Transformational Leadership fostering Open Innovation: A Dynamic Capabilities Perspective

Drawing upon dynamic capability theory, this research examines the role of transformational leadership in fostering open innovation in an emerging economy context in Southeastern Europe. Foremost, the study endeavours to tackle a noteworthy limitation, namely the nascent state of open innovation in the current body of literature pertaining to small and medium-sized enterprises (SMEs). Using a quantitative survey, we gathered information from 154 Albanian SMEs respondents. Data was analysed using PLS-SEM on the SmartPLS 4.0 version. The results show transformational leadership has a significant relationship with developmental culture and open innovation. In addition, we found that developmental culture mediates the relation between transformational leadership and open innovation. This research provides important practical implications for policymakers, leaders and industry practitioners to develop new business models for innovation diffusion. It requires shifting the focus from traditional innovation approaches towards new solutions to ensure collaboration and knowledge exchange. Existing researchers have highlighted transformational leadership with open innovation in the Western context. However, open innovation is less explored in Southeastern Europe specifically in SMEs which is an important context to unravel the useful insights. Significantly, open innovation became enabler of value creation, improved competitiveness and economic growth.