Transformational leadership, innovation, and performance of SMEs in Europe
Nada Jabbour Al Maalouf, Soha El Achi, Mohammad Balouza
Abstract
This study investigates the impact of transformational leadership on innovation activities, specifically focusing on exploration and exploitation, within small and medium-sized enterprises (SMEs) in Europe. Additionally, the study explores how these innovation activities affect business performance. A sample of 430 leaders and executives from SMEs across Europe was surveyed to examine these relationships. The findings reveal that transformational leadership has a significant positive influence on both exploration and exploitation activities within SMEs. Furthermore, both types of innovation were found to have a positive impact on the business performance of SMEs in Europe. This research makes a valuable contribution to the literature by highlighting that transformational leadership plays a crucial role in driving both exploration and exploitation activities in SMEs. By offering actionable insights, it provides guidance for leaders and policymakers seeking to leverage leadership to foster innovation and enhance business performance. Furthermore, the study advances theoretical understanding by distinguishing between the two innovation dimensions—exploration and exploitation—and demonstrating their distinct yet complementary impacts on business performance. This differentiation enriches the innovation management framework by emphasizing the need for a balanced approach to these activities, which is essential for SMEs to achieve sustainable growth and competitive advantage.