Knowledge management and organizational performance in the service industry: The role of transformational leadership beyond the effects of transactional leadership

a r t i c l e i n f o This study examines a comprehensive model comprising of various relationships between transformational and transactional leadership, knowledge management (KM) process, and organizational performance. Data are collected from human resource managers and general managers working in 119 service firms. Exploratory factor analysis and hierarchical regression analysis are used to analyze the proposed hypotheses. The results indicate that transformational leadership has strong and positive effects on KM process and organizational performance after controlling for the effects of transactional leadership. Further, KM process partially mediates the relationship between transformational leadership and organizational performance after controlling for the effects of transactional leadership. Implications and directions for future research are also discussed. Researchers always emphasized the importance of developing unique knowledge within firms to deliver new products/services and to distinguish it from competitors for achieving advantage (Menguc, Auh, & Shih, 2007). Delivering unique products/services to customers helps to improve customer satisfaction and sales volume, and so firms have observed the influence of knowledge development over performance (Bogner & Bansal, 2007; Tanriverdi, 2005). Since knowledge resides within the brain of employees, firms develop various strategies to create organizational knowledge through leveraging employees' knowledge. Human resource managers are get involved in the activities of finding suitable leadership style that supports implementation of knowledge management (KM) programs to augment organizational performance. Identification of suitable leadership style is essential in this turbulent environment since researchers have reported that different leadership styles have varying impacts on implementation of KM process (Bryant, 2003). Transformational leadership theory postulates that leaders exhibit certain behaviors that accelerate employees' level of innovative thinking through which they improve individual employee performance, organizational innovation, and organizational perfor-Since transformational leaders greatly influence employees, whose engagement is enormously required for implementation of KM process, the role of transformational leadership is focused on the implementation of KM process to improve organizational performance. To date, scholars have empirically investigated the positive impacts Though these studies explained the direct impact on organizational performance, the following research questions are still unanswered: (1) Do transformational leadership behaviors influence performance of service firms after controlling for transactional leadership behaviors?; (2) Do transformational leadership behaviors help to implement KM process in service firms after controlling for transactional leadership behaviors?; and (3) Will KM process mediate the relationship between transformational leadership and organizational performance in the service firms after controlling for transactional leadership? In order to answer …