The effect of charismatic leadership and organizational change on business transformation in the small and medium enterprises in Malaysia

Abstract

The concept of business transformation has emerged in international business literature especially as a solution to the increasingly challenging business environment. Today businesses must adapt to the rapid changes and undergo business transformation in order to survive and thrive. Charismatic leadership often plays an important role in influencing the process of change in an organization, as well as a larger scale in business transformation. Through charismatic leadership, business transformation can be better achieved, resulting in improved business performances and its survival rate. However, existing studies lack research on the relationship between charismatic leadership and organizational change on business transformation. In addition, studies related to business transformation were mainly based on larger organizations while little is known about the context of business transformation in Small Medium Enterprises (SMEs). Based on the research gap, this research investigated the relationship between charismatic leadership and organizational change on business transformation. This research also identified the mediating effects of organizational change on the relationships between charismatic leadership and business transformation. This quantitative study developed four research hypotheses; 1) There is a relationship between charismatic leadership and business transformation; 2) There is a relationship between charismatic leadership and organizational change; 3) There is a relationship between organizational change and business transformation and 4) The relationship between charismatic leadership and business transformation is mediated by organizational change. Primary data were gathered from 384 respondents comprising SMEs managerial employees in Malaysia. The results reveal that the four hypotheses are significant and supported, which included three direct relationships and one indirect relationship. Findings of the study reveal that there is a significant and positive relationship between charismatic leadership and organizational change in business transformation. Findings also indicate that charismatic leadership has a positive significant relationship with organizational change. Similarly, it is demonstrated that the relationship between charismatic leadership and business transformation is mediated by organizational change. Thus, results obtained in this study support the hypotheses. The implication of this study centred on the application of a more charismatic leadership during the implementation of organizational change and business transformation, to improve the chances in ensuring success on both initiatives.