How transformational leadership facilitates radical and incremental innovation: the mediating role of individual psychological capital

Purpose Given the important role of innovation capability in helping firms to innovate and adapt to a fast-paced and unpredictable environment, the purpose of this study is to investigate and deepen knowledge of how transformational leadership affects radical and incremental innovation via the mediating role of positive psychological capital. Design/methodology/approach The paper used structural equation modeling and cross-sectional design to test proposal hypotheses based on the empirical data collected from 379 participants in 89 manufacturing and service firms. Findings The results of this study revealed the positive and significant influence of transformational leadership on radical and incremental innovation. The findings highlighted the mediating role of individual psychological capital in the relationship between transformational leadership and aspects of innovation capability. Practical implications Organizations should invest and stress on practicing transformational leadership style for their managers/directors to foster and enhance individual psychological capital and innovation capabilities. Originality/value The paper has extended theory of innovation management by discussing and highlighting the important role of transformational leadership and psychological capital in fostering specific aspects of innovation namely radical and incremental innovation.