Transformational Leadership Facilitates Innovation Capability: The Mediating Roles of Interpersonal Trust

Abstract

Innovation capability is widely accepted as an important means to attain sustain competitive advantage for firms before the rapidly changing of business environment and increasingly competitive pressure. The main goal of this study is to explore an effective way to successfully improving innovation capability for firms based on examining the relationship between transformational leadership style, interpersonal trust, and innovation capability of Vietnamese firms. The authors apply Structural Equations Modeling (SEM) to test the impacts of transformational leadership, interpersonal trust on innovation capability by using data collected from 195 participants in Vietnamese firms. The result revealed that transformational leadership and interpersonal trust significantly affect innovation capability. In addition, interpersonal trust mediates the relationship between transformational leadership and innovation capability. The findings highlights the need of practicing transformational leadership to foster employee trust and finally to enhance innovation capability for firms. The findings of this study contribute to filling the theoretical gaps which call for research on antecedent factors of innovation capability.