The Relationships Among Leadership Styles,

Entrepreneurial Orientation,
and Business Performance
Chung-Wen Yang
This study aims to contribute to the knowledge of leadership styles
and entrepreneurial orientation at small and medium enterprises as
well as their eects on business performance. This study examines how
leadership style can aect the development and implementation of en-
trepreneurial orientation in small and medium enterprises in Taiwan.
It is also designed to examine the eects of leadership styles and en-
trepreneurial orientation on business performance. Signicant conclu-
sions from this study are that dierent leadership styles may aect
business performance; that transformational leadership is signicantly
more correlated to the business performance than is transactional lead-
ership and passive-avoidant leadership; that entrepreneurial orienta-
tion is positively related to performance; and that transformational
leadership with higher entrepreneurial orientation can contribute to
higher business performance.
Key Words: leadership styles, entrepreneurial orientation,
business performance
)vi Classication: xIo
Introduction
An eective leader inuences followers in a desired manner to achieve
desired goals. Dierent leadership styles may aect organizational ef-
fectiveness or performance (Nahavandi :oo:); Entrepreneurs have be-
come the heroes of economic development and contemporary enter-
prises (Sathe :oo,). Entrepreneurial orientation is a commonly used
measure in the literature (Morris and Kuratko :oo:). This concept is the
presence of organizational-level entrepreneurship (Wiklund and Shep-
herd :oo,).
Some researchers have tried to combine the two concepts into en-
trepreneurial leadership to explore both leadership and entrepreneur-
ship behavior (Gupta et al. :oo; Tarabishy et al. :oo,). They have tried
Dr Chung-Wen Yang is an Assistant Professor at the Department
of Business Administration, Cheng Shiu University, Taiwan.
Managing Global Transitions o (,): :,,:,,
:,8 Chung-Wen Yang
to combine entrepreneurship with leadership into a new form of lead-
ership called entrepreneurial leadership. This new leadership model has
been used to showboth entrepreneurship and leadership behavior (Tara-
bishy et al. :oo,). In the dynamic, complex, and uncertain competitive
environment, a type of entrepreneurial leader who is distinct from the
behavioral form of leaders is needed (Cohen :oo).
This study was designed to examine how leadership styles can aect
the development and implementation of entrepreneurial orientation in
Small and medium enterprises (sxvs) in Taiwan. sxvs exert a strong
inuence on the economies of Taiwan. It also examines the eects of en-
trepreneurial orientation and leadership styles on business performance.
The ndings could contribute new knowledge in the elds of leadership
and entrepreneurship, especially entrepreneurial leadership
Literture Reviewand Hypothesis Development
iv.uvvsuiv s1sivs .xu nusixvss vvvvovx.xcv
Leadership style is the relatively consistent pattern of behavior that char-
acterizes a leader (DuBrin :ooI, I:I). Todays organizations need ef-
fective leaders who understand the complexities of the rapidly chang-
ing global environment. Dierent leadership styles may aect organiza-
tional eectiveness or performance (Nahavandi :oo:). This study focuses
on three dierent leadership styles: transformational leadership, trans-
actional leadership, and passive-avoidant leadership measured through
the Multifactor Leadership Questionnaire (xiq; Bass and Avolio I,,,).
The concepts of transformational and transactional leadership have been
considerable interest in the leadership literature over the past several
years (Avolio and Bass :oo).
Transformational and transactional leadership are not viewed as op-
posing leadership styles. Leaders can be both transformational and trans-
actional (Lowe et al. I,,o). In general, transformational leadership is
more eective than transactional leadership (Gardner and Stough :oo:).
Some researchers have found data supporting the conclusion that trans-
formational leadership is superior to transactional leadership (Bass et al.
:oo,; Dvir et al. :oo:). Transformational leadership is more strongly cor-
related than transactional leadership with higher productivity and per-
formance (Lowe et al. I,,o), higher level of organizational culture (Block
:oo,), and higher level of emotional intelligence (Gardner and Stough
:oo:). Therefore, the researcher hypothesizes:
Managing Global Transitions
The Relationships Among Leadership Styles . . . :,,
uI Can the top-level managers leadership styles (transformational lead-
ership, transactional leadership, and passive-avoidant leadership)
predict higher business performance?
vx1vvvvvxvuvi.i ovivx1.1iox .xu nusixvss
vvvvovx.xcv
Entrepreneurial orientation is a commonly used measure in entreprene-
urship literature. Entrepreneurial orientation is the presence of organiz-
ational-level entrepreneurship (Wiklund and Shepherd :oo,). Several
researchers have agreed that entrepreneurial orientation could be ex-
plained by innovation, proactiveness, and risk taking (Wiklund I,,,).
A large proportion of entrepreneurship studies assume entrepreneurial
orientation to be a unitary concept (Covin and Slevin I,8,; Dess et al.
I,,,; Wiklund I,,,). The notion of a single factor entrepreneurial orien-
tation concept also has been examined in some studies. Because the three
dimensions of entrepreneurial orientation can vary independently of one
another (Krauss et al. :oo,; Kreiser et al. :oo:; Lumpkin and Dess I,,o;
Lyon et al. :ooo; Venkatraman I,8,), this study included a comparison of
the dimensions of entrepreneurial orientation and total entrepreneurial
orientation with other variables.
The assumption of entrepreneurial orientation is that entrepreneurial
businesses dier from other types of businesses. Successful corporate
entrepreneurship must have an entrepreneurial orientation (Covin and
Slevin I,8,; Wiklund I,,,; Wiklund and Shepherd :oo,). This study
compared three dimensions of the entrepreneurial orientation and the
total entrepreneurial orientation with business performance. Hence, the
researcher hypothesizes:
u: Can the entrepreneurial orientation (innovation, proactiveness, and
risk-taking) of sxvs in Taiwan predict the business performance?
iv.uvvsuiv s1sivs .xu vx1vvvvvxvuvi.i ovivx1.1iox
The study tried to combine these two concepts: leadership and en-
trepreneurship. The aim was to examine how leadership can aect
the development and implementation of entrepreneurial orientation in
sxvs in Taiwan. Entrepreneurial leadership is an eective and needed
leadership style (Cohen :oo; Fernald, Solomon, and Tarabishy :oo,;
Tarabishy et al. :oo,). Entrepreneurial leadership was coined by those
who realized that a change in leadership style was necessary. Entreprene-
urial leaders play a critical role in the success of new business ven-
Volume Number Fall
:oo Chung-Wen Yang
tures. Wah (:oo) suggested that future leadership research use more
quantitative approaches to survey Chinese entrepreneurial leaders. En-
trepreneurial leadership is understandable because of the uncharted and
unprecedented territory that lies ahead for businesses in todays dy-
namic markets (Tarabishy et al. :oo,). Thornberry (:ooo) stated that
entrepreneurial leadership is more like transformational leadership than
it is like transactional leadership, yet it diers in some fundamental ways
(p. :). The study also examines the eects of entrepreneurial orienta-
tion and leadership styles on business performance. Given this view the
researcher hypothesizes:
u, Can the top-level managers leadership styles (transformational lead-
ership, transactional leadership, and passive-avoidant leadership)
and entrepreneurial orientation of sxvs (innovation, proactiveness,
and risk-taking) predict higher business performance?
Methodology
vvsv.vcu uvsicx
This study used a quantitative research method to examine the relation-
ship among leadership styles, the entrepreneurial orientation, and busi-
ness performance of sxvs in Taiwan; a sample of top-level managers
from sxvs in Taiwan was used. sxvs represent a major part of most
modern economies. According to the White Paper on Small and Medium
Enterprises in Taiwan (Ministry of Economic Aairs :ooo), sxvs ac-
count for ,,.8% of all businesses in Taiwan. This study focused on sxvs
to control for organizational size. The population for the study was based
on the cu-vox version of the Directories of Corporations (China
Credit Information Service :ooo). The ccis is the leading business in-
formation agency in Taiwan, and its :ooo directories provide basic back-
ground information for :o,,o: enterprises in Taiwan. Surveys were ad-
dressed to top-level managers, who were identied as the cvos, owners,
founders, managers, presidents, or heads of sxvs. Top-level managers
were targeted because they are the most informed about the business
overall operational activities.
ixs1vuxvx1.1iox
Three survey instruments were used. The rst was the Multifactor Lead-
ership Questionnaire (xiq), which was used to measure top-level man-
agers leadership style (transformational, transactional, and passive-
Managing Global Transitions
The Relationships Among Leadership Styles . . . :oI
avoidant). The xiq is one of the most widely used instruments to mea-
sure transformational and transactional leadership behaviors (Avolio
and Bass :oo). The xiq Leader ,x short form consists of , items that
measure aspects of transformational leadership (attributed charisma,
idealized inuence, inspirational motivation, individualized stimulation,
and intellectual consideration), transactional leadership (contingent re-
ward and management-by-exception: active), and passive-avoidant lead-
ership (management-by-exception: passive and laisser-faire leadership)
on a ,-point scale.
The second assessment tool was the Entrepreneurial Orientation
Questionnaire (voq), the most widely utilized instrument for measur-
ing entrepreneurial orientation. It was developed by Covin and Slevin
(I,8,), based on the earlier study of Khandwalla (I,,o/I,,,) and Miller
and Friesen (I,8:). The voq, which contains nine items and uses a ,-
point scale, measures three dimensions of entrepreneurial orientation
(innovation, proactiveness, and risk-taking). It is used to assess three
components of entrepreneurial orientation, with three items measuring
innovation, three items measuring proactiveness, and three items mea-
suring risk-taking.
The third assessment tool was a business performance scale devel-
oped by the researcher according to the suggestions of previous stud-
ies. Business performance is a multidimensional construct (Wiklund and
Shepherd :oo,). Previous studies have often used self-reports to gather
business performance data, and these results have proven to be reliable
(Knight :ooo). Wiklund (I,,,) suggested that performance measures
should include both growth and nancial performance. Furthermore,
public information is unreliable because most sxvs are privately held
and have no legal obligation to disclose information. Respondents may
be reluctant to provide actual nancial data (Tse et al. :oo). Hence, this
study used subjective, self-reported measures of business performance
including growth and nancial performance. The business performance
scale was developed by the research according to suggestions of previ-
ous studies. The scale contains eight items and uses a ,-point Likert-
type scale. Four indicators of growth were utilized: sales growth, employ-
ment growth, sales growth compared to competitors, and market share
growth compared to competitors. The three nancial performance indi-
cators were gross prot, return on assets (vo.), and return on invest-
ment (voi). In addition, the researcher used an indicator of overall per-
formance/success to business performance (Lumpkin and Dess I,,o).
Volume Number Fall
:o: Chung-Wen Yang
s.xviixc
A sample should be large enough to provide a credible result. Gay and
Airasian (:oo,) said that, when the population size is about ,,ooo or
more, a sample size of oo should be adequate (p. II,). Furthermore,
because the similar studies in Taiwan reported a low response rate for
mailed surveys, the researcher randomly selected ,,ooo top-level man-
agers of sxvs in Taiwan through the :ooo Directories of Corporations
(cu version; China Credit Information Service :ooo). Questionnaires
were delivered to ,,ooo top-level managers via post service. Of these, ,
questionnaires were returned, but :o surveys were not usable because
they were incomplete.
The :, usable surveys were examined for accuracy of data entry,
non-response bias, missing values, reliability, and validity. None of the
nine variables transformational leadership, transactional leadership,
passive-avoidant leadership, outcomes of leadership, innovation, proac-
tiveness, risk-taking, total entrepreneurial orientation, and total business
performance violated the assumption of normality. Finally, I, surveys
were deleted due to outliers, so oo surveys without missing data re-
mained for analysis.
Data Analysis
The Statistical Package for the Social Sciences (svss I,.o) computer pro-
gram for Windows was used to conduct the statistical analysis of all data
in this study. The Cronbach alpha coecients of the xiq ranged from
.,, to .,o. The Cronbach alpha coecients of the voq ranged from.,8 to
.8; the overall Cronbach alpha coecient of the voq was .8,. The Cron-
bach alpha coecient of the business performance was .,I. All the co-
ecients were greater than .,o, exceeding the recommended minimum
level of ., (Nunnally I,,8). This ensured that these three scales had a
very satisfactory degree of reliability. The results concerning evidence of
reliability were consistent with previous studies involving two of the in-
struments used in this study: the Multifactor Leadership Questionnaire
(xiq; Bass and Avolio I,,,) and the Entrepreneurial Orientation Ques-
tionnaire (voq; Covin and Slevin I,8,). The business performance scale
also showed high reliability and inter-item correlations.
iv.uvvsuiv s1sivs .xu nusixvss vvvvovx.xcv
A Pearson product-moment correlation coecient was used to exam-
ine the relationship between the leadership styles and the business per-
Managing Global Transitions
The Relationships Among Leadership Styles . . . :o,
1.niv I Intercorrelations for leadership styles and business performance (N = I8)
Measure TF TA PA
Business Performance .:,*** .I,** .Io*
xo1vs TF = transformational leadership, TA = transactional leadership, PA = passive-
avoidant leadership; * p < .o,, ** p < .oI. *** p < .ooI.
formance of sxvs in Taiwan. Transformational leadership was signif-
icantly positively correlated with total business performance (r = .:,,
p < .ooI). There was a small, positive correlation between transforma-
tional leadership and business performance. Transactional leadership
was signicantly positively correlated with total business performance
(r = .I,, p = .oo,). There was a small, positive correlation with total busi-
ness performance (r = .I,, p = .oo,). There was also a small, positive
correlation between transactional leadership and business performance.
Passive-avoidant leadership was signicantly negatively correlated with
business performance (r =-.Io, p =.o,o). There was a small, negative cor-
relation between passive-avoidant leadership and business performance.
As shown in table I, transformational leadership had a stronger relation-
ship with business performance than did transactional leadership, both
with small and positive correlations. Passive-avoidant leadership had a
very small, negative correlation.
iv.uvvsuiv s1sivs 1o nusixvss vvvvovx.xcv
A standard multiple regression was performed with business perfor-
mance as the dependent variable, and scores on the xiq (transforma-
tional leadership, transactional leadership, and passive-avoidant leader-
ship) as independent variables. An analysis for evaluation of assump-
tions was performed to reduce the number of outliers and improve the
normality, linearity, and homoscedasticity of residuals. With the use of p
< .ooI criterion for Mahalanobis distance, no multivariate outliers were
found in the sample (N = oo). No cases had missing data and no sup-
pressor variables were found. A residual analysis was conducted to check
assumptions. To check the scatterplot of the standardized residuals and
the normal probability plot, assumptions about residuals were met.
Table : shows the correlations between the variables, unstandardized
regression coecients (B), and the standardized regression coecients
(). This regression model was signicantly dierent fromzero, F (,,o:)
= ,.8, and p < .ooI. The regression coecient of transformational lead-
ership was dierent fromzero, and ,,% condence limits were .:8 to .,,.
Volume Number Fall
:o Chung-Wen Yang
1.niv : Regression analysis summary for the top-level managers leadership styles
predicting business performance
Variable B SEB
Transformational leadership .,, .I, .:o***
Transactional leadership .oo .I, .o,
Passive-avoidant leadership .I .o8 .o,
xo1vs R
2
= .o,, adjusted R
2
= .oo (N = oo, p < .ooI), *** p < .ooI.
Only one independent variable contributed signicantly to prediction of
business performance, transformational leadership: p < .ooI, sr
2
= .o.
Altogether, o% (adjusted R
2
) of the variability in business perfor-
mance was predicted by xiq scores on these three independent vari-
ables. Transactional leadership and passive-avoidant leadership were not
good predictors of the business performance. The transformational lead-
ership of top-level managers contributed the most to the business perfor-
mance of sxvs.
iv.uvvsuiv s1sivs 1o nusixvss vvvvovx.xcv:
uiscvixix.x1 vuxc1iox .x.issis
The researcher divided business performance into two categories by its
mean (M = .,:): higher business performance and lower business per-
formance. A direct discriminant function analysis was performed using
three xiq variables (transformational leadership, transactional leader-
ship, and passive-avoidant leadership) as predictors of membership in
the two groups (higher business performance and lower business perfor-
mance). No cases were identied as multivariate outliers with p < .ooI.
An analysis for evaluation of assumptions of linearity, normality, multi-
collinearity, and homogeneity of variance-covariance matrices did not
violate multivariate analysis.
A discriminant function analysis indicated a strong association be-
tween groups and predictors,
2
(,) = I.,I and p = .oo:. Table , presents
the correlation of predictor variables with discriminant functions, which
suggested that the good predictors for distinguishing between higher
business performance and lower business performance were transforma-
tional leadership and transactional leadership.
sxvs with higher business performance had higher scores on trans-
formational leadership (M = ,.Io, SD = .,) than on transactional lead-
ership (M = :.,:, SD = .,) or passive-avoidant leadership (M = I.,,, SD
Managing Global Transitions
The Relationships Among Leadership Styles . . . :o,
1.niv , Correlation of predictor variables from the xiq with discriminant functions
(function structure matrix) and standardized discriminant function
coecients
Predictor variable Correlation with
discriminant functions
Standardized discriminant
function coecients
Function I Function I
Transformational .,o I.Io
Transactional .o .:,
Passive-avoidant .:, .:o
1.niv Means and standard deviations of predictor variables from the xiq
as a function of business performance (N = oo)
Predictor variable Lower business perf. Higher business perf.
M SD M SD
Transformational Leadership :.,I .,I ,.Io .,
Transactional Leadership :.o, .,: :.,: .,
Passive-avoidant Leadership I.o .o, I.,, .o:
= .o:). sxvs with lower business performance also had higher scores on
transformational leadership (M = :.,I, SD = .,I) than on transactional
leadership (M = :.o,, SD= .,:) or passive-avoidant leadership (M = I.o,
SD = .o,). Table presents the results.
Higher business performance diers fromlower business performance
on transformational leadership, F (I,o) = I.oI and p < .ooI. The group
of higher business performance did not dier from the group of lower
business performance on transactional leadership, F (I,o) = ,.: and p
= .o,, or passive-avoidant leadership, F (I,o) = I.I and p = .:,. Among
the three dierent leadership styles, transformational leadership (Wilks
= .,o) was the best predictor of higher business performance. Table ,
presents the predictor variables.
1.niv , Predictor variables from the xiq in stepwise discriminant function analysis
Predictor variable Wilks Equivalent F (I,o)
Transformational leadership .,o I.oI***
Transactional leadership .,, ,.:
Passive-avoidant leadership .,, I.I
xo1vs * p < .o,, *** p < .ooI.
Volume Number Fall
:oo Chung-Wen Yang
1.niv o Classication analysis for business performance
Actual group membership Predicted group membership
Lower bus. perf. Higher bus. perf.
N n % n %
Lower Business Performance :oo Io, ,:., ,, ,.,
Higher Business Performance :oo 88 :., II8 ,,.,
xo1vs Overall percentage of correctly classied cases (,.,%).
1.niv , Intercorrelations for dimensions of entrepreneurial orientation and measure
of business performance (N = oo)
Measure Innovation Proactiveness Risk-taking Total vo
Business Performance .,:*** .,,*** .:o*** .,,***
xo1vs vo = Entrepreneurial orientation, *** p < .ooI.
Table o shows the classication analysis for the business performance;
,.,% of cases were classied correctly. The group with higher business
performance was more likely to be correctly classied (,,.,%correct clas-
sications) than the group with lower business performance (,:.,% cor-
rect classications).
vx1vvvvvxvuvi.i ovivx1.1iox .xu nusixvss
vvvvovx.xcv
A Pearson product-moment correlation coecient was calculated to ex-
amine the relationship between entrepreneurial orientation and business
performance of sxvs in Taiwan. Table , shows the intercorrelations for
dimensions of entrepreneurial orientation and business performance.
Innovation was signicantly positively correlated with business per-
formance (r = .,:, p < .ooI). There was a medium, positive correlation
between innovation and the business performance. Proactiveness was
signicantly positively correlated with business performance (r = .,,, p
< .ooI). There was a medium, positive correlation between proactiveness
and business performance. Risk-taking was signicantly positively cor-
related with business performance (r = .:o, p < .ooI). There was a small,
positive correlation between risk-taking and business performance. Total
entrepreneurial orientation was signicantly positively correlated with
business performance (r = .,,, p < .ooI). There was a medium, positive
correlation between total entrepreneurial orientation and business per-
formance.
Managing Global Transitions
The Relationships Among Leadership Styles . . . :o,
1.niv 8 Regression analysis summary for scores on vo of sxvs in Taiwan predicting
business performance variable
Variable B SEB
vo-innovation .I .o, .I8**
vo-proactiveness .I, .o, .:o**
vo-risk-taking .oo .o .o8
xo1vs R
2
= .Io, adjusted R
2
= .I (N = o, p <.ooI); *** p < .ooI, ** p < .oI.
vx1vvvvvxvuvi.i ovivx1.1iox 1o nusixvss vvvvovx.xcv
A standard multiple regression was performed with business perfor-
mance as the dependent variable and scores on entrepreneurial orien-
tation as the independent variables. An analysis for evaluation of as-
sumptions was performed to reduce the number of outliers and improve
the normality, linearity, and homoscedasticity of residuals. With the use
of p < .ooI criterion for Mahalanobis distance, two multivariate outliers
were found. After deleting these outliers, o cases without missing data
continued to be analyzed. A residual analysis was conducted to check as-
sumptions. To check the scatterplot of the standardized residuals and the
normal probability plot, assumptions about residuals were met.
Table 8 presents the correlations between the variables, unstandard-
ized regression coecients (B), and standardized regression coecients
(). This regression model was signicantly dierent fromzero, F (,,oo)
= ::.8I, p < .ooI.
For the two regression coecients that diered signicantly fromzero,
,,% condence limits were calculated. The condence limits for innova-
tion were .o, to .::; for proactiveness, they were .o, to .:8. Two of the
independent variables contributed signicantly to prediction of business
performance, innovation (sr
2
= .o:) and proactiveness (sr
2
= .o:). Al-
together, I% (adjusted R
2
) of the variability in business performance
was predicted by entrepreneurial orientation scores on these three in-
dependent variables. Risk-taking was not a good predictor of business
performance.
iv.uvvsuiv s1sivs .xu vx1vvvvvxvuvi.i ovivx1.1iox
The relationship between the top-level managers leadership styles and
the entrepreneurial orientation of sxvs in Taiwan was examined us-
ing Pearson product-moment correlation coecient. Transformational
leadership was signicantly positively correlated with innovation (r =
Volume Number Fall
:o8 Chung-Wen Yang
1.niv , Intercorrelations for leadership styles and the voq measures (N = oo)
Measure TF TA PA
vo-innovation .::*** .I,* .o,
vo-proactiveness .:,*** .o, .o,
vo-risk-taking .I** .o, .o,
Total entrepreneurial
orientation
.:*** .II* .o:
xo1vs TF = transformational leadership, TA = transactional leadership, PA = passive-
avoidant leadership; * p < .o,, ** p < .oI, *** p < .ooI.
.::, p < .ooI), proactiveness (r = .:,, p < .ooI), risk-taking (r = .I, p =
.oo), and total entrepreneurial orientation (r = .:, p < .ooI). There was
a small, positive correlation between transformational leadership and all
dimensions of entrepreneurial orientation. Transactional leadership was
signicantly positively correlated with innovation (r = .I,, p = .oI) and
total entrepreneurial orientation (r = .II, p = .o:,). There was a small,
positive correlation between transactional leadership and innovation or
total entrepreneurial orientation. There were no signicant relationships
between passive-avoidant leadership and entrepreneurial orientation. As
shown in table ,, transformational leadership had a stronger relation-
ship on total entrepreneurial orientation than transactional leadership,
but with a small and positive correlation.
iv.uvvsuiv s1sivs 1o vx1vvvvvxvuvi.i ovivx1.1iox
A standard multiple regression was performed with the total entreprene-
urial orientation as measured by the voq as the dependent variable and
scores on the xiq (transformational leadership, transactional leader-
ship, passive-avoidant leadership) as the independent variables. An anal-
ysis for evaluation of assumptions was performed to reduce the number
of outliers and improve the normality, linearity, and homoscedasticity of
residuals. With the use of p < .ooI criterion for Mahalanobis distance,
no multivariate outliers were found. No cases had missing data and no
suppressor variables were found for the sample (N = oo). A residual
analysis was conducted to check assumptions. To check the scatterplot
of the standardized residuals and normal probability plot, assumptions
about residuals were met.
Table Io indicates the correlations between the variables, unstandard-
ized regression coecients (B), and standardized regression coecients
(). This regression model was signicantly dierent fromzero, F (,,o:)
Managing Global Transitions
The Relationships Among Leadership Styles . . . :o,
1.niv Io Regression analysis summary for the top-level managers leadership styles
predicting the total entrepreneurial orientation
Variable B SEB
Transformational leader-
ship
.o: .I, .,o***
Transactional leadership .I8 .I, .o,
Passive-avoidant leadership .o, .o8 .o,
xo1vs R
2
= .oo,, adjusted R
2
= .o,o (N = oo, p < .ooI). *** p < .ooI.
= 8.,, and p < .ooI. The regression coecient of transformational lead-
ership was dierent from zero, and ,,% condence limits were .,o to .88.
Only transformational leadership contributed signicantly to prediction
of the total entrepreneurial orientation, p < .ooI and the semipartial cor-
relations sr
2
= .o,.
Altogether, ,.o% (adjusted R
2
) of the variability in the total en-
trepreneurial orientation was predicted by xiq scores on these three
independent variables. Transactional leadership and passive-avoidant
leadership were not good predictors of the total entrepreneurial ori-
entation. Hence, the transformational leadership of top-level managers
contributed the most to the total entrepreneurial orientation of sxvs.
iv.uvvsuiv s1sivs .xu vx1vvvvvxvuvi.i ovivx1.1iox 1o
nusixvss vvvvovx.xcv: uiscvixix.x1 vuxc1iox .x.issis
The researcher divided business performance into two categories by its
mean (M = .,:): higher business performance and lower business per-
formance. A direct discriminant function analysis was performed using
three variables of the xiq and three variables of the voq as predic-
tors of membership in the two groups. Predictors were transformational
leadership, transactional leadership, passive-avoidant leadership, inno-
vation, proactiveness, and risk-taking. The groups were higher business
performance and lower business performance. Two cases were identi-
ed as multivariate outliers with p < .ooI. After deleting these cases, o
cases remained for analysis. An analysis for evaluation of assumptions
of linearity, normality, multi-collinearity, and homogeneity of variance-
covariance matrices did not violate multivariate analysis.
Adiscriminant function indicated a strong association between groups
and predictors,
2
(o) = ,.o and p < .ooI. Table II presents the correla-
tion of predictor variables with discriminant functions, which suggested
that the good predictors for distinguishing between higher business per-
Volume Number Fall
:,o Chung-Wen Yang
1.niv II Correlation of predictor variables from xiq and voq with discriminant
functions (function structure matrix) and standardized discriminant
function coecients
Predictor variable Correlation with
discriminant functions
Standardized discriminant
function coecients
Function I Function I
Transformational leadership ., .I
Transactional leadership .:o .o8
Passive-avoidant leadership .I, .I,
Innovation .8 .,,
Proactiveness .,o .:,
Risk-taking .,, .:o
1.niv I: Means and standard deviations of predictor variables from xiq and voq
as a function of business performance
Predictor variable Lower business perf. Higher business perf.
M SD M SD
Transformational Leadership :.,: o.,: ,.oI o.,
Transactional Leadership :.o, o.,: :.o8 o.,I
Passive-avoidant Leadership I.o o.o, I.,, o.o:
Innovation .I I.:, .,, I.:,
Proactiveness .:o I.I, .,o I.I,
Risk-taking ,.o8 I.:o ,.,, I.,o
formance and lower business performance were transformational lead-
ership, innovation, proactiveness, and risk-taking.
Table I: shows the innovation, F (I,o:) = ,,.o8 and p < .ooI; the
proactiveness, F (I,o:) = :,.o and p < .ooI; and the risk-taking, F
(I,o:) = Io.o: and p < .ooI. Innovation was the best predictor of group
membership (Wilkss = .,:,). As shown in table I,, higher business
performance diers from lower business performance on four variables:
transformational leadership, F (I,o:) = I,.8o and p < .ooI; innovation,
F (I,o:) = ,,.o8 and p < .ooI; proactiveness, F (I,o:) = :,.o and p <
.ooI; and risk-taking, F (I,o:) = Io.o: and p < .ooI. Innovation was the
best predictor of group membership (Wilks = .,:,).
Table I reports the classication analysis for business performance;
o,.%cases were classied correctly. The group with higher business per-
formance was more likely to be correctly classied (o,.%correct classi-
Managing Global Transitions
The Relationships Among Leadership Styles . . . :,I
1.niv I, Predictor variables from xiq and voq in stepwise discriminant function
analysis
Predictor variable Wilks Equivalent F (I,o:)
Transformational leadership .,o, I,.8o***
Transactional leadership .,,: ,.:I
Passive-avoidant leadership .,,8 o.8
Innovation .,:, ,,.o8***
Proactiveness .,,o :,.o***
Risk-taking .,oo Io.o:***
xo1vs *** p < .ooI.
1.niv I Classication analysis for business performance
Actual group membership Predicted group membership
Lower bus. perf. Higher bus. perf.
N n % n %
Lower business performance I,, I:: oI., ,, ,8.,
Higher business performance :o, ,I ,.o I, o,.
xo1vs Overall percentage of correctly classied cases (o,.%).
cations) than the group with lower business performance (oI.,% correct
classications).
Conclusion
In a comparison of three dierent leadership styles (N = oo), the mean
for transformational leadership (M = ,.oo) is higher than the mean for
transactional leadership (M = :.o8) and for passive-avoidant leadership
(M = I.,,). The results are similar to the results of a study (N = :,,:8,)
by Avolio and Bass (:oo) in which the mean for transformational lead-
ership (M = :.8,) was higher than the mean for transactional leadership
(M = :.:,) and for passive-avoidant leadership (M = .8). Furthermore,
a comparison of the three dimensions of entrepreneurial orientation (N
= oo) shows that the mean for innovation (M = .,,) is higher than the
mean for proactiveness (M = .,o) and for risk-taking (M = ,.,,). Total
entrepreneurial orientation has a mean of ., and a standard deviation
of I.o:. These results are similar to those of Covin and Slevin (I,8,); in
their results, the scale had a mean of .,, and a standard deviation of I.:,.
In another study, Covin et al. (:ooo) found that the scale had a mean of
.o, and a standard deviation of I.o8.
Volume Number Fall
:,: Chung-Wen Yang
The study conrmed the results of Covin and Slevin (I,8,) who found
that entrepreneurial orientation was positively related to performance.
Consistent with much of the literature reviewed (Smart and Conan I,,;
Wiklund and Shepherd :oo,; Zahra and Covin I,,,), the ndings from
the current study suggest that high levels of total entrepreneurial orien-
tation may contribute positively to business performance. A compari-
son of the three dimensions of entrepreneurial orientation shows that
high levels of innovation and proactiveness may contribute positively to
business performance. The attributes that appear to contribute to high
business performance are innovation and proactiveness. Risk-taking is
not a signicant contributor to predicting business performance, but it
is signicantly positively correlated with business performance in this
study. Although risk-taking is considered an attribute of entrepreneur-
ship, successful entrepreneurs are not gamblers (Kuratko and Hodgetts
:ooI). Indeed, Drucker (I,8,) argued that successful entrepreneurs are
typically not risk takers. Entrepreneurs usually take carefully calculated
risks and avoid taking unnecessary ones (Begley and Boyd I,8,). The re-
lationship between risk-taking and business performance is likely to be
aected by other inuences such as environmental factors (Krauss et al.
:oo,; Kreiser et al. :oo:).
Dierent leadership styles may aect performance. Transformational
leadership is signicantly more correlated to the business performance
than transactional leadership and passive-avoidant leadership. Among
the three dierent leadership styles, transformational leadership is the
best predictor of the business performance. This study supports the po-
sition of Gardner and Stough (:oo:) that transformational leadership
is more eective than transactional leadership. Transformational lead-
ership is more strongly correlated than transactional leadership with
higher productivity and performance (Bass et al. :oo,; Lowe et al. I,,o).
Eggers and Leahy (I,,,) reported that both management and leader-
ship skills such as nancial management, communication, motivation
of others, vision, and self-motivation play important roles in determin-
ing the growth rate of a small business. The results of this study con-
rmed these ndings because key aspects of transformational leadership
include idealized inuence, inspirational motivation, intellectual stimu-
lation, and individualized consideration (Avolio and Bass :oo). Finally,
transformational leadership with higher entrepreneurial orientation can
contribute to higher business performance. This study supports the idea
of entrepreneurial leadership, which is viewed to be more transforma-
Managing Global Transitions
The Relationships Among Leadership Styles . . . :,,
tional than transactional in nature but with some fundamental dier-
ences (Thornberry :ooo).
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