Transformational Leadership and Employee Innovation: A Literature on Motivation and Creativity

Transformational Leadership and Employee Innovation: A Literature on Motivation and Creativity

Norhafiza Hashim¹, Hanani Hussin²*, Nurliyana Abas³, Shamsinar Ibrahim⁴, Sovia Rosalin⁵

^{1 2 3 4} Faculty of Business and Management, Universiti Teknologi MARA (UiTM) Cawangan Kedah, Kampus Sungai Petani, Malaysia

⁵ Department of Business and Hospitality, Faculty of Vocational, Universitas Brawijaya, Jawa Timur, Indonesia

DOI: https://dx.doi.org/10.47772/IJRISS.2025.909000786

Received: 26 September 2025; Accepted: 03 October 2025; Published: 30 October 2025

ABSTRACT

In maintain a competitive edge. Transformational leadership has been widely recognized for its role in enhancing employee motivation and innovation, yet the mechanisms through which it influences generative thinking and job formalization remain underexplored. This study examines the relationship between transformational leadership, intrinsic motivation, generative thinking, and job formalization to understand how leadership can foster creativity while maintaining organizational structure. Using a literature review approach, the study synthesizes existing research on leadership, motivation, and innovation to establish theoretical linkages between these variables. The findings indicate that transformational leadership significantly enhances intrinsic motivation, which in turn stimulates generative thinking among employees. Moreover, while job formalization can restrict creativity, transformational leaders can mitigate its negative effects by encouraging autonomy, intellectual stimulation, and today’s rapidly evolving business environment, organizations must foster innovation and creativity to open communication. The study’s implications suggest that organizations should invest in leadership development programs to cultivate transformational leadership qualities that balance structure with innovation. Additionally, HR policies should be designed to promote flexible work environments that empower employees while maintaining operational efficiency. Future research should explore these relationships using empirical methods across different industries and cultural contexts to further validate the findings and provide actionable insights for leadership and organizational development.

Keywords: Transformational Leadership; Intrinsic Motivation; Generative Thinking; Job Formalization, Employee Innovation

INTRODUCTION

In today’s rapidly changing business landscape, organizations must continuously innovate to maintain a competitive edge. A critical driver of innovation within organizations is leadership, particularly transformational leadership, which has been widely recognized for its ability to inspire and motivate employees towards greater creativity and higher performance. Transformational leaders influence their followers by fostering a shared vision, encouraging intellectual stimulation, and offering individualized consideration, which in turn enhances employees’ intrinsic motivation and creativity. However, despite the established understanding of the relationship between transformational leadership and employee innovation, the mechanisms through which this influence occurs remain underexplored.

This paper seeks to address this gap by examining the role of transformational leadership in promoting employee innovation, with a focus on the mediating roles of psychological empowerment, intrinsic motivation, and creativity. Specifically, this study synthesizes the findings of recent research conducted between 2015 and 2025, identifying the key variables that mediate the relationship between transformational leadership and innovation outcomes. By understanding these mechanisms, organizations can better cultivate leadership styles that foster an innovative climate and empower employees to contribute creatively to organizational success.

Through a systematic literature review, this paper aims to provide a comprehensive understanding of how transformational leadership enhances employee innovation, offering a conceptual framework to guide future research and practical recommendations for organizations. The findings highlight the importance of creating an environment that encourages autonomy, supports employee empowerment, and nurtures intrinsic motivation, all of which are essential for fostering creativity and driving innovation in the workplace.

LITERATURE REVIEW

Transformational Leadership and Innovative Climate

Transformational leadership has been shown to play a crucial role in shaping innovative climates within organizations. Leaders who provide intellectual stimulation and individualized consideration foster an environment where risk-taking, experimentation, and collaboration are encouraged (Sağnak et al., 2015; Jaiswal & Dhar, 2015). Subsequent studies further revealed that organizational climate mediates the relationship between leadership and innovative behavior, with transformational leadership being a key driver of firm-level innovation (Sethibe & Steyn, 2018; Zhang et al., 2018).

Recent contributions emphasize that transformational leadership enhances innovation outcomes through mechanisms such as psychological empowerment and project-specific requirements (Puni et al., 2022; Korku & Kaya, 2023). These findings confirm that transformational leadership strengthens innovation both at the individual and organizational levels, with industry and cultural contexts shaping the extent of this relationship (Deprez et al., 2023).

Transformational Leadership and Employee Creativity

Transformational leaders inspire and motivate employees to generate new ideas, solve problems creatively, and pursue continuous improvement. Research demonstrates that innovation climate and creative self-efficacy act as mediators, enabling transformational leadership to enhance employee creativity (Jaiswal & Dhar, 2015; Qian & Kee, 2023). In healthcare and service contexts, transformational leadership has been associated with greater employee engagement in creative problem-solving (Ranjbar et al., 2019).

More recent work highlights moderating variables such as job characteristics, uncertainty avoidance, and team learning orientation, which influence how strongly transformational leadership drives creativity (Wang, 2020; Qian & Kee, 2023). These findings underscore the need for organizations to create environments that support risk-taking and learning to maximize the benefits of transformational leadership on creativity.

Transformational Leadership and Psychological Empowerment

A growing body of evidence confirms that transformational leadership positively influences psychological empowerment by enhancing employees’ sense of autonomy, competence, and meaning in their work (Bose et al., 2021; Cheng et al., 2022). Psychological empowerment often serves as a mediator between transformational leadership and critical outcomes such as job satisfaction, career development, and innovative behavior (Jong & Faerman, 2021; Garg et al., 2023).

Recent studies also highlight contextual moderators, including organizational culture and emotional exhaustion, which may strengthen or weaken the link between transformational leadership and empowerment (Raza & Yousufi, 2023; Helalat et al., 2023). These findings indicate that the empowering effects of transformational leadership are not universal but depend on both organizational and individual-level conditions.

Transformational Leadership and Intrinsic

Transformational leadership has been consistently linked to higher levels of intrinsic motivation, as it provides employees with meaningful goals and a sense of purpose (Nguyen et al., 2019; Chua & Ayoko, 2021). This leadership style encourages autonomy, creativity, and persistence by aligning individual goals with organizational vision (Wong et al., 2017; Xue et al., 2022).

Empirical studies further show that intrinsic motivation mediates the relationship between transformational leadership and outcomes such as employee performance, organizational learning, and work engagement (Schopman et al., 2017; Udin, 2023; Udin, 2024). By fostering intrinsic motivation, transformational leaders help employees sustain commitment and creativity even under challenging conditions.

The studies reviewed consistently show that transformational leadership positively influences employee innovation through mediating mechanisms such as empowerment, creativity, and intrinsic motivation. However, there are contradictions in the findings. For example, while many studies suggest a strong link between transformational leadership and employee creativity, other studies indicate that organizational culture may moderate this relationship, with rigid cultures reducing the impact of leadership behaviors on innovation. Furthermore, the research heavily relies on cross-sectional data, which limits the ability to infer causal relationships between transformational leadership and innovation outcomes.

Literature Review Analysis Approach

The literature review was conducted using a systematic and thematic analysis approach. Relevant studies were identified through a comprehensive search of peer-reviewed journals using databases such as Scopus. The search focused on publications from 2010 to 2025 containing the keywords “transformational leadership,” “innovation climate,” “employee creativity,” “psychological empowerment,” and “intrinsic motivation.”

Each study was critically evaluated based on methodological rigor, theoretical grounding, and contextual relevance. Findings were then grouped thematically according to key constructs and mediating or moderating mechanisms linking transformational leadership to innovative outcomes. This process allowed for the identification of patterns, consistencies, and contradictions across studies.

A narrative synthesis was employed to integrate results from both quantitative and qualitative research, ensuring a balanced understanding of the phenomenon. Where possible, relationships among constructs were assessed based on empirical evidence, highlighting mediating mechanisms such as empowerment, creativity, and motivation. Additionally, emerging trends and research gaps—such as contextual moderators and causal limitations—were identified to inform the development of the study’s conceptual framework and hypotheses.

Although extensive research supports the positive influence of transformational leadership on innovation-related outcomes such as creativity, empowerment, and intrinsic motivation, several limitations constrain the current body of knowledge. Most studies rely on cross-sectional, self-reported data, limiting causal inference and raising concerns about common method bias. The literature is also dominated by Western-centric models, with limited exploration of cultural contingencies that may shape leadership effectiveness. Furthermore, existing research often examines mediating and moderating variables in isolation rather than through integrative, multi-level frameworks that reflect organizational complexity. Inconsistent measurement of constructs like innovation climate and creativity further reduces comparability across studies.

METHODOLOGY

This study employed a systematic literature review approach to examine the relationship between transformational leadership and employee innovation, with a particular focus on the mediating roles of psychological empowerment, creativity, and intrinsic motivation. The literature search was conducted using Scopus AI, a powerful AI-driven tool that enhances traditional literature searches by utilizing machine learning algorithms. Scopus AI’s capabilities allow for more accurate identification and classification of relevant studies, providing a comprehensive set of studies on transformational leadership and its impact on employee innovation.

Data Collection Strategy

The data collection strategy involved searching for studies published between 2015 and 2025 using specific keywords such as “transformational leadership,” “employee innovation,” “psychological empowerment,” “creativity,” and “intrinsic motivation.” The AI model in Scopus was utilized to refine the search process and ensure that the retrieved studies were relevant to the review’s objectives. The inclusion criteria focused on peer-reviewed articles in English, studies that specifically explored the mediators of leadership and innovation, and those that addressed the relationship between transformational leadership and innovative outcomes. The output from Scopus AI was analyzed to select the most pertinent studies, resulting in a pool of over 80 articles that formed the basis of this review.

Summary and Expanded Summary

The literature was synthesized into both a Summary and an Expanded Summary. The Summary provided an overview of the key findings from the studies, organized by themes such as the role of transformational leadership in fostering creativity, empowerment, and intrinsic motivation. The Expanded Summary went deeper into the literature, comparing studies, identifying common patterns and contradictions, and analyzing the methodologies used in the research. This section also highlighted emerging trends and gaps in the literature, such as the need for more longitudinal studies and the exploration of cross-cultural differences in leadership’s impact on innovation.

Concept Map

To visually represent the relationships between transformational leadership and employee innovation, a Concept Map was created. This map illustrates how transformational leadership influences intrinsic motivation and psychological empowerment, which in turn foster creativity and contribute to an innovation climate. The Concept Map also highlights the mediating variables that affect the relationship between leadership and innovation and identifies the moderators, such as organizational culture and industry-specific factors. The Concept Map serves as a framework to help understand the mechanisms through which transformational leadership drives innovation within organizations.

Fig. 1 Concept Map of Transformational Leadership

Topic Expert

In addition to the literature analysis, a topic expert in transformational leadership and organizational behavior was consulted to provide additional insights and validate the review’s findings. The expert’s input ensured the relevance of the selected studies and helped in identifying emerging trends within the literature, such as the growing emphasis on psychological empowerment and creativity as key mediators of leadership effectiveness.

Emerging Theme

Several emerging themes were identified throughout the review process. One notable theme was the role of organizational culture, which consistently appeared as a moderator that influences the effectiveness of transformational leadership in fostering creativity. Another emerging theme was the need for longitudinal studies, as much of the current research relies on cross-sectional data that cannot capture the long-term effects of transformational leadership on innovation. The review also highlighted the variability across cultures in the effectiveness of transformational leadership, suggesting that leadership practices may need to be adapted to different cultural contexts. Lastly, a critical theme was the balance between structure and flexibility, with many studies suggesting that transformational leaders must navigate the tension between job formalization and the creative freedom required for innovation.

RESULTS AND DISCUSSIONS

To review the key characteristics of transformational leadership that influence employee innovation.

Transformational leadership is widely recognized for its ability to foster employee innovation by inspiring, intellectually stimulating, and empowering employees. One of the most crucial characteristics of transformational leadership is idealized influence, in which leaders serve as role models, gaining trust and respect from their employees. When employees perceive their leaders as ethical and visionary, they are more likely to take risks and engage in innovative behaviors (Kim, Kim, & Jung, 2018). This leadership characteristic promotes a culture of innovation by encouraging employees to challenge existing norms and explore creative solutions. Furthermore, idealized influence helps create a strong organizational identity, which enhances employees’ commitment to innovation and continuous improvement (Nguyen, Hooi, & Avvari, 2023).

Another key attribute of transformational leadership that influences innovation is inspirational motivation. Leaders who articulate a compelling vision and communicate high expectations inspire employees to think beyond routine tasks and explore new possibilities. Inspirational motivation fosters a shared purpose within organizations, encouraging employees to engage in creative problem-solving and innovative initiatives (Afsar & Umrani, 2020). Additionally, research suggests that when leaders express confidence in their employees’ abilities, it enhances intrinsic motivation, leading to greater engagement in innovative activities (Nguyen et al., 2022). This leadership characteristic plays a pivotal role in shaping employees’ willingness to embrace change and seek novel approaches to work-related challenges.

Intellectual stimulation is another fundamental characteristic of transformational leadership that fosters employee innovation. Transformational leaders challenge employees to question assumptions, reframe problems, and approach tasks from different perspectives (Watts, Steele, & Den Hartog, 2020). By encouraging critical thinking and knowledge-sharing, leaders create an environment where employees feel safe to experiment with new ideas without fear of failure. Studies indicate that intellectual stimulation significantly enhances creative problem-solving skills, particularly in organizations that emphasize continuous learning and adaptability (Deprez, Robijn, & Euwema, 2023). When employees are intellectually stimulated, they are more likely to engage in innovative behaviors, contributing to the overall competitiveness of the organization.

Another vital aspect of transformational leadership that influences innovation is individualized consideration. Transformational leaders provide personalized support, mentorship, and coaching, ensuring that employees’ unique talents and aspirations align with organizational goals (Alhosani, Ahmad, & Nawi, 2019). This tailored approach to leadership helps employees feel valued and motivated to contribute innovative ideas. Furthermore, individualized consideration fosters a culture of psychological safety, where employees are encouraged to voice their opinions and experiment with creative solutions without fear of retribution. Research suggests that organizations where leaders exhibit high levels of individualized consideration experience higher levels of employee-driven innovation and job satisfaction (Wong, 2017).

Finally, empowerment and delegation are essential transformational leadership characteristics that significantly impact employee innovation. Transformational leaders empower employees by granting them autonomy in decision-making and providing opportunities for skill development (Afshari, Siraj, Ghani, & Afshari, 2011). Empowered employees are more likely to take initiative and engage in innovative tasks, as they feel a sense of ownership over their work. Studies highlight that when employees have the freedom to experiment with new approaches and are encouraged to contribute innovative solutions, organizations benefit from increased creativity and problem-solving capabilities (Nguyen et al., 2023). Ultimately, transformational leadership fosters an environment where innovation thrives by combining trust, encouragement, and strategic vision.

To review the role of motivation in enhancing creative and innovative behaviors among employees.

Motivation plays a crucial role in driving employee creativity and innovation, as it determines the effort and persistence individuals invest in generating and implementing novel ideas. Intrinsic motivation, which refers to an employee’s internal drive to engage in tasks for personal satisfaction rather than external rewards, is particularly influential in fostering innovation (Afsar & Umrani, 2020). Employees who find their work meaningful and enjoyable are more likely to experiment with new ideas and approaches (Nguyen, Hooi, & Avvari, 2023).

Transformational leaders enhance intrinsic motivation by creating an inspiring vision, fostering autonomy, and encouraging employees to take ownership of their tasks (Kim, Kim, & Jung, 2018). When employees feel intrinsically motivated, they are more willing to invest cognitive resources in problem-solving and exhibit greater perseverance in the face of challenges.

Beyond intrinsic motivation, extrinsic motivation—such as financial incentives, recognition, and career advancement—also plays a significant role in fostering employee innovation. While extrinsic rewards can sometimes undermine intrinsic motivation, they can be effective when aligned with employees’ personal goals and values (Nguyen et al., 2022). Organizations that implement structured incentive programs, such as performance-based bonuses or public recognition for innovative contributions, often experience higher levels of creative engagement among employees (Watts, Steele, & Den Hartog, 2020). However, research suggests that extrinsic motivation alone is insufficient in sustaining long-term innovation, as employees may focus on meeting reward criteria rather than engaging in deep, creative problem-solving (Wong, 2017).

Another key factor in the motivation-innovation link is the role of psychological empowerment. Employees who perceive their work as impactful and feel confident in their ability to contribute meaningfully to their organization tend to be more innovative (Alhosani, Ahmad, & Nawi, 2019). Transformational leaders enhance psychological empowerment by fostering a supportive and trust-based environment, delegating responsibilities, and encouraging risk-taking (Deprez, Robijn, & Euwema, 2023). Studies indicate that when employees feel empowered, they exhibit higher levels of creative self-efficacy, which strengthens their willingness to generate and implement innovative ideas (Afshari, Siraj, Ghani, & Afshari, 2011).

Additionally, the motivation to learn has been identified as a critical driver of innovation. Employees who are motivated to acquire new knowledge and skills are more likely to embrace change and explore creative solutions (Afsar & Umrani, 2020). Transformational leaders play a vital role in fostering a learning-oriented culture by encouraging employees to seek professional development opportunities and supporting continuous learning initiatives (Nguyen et al., 2023). Organizations that prioritize learning motivation through training programs, cross-functional collaboration, and knowledge-sharing platforms often experience higher levels of employee-driven innovation (Watts et al., 2020).

Finally, goal orientation significantly influences employees’ motivation to engage in creative behaviors. Employees with a learning goal orientation, who strive to develop competence and master new challenges, are more likely to explore innovative solutions compared to those with a performance goal orientation, who prioritize meeting external expectations (Wong, 2017). Transformational leaders who encourage a growth mindset and provide constructive feedback help employees shift their focus toward learning and experimentation rather than fearing failure (Kim et al., 2018). By fostering a culture where motivation is centered on self-improvement and long-term development, organizations can create an environment where creativity and innovation thrive.

To examining the connections between key themes such as innovative climate, employee creativity, psychological empowerment, and intrinsic motivation

Transformational Leadership and Innovative Climate

Transformational leadership plays a crucial role in shaping an innovative climate, which fosters creativity and enhances employee innovation. Research indicates that transformational leaders create an environment that encourages risk-taking, open communication, and knowledge-sharing, all of which contribute to a positive innovation climate (Jaiswal & Dhar, 2015). Through intellectual stimulation, transformational leaders challenge employees to think creatively and question conventional processes, promoting an atmosphere where new ideas are encouraged and valued (Wang & Rode, 2010). Additionally, inspirational motivation enhances employees’ confidence and enthusiasm for exploring innovative solutions, leading to a stronger commitment to innovation within the organization (Eisenbeiss, van Knippenberg, & Boerner, 2008).

The innovative climate also serves as a mediator between transformational leadership and organizational performance. Studies suggest that firms with a strong innovation climate tend to outperform their competitors due to their ability to adapt to changes and implement new ideas effectively (Puni, Hilton, Mohammed, & Korankye, 2022). Transformational leaders influence this climate by promoting a shared vision, aligning employee goals with organizational objectives, and providing necessary support for innovation (Korku & Kaya, 2023). The presence of an innovation-supportive environment allows employees to feel psychologically safe, increasing their willingness to take creative risks and contribute new ideas without fear of failure (Liu & Chan, 2017).

Moreover, the relationship between transformational leadership and innovative behavior is strengthened by project requirements and organizational contexts. For instance, in industries where high innovativeness is a key requirement, employees are more likely to perceive transformational leadership as a crucial factor in fostering an innovation-driven climate (Zhang, Zheng, & Darko, 2018). This suggests that transformational leadership may be particularly effective in organizations where creativity and continuous improvement are essential to achieving business objectives. The adaptability of transformational leaders allows them to tailor their leadership approach to fit industry-specific demands, reinforcing the innovation climate accordingly (Sethibe & Steyn, 2018).

Transformational leadership fosters an innovation-friendly organizational climate by encouraging collaboration and knowledge exchange among employees. Leaders who emphasize individualized consideration and intellectual stimulation help employees feel valued and motivated to contribute innovative ideas (Jaiswal & Dhar, 2015). This supportive climate enables employees to develop creative self-efficacy, which further enhances their ability to generate and implement novel solutions (Korku & Kaya, 2023). A collaborative and trust-based work environment also promotes cross-functional teamwork, which is essential for fostering organizational-wide innovation (Puni et al., 2022).

While many studies confirm the positive influence of transformational leadership on innovative climate, some research highlights variations in this relationship. Certain leadership behaviors may have stronger impacts in specific organizational contexts or cultures, and factors such as workplace autonomy and industry type may moderate the effectiveness of transformational leadership in fostering an innovation climate (Wang & Rode, 2010). Additionally, while transformational leadership is generally associated with positive innovation outcomes, other leadership styles, such as authentic leadership, may also contribute to an innovation-supportive environment (Korku & Kaya, 2023). Future research should explore these nuances to develop a more comprehensive understanding of how leadership styles interact with organizational climates to drive innovation.

Literature Review on Transformational Leadership, Creativity, Empowerment, and Motivation

Table 1 Summary of Literature Review on Transformational Leadership, Creativity, Empowerment, and Motivation

The consolidated literature demonstrates that transformational leadership (TL) enhances employee innovation through four interconnected pathways: innovative climate, creativity, empowerment, and intrinsic motivation.

Innovative Climate: Early studies (Eisenbeiss et al., 2008) established that TL shapes team climates conducive to innovation. Subsequent research highlighted mediating mechanisms (Sağnak et al., 2015; Jaiswal & Dhar, 2015) and contextual moderators such as project requirements (Zhang et al., 2018). In developing economies, TL promotes firm performance through innovation climates (Puni et al., 2022).

Employee Creativity: TL enhances creativity both directly (Akbar et al., 2015; Ranjbar et al., 2019) and indirectly via engagement, job characteristics, and creative self-efficacy (Ul Haq et al., 2010; Jaiswal & Dhar, 2015). Moderators such as uncertainty avoidance (Wang, 2020) and team learning orientation (Qian & Kee, 2023) further shape outcomes.

Psychological Empowerment: TL boosts empowerment, mediating links with innovation, career satisfaction, and organizational identification (Lin, 2009; Joo & Lim, 2013; Bose et al., 2021). Effectiveness is stronger in flexible, organic structures (Dust et al., 2014) and weaker under emotional exhaustion (Raza & Yousufi, 2023). Organizational culture also conditions this relationship (Helalat et al., 2023).

Intrinsic Motivation: TL fosters intrinsic motivation by enhancing autonomy, competence, and purpose. This mechanism mediates outcomes such as creativity (Chen et al., 2009), performance (Nguyen et al., 2019; Udin, 2023), and work engagement (Chua & Ayoko, 2021). Meta-analytic evidence (Xue et al., 2022) confirms its robustness.

Taken together, TL exerts its strongest impact when these mechanisms interact. Leaders cultivate climates of trust and risk-taking, empower employees with autonomy, and nurture intrinsic motivation, which together unlock creativity and innovation. Contextual moderators such as culture, structure, and industry demand determine the strength of these effects, suggesting the need for situationally adaptive leadership.

Linkages between transformational leadership, employee creativity, financial rewards, organizational culture, and innovation

Transformational leadership significantly influences employee creativity, as it fosters an environment that encourages innovation, risk-taking, and independent thinking. Transformational leaders achieve this by employing intellectual stimulation, which challenges employees to think critically and explore novel solutions, and individualized consideration, which supports employees’ professional growth (Akbar, Sadegh, & Chehrazi, 2015).

Additionally, transformational leadership enhances employees’ creative self-efficacy, which is a key determinant of their willingness to engage in creative behaviors (Qian & Kee, 2023). However, the extent to which transformational leadership influences creativity depends on other organizational and contextual factors, including financial rewards, organizational culture, and overall innovation climate.

One critical factor that interacts with transformational leadership in fostering employee creativity is financial rewards. While transformational leadership primarily motivates employees intrinsically, financial incentives such as performance-based bonuses, innovation grants, and recognition programs can further reinforce creative behaviors (Jaiswal & Dhar, 2015). Studies suggest that intrinsic and extrinsic motivation can work synergistically when financial rewards are structured to acknowledge creativity rather than just routine performance (Wang, 2020). However, excessive emphasis on extrinsic rewards may undermine intrinsic motivation, leading employees to focus on short-term gains rather than long-term creative contributions (Wang & Rode, 2010). Transformational leaders must therefore strike a balance between providing financial incentives and fostering an environment where employees find meaning and fulfilment in their creative work.

Organizational culture also plays a vital role in moderating the relationship between transformational leadership and employee creativity. A culture that values risk-taking, experimentation, and open communication enhances the positive effects of transformational leadership on creativity (Ul Haq et al., 2010). Conversely, rigid hierarchical cultures with a strong focus on control and conformity can suppress creative expression, limiting the effectiveness of transformational leadership (Jaiswal & Dhar, 2015). Additionally, transformational leaders who establish a psychological safety climate—where employees feel comfortable voicing new ideas without fear of criticism—can significantly enhance creative behaviors (Qian & Kee, 2023). This highlights the importance of aligning leadership practices with cultural norms that support innovation and change.

The impact of transformational leadership on organizational innovation extends beyond individual creativity, influencing collective innovation efforts at the team and organizational levels. By fostering an innovation-oriented climate, transformational leaders encourage collaborative knowledge-sharing, interdisciplinary problem-solving, and continuous learning, which are essential for driving breakthrough innovations (Akbar et al., 2015).

Additionally, when employees perceive that their creative contributions are valued and rewarded, they are more likely to engage in behaviors that lead to tangible organizational innovation (Wang, 2020). However, the presence of structural barriers, such as bureaucratic decision-making and resource constraints, can limit the ability of transformational leaders to translate employee creativity into organization-wide innovation (Wang & Rode, 2010). This underscores the need for transformational leaders to advocate for flexible structures and resource allocation strategies that support long-term innovation.

In conclusion, transformational leadership fosters employee creativity through intellectual stimulation, intrinsic motivation, and creative self-efficacy. However, its effectiveness is enhanced or constrained by financial rewards, organizational culture, and the broader innovation climate. Financial incentives, when aligned with intrinsic motivation, can reinforce creative efforts, while an innovation-friendly organizational culture amplifies the impact of transformational leadership. Ultimately, transformational leaders play a pivotal role in shaping an environment that not only nurtures individual creativity but also translates it into sustainable organizational innovation. Future research should explore the long-term effects of transformational leadership on financial performance and market competitiveness, as well as the role of digital transformation in shaping leadership-innovation dynamics (Jaiswal & Dhar, 2015; Qian & Kee, 2023).

Linkages Between Transformational Leadership and Psychological Empowerment: The Roles of Employee Creative Performance and Job Performance Outcomes

Transformational leadership significantly influences psychological empowerment, which in turn enhances both employee creative performance and job performance outcomes. Transformational leaders empower employees by fostering a sense of autonomy, competence, meaning, and impact, enabling them to take ownership of their tasks and approach work with greater confidence and motivation (Dust, Resick, & Mawritz, 2014; Helalat et al., 2023). By exhibiting behaviors such as individualized consideration, intellectual stimulation, inspirational motivation, and idealized influence, transformational leaders cultivate a work environment where employees feel trusted and capable of making meaningful contributions (Joo & Lim, 2013; Walsh, Dupré, & Arnold, 2014). As a result, psychological empowerment emerges as a critical mediating mechanism through which transformational leadership drives higher employee engagement and innovation (Garg, Attree, & Kumar, 2023).

Psychological empowerment plays a pivotal role in enhancing employee creative performance, as it provides employees with the confidence and motivation to explore novel ideas, take risks, and experiment with innovative solutions (Raza & Yousufi, 2023). When employees feel psychologically empowered, they are more likely to exhibit proactive behaviors and challenge traditional ways of doing things, which is essential for fostering a culture of innovation (Bose, Patnaik, & Mohanty, 2021). Transformational leadership further strengthens this process by stimulating intellectual curiosity and encouraging employees to think critically about their work (Cheng, Jiang, & Tian, 2022). This intrinsic motivation, reinforced by transformational leadership and psychological empowerment, leads to higher levels of creative performance, particularly in knowledge-intensive and dynamic work environments where problem-solving and innovation are crucial (Garg et al., 2023).

Beyond creativity, psychological empowerment also enhances overall job performance outcomes, as empowered employees demonstrate higher levels of job engagement, commitment, and effectiveness (Jong & Faerman, 2021). Employees who perceive greater control and meaning in their work tend to exhibit stronger organizational commitment and job satisfaction, leading to higher productivity and reduced turnover intentions (Bose et al., 2021). Transformational leaders facilitate this by creating a supportive and inspiring work atmosphere, where employees feel valued and motivated to go beyond their formal job roles (Cheng et al., 2022). Additionally, psychological empowerment fosters self-efficacy, which enables employees to overcome challenges, persist in their efforts, and maintain high levels of performance despite obstacles (Dust et al., 2014).

However, the extent to which transformational leadership fosters psychological empowerment and job performance outcomes depends on organizational context and employee well-being. In organic and decentralized structures, where flexibility and autonomy are encouraged, transformational leadership has a stronger impact on psychological empowerment and performance (Helalat et al., 2023). Conversely, in mechanistic, rigidly structured organizations, employees may experience less autonomy, limiting the effectiveness of transformational leadership in fostering empowerment (Dust et al., 2014). Furthermore, emotional exhaustion can weaken the link between transformational leadership and psychological empowerment, as employees experiencing burnout may struggle to internalize the empowering messages of their leaders (Raza & Yousufi, 2023).

In conclusion, psychological empowerment serves as a vital link between transformational leadership and key workplace outcomes, including employee creative performance and job performance. Through fostering autonomy, competence, and meaning, transformational leaders empower employees to engage in innovative thinking and high-performance behaviors that contribute to organizational success. However, factors such as organizational structure and employee well-being can influence the effectiveness of this relationship. Future research should explore how industry-specific conditions and individual differences shape the interplay between transformational leadership, psychological empowerment, and workplace performance to develop a more nuanced understanding of these dynamics.

Linkages Between Transformational Leadership and Intrinsic Motivation: The Roles of Generative Thinking and Job Formalization

Transformational leadership (TL) is widely recognized for its ability to inspire and motivate followers to exceed their self-interests for the good of the organization. A key aspect of TL is the leader’s ability to create an environment where employees feel valued and are empowered to engage in self-directed growth and development. This directly impacts intrinsic motivation, which refers to the motivation that comes from within an individual, such as personal satisfaction or the enjoyment of a task. Transformational leaders encourage autonomy, foster a sense of purpose, and offer intellectual stimulation, all of which contribute to the enhancement of intrinsic motivation. By creating an atmosphere where employees are encouraged to think creatively and pursue innovative ideas, TL boosts their intrinsic motivation, making them more likely to engage in generative thinking (Bass & Avolio, 1994; Deci & Ryan, 2000).

Generative thinking, in the context of leadership, refers to an individual’s capacity to generate new, innovative ideas or solutions. It is inherently linked to intrinsic motivation, as employees are more likely to engage in creative processes when they feel motivated by personal interests rather than external rewards. TL plays a vital role in fostering this kind of thinking by promoting a supportive environment where employees feel empowered to take risks and experiment. Leaders who provide intellectual stimulation, one of the core components of TL, challenge employees’ thinking, encourage experimentation, and reward creativity, thus fostering an environment that is conducive to generative thinking. This in turn leads to an increase in innovative behaviors that benefit the organization (Shin & Zhou, 2003; Oldham & Cummings, 1996).

Job formalization refers to the extent to which a job is standardized, with clearly defined roles, tasks, and responsibilities. While job formalization can enhance efficiency and clarity within organizations, it may limit the degree of creative freedom employees have. However, TL can mitigate the negative effects of job formalization by creating a balance between structure and flexibility. Transformational leaders are adept at maintaining clarity regarding job roles while also encouraging employees to think outside of the box and explore innovative solutions. This balance allows employees to operate within well-defined parameters while still having the freedom to apply their generative thinking skills. TL’s ability to create this balance helps to bridge the gap between the structured nature of formalized jobs and the need for creativity and innovation (Mumford et al., 2002).

Furthermore, TL positively influences job satisfaction, which is closely tied to intrinsic motivation and generative thinking. When employees feel that their contributions are valued, they are more likely to exhibit intrinsic motivation, leading to higher levels of engagement and job satisfaction. This heightened satisfaction can enhance creativity, as satisfied employees are more willing to invest time and effort into generating novel ideas. Transformational leaders inspire job satisfaction by demonstrating concern for their employees’ well-being, offering support, and recognizing achievements. Through these actions, TL not only fosters intrinsic motivation but also encourages a mindset of continuous improvement, which is essential for generative thinking (Avolio & Bass, 2004).

Finally, the linkage between transformational leadership, intrinsic motivation, and generative thinking is a dynamic process that benefits both individuals and organizations. TL cultivates an environment where employees are intrinsically motivated to think creatively, which leads to higher levels of job performance and innovation. By promoting a sense of purpose, autonomy, and intellectual stimulation, TL empowers employees to contribute to organizational success through generative thinking. Moreover, job formalization, when managed effectively by transformational leaders, does not stifle creativity but rather provides a framework within which employees can exercise their creative potential. This synergy between leadership, motivation, and creativity creates a culture of continuous innovation, positioning organizations for long-term success (Judge & Piccolo, 2004; Amabile, 1996).

Across the reviewed studies, there is strong consensus that transformational leadership (TL) positively influences employee innovation through mechanisms such as innovative climate, creativity, psychological empowerment, and intrinsic motivation, yet the magnitude and pathways of these effects vary across contexts. For instance, while Eisenbeiss et al. (2008) and Jaiswal and Dhar (2015) found that TL strengthens innovation by cultivating supportive team and organizational climates, Wang and Rode (2010) observed that contextual moderators such as uncertainty avoidance and organizational identification can either amplify or weaken this relationship. Similarly, Akbar et al. (2015) and Ranjbar et al. (2019) confirmed that intellectual stimulation and individualized consideration enhance creativity, but Wang (2020) and Qian and Kee (2023) demonstrated that this effect depends on team learning orientation and job characteristics. In terms of psychological empowerment, Dust et al. (2014) and Helalat et al. (2023) showed that TL’s impact is stronger in organic structures and weaker in rigid, mechanistic ones, while Raza and Yousufi (2023) highlighted the moderating role of emotional exhaustion. The relationship between TL and intrinsic motivation is consistently positive (Nguyen et al., 2019; Chua & Ayoko, 2021), though studies such as Wang (2020) caution that excessive reliance on extrinsic rewards can undermine intrinsic drive. Collectively, these findings suggest convergence on the centrality of TL in fostering innovation, yet they diverge in identifying the specific contextual and individual factors—such as culture, structure, and motivation type—that determine the strength and sustainability of this influence.

Managerial Implications

Leadership Development Programs

Organizations should design leadership development initiatives that emphasize transformational leadership behaviors such as intellectual stimulation, inspirational motivation, individualized consideration, and idealized influence. Such programs can help leaders effectively foster creativity, innovation, and intrinsic motivation among employees (Jaiswal & Dhar, 2015; Chua & Ayoko, 2021).

Fostering an Innovative Climate

Managers need to actively cultivate a work environment where employees feel encouraged to experiment, take risks, and engage in creative problem-solving. Studies show that an innovative climate mediates the link between leadership and innovation, making this a critical area for managerial focus (Sağnak et al., 2015; Sethibe & Steyn, 2018; Zhang et al., 2018).

Enhancing Psychological Empowerment

Transformational leaders should prioritize strategies that enhance employees’ sense of autonomy, competence, and purpose. By empowering employees, managers can increase organizational commitment, job satisfaction, and innovative work behavior (Bose et al., 2021; Garg et al., 2023; Helalat et al., 2023).

Strengthening Intrinsic Motivation

Managers should align organizational goals with employees’ personal values and provide meaningful recognition of contributions. By doing so, leaders can enhance intrinsic motivation, which mediates the relationship between leadership and performance outcomes (Nguyen et al., 2019; Udin, 2023; Udin, 2024).

Adapting to Cross-Cultural and Industry-Specific Needs

Because the effectiveness of transformational leadership varies across cultural and industry contexts, managers should tailor their approaches accordingly. For example, leadership strategies effective in healthcare may differ from those in banking or construction (Ranjbar et al., 2019; Puni et al., 2022; Garg et al., 2023). Sensitivity to cultural and organizational differences is therefore essential.

Table 2 Summary of Transformational Leadership Research

Summary of Transformational Leadership Research

The findings summarized in Table 1 reinforce the central role of transformational leadership in shaping innovative and creative outcomes across different industries and cultural contexts. Studies consistently show that mediating mechanisms—such as innovation climate, psychological empowerment, creative self-efficacy, and intrinsic motivation—explain how transformational leadership enhances organizational performance and employee outcomes (Jaiswal & Dhar, 2015; Sethibe & Steyn, 2018; Nguyen et al., 2019; Garg et al., 2023). Moderating factors, including project requirements, organizational culture, and individual learning orientation, further influence the strength of these relationships (Zhang et al., 2018; Qian & Kee, 2023; Helalat et al., 2023). Together, these findings support the argument that transformational leadership is not only critical for promoting creativity and innovation at the individual level but also for driving firm-level growth and adaptability in an era of digital transformation and organizational change (Deprez et al., 2023; Udin, 2024).

CONCLUSIONS

Summary of Key Findings

This paper highlights that transformational leadership significantly enhances innovation, employee creativity, psychological empowerment, and intrinsic motivation. Evidence from 2015–2025 shows that these outcomes are achieved through mediating mechanisms such as innovation climate, creative self-efficacy, and empowerment, as well as moderating factors like job characteristics, cultural context, and organizational learning orientation.

Theoretical Contributions

By synthesizing recent studies across industries and cultures, this review contributes to leadership theory by demonstrating that transformational leadership effectiveness depends not only on direct leader behaviors but also on contextual mediators and moderators. This integrated perspective enriches the understanding of how transformational leadership drives sustainable organizational performance.

Managerial Relevance

The findings emphasize the importance of developing leaders who can foster innovative climates, empower employees, and strengthen intrinsic motivation. For managers, this means creating environments that balance structure with autonomy, align organizational goals with personal values, and adapt leadership practices to cultural and industry-specific contexts.

Limitations and Future Research

This study is limited to a review of research published between 2015 and 2025. Future research should incorporate longitudinal approaches to assess the lasting impact of transformational leadership and explore new contexts such as digital transformation, remote work, and the evolving demands of a global workforce.

ACKNOWLEDGEMENT

The authors would like to express their sincere gratitude to the Kedah State Research Committee, UiTM Kedah Branch, for the generous funding provided under the Tabung Penyelidikan Am. This support was crucial in facilitating the research and ensuring the successful publication of this article.

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