Transformational leadership and organisational commitment in manufacturing and service small to medium-sized enterprises

Purpose – The purpose of this paper is to investigate whether the generally positive impact of transformational leadership on organizational commitment in large organizations can be extended to small- and medium-sized businesses (SMEs) in the manufacturing and service industry. The authors investigate the possible moderator effects of a participative and directive leadership style. Design/methodology/approach – The collected data from 588 employees who rated 93 supervisors within 35 Dutch SMEs in both manufacturing and service industry. The authors analyse the nested data by means of multilevel modelling. Findings – Transformational leadership, defined as visionary leadership and development stimulation, was positively related to organizational commitment for service SMEs, but not for manufacturing SMEs. While a participative leadership style did not moderate the relationship between transformational leadership and organizational commitment in either industry, a directive leadership style strengthened the relationship between transformational leadership and organizational commitment in manufacturing SMEs. Research limitations/implications – Leaders in the service industry SMEs should engage in transformational leadership, whereas leaders in manufacturing industry SMEs should engage in other types of leadership. Future research should examine effective leadership in manufacturing. Practical implications – As the results of this study suggest, a distinction should be made between manufacturing and service industry. The advice therefore needs to be twofold. Supervisors in manufacturing SMEs can best improve employees’ organizational commitment by intensifying transformational leader behaviour combined with a directive decision style. Supervisors in service SMEs do not have to combine transformational leader behaviour with a particular leader decision style, if they wish to be more effective. Social implications – Demonstrating transformational leader behaviour can be successful in both manufacturing and service SMEs. However, in manufacturing companies this will only be effective when combined with a directive leader decision style. Originality/value – Although SMEs most of the time are considered as one similar group in comparison to large organizations, the authors follow Hughes and Wood (1999; see also Stonehouse and Pemberton, 2002) who argue that because of their different products, customers, and labour it is important to disaggregate research on SMEs and differentiate between manufacturing and service SMEs.