exploratory and exploitative innovations while transactional leaders only effectively encourage exploitative innovation. Findings also indicate that explorative innovation can lead to positive innovation performance, but not exploitative innovation. Moreover, reward philosophy is found to negatively moderate the transactional leadership-exploratory innovation link while entrepreneurial culture has a positive moderating effect on the relationship between transformational leadership and exploitative innovation.