Innovation and organizational development: the role of organizational leadership

The purpose of this paper is to assess the moderation effect of organizational leadership on the relationship between service firm’s innovation strategy and organizational development. The study argues that in Ghana where power distance is high, organizational leadership provides the needed impetus for strategies such as innovation to achieve enhanced firm performance.

Data were collected from different service firms across Ghana for this study. A confirmatory factor analysis was used for construct reliability and validity checks. Robust regression estimations were then performed to test the hypothesized relationships.

The results show that both product innovation as strategy and organizational leadership are positively related to organizational development (i.e. financial and non-financial performance). It was also found that organizational leadership does not only serve as a predictor of strategy formulation but provides the necessary strategic fit between a firm’s strategy and business environment to achieve organizational development.

This study has shown that in high-power distance cultures, firms that are able to align their leadership orientation with their institutional environment are able to create a better fit between their strategic orientation and business environment in order to enhance organizational development.