Jour of Adv Research in Dynamical & Control Systems, Vol.

12, 03-Special Issue, 2020

Leadership and Innovation towards Firms’

Performance: The Case of Selected
Industries in Oman
Revenio C. Jalagat, Jr., Al-Zahra College for Women.
(Email:[email protected])
Perfecto G. Aquino, Jr., Duy Tan University.
(Email:[email protected])
Doan Hong Le, Duy Tan University.
Vu Duy Nguyen, Academy of Finance.
Dang T.D, Eastern International University.
(Email:[email protected])

Abstract---This study attempts to investigate the relationship amongst innovative leadership traits, leadership style,
culture of innovation, and company performance. It also examines the mediating role of culture of innovation on
innovative leadership traits, leadership style and company performance. Three industries were explored in Oman to
determine the sample size from information technology, construction, and manufacturing sector. The respondents
were sampled from 500 executives but only 150 responded and were considered as final participants. Key findings
from data analysis revealed that there exists positive relationship on the four constructs that support the hypotheses
in this study. Specifically, positive relationships were tested on: innovative leadership traits, leadership style, culture
of innovation, and company performance. Culture of innovation also mediates the relationship between innovative
leadership traits, leadership style, and company performance. Main recommendations suggest that equal importance
be given to the four constructs, strong culture of innovation and leader’s commitment in fostering innovation
culture.
Key words---Firm Performance, Innovation Culture, Leadership Style, Leadership Traits, Oman

I. INTRODUCTION
The increasing demand for change of many organizations nowadays are driven by the fast-changing technology
as well as the changing economy that urges management of organizations to endeavor rapid transformation. Quite
number of organizations are lagged behind transformation because of their lack of emphasis on innovation resulting
to a do or die business situation. This has relative implication in Oman who have initiated transformation for the past
years due to the fluctuating oil prices. Despite Oman’s richness in oil deposit, the country has experienced oil prices
decline specifically during 2013-2017 [54]. This has led to the country’s effort to diversify its oil-based economy
into non-oil based production and service industry. Several studies revealed that, economic diversification of
countries have helped them lower economic risk, promote economic sustainability and maintain growth in Gross
Domestic Product (GDP) [1], [47].
For the past two years, the construction industry in Oman has showed increasing trend posting 10.4% increase in
2016 and has become the main source of revenues in the government of Oman [44]. Statistics showed that, the
contribution of the construction industry into the country’s GDP has reached to 5-6% which is widely considered as
high performance. This is expected to continuously increase to 10% by 2020 [54]. This increase is partly attributed
to the organization’s adaption of the latest technology that enhance competitiveness, increase operational efficiency,
cost effectiveness, streamlining activities as well as achieve economies of scale. Another sector that marks the key
driving force of non-oil based diversification can be seen in the manufacturing industry. In 2014 for instance,
manufacturing industry has contributed at 10% to the country’s GDP and the government is optimistic that this will
increase up to 15% in 2020. In consonance with the Vision of Oman 2020, different sectors including but not limited
to manufacturing, mining, construction, and agriculture vibrantly contribute 29% to the GDP in 2020 [43]. The
government of Oman is investing largely on Information Technology in transforming the country into digital
economy. With the Information Technology Authority (ITA), this authorized government body is responsible to
formulate national strategy in transforming the country into a digitally knowledge-based economy through

DOI: 10.5373/JARDCS/V12SP3/20201361
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Jour of Adv Research in Dynamical & Control Systems, Vol. 12, 03-Special Issue, 2020

individual empowerment, private and government products and services improvements by leveraging the
information and communication technology [27].
However; various studies have found that innovation efforts by organizations failed because of the lack of strong
leadership of the management towards fostering innovation culture [31], [36], [41]. Reference [10] stressed that
enhancing performance of organizations are achieved through the major role played by strong culture of innovation
and leadership attributes. Depending on how organizations view innovation culture, the extent of implementation of
innovation culture affects how the organizations perform. This also applies to leadership attributes and styles needed
to promote innovativeness. For instance, leadership influences the working environment wherein employees and
subordinates will be encouraged to pursue innovative efforts if innovation leaders stimulate innovation in the
workplace [34], [40]. According to [36], the mixture of leadership and innovation enable organizations to gain
competitive advantage, sustainable operation, improved productivity, profit maximization in relation to improve
organizational performance.
Studies on leadership and innovation had already been conducted but, most of the findings were based on one or
single sector. Few researches were conducted linking leadership and innovation to the three sectors wherein in this
study, these sectors were identified as manufacturing, information technology, and construction. These three sectors
are perceived to have higher adaption of innovation and culture leading to enhanced firm’s performance. Study
related to information technology sector proved to have significant relationship between innovation culture and
firm’s performance [48].
Furthermore, this study emphasized the investigation on multiple sectors. It specifically deals with the
relationship among the four constructs comprising of innovative leadership traits, leadership style, culture of
innovation, and company performance. The main objective is to determine the effect of leadership and innovation on
company performance mediated by culture of innovation.

II. REVIEW OF LITERATURES

2.1. Association amongst innovative leadership traits and leadership style
In various studies, the terms leadership style and leadership traits are used alternatively but are not the same
contextually. Leadership style is founded on methodologies and theories that emphasized the concept of managing
individuals, teams and groups while leadership traits encompass leader’s possession of emotional, physical,
intellectual and social characteristics [39]. Currently, scarcity of studies is experienced in investigating the link
between leadership style and traits on innovation. Although, reference [15] identified the characteristic traits that
links leadership style of leaders in social innovation projects such as open-mindedness, leader’s self-awareness,
intellectual stimulation, idealized influence, freedom of delegation, team development, and individualized
consideration. In other words, the relationship of leadership style and traits are already explored to positively
correlates innovation.
The research conducted by [13] entitled “The significance of an innovative leader in the organization”, training
and communication, employee motivation, charisma, innovative ability, and decision-making ability are leadership
traits that positively correlates innovation. Accordingly, leadership effectiveness is defined by positive qualities and
traits of a leader that can be achieved through self-awareness, long-term focused, flexibility, visionary,
transformational, and leadership duplicator [14]. Anchored on these arguments, it offers the first proposition:
H1. There is positive relationship between innovative leadership traits and leadership style.
2.2. Innovative leadership traits, leadership style, culture of innovation, and company performance
Vast researches have investigated the relationship between leadership style and innovation even though results
from these studies have not clearly identified which of the leadership styles affect innovation. For example, positive
relationship between leadership style and innovation culture were found in the study of [28] and [40]. Specific
findings also claimed the positive relationship of servant leadership on team innovation [59]. However, reference
[58] has found the relationship of participative leadership on innovation.
Similarly, previous researches explored the affirmative relationship of transactional and transformational
leadership style on innovation [34], [40], [45], [46]. Moreover; many studies have found the strong predictability of
transformational leadership on innovation [2], [7], [12], [19], [20], [21], [22], [28], [35], [40], [46], [50], [56]. T his
result is followed by the relationship of transactional leadership on innovation [34]. The central role of leadership in
general is essential in developing innovation culture [4], [7], [36], [37]. According to [26], innovation champions

DOI: 10.5373/JARDCS/V12SP3/20201361
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Jour of Adv Research in Dynamical & Control Systems, Vol. 12, 03-Special Issue, 2020

refer to leaders that actively contributed to the success of innovation in business organizations through overcoming
organizational critical stages. An example to this, leaders who are change-oriented quickly adapt to the internal and
external change factors affecting the entire organization leading to innovation and positively organizational structure
and the culture of innovation [60].
On one hand, reference [9] stipulate that culture and people play a vital role as driver towards innovativeness.
Previous studies confirm that companies that demonstrate strong leadership style and innovativeness achieve higher
performance compared to those companies that ignore the concept and application of innovation [4], [38], [42], [57].
In various sectors, innovation served as gateway to the growth of performance. According to [9], innovation
encompasses products, services and ideas that include operational processes, value chain, customer relationship
management, distribution, management functions, and other related field. Organizations that integrate leadership and
innovation in the operations experienced sustainable performance growth [5]. In the same way, managers consider
the culture of innovation as a constructive change for the better in the business environment. This means that, those
firms and organization that welcomes creative concepts and ideas as integral part of operations likely experienced
progression in business operation and business dealings [18], [25].
Furthermore, various studies affirmed that stimulating workplace creativity and innovation leads to attaining
innovation culture that leads to firm performance [1], [3], [24], [25], [52]. However; leadership precedes innovation
culture and firm performance [30]. Reference [5] argued that, organizations that possess culture of innovation have
empowered employees that share valued ideas and fearless when it comes to failures. Further, leaders and managers
value and emphasize engagement of employees in innovative efforts that contributes positively to firm’s
performance. In this case, leaders should learn new skills to teach, guide and engage with employees in projects that
requires creativity and innovation to enhance their capabilities and skills to overcome these challenging tasks.
Studies have identified six leadership abilities and skills that impacts firm’s performance through innovation and
these include guidance and supervision, motivation, building supportive environment among management and
employees, building cooperativeness and work-teams, effective communication, capability to institute rewards [6].
Although not many studies have confirmed which of these leadership skills specifically impacts firm performance,
these skills were proved to promote innovation culture [3], [18], [33]. Vast studies indicated the essentiality of
establishing innovation culture to be creative and innovative as firms who classify themselves as such obtain
flexibility, tolerant with risks, and freedom to higher extent [52]. Contextually, firms that emphasize the importance
of innovation culture have realized the vital role of leadership as predictor of firm performance and leadership’s
direct relationship to innovation culture [1]. As defined, innovation culture refers to an environment of work where
thinking creatively and innovatively are encouraged by leaders to employees regardless of rank and position in the
firm [55].
Reference [11] confirmed that, firms that foster innovation culture demonstrate excellent firm performance [11],
[17] which is also supported by [29] with similar findings that, innovation positively correlates firm’s business
performance. The study of [4] with 900 firms in different industries such as service industry, construction, farming,
and manufacturing, findings showed that innovation and innovation culture significantly promotes firm’s
performance. Based on these literatures, the hypotheses are developed as stated.
H2. Positive correlation occurs between innovative leadership traits and culture of innovation.
H3. Positive relationship occurs between innovative leadership traits and company performance.
H4. There is positive correlation between leadership style and culture of innovation.
H5. There is positive correlation between leadership style and company performance
H6. There is positive relationship between culture of innovation and company performance.
2.3. Mediating effects of culture of innovation on innovative leadership traits, leadership style and company
performance
Very limited readings have reinforced the mediating impact of culture of innovation on leadership style,
innovative leadership traits and company performance. One of studies that produced similar findings is the study of
[45] that found substantial relationship between innovative leadership and organizational culture of innovation and
the significant moderate association of team climate for innovation on firm’s innovation culture. However, the
extent of relationship of both the leadership for innovation and team climate of innovation constitute indirect impact
on firm’s innovation culture. The researchers’ difficulty of finding related literatures in establishing the mediating

DOI: 10.5373/JARDCS/V12SP3/20201361
ISSN 1943-023X 1154
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 Jour of Adv Research in Dynamical & Control Systems, Vol. 12, 03-Special Issue, 2020

effect of innovation culture on leadership style, leadership traits and firm performance have led to the development
of two propositions as identified:
H7. Culture of innovation mediates the relationship between innovative leadership traits and company
performance.
H8. Culture of innovation mediates the relationship between leadership style and company performance.
2.4. Proposed Framework of the Study
The model adapted in this study demonstrates the interrelationship of the four main variables used as illustrated
in figure 1. Hardly, studies are found that investigate the relationship between innovative leadership traits,
leadership style and company performance. Consequently, there is also scarcity from literatures that examines the
significant relationship between leadership traits towards innovation and leadership style as well as the mediating
relationship of innovation culture. To simplify these descriptions, the conceptual framework was developed showing
diagrammatic presented as provided hereunder.

III. METHODOLOGY
3.1. Descriptive Method and Questionnaire Survey
This study employs descriptive method with online survey questionnaire using Google documents for
distribution to respondents from the three sectors/industries identified in Sultanate of Oman. These sectors include
the Manufacturing, Construction, and Information Technology where prevalence of innovation are observed. Sorting
of information were made through Link-In in order to choose the respondents and about 500 executives were
considered as respondents and are classified as small, medium and large-scale enterprises in Oman. The distribution
of respondents showed 28 manufacturing companies, 86 construction firms, and 36 information technology firms.
Of the 500 executives however; only 150 responded with only 30% retrieval ratio. Expert review technique was
applied to pre-test the instrument.
The choice of considering managers generally lie on the premise that they are capable of leadership and authority
to impose innovation [49]. Based on literatures, the components of the four constructs are framed as: Leadership
Style with three items, five items for Leadership Traits (5 items), four items for Innovation Culture and three items
for Firm Performance [5], [6], [9]. Further, it utilized the 5-point Likert scale with the measures: 1 for strongly
disagree and 5 for strongly agree.
3.2. Sampling and Sample Size
From the 500 identified respondents, only 150 respondents based on the fully-filled questionnaires. Segmenting
demographically the participants, it showed that most are male (80%); age bracket (30-39, 60%); master’s degree
holders (38%); organization type (large, 62%); and, in terms of management rank, middle management (65%). To
ensure how valid and reliable the instrument used, face validity was utilized to test suitability while reliability test
was run showing the Cronbach Alpha’s results of the four constructs distributed as follows: Leadership Style (LS) (3
items), 0.912; Innovative Leadership Traits (ILT) (5 items), 0.798; Culture of Innovation (COI) (4 items), 0.802; and
Company Performance (CP) (3 items), 0.902. These outcomes are above the minimum acceptable Cronbach Alpha’s
0.700 and thus, internally consistent [23].

DOI: 10.5373/JARDCS/V12SP3/20201361
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 Jour of Adv Research in Dynamical & Control Systems, Vol. 12, 03-Special Issue, 2020

IV. DATA ANALYSIS

Using the Principal Component Analysis (PCA), factors were extracted that reveals loading patterns of the
utilized variables. VARIMAX orthogonal rotation technique however; was used to determine the acceptability of
sample size and it reveals compliance with the case-to-variable ratio [23]. Further, Kaiser-Meyer-Olkin (KMO) and
Bartlett’s Test were done to verify the sampling adequacy and results depict the adequacy with 0.803 more than the
minimum ratio of 0.600 [53]. Approximate Chi Square likewise displays tolerable proportion with 731.124 and
significant at 0.000. The eigenvalue with application of PCA is greater than 1 using the Scree test and priori criterion
that accounts for 61.33% cumulative percentage of extracted variance showing the four factors. Only one item is
also eliminated in the loading of factors because of its rating below 0.500 which means that the instrument is both
valid and reliable for statistical application. This result is summarized in Table 1.
Table 1. Results of Rotated Component Matrix Analysis

In addition, no cross-loading of items were identified which means that the variables used strongly correlate with
each other.
4.1 Descriptive Statistics and Correlation Coefficient
To determine the positive significant relationship among the four constructs, coefficient of correlation was
performed with descriptive statistics. Outcomes show that, there is affirmative significant association between
innovative leadership traits (ILT) and leadership style (LS) with β=0.412 (p<.05; H1); positive significant
relationship between ILT and COI with β=0.436 (p<.05; H2); ILT positively relates CP, β=0.303 (p<0.05; H3); LS
clearly associates COI, β=0.810 (p<.01; H4); LS substantially impacts CP, β=0.299; H5); COI notably influences
CP, β=0.610 (p<.01; H6) see Table 2.
Table 2. Descriptive Statistics and Correlation Matrix

In determining the mediating effect of culture of innovation on leadership style, innovative leadership traits and
company performance, results show that culture of innovation arbitrates positively innovative leadership traits and
company performance thus confirming H7. The similar result is established in H8 that ratifies the substantial
affirmative mediation of culture of innovation on leadership style and company performance. The findings of
assumptions testing can be recapped in Table 3.

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Table 3. Summary findings of hypotheses, significance & decisions

V. DISCUSSION AND CONCLUSION

The results of data analysis of the four constructs generally provide the positive significant relationship that
potentially create varied and multiple implications. The first hypothesis testing that examines the significant
association amongst innovative leadership traits and leadership style implies that innovative leadership traits affect
significantly leadership style. This indicates that, as the innovative leadership traits increase, leadership style should
also increase. Although, this study does not mean which leadership style to pursue, related studies cited the
likelihood of transformational leadership as more preferable option for promoting innovation culture. This outcome
is coherent with limited research papers that affirm the significant connection between innovative leadership traits
and leadership style [15]. The leadership traits mentioned comprised of: leader’s self-awareness; idealized influence,
team development, delegation freedom, open-mindedness; team development; and, individualized consideration. In
the absence of studies that affirm the relation between leadership traits towards leadership and innovation, this study
strongly confirms the positive relationship that signals scholars and researchers to conduct in-depth exploration of
the association of these two concepts.
The second hypothesis also showed significant positive relationship between leadership traits towards innovation
and innovation culture. Based on the questionnaires, the identified leadership traits that affects innovation culture
include motivation and action-oriented, risk tolerant and creative, success-oriented, openness to new ideas, and
ability to think outside the box. This finding is supported by [13] and [14] that describes leadership traits as sets of
characteristics that include innovative ability, charismatic and visionary, flexible, training and communication skills,
and self-awareness. This implies that, in fostering the innovation culture in the workplace, the leadership traits of
leaders towards innovation is a significant predictor in ensuring that the organization is moving forward into
innovation. The extent of influence of leaders should be obvious and with authority so followers will be serious in
moving towards innovation culture.
On the other hand, the third hypothesis also reflects significant positive relationship on firm performance. Even
in scarcity of literatures that affirm this relationship, this result is a strong indicator for further studies that the
relationship between these two constructs are evident. Firms should consider the strong influence that the leaders
can bring towards innovation to ensure performance growth. When relationship was tested between leadership style
and innovation culture, strong positive relationship emerged which means that the extent of innovation culture that
the organization possess depends on how well the leadership styles are exercise by leaders. In the literatures
provided in this study, findings showed that transformational leadership significantly relates to innovation culture.
When leadership style is strong, this would imply higher state of innovation culture. The studies of [28], and [40]
affirmed this finding emphasizing the strong positive relationship between transformational leadership and
innovation culture.
Further implications from the relationship dictate that leadership style and innovation culture are concepts that
firms should be given attention if the emphasis is on continuous improvement and innovation. This can be addressed
by creating an atmosphere wherein the workplace becomes conducive towards innovation with the employees’
commitment to fully support any kind of creative and innovative activities. It is also important to note that, if the
leaders have no leadership style towards innovation then imposing a culture of innovation can become a false
reality. Commitment of leaders to utilize at its full measure resources to promote innovation culture is also a major
requirement considering that innovation can be costly. In the same way, innovation culture also directly impacts

DOI: 10.5373/JARDCS/V12SP3/20201361
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Jour of Adv Research in Dynamical & Control Systems, Vol. 12, 03-Special Issue, 2020

firm performance which indicates that, as the innovation culture increase, the firm’s performance also increases.
Two studies were explored that affirm the relationship between innovation culture and firm performance where one
of these studies applied to 900 firms enumerated the four industries namely: service industry, farming industry,
construction and manufacturing industry as beneficiaries of these relationships [4], [29].
On one hand, when the mediating effect of innovation culture on leadership traits towards innovation and form
performance were tested, the results depict the positive significant relationship which also provides the same result
when hypothesis 8 was performed. Hence, both H7 and H8 show the positive mediating effect of innovation culture.
The mediating role of innovation culture is not only supported in this study but also proven to be a strong link in
determining the relationship between leadership traits towards innovation, leadership style and firm performance.
Firms should ensure that they uphold the culture of innovation so that any efforts that people do to improve whether
in department level or organizational level have something to do with innovation.
From these findings some suggestions and recommendations are proposed. Firstly, positive significant
relationship of the four constructs can bring a strong indicator for firms to create a balance of applying these
variables because all are equally important if firms are serious on its quest to improve firm’s performance. The
interrelationship dictates that absence in one of these constructs may negatively affect firm’s performance.
Secondly, the strong positive relationship between leadership style and innovation culture suggest that managers and
firm’s management should identify specifically which leadership style to pursue for innovation to take place. Wrong
choice of leadership style may impair the establishment of innovation culture hence; deprive the firm of higher
performance. And, the mediating effects of innovation culture cannot be underestimated as the positive relationship
strong that leads to the recommendation that, that if firms wanted to increase performance should establish a culture
of innovation. Without implementing innovation culture, the performance level of firms may not experience
continuous growth.
However; limitations are pointed out in this study. One, the study is limited to Oman and to three sectors only
namely: IT, Manufacturing and Construction industry. The variables used are generally stated which for example
considers leadership style and does not specify which leadership style will be used. Thirdly, other factors can be
considered for future studies such as organizational learning, innovation diffusion, transactional and
transformational leadership, innovation management and team climate. Finally, innovation as used in this study does
not specify which of the many types of innovation will be used hence; specific coverage can be pursued, applied to
wider settings with larger sample, and can further be explored.

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DOI: 10.5373/JARDCS/V12SP3/20201361
ISSN 1943-023X 1160
Received: 16 Jan 2020/Accepted: 18 Feb 2020