Leadership Dynamics in the Knowledge-Based Landscape: Unravelling the Mediating Forces of Cognition on Innovative Behaviour

In the dynamic knowledge-based landscape, effective leadership has a crucial role in sharing knowledge and expertise towards innovation. Multiple previous research studies have studied the correlation between leadership style and innovative behaviour. Nevertheless, few empirical studies have investigated the mediating influence of psychological empowerment on the connection between organisational leadership and innovative behaviour. The study also examines how creative self-efficacy influences the connection between entrepreneurial leadership and innovative behaviour. This study addressed the knowledge gap by examining the correlation between transformational leadership, entrepreneurial leadership, and innovative behaviour. Additionally, it sought to explore the role of psychological empowerment and creative self-efficacy as mediators in the relationship between entrepreneurial leadership, transformational leadership, and innovative behaviour. A questionnaire was administered to 228 individuals who are employees working in Pakistan’s SMEs. The data were then analysed using Structural Equation Modelling (SEM) with Smart-PLS software. The findings suggest transformational leadership and entrepreneurial leadership heightened innovative behaviour among employees through psychological empowerment and creative self-efficacy. No direct impact was established for transformational leadership on innovative behaviour indicating the presence for mediator. This study contributes to the existing literature by offering empirical proof of the correlation between transformational leadership, entrepreneurial leadership, and innovative behaviour. It also examines the influence of psychological empowerment and creative self-efficacy on innovative behaviour. The practical implication is that to encourage innovative behaviour, leaders need to get down the field to empower and build confidence among employees.