Effect of Transformational Leadership and Employee Empowerment on Innovation Performance through Innovation Capability: Evidence from the Hospitality Sector

The purpose of this study is to examine the impact of transformational leadership and employee empowerment on innovation performance, with innovation capability acting as a mediating mechanism. The research aims to provide a theory-driven, context-specific understanding of how internal organizational factors foster innovation, particularly in developing countries such as Pakistan. It also seeks to contribute to the refinement of innovation theory by integrating underexplored constructs into a cohesive model grounded in the Resource-Based View. The study employed a quantitative, cross-sectional research design and used a structured questionnaire to collect data from 361 employees in Pakistan’s hospitality sector. A convenience sampling technique was adopted due to accessibility constraints. The constructs were measured using validated scales, and the data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) via SmartPLS 4.0. All three hypotheses were supported by the data. Transformational leadership had a significant positive effect on innovation capability, as did employee empowerment. Innovation capability significantly influenced innovation performance. These findings confirm the mediating role of innovation capability and reinforce the RBV perspective that intangible internal resources, such as leadership and empowerment, are critical to achieving innovation success in environments with limited external support.