How CEO transformational leadership promotes firm innovation: mediating role of collective task self-efficacy

Purpose Innovative capabilities are essential for the survival and development of an organization. Previous studies have found a positive relationship between CEO transformational leadership (CEOTFL) and firm innovation. However, limited studies have endeavored to investigate the relationship between CEOTFL and firm innovation through the cognition and attitudes of the ordinary employees, despite their significant role in corporate innovation. Existing TFL literature has predominantly concentrated on “the close relationships” between leaders and their immediate subordinates, leaving the remote influence of CEOTFL on ordinary employees under-researched. Therefore, the current study aims to explain the relationship between CEOTFL and firm innovation from a micro-level perspective. Design/methodology/approach Multilevel and multi-sourced data from 1,627 employees across 145 firms was used to test the hypotheses in this study. Findings The results indicate that CEOTFL can enhance firm innovation by enhancing the collective task self-efficacy of regular employees. Moreover, this effect is not observed when employees are exposed to a low level of work–life balance practices. Practical implications The findings suggest that CEOs can perform increased TFL to promote firm innovation. It is recommended that CEOs demonstrate their TFL not only to their direct subordinates but also to regular employees using various methods, such as participating in corporate activities with employees, delivering public speeches and sending emails to employees. Meanwhile, the HRM system should consistently align with the CEO’s leadership approach within the organization. Social implications This study strengthens the importance of ordinary employees and their contribution to firm innovation. Originality/value The present study contributes to the literature on the micro-foundations of the relationship between CEOTFL and firm innovation by considering ordinary employee reactions as a mediator. Furthermore, this study enriches the CEOTFL literature by investigating the distant influence of CEOTFL on rank-and-file employees through the lens of social cognitive theory. Additionally, the authors expand cue consistency theory to the realms of CEO leadership and HRM literature by integrating CEOTFL and work–life balance practices into a unified model. The findings reveal the importance of coordination between CEO leadership and HRM systems within an organization. The inclusion of Chinese sample data in this study augments the cultural diversity of the sample within the CEOTFL literature.