Transformational and Transactional Leadership for Employee Entrepreneurial Behavior

The article by Afsar et al. (2016), entitled “Transformational and Transactional Leadership and Employee’s Entrepreneurial Behavior in Knowledge-Intensive Industries,” was published in The International Journal of Human Resource Management. The researchers aimed at exploring the influence of transformational and transactional leadership styles on employees’ entrepreneurial behavior and the mediating role of psychological empowerment. The findings of their study indicated that transformational leadership positively influenced employees’ entrepreneurial behavior, while transactional leadership discouraged workers from engaging in innovative behavior (Afsar et al., 2016). As for the mediating role of psychological empowerment, Afsar et al. (2016) found out that psychological empowerment increased employees’ involvement in entrepreneurial behavior under transformational leadership. However, employees’ high psychological empowerment in transactional leadership led to their engagement in entrepreneurial behavior that benefited themselves rather than their organization (Afsar et al., 2016). The study has important implications for managers since it proves that transformational leadership, combined with employees’ high psychological empowerment, has a positive impact on employees’ entrepreneurial behavior.

Addressed Gaps in the Literature

In the literature review, the authors identified several gaps that they aimed at addressing. According to Afsar et al. (2016), the existent literature had explored the mediating role of psychological empowerment on employee behaviors other than entrepreneurial behavior. Finally, Afsar et al. (2016) found out that prior studies did not consider the moderating effect of psychological empowerment when exploring the impact of transactional and transformational leadership on employees’ innovative behavior. The authors aimed at addressing these gaps by studying the mediating role of psychological empowerment in the relationship between transformational and transactional leadership styles and employees’ entrepreneurial behavior.

Ideas and Arguments Found Stimulating

The first idea found stimulating was that workers’ entrepreneurial activity significantly depended on the leadership style in their organization. This argument implies that the same employee working with different leaders may produce different results. As a consequence, in order to change employees’ behavior and encourage them to engage in entrepreneurial activity, managers should consider changing their leadership style. Another idea found interesting was that highly empowered employees managed by transactional leaders made efforts to achieve their own goals rather than engage in entrepreneurial behavior for the benefit of the organization (Afsar et al., 2016). It may mean that empowered employees consider their innovative ideas useless under circumstances where the deviation from standards is not welcome, so they see no point in contributing much effort to such an organization.

Questions and Concerns with the Main Claims

The authors’ main claim is that the leadership style is a significant factor influencing employees’ entrepreneurial behavior. According to Afsar et al. (2016), one concern related to this claim is that it is necessary to investigate what specifically contributes to workers’ involvement in entrepreneurial activity. They also argued that investigating only the impact of leadership styles was not enough to get an understanding of their influence on entrepreneurial behavior. Thus, they hypothesized that transformational and transactional leadership, mediated by psychological empowerment, influence employees’ innovative behavior (Afsar et al., 2016). Their findings indicated that transactional leadership was negatively related to innovative behaviors. It raises a new concern about whether organizations should stop applying the transactional leadership style and transit to transformational leadership.

Similarities or Disagreements Reported in The Literature

The authors reviewed similarities and differences between transformational and transactional leadership reported in the literature. There was only one reported similarity between transactional and transformational leadership styles, which was their function of encouraging employees to take risks and engage in proactive and innovative behaviors (Afsar et al., 2016). However, in general, these two leadership styles are considered antithetical. Transactional leadership is based on extrinsic motivation, which is realized by a system of rewards and punishments. Transformational leadership, on the contrary, relies on employees’ intrinsic motivation that comes from inspiration and encouragement to realize their full potential and perform more than prescribed by their job role. Transformational leaders encourage employees to challenge the status quo and propose creative solutions, while transactional leaders oblige workers to adhere to strict standards. As a result, transformational leadership is more suitable for employees’ engagement in entrepreneurial behavior than transactional leadership. However, both leadership styles are ineffective in improving employees’ entrepreneurial behavior if employees have low psychological empowerment.

Future Research Directions

The authors outlined a number of research directions for future studies. First, the role of other mediating factors, such as personality traits or self-efficacy, in the relationship between leadership styles and entrepreneurial behavior may be explored. Such studies would clarify whether leadership styles have a greater influence on entrepreneurial behavior than employees’ personal characteristics. Secondly, future research may be based on peer ratings rather than supervisory judgments to reduce the risk of bias. Thirdly, other researchers may investigate the mediating role of psychological empowerment on the relationship between transformational leadership and other variables, such as job satisfaction or organizational commitment.

A Recent Work Missing

Most recent works are focused on exploring the effects of transformational leadership on various employees’ behaviors. However, it was possible to identify one study that explored the mediating role of psychological empowerment on entrepreneurial behaviors of employees managed by transactional and transformational leaders. This study was conducted by Kustanto et al. (2020), and its findings were partially consistent with those of Afsar et al. (2016). Just like Afsar et al. (2016), Kustanto et al. (2020) found out that transformational leadership, especially moderated by psychological empowerment, strengthened employees’ entrepreneurial behavior. However, according to Kustanto et al. (2020), transactional leadership also can improve entrepreneurial behaviors by means of awards and reinforcement, which does not align with the findings of Afsar et al. (2016). Based on the two studies, it may be concluded that transactional leadership can encourage employees’ entrepreneurial behavior only if managers specifically set goals for innovation and reward employees for their involvement in entrepreneurial activity.


Afsar, B., Badir, Y. F., Saeed, B. B., & Hafeez, S. (2016). Transformational and transactional leadership and employee’s entrepreneurial behavior in knowledge–intensive industries. The International Journal of Human Resource Management, 28(2), 307-332. Web.

Kustanto, H., Hamidah, Eliyana, A., Mumpuni, J. H. S., & Gunawan, D. R. (2020). The moderation role of psychological empowerment on innovative work behaviour. Systematic Reviews in Pharmacy, 11(8), 254-264.

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