Abstract
BACKGROUND:
Dynamic and globalized business environment incites organizations to be innovative for long-term survival. This central role of innovation provokes the continuing interest of social scientists in determining the antecedents of Innovative work behavior in organizations.
OBJECTIVE:
In line with the prior studies, this study aims to investigate the role of inclusive leadership in fostering employee innovative work behavior. Additionally, this study also investigates the mediating role of psychological safety.
METHODS:
Data were collected through a questionnaire from employees working in Pakistani banks. Hypothesized relationships were analyzed using structural equation modeling.
RESULTS:
The findings of the study depicted a positive relationship between inclusive leadership and IWB, while mediation of psychological safety was also established.
CONTRIBUTION:
This study contributes to the existing literature in multiple ways. Although the link between inclusive leadership and creativity is measured but in what ways inclusive leadership develops the perception of employees, which leads towards positive outcomes is a contribution. This study extends the understanding of relational leadership by focusing on its specific dimension that is IL, instead of focusing on the broader construct of leadership.
Introduction
Dynamism and hyper-competition in today’s business world have created enormous challenges for organizational survival and growth [1] In order to achieve organizational goals; attention must be diverted on innovation. Since the introduction of the Innovation concept, it has been applied in several business processes [2]. Among different types and levels of innovation, employees’ innovative work behavior (IWB) is considered a cornerstone of the organization’s success because it is the individuals who create the ideas, not the organizations [3]. IWB is “an outward expression of the inner creativity of employees; it is a method used to develop creative products and a process through which employees generate and implement new ideas to improve performance or solve work-related problems [4]”. It includes all the behaviors initiated at an individual level to generate, introduce, and apply the novel ideas for the betterment of the organization.
Many studies have explored the antecedents of innovative work behavior at individual and organizational levels [5–7]. However, the role of leaders in fostering innovative work behavior was found to be the most significant among other factors. Therefore, in this study, we focused on one type of leadership, called inclusive leadership. Inclusive leaders ensure the participation of employees in crucial matters in which their thoughts might not be heard previously [8]). This will become helpful for employees to participate in important processes with ease and confidence and pave a path for them to promote and apply creative ideas. Therefore, it can be asserted that inclusive leadership is the primary factor behind the promotion of innovative work behavior. Furthermore, it is required to understand the process through which the inclusive leadership style might operate to foster innovative work behavior.
Innovative work behavior is the extra-role behavior of employees, which avoids traditional thinking and involves new work ideas; therefore, psychological safety is needed to further the process of innovation [9]. Psychological safety is the perception of employees that they are comfortable being themselves’ [8]. Inclusive leaders focus their efforts towards creating a comfortable atmosphere where group members might not fear in speaking up [10]. Moreover, many researchers have concluded that innovative work behavior is enhanced through psychological safety [11–14]. It is, therefore, assumed that the relationship between inclusive leadership and innovative work behavior is mediated by psychological safety.
This study contributes to the existing literature in several ways. First, the research uncovers how inclusive leadership [15, 16] aids in creating innovative and creative ideas which help organizations to gain positive outcome (innovative work behavior). This study proposes that inclusive leadership is best suited for getting maximum output in the form of creative work behavior from employees as compared to other leadership approaches. Second, this study leads the focus of organizations towards re-thinking of different HRM functions so that innovative work behavior may be exhibited from their employees.
Furthermore, the study lends support to the leader-member exchange theory by analyzing the impact of inclusive leadership and innovative work behavior. This assumption was based on the tenet that the leader-member quality relationship produces positive results [17]). In addition, this high-quality relationship generates more psychological safety within employees for the generation and implementation of creative ideas [18].
The rest of the paper is structured as follows. The next section elaborates on the literature and proposes the hypotheses, which are followed by the methodology section. Then, using PLS-SEM, the hypotheses are tested in section four. Finally, the discussion on finding and implications of the study are presented in section five.
Literature review and hypotheses development
Inclusive leadership and IWB
De Jong ((2006 : 19) defined IWB as peoples’ behavior towards the initiation of novel procedures, ideas, and products that are beneficial for employing organization. The difference between innovative ideas and traditional ideas prevailing in organizations stresses the need for support from organizational culture and top management [19]. Leadership style is significantly related to employees’ ability to innovate. The leader who shows accessibility, openness, and availability to his or her followers would be considered as an inclusive leader [20]. Inclusive leaders involve followers in decision making and ensure their availability for helping employees in every step; therefore, it provides employees a chance to become active members and to enhance their creative thinking [21]. This capability of new thoughts generation is considered as a progression towards IWB [22]. The leaders following the inclusion approach make all the necessary resources available for employees; this helps employees in the promotion and implementation of their novel ideas and remove all the barriers in their advancement towards the intended purpose [23, 24]. It is, therefore, assumed that inclusive leadership creates innovation in the workplace, which produces fruitful outcomes for organizations.
Innovation at the workplace requires considerable support from organizational culture and the environment [19]. It is the responsibility of the leader to present himself or herself as a change agent in the organizational work environment. A leader’s support for new ideas builds the perception of employees that the system is supportive and conducive for the implementation of creativity [25, 26]. Inclusive leaders establish a relationship with their employees based on equity and fairness. This fairness in organizational setup encourages the workers to meet or even exceed the demands of the organization [27].
Inclusive leaders empower employees by facilitating them to decide on their own, and this motivates every individual to develop agreement on useful ideas and implement ideas for getting practical advantages. Leaders share the vision and goals of the organization with employees and incorporate suggestions of the employees. By doing so, employees develop more commitment towards the organizational goals, and their efforts in the attainment of goals become more focused and energized. Increased commitment with leaders makes them reciprocate by exhibiting extra-role behavior [27–29].
Leadership is considered as the most crucial factor in producing innovation and creativity within organizations [30]. It is not enough to recruit and develop people from underrepresented groups as this does not provide surety that their skills, abilities, and perspective would be heard and implemented. The leaders can provide the necessary environment and create favorable working conditions from which innovative behavior would be displayed [31]. In order to get full advantage of diverse workers’ abilities and to make sure of getting performance with full potential, research has shown considerable evidence in providing them with inclusion [32].
Hollander (2012) argued that inclusive leaders uniquely support their followers by taking complete responsibility for the outcomes, and if some ideas do not produce the intended results, leaders safeguard their employees by undertaking the responsibility of failure. Because of this, employees feel less threatened about the consequences of failure in the process of innovation, which is a trial and error procedure [33]. Based on the argument presented above, we hypothesized as under:
Inclusive leadership and psychological safety
Edmondson, Kramer, & Cook, (2004) explained that psychological safety is a state in which employees feel safe in making risky decisions, whereas there are many hurdles for open sharing of ideas. Employees’ perception of inclusion may originate from the leader’s group-oriented behavior like the involvement of employees in crucial matters and ensuring their voice is being heard, and suggestions are being incorporated [34]. Inclusive leaders promote such an environment in which novel ideas are heard, valued, and encouraged. An inclusive leader builds the perception of care and support for employees and creates a conducive environment in which employees’ expectations are met. The environment created by inclusive leaders enables employees to feel more psychological safety in the workplace, which ultimately results in IWB [35]. Inclusive leaders encourage employees to implement innovative ideas without the fear of consequences, which increases the experience of greater psychological safety [36]. Inclusive leaders provide emotional and intellectual support, which creates a perception of safety for individuals [27].
This perception of being safe to raise the voice encourages people to promote and implement creative ideas. Therefore, we hypothesized as under:
Psychological safety and IWB
Psychological safety empowers employees to disregard traditional methods of performing a job and to assert creative methods in workplace setting [12]. There is an inherent risk associated with proposing novel ideas because the implementation of those may also lead to failure [37]. The new way of doing things may be rejected because those can be categorized as deviant workplace behavior [38]. Abbas & Wu, (2019) argued that there is a need to create an environment of listening for the employees so that they present novel business ideas without any fear of reprimand.
The feeling of increased psychological safety becomes the reason for greater IWB [39]. Psychological safety helps make people realize that they have the potential to present innovative ideas. Employees with psychological safety, feel free to raise questions on the merits of decisions taken by management in order to suggest positive changes for the success of the organization [40]. Janssen (2002) concluded that IWB is related to risk-taking, and if employees do not find a psychologically safer environment that will refrain them from speaking up about creative ideas [41, 42]. However, the presence of supportive leadership will make employees feel otherwise [43]. We believe when employees are psychologically safe, they would speak up and will express themselves without any fear of negative consequence, and this psychological safety will help employees to participate in the innovative ideas. So, we propose a hypothesis:
Mediation of psychological safety
Mumford and Hunter (2005) suggested that employees’ creativity is enhanced through supportive leadership. However, many studies focused on overall leadership support factors (e.g., support through resources, support new ideas and appreciation), while did not create a difference between aspects of leadership support [30]. Supportive leadership provides overall support to the employees, which enhances their ability to innovate [44, 45]. Leaders who showed interactional justice and provided developmental feedback to their followers, these supportive behavioral mechanisms led their employees to present novel ideas [45]. It was found that interpersonal risk-taking attitude was developed in workers by supportive coaching of leaders, while the strict process of evaluation to uncover mistakes hinders innovation [46].
From past studies, we can infer that inclusive leadership provides an environment that develops the psychological safety of employees that ultimately leads to innovative employees. Therefore, we assumed that psychological safety mediates the relationship between IWB and inclusive leadership. In light of the arguments mentioned above, it can be assumed that IWB is indirectly increased by inclusive leadership through psychological safety. Thus, this study proposes a hypothesis.
Research methodology
Measures
Standardized questionnaires were administrated for the collection of data. A five-point Likert scale was used in all items for the measurement of dimensions of study.
Inclusive leadership scale was adopted from [20] presented nine items to measure inclusive leadership through its three dimensions, namely openness, accessibility, and availability [20]. It was used to judge employees’ perceptions regarding their direct supervisors. Sample items are ‘The manager is open to hearing new ideas’ (openness), ‘The manager encourages me to access him/her on emerging issues’ (accessibility), and ‘The manager is ready to listen to my requests’ (availability). Innovative work behavior 9-item scale was used to measure IWB from the study of Janssen (2000). Sample items were: ‘Creating new ideas for difficult issues’ (idea generation), ‘Acquiring an approval for innovative ideas’ (idea promotion), and ‘Transforming innovative ideas into useful applications’ (idea realization). Psychological Safety. This study used five items to measure psychological safety, which was developed by Edmondson (1999). Employees were asked to respond on a five-point scale ranging from 1=’not at all’ to 5=’to a large extent.’
Data collection
A total of 250 questionnaires were distributed among employees working in five different banks located in Multan and Lahore, Pakistan, by stratified random sampling, and data from 217 complete questionnaires were used in this research. Thirty-three questionnaires were excluded from data analysis because of incomplete response by the respondents. Employees were made aware of the purpose of research through the inclusion of a cover letter at the beginning of the questionnaire. Issues regarding confidentiality and anonymity were also addressed. The reason for selecting this population of interest is that the banking sector in Pakistan is experiencing hyper-competition due to competitive pressures and the adoption of innovative practices from competing banks. Therefore, it became essential for having those employees who are capable of exhibiting innovative work behavior. It is also worth mentioning that leaders are needed to stimulate and inspire them to become innovative employees.
Descriptive statistics revealed that about 82% of the respondents were males, 18% were females. About 47% of the respondents’ age was below 35, 36% were between the ages of 31–40, and 17% were between the ages of 41–50. In our sample, 84 percent held a Master’s degree, and the remaining 16 percent of the participants held an MPhil degree or above.
Data analysis
Common method variance
The common method variance issue was addressed by following Harman’s 1976 one-factor solution. Herman’s single factor test was conducted on the items by exploratory factor analysis (EFA). The percentage variance obtained was 19.7%, which is well below the 50% recommendation by Harman (1976). Thus, no issue of common method bias was detected.
PLS-SEM
Partial least square (PLS) path modeling technique was used to test the hypothesized relationship of the study. For doing so, we used Smart PLS software version 3. PLS-SEM has increasingly been used in several disciplines such as management, marketing, and entrepreneurship [47–54].
PLS is a two-stage process of analysis. In the first stage, the measurement of the outer model is tested for the validity and reliability of the instrument, and the second stage is used to test the structural model or inner model. In this stage, the path coefficients are tested for their significance. The following section will elaborate on both stages.
Measurement model evaluation
We followed Hair et al. (2017) suggestions for testing composite reliability, discriminant validity, and convergent validity before testing the hypothesized relationships. From Table 1, we can see that the composite reliability (CR) values are well above the threshold value of 0.70. Similarly, the factor loadings of each item were also above the threshold value of 0.70. Furthermore, the average variance extracted (AVE) was used to investigate the convergent validity. Table 1 depicts that AVE values are also above 0.50, which is the threshold value.
Validity and reliability of the measurement model
Validity and reliability of the measurement model
Next, we established discriminant validity by using the HTMT ratio as suggested by [55] Discriminant validity refers to the extent to which one latent construct differs from the other construct. It shows that the items of different constructs are not overlapping. All HTMT ratio values were below the 0.85 threshold level. The results of HTMT ratios are presented in Table 2.
Discriminant validity by HTMT ratio
After establishing the validity and reliability of the model, then we evaluated the structural model. The evaluation of the structural model involves specific steps, which are outlined as follows. Assessment of collinearity Assessment of the structural model relationships for significance Assessment of R square
Before testing the structural model relationship for their significance, assessment of collinearity was assessed. A VIF value above five is considered critical. Table 3 shows that all the VIF values are well below the threshold value of 5. Thus, the collinearity issue does not exist in the structural model.
Collinearity statistics
Collinearity statistics
The next step in the structural model evaluation is the assessment of the structural relationship for their significance. For this purpose, we used a bootstrap procedure with 5000 samples, as suggested by Hair et al. (2017). Table 4 shows that all three hypothesized relationships were significant.
After testing the significance of path coefficients, we evaluated the variance caused in innovative work behavior by Inclusive leadership and psychological safety. The results predicted that 39.2% of the variance was incurred in IWB.
Significance of path coefficients
In the past, testing of the mediating effect was done through the Sobel (1982) test, which compares the direct relationships between the dependent variable (DV) and independent variable (IV) with the indirect relationship of IVs and DVs with a mediation construct. In the case of the Sobel test, a normal distribution is assumed; however, that is not relevant in the case of PLS-SEM. Therefore, to test the mediation of psychological safety, we used bootstrapping, as suggested by Hair et al. (2017). This function does not consider the sample distribution. So, this approach is perfectly suitable for PLS-SEM [56].
The direct effect of inclusive leadership on IWB is positive (Table 4). Similarly, the indirect effect of Inclusive leadership on IWB through psychological safety is also positive (Table 5). Since both direct and indirect effects are significant and in the same direction, hence, according to [56], this mediation is categorized as complementary mediation.
Mediation results
Mediation results
This research found a positive relationship between IL and PS, which created a link between IL and creative work through PS. Employees’ inclusion in innovative work was further enhanced in the presence of PS. So, IL contributed to IWB of employees working in the banking sector of Pakistan. In addition, the intervening role of PS between the relationship of IL and IWB is a unique contribution, especially in the context of the Pakistani banking industry both in the fields of creativity and leadership.
The model of this study was based on the leader-member exchange theory, which explicates about how IWB is linked with IL. We hypothesized and checked the direct relationship between IWB and IL; the effect of this relationship was also tested through the involvement of PS as mediators. It was argued that a quality relationship with the leader is the key to enhance creativity [57]. The positive link between IL and IWB is in line with the assumptions of LMX theory. IL promotes an exchange relationship with employees by providing them with inclusion and autonomy. Therefore, employees reciprocate in the form of generating novel and useful ideas.
We also proposed that the increased motivation among the employees to promote and implement new ideas is directly related to the strength of the leader-follower relationship. In order to encourage employees to take risks of new ideas implementation without the fear of consequences, the leader must provide them with a psychologically safe environment in the organization. People tend to indulge themselves in creative tasks only when they feel PS in the organizational environment.
Theoretical implications
This study contributes to the existing literature in multiple ways. Although the link between inclusive leadership and creativity is measured but in what ways inclusive leadership develops the perception of employees, which leads towards positive outcomes is a contribution. This study extends the understanding of relational leadership by focusing on its specific dimension that is IL, instead of focusing on the broader construct of leadership. It stresses and further supports the importance of leaders’ inclusiveness in the creation of PS [10]. Moreover, this study made the effect of PS more visible in the relationship between IL and IWB. Our research depicts that when leaders are open and accessible, then their employees would not feel any danger to discuss and implement novel ideas. Furthermore, employees’ creativity would be increased when they speak up without the fear of retribution. Hence, this psychologically safe environment becomes the primary reason for the creation of positive perception in the minds of people about the organization. This perception directly leads the engagement in IWB. This also highlights the importance of social context, which is conducive for innovation [58]. IL, in the form of relational leadership, develops an individual’s perception regarding organizational climate, which is conducive to IWB. This perception of PS within organizational culture triggers creativity among the employees, which supports the process view of leadership. Different studies [23, 59] emphasized that leadership promotes IWB through individual-level factors such as psychological empowerment and intrinsic motivation. This study reveals a new individual-level path in the relationship between IL and IWB by depicting the mediation of PS.
Our study adds to the understanding of how leadership processes promote the workers’ IWB. IL behavior develops a perception of workers regarding organizational context, which, in turn, creates IWB and provides support to the process view of leadership. Finally, the social exchange view is also supported by this study [60]. It is concluded that a positive perception of being valued is created among employees by IL attributes like openness and inclusiveness. This perception builds the thinking of positive social exchange, and people tend to exhibit IWB is reciprocal.
Managerial implications
Today’s knowledge-intensive and uncertain environment in the banking sector requires the leaders to facilitate their workers in order to keep them competitive and innovative. Employees can only serve as a competitive advantage when they bring useful and innovative ideas. Employees’ ability to think out of the box to resolve complex problems is crucial for service industries where customers’ satisfaction has paramount importance in the brand image of the firm. So, the leaders must understand what is required from them and how they could behave to nurture IWB. Top management can initiate and specially design training programs related to IL. Those programs must shed light on the positivity of exhibiting openness, inclusiveness, and accessibility. Furthermore, this research found that if the leaders exhibit inclusiveness, then their workers would become innovative in tasks. There is a need to remain accessible for the employees in order to listen and approve their proposed ideas. Also, the conducive and fearless environment must be provided so that workers can speak up and voice their concerns openly, which ultimately cultivates IWB. Managers must nurture an environment of openness and integrity in which people are encouraged to speak and generate new ideas without any fear of negative consequences. So, this study further contributes to the literature by documenting the value of IL in promoting PS and IWB, specifically in the Pakistani banking industry.
Limitations and future research directions
We focused our research model on the relationship between IL and IWB through PS, while there can be other unobserved variables that could also explain employees’ IWB. Thus, the implication of our findings is limited by those variables. So, there is a need to explore additional paths of mediation in the proposed relationship. Many variables like creative self–efficacy, psychological empowerment, and organizational climate for innovation can be used to examine the connection between IL and IWB. Secondly, our sample data was collected from the province Punjab of Pakistan. This can cause an issue of generalizability. Although, most of the banks are located in that bigger province, still there is a need to include other provinces and more banks. It is advisable to replicate this study in multiple cultural contexts and different corporate sectors.