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The Nexus between Transformational Leadership and Corporate Entrepreneurship: The Mediating Role of Absorptive Capacity

Beh L. S., Shafique I.

Abstract


This study aims to analyze the nexus between transformational leadership and corporate entrepreneurship by integrating the dispersed scholarly work on transformational leadership, absorptive capacity, and corporate entrepreneurship into one framework. The paper utilizes the literature on relationship between transformational leadership and corporate entrepreneurship in a novel way which fills the gap of investigating more dimensions of entrepreneurship individually as well as unidimensionally and includes the mediating role of absorptive capacity and tests a number of hypotheses which have been previously ignored. This study compared to the existing research contributes to the impact of transformational leadership on corporate entrepreneurship and absorptive capacity especially in the Pakistan business settings. A survey method was employed and analysis of results on small and medium manufacturing enterprises (SMEs) of Pakistan using structural equation modeling. The results demonstrate that transformational leadership positively affects corporate entrepreneurship and its dimensions namely innovation, new business venturing, self-renewal, proactivity and risk-taking both directly and through absorptive capacity. The direct effect of absorptive capacity on corporate entrepreneurship is more than the direct effect of transformational leadership on corporate entrepreneurship and its dimensions. Thus transformational leadership approach encourages corporate entrepreneurship through self-renewal, proactivity, innovation, new business venturing and risks-taking. It generates possible futures with the current research that clearly fits the kind of leadership required and it is against this backdrop that this research is done. This is a cross-sectional study with its limitations and future studies could extend beyond the manufacturing sector.


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