Authentic Leadership, Leader-Member Exchange, and Psychological Capital: A Literature Review

Running head: POSITIVE LEADER
Positive Leader
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Introduction
Positive leaders or authentic leaders are highly efficient in building positive and
collaborative relationship with the employees. Positive leader member exchange fosters honesty
and moral integrity among the employees (Little, Gooty and Williams 2016). Hence, such
employees become emotionally connected with their organizational goals and job roles. In this
way, such employees become highly performing for achieving organizational success. This
literature review will demonstrate the relationship between authentic leadership, Leader-Member
Exchange (LMX) and employees’ Psychological Capital. The literature review will also discuss
the importance of Psychological Capital in the performance level of the employees. Furthermore,
the study will critically review the literature that will explain the ways in which leaders can build
psychological capital of different types of employees like professionals versus administrative
employees, emotional labor, blue collar versus white collar employees, different generational
cohort, and/or different ethnicities. The literature review will demonstrate the importance of
emotion on the performance level of the employees.
Discussion
Authentic leadership can broadly be termed as genuine, positive and ethical form of
leadership. This leadership has been recognized as the most popular positive approach of
leadership, which can extremely help in meeting today’s business challenges. According to
Leroy et al. (2015), authentic leaders always share organizational information with their
followers for making organizational decisions, other’s inputs, disclosing their motives, personal
values and sentiments. Moreover, this leadership is mostly characterized by openness, self-
awareness and clarity behavior. On the other hand, Wang et al. (2014) stated that the

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characteristics of the authentic leaders enable the followers towards accurately assessing the
morality and competence of the authentic leader’s actions. In this way, such leaders maintain the
clarity and transparency in their behavior and actions for building trust among the followers.
Such mechanism ultimately influences the attitude, behavior and performance of the followers.
On the other hand, high quality leader member leadership results in friendliness and effective
intimacy among leaders and employees (Michel and Tews 2016). Such friendly relationship
fosters mutual beneficial relation among leaders and employees leading to increased employee
performance.
Authentic leaders are highly efficient in developing and influencing their followers
through invigorating their positive psychological state, which is extremely conducive for their
enhanced performance. According to Laschinger and Fida (2015), authentic leaders draw from
their own psychological resources and contribute the psychological state of the followers for
enhancing their performance. Psychological capital has been recognized as the positive
psychological resources of the employees, which is consisted of the factors like efficacy, hope,
optimism and resiliency. Furthermore, Hirst et al. (2016) opined that authentic leaders always
behave in accordance with their actual value and strive to achieve truthfulness and openness with
the relationship with the employees. Moreover, such leaders lead the employees by setting
examples and demonstrating the transparency of decision making. They also guide the
employees towards being emotionally connected and cognitively vigilant during their work
performance. In this way, authentic leaders become able to generate moral standard among the
employees, which help the employees in maintaining honesty, ethical standards, integrity and
fairness in their work performance.

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The psychological capital plays an important role in moderating the performance level
of the employees. Authentic leadership is positively associated with the enhance performance
level of the employees through building high level of psychological capital among them.
According to Sendjaya et al. (2016), authentic leaders mostly remain realistically trustworthy
and hopeful, which can enhance the hope of employees not only establishing willpower among
them but also demonstrating positive aspects of direction to pursue a certain task. In this way,
such leaders are extremely efficient in enhancing the sense of self-efficacy among the employees
towards performing certain job. On the other hand, Rego et al. (2014) pointed out that authentic
leaders interpret information, exchange and interact with the employees from positive
perspective that evoke the positive emotion of the employees. In this way, the positive emotion
ultimately turns into optimistic perspective among the employees for completing their jobs
successfully. More specifically, the employees having high psychological capital remain highly
optimistic, hopeful, confident and resilient towards their job. Such positive capacities lead them
to achieve high level of performance at their work.
Leader member exchange (LMX) denotes the rational approach of establishing positive
relation between the authentic leaders and employees towards enhancing employee performance.
Moreover, LMX plays an important role in mediating the performance level of the employees.
According to Lyubovnikova et al. (2017), leader member exchange relationship nourishes the
positive social exchange through the virtue of establishing credibility and gaining the respect of
the employees. The components like internalized moral standards, self awareness, relational
transparency and balanced processing constitute the central element of the high quality leader
member exchange relationship. Authentic leaders show respect for each employees by eliciting
diverse viewpoints from them. In this way, the leaders become able to build trust among the