How transformational leadership drives innovation: the roles of knowledge sharing and organizational learning

Abstract

Innovation has become increasingly important for small and medium-sized enterprises (SMEs) operating in uncertain and resource-constrained environments, yet the mechanisms through which leadership contributes to innovation remain insufficiently understood. This study examines whether transformational leadership enhances innovation performance by encouraging knowledge sharing and strengthening organizational learning. Drawing on the dynamic capability perspective, a serial mediation framework is developed and tested using survey data collected from 312 manufacturing and service SMEs in Iran. The proposed relationships were evaluated through Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings indicate that transformational leadership does not directly improve innovation performance. Instead, leaders influence innovation by creating conditions that encourage employees to exchange knowledge, which subsequently strengthens organizational learning and leads to superior innovation outcomes. The results demonstrate that knowledge sharing, and organizational learning jointly transmit the influence of transformational leadership to innovation performance. These findings contribute to leadership and innovation research by explaining how leadership behaviors are converted into organizational capabilities that support innovation in emerging economies. The study also provides practical guidance for SME managers by highlighting the importance of fostering collaborative knowledge exchange and continuous organizational learning rather than relying solely on inspirational leadership behaviors.