Leader-Member Exchange and Innovative Behavior

Original Article

Leader-Member Exchange andInnovative Behavior

The Mediating Role of Psychological Empowerment

Carsten Christoph Schermuly,1 Bertolt Meyer,2 and Lando Dämmer3

1Business Psychology, SRH University Berlin, Germany, 2Social and Business Psychology, University ofZurich, Switzerland, 3University of Maastricht, The Netherlands

Abstract. This study investigates the process underlying the relationship between leadership and employees’ innovative workplace behavior.By combining findings from leader-member exchange (LMX) theory and from research on psychological empowerment, we propose thatempowerment mediates the effects of LMX on innovative behavior. We tested the proposed process model with a structural equation modelbased on a time-lagged questionnaire study with a sample of 225 employees. This design allowed us to investigate the proposed effects undercontrol of the temporal stability of innovative behavior. In partial support of the hypotheses, the model revealed a full mediation of LMX onsubsequent innovation behavior via psychological empowerment. The indirect effect was significant even when controlling for the stability ofinnovative behavior over time.

Keywords: leader-member-exchange, psychological empowerment, innovative work behavior

Organizations must continuously develop innovative prod-ucts and services to remain competitive in a globalized busi-ness environment (Miron, Erez, & Naveh, 2004). Therefore,innovations are an existential resource for the success oforganizations (Nonaka & Takeuchi, 1995). At the same time,employees’ newly created knowledge and ideas form thefoundations of organizational innovations (Scott & Bruce,1994). To remain competitive in a globalized business envi-ronment, organizations have to rely on the innovativeness oftheir employees. It is thus important to understand the ante-cedents and complex mechanisms driving innovative workbehaviors in organizations (Sanders, Moorkamp, Torka,Groeneveld, & Groeneveld, 2010).

As one important antecedent of innovative behavior, thequality of employees’ relationship with their supervisorshas been identified in the context of leader-memberexchange theory (LMX theory) (e.g., Basu & Green,1997; Sanders et al., 2010; Scott & Bruce, 1994). This find-ing echoes the considerable research attention that LMXtheory (Graen & Uhl-Bien, 1995) has received in organiza-tional research (Dulebohn, Bommer, Liden, Brouer, &Ferris, 2012). LMX theory focuses on dyadic relationshipsbetween supervisors and employees, stating that supervisorsvary the quality of these relationships across employees(Graen & Uhl-Bien, 1995). The theory has ‘‘substantiallycontributed to deepening our understanding of fundamentalleadership phenomena’’ (Schriesheim, Castro, & Cogliser,1999, p. 102).

Nevertheless, little is known about the psychologicalprocesses that underlie the association between LMX andinnovative work behavior. An understanding of the mecha-

nism that relates LMX and innovative behavior could beused in leadership and organizational developmentprograms to minimize barriers to the innovation processesin organizations. In this study, we therefore propose a pos-sible mediator of the relationship between LMX and inno-vative behavior. Supervisors are key interaction partners fortheir employees, and ‘‘the supervisor-subordinate relation-ship has a major impact on employees’ work experiences’’(Liden, Wayne, & Sparrowe, 2000, p. 409). We proposethat one such central work experience is the perception ofpsychological empowerment. Psychological empowermentis a motivational construct manifested in four individualevaluations of the work role of an employee. The cogni-tions of meaning, competence, self-determination, andimpact should combine to an overall construct of psycho-logical empowerment (Spreitzer, 1995). Meta-analyticresults (Dulebohn et al., 2012) showed that there is a posi-tive relationship between LMX and psychological empow-erment. Further, a recent study revealed that empowermentcan be an important mediator for the relationship betweenLMX and outcome variables like job performance andjob satisfaction (Zhou, Wang, Chen, & Shi, 2012). Buildingon these arguments, we propose that psychological empow-erment can also be an important mediator for the relation-ship between LMX and innovative work behavior.

Our study is the first to examine LMX, psychologicalempowerment, and innovative workplace behavior simulta-neously and does so with a time-lagged design. We proposethat LMX impacts subsequent innovative workplace behav-ior directly as well as indirectly through psychologicalempowerment. By proposing this process model, we con-

Journal of Personnel Psychology 2013; Vol. 12(3):132–142DOI: 10.1027/1866-5888/a000093

� 2013 Hogrefe Publishing

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tribute to the leadership literature by exposing one of theprocesses through which the supervisor-subordinate rela-tionship contributes to organizational success. Further, thisinvestigation contributes to the body of research on psycho-logical empowerment. In contrast to many other studiesemploying this construct (e.g., Avolio, Zhu, Kho, & Bhatia,2004; Chen, Kirkman, Kanfer, Allen, & Rosen, 2007;Nederveen Pieterse, van Knippenberg, Schippers, & Stam,2010), we employ the four dimensions of psychologicalempowerment rather than a single scale mean. By doingso, we adhere to calls by Spreitzer (2008) to elucidate thegestalt of psychological empowerment. With regard tothe practical implications of the proposed model, we helpto identify possible intervention mechanisms to foster inno-vative behavior in organizations.

In the following, we first review the literature on theantecedents of workplace innovative behavior and explainwhy LMX affects innovative behavior and how this rela-tionship is mediated via empowerment. We subsequentlytest our hypotheses using a structural equation model of atime-lagged sample of diverse employees. This design pro-vided us the rare opportunity to investigate the proposedeffects while controlling for the stability of innovativebehavior thereby giving the analysis further validity.

Innovative Behavior and LMX

Innovative behavior is defined as ‘‘a broad set of activitiesinvolving the creation and implementation of concepts andproducts new to an organization’’ (Basu & Green, 1997,p. 477). To be innovative employees must search for andpromote new ideas and find support for the implementationof them (Singh & Sakar, 2012). Thus, problem recognitionand the production of new and useful ideas is only the firststage of innovative behavior. The search for support and theimplementation of the ideas is part of innovative behavioras well. Innovative behavior is therefore a process with dif-ferent stages and consists of different behaviors (Scott &Bruce, 1994). Past research has linked employees’ innova-tive behavior to organizational success (see meta-analysisby Rubera & Kirca, 2012). Some organizational theorieseven go so far as to suggest that the creation of new knowl-edge through innovation is the core of organizational suc-cess (Nonaka & Takeuchi, 1995).

Given the importance of employees’ innovativebehavior, several researchers have examined whether it ispossible to (positively) influence it through the supervi-sor-subordinate relationship. Among these, studies employ-ing LMX theory were able to identify positive influenceson innovative behavior (e.g., Basu & Green, 1997; Sanderset al., 2010; Scott & Bruce, 1994). LMX theory was firstintroduced by Graen and his colleagues (Graen, 1976;Graen & Cashman, 1975; Graen & Scandura, 1987; Graen& Uhl-Bien, 1995). It focuses on the dyadic interactionquality between supervisors and employees (Graen &Uhl-Bien, 1995). According to LMX theory, the supervisorand the employee are in a continuous social exchange pro-cess. In this context, LMX is characterized as the individual

impression of the leader-member relationship quality alonga continuum from bad to good (Chen et al., 2007). LMX isthus considered a relational approach to leadership (Graen& Uhl-Bien, 1995). According to LMX theory, a supervi-sor’s relationship quality differs across employees. Thesupervisor’s in-group members enjoy a higher quality rela-tionship than the members of the out-group (Graen, Liden,& Hoel, 1982; Graen & Uhl-Bien, 1995). According tosocial exchange theory, the quality of a leader-memberexchange relationship is high, if employees perceive theirimmediate supervising manager as acting in their best inter-est, caring, supportive, loyal, and reliable (Walumbwaet al., 2011). More precisely, Liden and Maslyn (1998,p. 50) name four conditions for a high-quality LMX rela-tionship: contribution (amount of activity toward themutual goals), affect (mutual liking), loyalty (consistentfaithfulness), and professional respect (perception of repu-tation). Furthermore, trust appears to be another essentialcomponent of LMX (G�mez & Rosen, 2001).

Research on LMX has shown that if the quality of theirleader-member exchange is high, employees receive moretime and work-related information and higher levels ofemotional support and respect from their supervisors(Sparrowe & Liden, 1997). In return, employees reciprocatetheir supervisor’s positive behavioral contributions throughenhanced effort, engagement, and positive attitudes towardwork (Chen, Lam, & Zhong, 2007; DeConinck, 2011).Several studies have also shown that high leader-memberexchange relationships are associated with innovativebehaviors (Basu & Green, 1997; Sanders et al., 2010; Scott& Bruce, 1994) and higher amounts of creative perfor-mance by employees (Tierney, Farmer, & Graen, 1999).It was found that employees with high-quality relationshipsspend more time on nonroutine tasks, whereas memberswith lower quality relationships spend more time on routinetasks (Graen & Cashman, 1975). Also, they are lessrestricted and have a greater degree of freedom (Vecchio& Gobdel, 1984). Non-routine tasks can help to stimulatethe creation of new ideas, because employees are con-fronted with new challenges and perspectives. Employeeswith more freedom have more opportunities to test andimplement their ideas. As employees generalize their per-ception of their supervisor to the organization at large(Scott & Bruce, 1994), the showing of innovative behaviorcould, furthermore, be employees’ reciprocation for a per-ceived positive relationship with their supervisors. Becauseemployees experience a high relationship quality and thesupervisors as agents of the organizations are seen as inter-ested in innovations, the employees respond to the qualityof the relationship with higher levels of innovative work-place behavior. Innovative behavior could be further allevi-ated by other factors that are associated with LMX: time,information, and emotional support (Sparrowe & Liden,1997). More time spent with supervisors spurs employees’innovative behaviors by providing more opportunities totalk about new ideas, by providing feedback, and by prof-iting from the expertise of the supervisor. Receiving morework-related information and more emotional support canfoster innovative behavior, because more information can

C. C. Schermuly et al.: Leader-Member Exchange and Innovative Behavior 133

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stimulate new ideas and more support can promote theimplementation of these ideas, especially in risky situations.

Thus, in replication of previous findings, we predict:

Hypothesis 1: A high leader-member exchange qual-ity is positively related to subsequent innovativebehaviors.

The Mediating Role of PsychologicalEmpowerment

Supervisors have a large impact on the feelings and cogni-tions of their subordinates (Dienesch & Liden, 1986). Theyshape their subordinates’ perceptions of their work role andexperiences in the workplace (Liden, Sparrow, & Wayne,1997). We thus argue in the following that positive lea-der-member exchanges bring about positive effects oninnovative behavior, because they lead to higher levels ofpsychological empowerment. For this reason, we elaboratehere the theoretical background of psychological empower-ment and subsequently explain how psychological empow-erment acts as a mediator between LMX and innovativework behavior.

There are two different perspectives on psychologicalempowerment, structural and psychological (Spreitzer,2008). The structural perspective reflects an environment-centric perspective on empowerment. In this perspective,empowerment is seen as a set of environmental structures,practices, and policies that decentralize power and authoritywithin the organization, which in turn enables employees totake independent and adequate actions even at lower levelsof the organization (Seibert, Wang, & Courtright, 2011).From the psychological perspective, these structural factorsare seen as contextual antecedents of psychologicalempowerment rather than as empowerment itself (Seibert,Silver, & Randolph, 2004; Spreitzer, 2008). Thereby, thefocus of the psychological perspective is on employee per-ception. Specifically, psychological empowerment refers toa cognitive orientation toward an employee’s own workrole (Spreitzer, 1995; Thomas & Velthouse, 1990). It isconceptualized as a set of four dimensions that, takentogether, operationalize the empowerment construct: mean-ing, competence, self-determination, and impact (Spreitzer,1995). Meaning refers to the fit between the characteristicsof the employees’ work role and the employees’ beliefs andvalues (Spreitzer, 1995). Competence involves self-efficacyabout one’s own capabilities to perform well in the work-place (Spreitzer, 1995, 1996). Self-determination refers tothe perceived sense of choice to initiate and regulate one’sown actions in the workplace (Spreitzer, 1995, 2008).Impact reflects the degree to which an employee can influ-ence strategic, administrative, or operative work outcomes(Spreitzer, 1995, 1996). These four dimensions are distinctbut contribute to a uniform perception of empowerment(Seibert et al., 2011; Spreitzer, 1995).

Several findings corroborate the potential relationshipbetween leader-member exchange and psychologicalempowerment (Aryee & Chen, 2006; Liden et al., 2000).

A meta-analytic review (Seibert et al., 2011) shows thatpositive forms of leadership are an important contextualantecedent of psychological empowerment. If supervisorsare loyal and friendly and show support and professionalrespect for the capabilities of their employees, the employ-ee’s feelings of competence should be enhanced. For exam-ple, there is a positive relationship between occupationalself-efficacy, which is conceptually similar to the compe-tence facet of psychological empowerment, and LMX(Schyns, Paul, Mohr, & Blank, 2005).

Balance theory (Heider, 1946) can be used to explainhow LMX is associated with employees’ perception ofjob meaningfulness. As mentioned above, supervisorsshould have a positive attitude to innovation, because it isnecessary for the organization’s (and therefore their own)success. If a supervisor has a positive attitude toward aninnovative task and toward the employee, the situationbecomes balanced if the employee has positive/meaningfulcognitions toward the task as well. Further, employees inhigh LMX-relationships enjoy more challenging work tasksand more access to information, which can also positivelyinfluence their perceptions of job meaningfulness (Aryee& Chen, 2006). This is in accordance with the positive cor-relation between LMX and the empowerment variable ofmeaning found by Liden et al. (2000).

A positive relationship between LMX and employees’perception of self-determination and impact also appearslikely. If the relationship between supervisor and employeeis trustful, the supervisor should be more inclined to sharehis or her competencies and decision-making power withthe employee. The supervisor should also share more infor-mation and provide the employees with more challengingassignments (Dulebohn et al., 2012). At the same time,supervisors with a positive relationship to their employeesshould exert lower levels of micromanagement. On the partof the employees, this reception of more structural empow-erment could subsequently lead to more psychologicalempowerment and especially foster the experience ofimpact and self-determination. Accordingly, a positive rela-tionship between LMX and perceived influence over deci-sions (Scandura, Graen, & Novak, 1986) and a strongpositive relationship between LMX and delegation wasfound (Yukl & Fu, 1999). Furthermore, Liden et al. foundpositive correlations between LMX and the empowermentvariables of self-determination and impact. In summary,prior findings suggest that LMX is positively associatedwith psychological empowerment. In the following, weexplain why psychological empowerment is in turn relatedto more innovative work behavior.

The importance of psychological empowerment forwork outcomes is reflected in recent meta-analytic findings(Seibert et al., 2011) that show that empowerment is animportant antecedent for important work-related outcomessuch as job satisfaction, organizational commitment, strain,turnover intensions, organizational citizenship behavior,task performance, and workplace innovation. Regardingworkplace innovation, empowerment enhances ‘‘the abilityof employees to implement their ideas and suggestions forchange, resulting in greater innovation at work’’ (Seibertet al., 2011, p. 986). These findings already indicate a

134 C. C. Schermuly et al.: Leader-Member Exchange and Innovative Behavior

Journal of Personnel Psychology 2013; Vol. 12(3):132–142 � 2013 Hogrefe Publishing

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relationship between empowerment and innovative work-place behavior, but further arguments speak to this connec-tion: Self-determination and impact can not only help toimplement new ideas but also help to create ideas in the firstplace, because self-determined and impactful employeesexperience the freedom to test new ideas. Further, employeeswith high competence beliefs are more creative (Zhou, 1998)and could have more confidence and success in finding sup-port for their ideas and implementing them persistently.Employees experiencing more meaning could show moreinnovative behavior, because their intrinsic motivation helpsthem to overcome motivational difficulties in the innovationprocess. Further, a meaningful commitment to their ownwork role should increase employees’ attention to processesor products in need of improvement. Accordingly, an associ-ation between meaning and innovative behavior – partiallymediated by job involvement – has been demonstrated inprior research (Singh & Sakar, 2012). Summarizing the argu-ments presented above, we propose:

Hypothesis 2: Psychological empowerment partiallymediates the relationship between LMX and subse-quent innovative behavior.

The Temporal Stability of InnovativeBehavior

So far, the hypotheses have assumed a temporal associationbetween LMX, empowerment, and innovative behavior. Ifinnovative behavior is to be predicted with other variables,its potential temporal stability should be considered. In thevariance-analytical approach that underlies most of hypoth-esis testing in work and organizational psychology (Roe,Gockel, & Meyer, 2012), one variable is assumed to predictanother, if the two share between-participant variance. Inthis particular case, we assume that LMX and empower-ment at a given time (i.e., time 1) share variance with inno-vative behavior measured at a subsequent time (i.e., at time2). If, however, LMX and empowerment also share vari-ance with innovative behavior at time 1, which is likelygiven the previous hypotheses, their influence on innova-tive behavior at time 2 would be overstated, if innovativebehavior was not controlled at time 1. If innovative behav-ior at time 1 is not taken into account, shared variance in(stable) innovative behavior between the measurement timepoints would be erroneously attributed to shared variancebetween the variables and subsequent measures of innova-tive behavior. In other words, a failure to control for inno-vative behavior at time 1 would likely overstate theinfluence of LMX and empowerment at time 1 on innova-tive behavior at time 2. Because LMX and empowerment attime 1 also share variance with innovative behavior at time1, which will in turn share variance with innovative behav-ior at time 2, a certain temporal stability has to be assumed.We therefore postulate:

Hypothesis 3: The mediation of LMX on subsequentinnovative behavior via psychological empowerment

holds under control of previous levels of innovativebehavior.

Method

We tested the hypotheses with a two-wave time-laggedquestionnaire survey with a sample from the general work-ing population in Germany. Using a structural equationmodel, we tested the direct effect of LMX (t1) on innova-tive work behavior (t2) (Hypothesis 1) as well as the indi-rect effect of LMX (t1) via psychological empowerment(t1) on innovative work behavior (t2) (Hypothesis 2) underthe control of innovative work behavior (t1) (Hypothesis 3).

Sample

The online questionnaire was sent to a diverse sample of381 German employees who work under the leadershipof a supervisor. The participants came from different orga-nizations. Participants were contacted through the networkof the university where the study was conducted. Of these,292 participants responded, resulting in a response rate of76.6% for time 1 (t1). Six weeks later, a shorter versionof the survey was sent to these 292 participants, of which240 responded, resulting in a response rate of 82.2% fortime 2 (t2). We subsequently had to remove 15 incompletesurveys. Thus, the final data set consisted of 225 partici-pants who had filled in the questionnaire at t1 and t2, repre-senting an overall return rate of 59%.

The employees in the final sample worked in a varietyof different branches, including advisory services and con-sulting (22.2%), government and public services (19.6%),manufacturing (13.3%), public health care (9.3%), tradebusiness and commerce (8.4%), science (5.3%), bankingand finance (4.0%), media (2.7%), and others (15.2%).The average age of the employees was 38.34 years(SD = 12.44), and the reported average age of supervisorswas 47.17 years (SD = 9.45); 50.7% of the participantswere female, and 76% of the rated supervisors were male.Participating employees had worked with their individualsupervisors on average for 5.25 years (SD = 4.51). Morethan 75% of the employees had personal contact with theirdirect supervisors several times per week or even more fre-quently. Among employees, 85.3% had at least a univer-sity-entrance qualification (German Abitur) or a higherlevel of education. Overall, employees had 11.33 years ofgeneral working experience in their current profession onaverage (SD = 11.13). Data were collected during 10 con-secutive days at each of two waves of acquisition. Table 1provides means, standard deviations, and bivariate correla-tions of measurement variables.

Measures

We measured all constructs with existing validated scales.LMX was measured at t1, psychological empowerment at



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t1, and innovative work behavior at both measurement timepoints.

Leader-Member Exchange (LMX)

We measured LMX using Graen and Uhl-Bien’s scale(1995) in a German translation by Schyns (2002) withseven items such as ‘‘My supervisor would be personallyinclined to use his or her power to help me solve problemsin my work’’ or ‘‘How well does your leader understandyour problems and needs?’’ The scale has different verbalanchors, and Cronbach’s alpha was .89.

Innovative Work Behavior

We employed a five-item scale (De Jong & Den Hartog,2008) for measuring innovative behavior at t1 and t2. Thescale uses never-to-always responses for items such as‘‘How often do you make suggestions to improve currentproducts or services?’’ and ‘‘How often do you produceideas to improve work practices?’’ Cronbach’s alpha for thisscale was .82 at t1 and .80 at t2.

Psychological Empowerment

We used Spreitzer’s (1995) 12-item scale for measuringpsychological empowerment at t1. It contains three itemsfor each of the four dimensions of empowerment, that is,meaning (e.g., ‘‘The work I do is meaningful to me,’’a = .86), competence (e.g., ‘‘I am confident about my abil-ity to do my job,’’ a = .84), self-determination (e.g., ‘‘I candecide on my own how to go about doing my work,’’a = .86), and impact (e.g., ‘‘I have a great deal of controlover what happens at my department,’’ a = .86). A scorefor overall empowerment was formed by averaging thescores across all 12 items (a = .89).

Control Variables

The quality of the leader-member relationship can be influ-enced by other contextual and structural factors that weattempted to control for. First, research on LMX in the con-text of relational demography (e.g., Liden, Wayne, &Stilwell, 1993; Turban & Jones, 1988) shows that demo-graphic similarity between leader and follower can havean effect on the quality of their relationship. We thereforeincluded a variable denoting whether leader and followerhad the same gender (coded 0 = no, 1 = yes). We alsoincluded a variable denoting the age diversity in the lea-der-member dyad, operationalized with the standard devia-tion of age in the dyad (Harrsion & Klein, 2007). As theduration of the leader-member relationship also plays a rolein its quality (Turban, Dougherty, & Lee, 2002), we mea-sured it in months and included it in the analysis. Finally,to account for structural features of the work contexts, wecontrolled for company size and for number of subordinatesT

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of the given leader (i.e., for the span of control), becausethere is evidence that span of control is negatively relatedto LMX (e.g., Schriesheim, Castro, & Yammarino, 2000;Schyns, Maslyn, & van Veldhoven, 2012). All five controlvariables were inserted as predictors of the focal predictionvariable, LMX, and of the outcome variable, innovativebehavior.

Although we specifically asked participants to estimatethe number of members (including themselves) who areunder direct supervision of the focal leader, 19 participantsindicated a span of 100 or more members. We thus had tosuspect that these participants did not understand the itemcorrectly. As we could not be certain whether they under-stood the remaining items correctly, we ran the analyseson a sample that excluded these 19 participants and on asample that included them. Overall patterns (i.e., levels ofsignificance of coefficients) were identical for both sam-ples. In the following, we report the results for the samplethat excluded the 19 participants.

Results

Analysis Strategy

We tested the hypotheses using a structural equation model.Especially for testing mediations, structural equation mod-els are superior to simple regression analyses (Iacobucci,2008). Further, in the context of psychological empower-ment, structural equation models allow us to model empow-erment as a latent variable and to use the scale means of itssub-facets meaning, competence, self-determination, andimpact as its measurement indicators. In this way, the load-ings of the four indicators on the latent empowerment var-iable capture the gestalt (Spreitzer, 2008) of empowermentin the context of our sample. In addition, the use of a struc-tural equation model allows us to control for all correlationsbetween predictors simultaneously and to test the mediationunder control of the other main effects. It also allows us tobootstrap the significance of the indirect effect as recom-mended by Preacher and Hayes (2008).

Structural Equation Model Specification

We specified the model according to Hypotheses 1–3 (seeFigure 1) so that it contained a direct effect of LMX at t1on innovative behavior at t2, an indirect effect via psycholog-ical empowerment at t1, and a direct effect of innovativebehavior at t1 on innovative behavior at t2. Innovative behav-ior and empowerment were allowed to correlate freely, aswere LMX at t1 and innovative behavior at t1. The latent vari-ables for innovative behavior at both measurement timepoints and LMX at t1 were measured through their respectivequestionnaire items (five items for innovative behavior andseven items for LMX). The latent variable for empowermentat t1 was measured by the scale means of the four sub-facetsof empowerment (see Schermuly, Schermuly, & Meyer,2011, for an identical measurement model of psychologicalempowerment).

Further, we added six error covariances to the modelbased on a-priori theoretic considerations: Kraiger, Seibert,and Liden (1999) reported that the two facets of empower-ment, self-determination and impact, are more closelyrelated than the others, because ‘‘. . . self-determinationmust be present for impact to occur’’ (p. 140). Kraigeret al. thus specified an according covariance in their model,as did Schermuly et al. (2011). We therefore also allowedthe errors between self-determination and impact to covaryfreely. We further allowed free error covariations betweenthe five identical measurement items of the repeated mea-sure for innovative behavior, that is, the measurement errorof the first item measuring innovative behavior at t1 wasallowed to covary with the residual of the same item att2, as is common practice in structural equation modelsemploying repeated measures (Maruyama, 1998). Finally,we specified the indirect effect of LMX via empowermentat t1 on innovative behavior at t2 by defining an accordingparameter as the product of the two path coefficients. Ontop of that, we specified direct relationships from the fivecontrol variables (leader-member gender similarity, lea-der-member age diversity, leader-member relationshipduration, company size, and the leader’s estimated numberof subordinates) to the focal independent variable, LMX,and to the outcome variable, innovative behavior at t2.

We used the latent variable analysis package (lavaan)developed by Rosseel (2012) of the open-source statisticalenvironment R (R Development Core Team, 2012) formaximum likelihood (ML)-based parameter estimationand employed bootstrapping with 2000 resamples for esti-mating the standard errors of all model parameters, includ-ing the indirect effect of LMX via empowerment at t1 oninnovative behavior at t2.

Model and Hypotheses Testing

According to the criteria proposed by Schermelleh-Engel,Moosbrugger, and M�ller (2003), the model exhibited afit that was between good and acceptable: v2(272) =442.53, p = .001, CFI = .92, TLI = .91, RMSEA = .056,90% CI = .046; .065; SRMR = .077. The model accountedfor 77% of the variance of innovative behavior at t2 and of23% of the variance of empowerment at t1.

Hypothesis 1 predicted a positive relationship betweenLMX at t1 and innovative behavior at t2. As Figure 1 shows,this path was not significant (b = �.13, p > .05). Hypothe-sis 1 was thus refuted by the data. Note, however, that thescale means of LMX at t1 and innovative behavior at t2exhibit a significant positive bivariate correlation (seeTable 1). The fact that this initial positive bivariate relation-ship turns into a negative one once the mediation path viaempowerment is incorporated into the model is indicativeof a suppression effect.

Hypothesis 2 predicted that the effect of LMX at t1 oninnovative behavior at t2 is mediated by empowerment at t1.Under control of the direct association between LMX at t1on innovative behavior at t2 and innovative behavior at t1on innovative behavior at t2, the path from LMX at t1 toempowerment at t1 (b = .50, p < .001) and the path



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between empowerment at t1 and innovative behavior at t2(b = .29, p < .01) were both significant. To test the signif-icance of the indirect effect, we bootstrapped the 95% con-fidence interval of the product of both paths (Preacher andHayes, 2008). As its 95% confidence interval excluded 0,CI = .09; .46, the indirect effect was deemed significantand the hypothesis was supported by the data. It is impor-tant to note that this relationship was significant underthe presence of a relationship between innovative behaviorat t1 and innovative behavior at t2 (Hypothesis 3).

The loadings of the four empowerment facets on theempowerment factor illustrate how much of their variancecontributes to the higher-order construct empowerment(Schermuly et al., 2011). Thus, in the context of our study,empowerment was reflected the most strongly in feelings ofimpact, followed by meaning and self-determination, andfeelings of competence were the least indicative ofempowerment.

With regard to the relationships between the five controlvariables (leader-member gender similarity, leader-memberage diversity, leader-member relationship duration, com-pany size, and the leader’s estimated number of

subordinates), and LMX and innovative behavior at t2, onlyone relationship turned out to be significant (all otherps > .10): Gender similarity between leader and subordi-nate was associated with higher levels of reported LMX,b = .16, p < .05.

Discussion

Apart from a direct effect of LMX on innovation behavior,we postulated an indirect effect of employees’ perceivedLMX quality on employees’ subsequent innovation behav-ior via psychological empowerment. As we elicited innova-tion behavior at two measurement time points, we wereable to test the proposed relationship while controlling forthe temporal stability of innovation behavior.

In rejection of the first hypothesis, our structural equa-tion model showed that LMX had no direct effect on sub-sequent innovative behaviors if the postulated indirecteffect was taken into account simultaneously. In otherwords, the effect of LMX on subsequent innovative behav-

Figure 1. Structural equation model of theproposed hypotheses. LMX = leader-memberexchange, EMP = psychological empower-ment, IN1 = innovative behavior at t1,IN2 = innovative behavior at t2, ME = mean-ing, CO = competence, SE = self-determina-tion, IM = impact. Unless denoted with ns, alldepicted standardized path coefficients aresignificant at p < .05, as determined by the95% confidence intervals of the non-paramet-ric bootstrapping solution. The error covari-ances between the identical measurementitems of IN1 and IN2 are omitted. The modelalso included five control variables (leader-member gender similarity, leader-member agediversity, leader-member relationship dura-tion, company size, and the leader’s estimatednumber of subordinates) that were specified aspredicting LMX and IN2. As only one of theseten relationships turned out to be significant(b = .16, p < .05, between leader-membergender similarity and LMX), they are omittedin the figure.



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iors was fully mediated by psychological empowerment.Better exchange relationships with the supervisor were pos-itively associated with psychological empowerment, whichled to more subsequent innovative behavior. This relation-ship was significant even when controlling for the stabilityof innovative behavior over time. We believe that this time-lagged approach is a strength of the study and adheres tothe calls of different researchers for time-lagged designsin empowerment (e.g., Laschinger, Purdy, & Almost2007; Singh & Sakar, 2012) and LMX research (Dulebohnet al., 2012; Yukl, 2002).

Theoretical Implications

Our findings contribute to the leadership literature by show-ing one of the processes through which the supervisor-sub-ordinate relationship leads to increased innovativebehavior. In line with other studies (e.g., Basu & Green,1997; Sanders et al., 2010; Scott & Bruce, 1994), we canconfirm that leadership is a critical factor in the innovativebehavior of employees and that supervisors play an impor-tant role in the innovation process. Our results further showthat the basal relationship between supervisor andemployee is crucial. As other studies have already shown,LMX is positively associated with employees’ innovativework behavior. But it is very important to note again thatwe found no direct effect of LMX on innovative behaviorwhen the indirect effect via psychological empowermentwas considered. Thus, a high quality in the exchangebetween leaders and team members has a positive effecton innovative behavior only because it increases employ-ees’ psychological empowerment. Our study thus elucidatesone of the mechanisms of how LMX leads to more subse-quent innovative behavior. Our results are also importantfor other domains of leadership research. For example,LMX is strongly related to transformational and contingentreward leadership (Dulebohn et al., 2012; Howell & Hall-Merenda, 1999). At the same time, there is a link betweentransformational leadership and innovation (e.g., Howell &Higgins, 1990). Our results raise the question as to whetherpsychological empowerment is also the critical mediatingfactor in this relationship. Further, it should be tested iftransformational leadership has an incremental meaningfor innovative work behavior when added to the model ofthis study.

Our findings also contribute to research on psychologi-cal empowerment: Spreitzer (2008) stated that it is impor-tant to further elucidate how the four dimensions ofpsychological empowerment create the gestalt of empower-ment. In our study, the latent variable representing psycho-logical empowerment was the most strongly reflected infeelings of impact, followed by meaning and self-determi-nation. Feelings of competence were the least indicative ofempowerment in our study. This is surprising, because inthe study by Schermuly et al. (2011), competence had thehighest loading. This can be due to the different researchcontext. Another explanation is offered by the mean andthe standard deviation of the competence dimension (see

Table 1): In comparison to the other facets of empower-ment, its mean is very high and its standard deviation isvery low, which indicates a ceiling effect with the accom-panying low levels of variance.

Practical Implications

In 2010, companies in Germany, for example, spent121.3 billion euros on innovation (Rammer et al., 2012).Of these costs, the proportion of investments in leadershipprograms is most likely very low. Investments in leadershiptraining programs fostering relation- and exchange-orientedleadership styles could be very profitable, however: As ourresults show that LMX has a significant indirect effect onthe employees’ innovativeness, supervisors should knowthat their relationships with their employees can haveimportant consequences for their organizations. Further,meta-analytic research (Dulebohn et al., 2012, p. 24) hasshown that ‘‘LMX is more strongly influenced by leadersrather than followers and that LMX quality is significantlyaffected by leaders.’’ Thus, supervisors should try todevelop and maintain stable positive relationships with asmany employees as possible. To reach this goal, supervi-sors do not need to treat all employees the same, but everyemployee should feel respected and not like a second-classcitizen (Yukl, 2002).

Leadership training programs could therefore highlightways to improve the relationship quality between leadersand team members. For example, supervisors should learnhow to treat employees with respect, give sufficient feed-back, and identify the needs and development potential ofan employee. However, supervisors should know that thepositive relationship has no direct effect on the innovationbehavior of their employees. They should realize that psy-chological empowerment is the key factor and thus addi-tionally remove structural hindrances that can threatentheir employees’ psychological empowerment. At the sametime, they should support structural conditions that canfoster psychological empowerment, such as challengingwork tasks, high task and skill variety, and other job enrich-ment initiatives.

Limitations and Outlook

The current research has some limitations. All measureswere self-reported, and the relationships could be inflatedby common method bias. However, the collection of morethan one data point attenuates this effect (Podasakoff &Organ, 1986). Nevertheless, a third data point would havebeen helpful to confirm the results. Future research shouldthus test how LMX at t1 influences psychological empow-erment at t2 and how innovative work behavior at t3 is influ-enced by this relationship. Future research should alsoconsider LMX and empowerment at several points in timeto identify the stability of these constructs within theresearch design. For example, with respect to different timeintervals Wakabayashi, Graen, Graen, and Graen (1988)



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report a rather medium stability of .60 (median) for LMX.Additionally, the time interval between our measurementpoints was quite short. More variance between the innova-tive behaviors may be possible when examined at longerintervals.

In our study, we collected only follower-rated LMX (forstudies collecting both perspectives see, for example,Schyns & Wolfram, 2008). Future research should collectdata from both sources and analyze whether supervisorLMX or the difference between supervisor and leaderLMX has different effects on the postulated relationships.Moreover, it could be interesting to broaden the social con-text of our study. We only incorporated hierarchical dyadicrelationships in organizations. Future studies could considerthe exchange processes between lateral peers (colleagues)and analyze their additional effects on psychologicalempowerment and innovative behavior. In sum, we believethat these findings can help organizations to unlock the fullinnovative potential of employees with suitable manage-ment practices.

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Carsten Christoph Schermuly

SRH University BerlinBusiness PsychologyErnst-Reuter-Platz 10Berlin 10587GermanyTel. +49 30 922-53556Fax +49 30 922-53555E-mail [email protected]



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Leader-Member Exchange and Innovative Behavior

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