Comparison: Leadership Styles and Employee Creativity in Australia

This report presents a research proposal comparing transactional and ethical leadership styles and their influence on fostering creativity in the Australian service sector. The study reviews existing literature and proposes a mixed-methods approach, including surveys with managers and employees, to determine the correlation between leadership styles and employee innovation. The research aims to define innovation within the Australian context and identify any mediating factors influencing the relationship between leadership and creativity. The expected findings suggest that ethical leadership will have a more significant positive impact on innovative work behavior compared to transactional leadership, with potential moderating factors such as gender, organizational culture, and size. The research anticipates that the reward dimension of transactional leadership may have a short-term positive impact, while the punishment dimension will negatively affect innovation. The study expects ethical leadership to foster greater employee self-confidence, positive self-perception, and overall innovation and creativity within the Australian service sector, benefiting both small and large organizations.

Comparison of Transactional Leadership and Ethical Leadership in
Generating Creativity in the Service Sector of Australia.

Introduction
Literature Review
The transactional leadership style is a an approach to leadership where compliance by followers is
achieved through the use of punishment and reward. Using punishment and reward, the leader is
able to motivate followers/ employees but just in the short term. On the contrary, ethical leadership
refers to the type that is directed by respecting other people’s ethical beliefs and values, and also
taking into consideration and demonstrating deference for other people’s dignity and rights (Das,
2014). The concepts that underlie ethical leadership include consideration, being honest, fairness,
and being charismatic. All these leadership styles have an impact on the the creativity levels and
employees’ innovative work behavior, according to Herrmann and Felfe (2012).
Impact of ethical leadership on creativity: the role of psychological empowerment
In this article, the authors sought to establish the relationship that exists between ethical leadership
(EL) and creativity and innovation among employees, Javed et al. (2016) found that EL is a
significant promoter of workplace creativity while the effects of EL on innovation and creativity is
mediated by emotional empowerment. On numerous occasions, it has been demonstrated that
innovation within organizations is important and effective leadership has been identified as a critical
catalyst.
Measuring Innovative Work Behaviour
The authors researched on the effects of leadership styles based o the context that the significance
of individual employees’ (IWB) is emphasized by both practitioners and scientists as being crucial
for the success of a firm. However, IWB measurement still remains at a developmental level. A pilot
study involving 81 professionals in the research filed, as well as their research directors and further
involving 703 matched knowledge workers dyads and their directors in 94 organizations in the
intensive knowledge area was done. The study included hierarchical multilevel regressors and
confirmatory factor analyses to test the hypothesized correlations of IWB to relevant constructs that
include leadership that encourages employee input, innovative output, and external work contracts.
The results showed sufficient reliability as well as the validity of criterion with the uniqueness
evidence of four elements was weak, indicating that IWB as a measure is single-dimensional and
the researchers concluded that more research is needed on the issue (de Jong and den Hartog, 2010).
A study was done on the influences the four dimension model developed by Maigan (1999), of
businesses social responsibility based on ethical, economic, discretionary, and legal obligations on
the business achievements in the hospitality sector. Empirical evidence was obtained form tourist
hotels and SEM (structural equation modeling) evaluations applied. The study found that
sustainable and ethical activities of the social obligations of a business had positive outcomes on the
employees’ commitment to their organization as well as customer loyalty and organizational

innovation and these all had positive consequences on business performance. The research also
found that corporate citizenship is indirectly correlated to positive business outcomes in a positive
manner via the moderating roles of perceptual commitment to an organization, customer loyalty,
and innovativeness.
Motivated or Demotivated to Be Creative: The Role of Self‐Regulatory Focus in
Transformational and Transactional Leadership Processes
Active transactional leadership, according to this experimental research, is a significant causative
factor in the hindrance of employee creativity by leaders due to its alignment with followers/
employees’ prevention of situational self regulation focus. The research was conducted using an
experimental study with 189 participants and a filed study involving 75 managers and 343
employees. The study also shows that there is a complex relationship than previously thought,
between different leadership styles and innovation and creativity
Leadership, creativity, and innovation: A critical review and practical recommendations
Among the key predictors of team, employee, and organizational innovation and creativity if
leadership and there is promise for great research in this field. In this paper, the authors performed
an extensive review of empirical studies (number N = 195) studying innovation and workplace
creativity and its relation to leadership. The paper performed several systematic analyses that were
used to develop narratives based on observations made in the review in five thematic areas. The
analysis established that positive leadership approaches such as ethical leadership had a strong and
positive correlation with creativity and innovation at the workplace. The researchers coded the
studies for factors such as correlation coefficients, sample size, and reliability. Using meta-analytic
procedures that corrected correlations among observations, the analysis showed that there is a
positive correlation between ethical leadership and ethical context perceptions among the
employees with p=0.56. It was also found that there was positive relationship between ethical
leadership behaviors and employee creativity and self initiative with p=0.44. Further, the meta
analysis established that there was positive strong relationship between ethical leadership behaviors
and IWB among the followers (employees) with p= 0.78. It was also determined that there was a
positive and strong relation between ethical leadership behaviors and dimensions of contingent
reward with p= 0.82.
The relationships between various constructs in follower actions and responses with other forms of
leadership styles, notably transactional leadership and transformational leadership were also
evaluated. The relationship between abusive leadership behavior and perceptions of ethics had a
negative but moderate relationship with p= 0.54. There was a weak puts positive relationship
between punishing behaviors associated with transactional leadership and follower creativity and
self initiative with p= 0.22. the relationship between rewarding behaviors, also associated with

transactional leadership with IWB was positive but weak-to- moderate with p= 0.39. There were
also moderate to strong negative associations between ethical leadership behavior and the laissez-
faire transactional leadership dimensions with p=0.66. The meta-analysis shows that ethical
leadership characteristics have positive relationships with various follower behaviors such as
psychological well being, self initiative and creativity, greater job satisfaction, and IWB. It was
further determined that ethical leadership behaviors were positively associated with the
transactional leadership style contingent reward dimension. However, there was negative
correlations with the punishing dimensions of transactional leadership dimensions. The findings
show that ethical leadership styles has positive effects on employees as it helped make them take
initiative, become more creative, and also led to IWB by the followers. While the same trend is seen
in the reward domain of transactional leadership with low to moderate positive relationship, the
effect is negative for the abusive and punishing domain of transactional leadership.
The Impact of Transformational/Transactional Leadership on Creative Behavior: A Cross-
Level Study
This study found that transactional leadership had a positive effect on the creative behavior in
employees in the hospitality industry and that this tendency towards creative behavior during
change situations was moderated significantly by radical change; but continuous change had the
opposite effect. The findings imply that in the short term, especially during periods where change is
a necessity, transactional leadership can spur creative behavior but only in the short term as radical
change is a moderating factor.
In the past few years, research on innovation in the Western nations, particularly in the United
States and Europe and how this is impacted by leadership styles, the same cannot be said for
Australia. Innovation has different interpretations as well as paradigms. The factors that stimulate or
foster innovation and the factors that hinder innovation especially in public sector of different
nations require a careful study for a variety of reasons, especially because culture also plays an
important role on how different leadership styles affect innovative behavior among employees. The
dearth of research on how different leadership styles affect employee innovation at the workplace is
among the motivating reasons for undertaking this research (Wang, 2014).
Research Aim
This research aims at establishing how two different leadership styles; transactional leadership and
ethical leadership have an influence on the innovative work behavior by employees, with a focus on
the Australian services sector. This will be established by first undertaking a detailed review of
existing literature, and then conducting a survey on a select services sector industry to determine if
there is a direct correlation between the effects that transactional or ethical leadership impacts
employee innovation. Innovation will be defined to reflect the Australian context. This proposed

research also aims at determining if the effects of transactional or ethical leadership styles have any
mediating factors on their impact on employee innovation within the selected Australia services
sector industry.
Methods and Analyses
This research will be conducted based on a broad framework of the deductive research approach;
the deductive research approach works on the principle of developing a hypothesis that is supported
by existing concepts and theories. The research approach then designs a suitable strategy for
conducting the research in order to test the developed hypothesis. The research will employ a mixed
methods approach, involving qualitative and quantitative methods, depending on the suitability of
each for every situation. Data will be collected using primary methods, specifically using semi-
structured surveys with managers/ leaders in various service sector businesses including hospitality,
medical, and financial services and their employees. The surveys will be designed and sent to the
respondents upfront to help them gather as much information as possible to discuss with the
interviewer. This method has been selected because it will enable in-depth discussions that will
bring out deeper insights on the type of leadership being applied as well as enable the identification
and characterization of creativity and innovative work behaviors being practiced by staff at their
respective organizations. Getting such information is better done through interviews than say using
self-administered questionnaires because explaining some innovations can be lengthy and they are
likely not to be standard. Some simple randomization will e used in selecting respondents to
participate in the interviews. Analysis will be done by first recording the interviewee responses and
then evaluating the responses in order to identify themes that will then be discussed by describing
the themes identified in the study, based on relevant theoretical constructs.
Findings
It is expected that the research findings will be roughly consistent with findings from past research;
the author expects that ethical leadership will have a far greater positive effect on innovative work
behavior by employees in the Australian services sector than transactional leadership. It is also
expected that there will be a number of moderating factors, including gender, the organizational
culture, and other factors such as organization size and the organizational structure in realizing
innovation. It is expected that the reward dimension of transactional leadership will result in
positive but moderate IWB and creativity among the followers (employees) and this will only be in
the short term; in the medium to longer term, the positive effects will gradually decline while the
punishment domain of transactional leadership is expected to have a negative relationship with IWB
and creativity. Ethical leadership behaviors will also result in other positive attributes among
followers, including greater self confidence and positive self perception. It is expected that overall,
ethical leadership behaviors will help spur innovation and creativity in employees in the Australian

services sector and these effects will be experienced in both SME’s and large organization and so
this model of leadership should be promoted in the sector.

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