Transforming Telecoms: How Transformational Leadership, Creativity and Innovation Drive Organizational Performance

Abstract

Intense technological advancements and market liberalization have intensified competition in the telecommunication industry, challenging established operators to innovate continuously. This study investigates how transformational leadership drives creativity and innovation and, consequently, organizational performance, focusing on its four dimensions: inspirational motivation, idealized influence, individualized consideration, and intellectual stimulation. Data were collected from 314 executives and analyzed using partial least squares structural equation modeling (PLS-SEM). Results indicate that inspirational motivation, individualized consideration, and intellectual stimulation significantly enhance creativity and innovation, whereas idealized influence shows no direct effect. Creativity and innovation further mediate the relationships of inspirational motivation and individualized consideration with organizational performance, highlighting their critical role in translating leadership behaviors into tangible performance outcomes. The findings advance theoretical understanding by clarifying the pathways through which transformational leadership fosters innovation and creative engagement. Practically, the study provides actionable insights for organizational leaders to cultivate a culture of creativity and innovation to sustain competitive advantage, and informs policymakers and regulators in supporting organizational performance and sectoral development.

1. Introduction

The telecommunications industry is undergoing a profound transformation driven by digital convergence, 5G deployment and rising demand for faster, more personalized services (Mendonça et al., 2022). These developments are reshaping business models and intensifying the need for innovation and differentiation (Noh et al., 2021). Organizations are therefore required to modernize infrastructure and cultivate strategic capabilities that convert technological advancements into competitive offerings and enhanced customer value (Noh et al., 2021; Mendonça et al., 2022).

In Malaysia, these trends are mirrored in the emergence of Mobile Virtual Network Operators (MVNOs) alongside incumbent Mobile Network Operators (MNOs), further intensifying competitive dynamics. Sustaining competitiveness necessitates leveraging innovative services, creative strategies and adaptive approaches in a rapidly evolving marketplace (Levy et al., 2010; Sayyadi Ghasabeh, 2020). This competitive landscape underscores the importance of skilled, proactive human capital and leadership capable of guiding organizational change (Bonaccio et al., 2020). Evidence indicates that organizations integrating creativity and innovation under transformational leadership achieve superior performance and are better equipped to respond to technological shifts (Jung et al., 2003; Demir & Budur, 2019; Demir et al., 2020).

Firms are increasingly required to embed creativity and innovation as core capabilities to maintain competitiveness in dynamic markets (Kasia & John, 2007; Hui, 2022). The telecommunications sector contributes significantly to national economic development, with technological advancements and innovative service delivery shaping market outcomes (Gary & Scott, 2000; Chong et al., 2009). Transformational leaders inspire employees through four key dimensions: idealized influence, intellectual stimulation, inspirational motivation, and individualized consideration (Bass, 1985; Bass & Riggio, 2006), which are crucial in fostering creative and innovative organizational environments (Sosik et al., 1998; Liu et al., 2021). Prior research confirms that organizational structures, support mechanisms, behavioral norms, and strategic clarity facilitate innovation and enhance firm performance through improved processes, products, and services (Martins & Terblanche, 2003; Hansen et al., 2014; James et al., 2018). Creativity and innovation are thus central to organizational performance, competitive advantage, and long-term sustainability (Subramaniam et al., 2010; Shafi et al., 2019).

Despite substantial evidence on the role of transformational leadership in promoting innovation and organizational performance, the existing literature shows inconsistent findings and limited empirical studies examining these relationships concurrently, particularly in service-intensive and technology-driven sectors such as telecommunications (Jung et al., 2008; Boies et al., 2015). More critically, prior research often lacks an integrated explanatory mechanism clarifying how distinct leadership behaviors translate into organizational-level innovation and performance outcomes. Many studies treat transformational leadership as a single higher-order construct rather than examining its distinct dimensions and their specific behavioral mechanisms linking leadership actions to creativity, innovation, and performance outcomes (Jung et al., 2008; Mittal & Dhar, 2015). Furthermore, research on creativity and innovation often emphasizes individual-level behaviors rather than examining them as organizational-level capabilities that mediate the relationship between leadership behaviors and firm performance, such as strategy, structure, support mechanisms, and behavioral norms, which are essential for firm-wide competitiveness (Martins & Terblanche, 2003; Harari et al., 2016). In the Malaysian telecommunications context, empirical work investigating how CEOs’ transformational leadership fosters creativity and innovation to enhance organizational performance remains scarce.

This study addresses these gaps by examining the interrelationships among transformational leadership, creativity and innovation, and organizational performance in the Malaysian telecommunications sector. The study examines how the four dimensions of transformational leadership, including idealized influence, intellectual stimulation, inspirational motivation, and individualized consideration, each influence creativity and innovation, which in turn mediate their effects on organizational performance. The study also considers the direct effects of transformational leadership on performance. The research contributes theoretically by advancing a mechanism-based understanding of how the four distinct dimensions of transformational leadership influence organizational performance through creativity and innovation as mediating capabilities. Practically, it offers guidance to organizational leaders, particularly CEOs, on strategies to cultivate creativity and innovation to maintain competitive advantage. At the policy level, the findings inform regulatory bodies such as the Malaysian Communications and Multimedia Commission, providing insights into key factors that enhance organizational innovation and performance. Ultimately, the study supports Malaysia’s national objective of building a knowledge-based economy by demonstrating the critical role of transformational leadership in fostering creativity and innovation, improving organizational performance, and strengthening industry competitiveness.

2. Literature Review

2.1. Social Exchange Theory

Social Exchange Theory (SET) offers a robust theoretical foundation for explaining how interpersonal relationships shape employee attitudes and behaviors within organizations. Originating from the works of Blau (1964) and Gouldner (1960), SET posits that social interactions are governed by reciprocal exchanges of valued resources, both tangible and intangible, such as trust, recognition, and support. Central to SET is the norm of reciprocity, whereby individuals feel obligated to return favorable treatment received from others once trust has been established (Gouldner, 1960). Within organizational research, SET has been widely applied to explain how leader–employee interactions influence motivation, commitment, and performance-related behaviors (Settoon et al., 1996). Accordingly, this study adopts SET to conceptualize the relational linking between transformational leadership, creativity and innovation, and organizational performance.

The extant literature further substantiates the relevance of SET in explaining how high-quality social exchanges foster positive employee outcomes. Employees are more likely to exhibit loyalty, responsibility, and discretionary effort when leaders demonstrate fairness, respect, and support (Lawles & Thye, 1999; Wong & Law, 2002; S. Y. Chen et al., 2015). Such exchanges create mutual dependence, as organizational goals are often unattainable without cooperative effort (Lawles & Thye, 1999). When employees perceive that their contributions are valued, they reciprocate through heightened engagement and commitment, which in turn strengthens performance outcomes (Carvalho et al., 2016). These dynamics highlight the importance of leadership behaviors that cultivate trust-based relationships grounded in reciprocal obligation.

Within this relational framework, SET provides a compelling explanation for how transformational leadership promotes creativity and innovation. Transformational leaders who recognize and support employees’ needs foster feelings of trust and appreciation, encouraging intrinsic motivation and creative engagement (Shalley & Gilson, 2004; Zhou & Oldham, 2001). Supportive exchanges enhance employees’ willingness to invest effort in novel problem solving and idea generation (Amabile, 2000; Amabile & Kramer, 2011), while leader trust facilitates delegation of meaningful and challenging tasks (Lee et al., 2015). As employees reciprocate these positive exchanges through creativity and innovation (Chew & Chan, 2008), organizations benefit from enhanced innovative outputs that ultimately translate into superior organizational performance (Eisenberger et al., 2001). Accordingly, within the SET framework, creativity and innovation operate as mediating mechanisms through which transformational leadership influences organizational performance under the norm of reciprocity.

2.2. Organizational Performance

Organizational performance is widely acknowledged as a multidimensional construct, encompassing effectiveness, efficiency, quality, productivity, innovation and profitability (Ebrahim, 2018). These dimensions vary across industries as organizational demands and environmental conditions differ, making it challenging to establish a universally applicable performance model (Gaynard, 1997; Kaczmarczyk & Murtough, 2002). Sofi and Devanadhen (2015) emphasized that transformational leadership plays a significant role in strengthening performance, underscoring the importance of leader-driven processes in shaping organizational outcomes. From this perspective, organizational performance reflects the organization’s ability to manage systematic processes effectively while fulfilling both adaptive and maintenance functions (Damanpour, 2014). Research consistently shows that organizations that prioritize innovation exhibit greater resilience and distinctiveness, leading to enhanced performance (Damanpour & Evan, 1984; Gopalakrishnan, 2000). Recent findings further support this, demonstrating that rapid technological change and competitive pressures amplify the need for innovation and knowledge-based capabilities to sustain competitive advantage (Mehralian et al., 2023; Lerro et al., 2023). Consistent with this view, Arokiasamy et al. (2023, 2024) demonstrate that human capital investment strengthens capabilities that support innovation and long term organizational performance.

Traditional assessments of organizational performance were largely based on financial measures such as profitability, return on assets, return on investment and return on equity. However, these indicators have been criticized for their limited scope and short-term focus. In response, scholars have advocated for more comprehensive performance frameworks that integrate both financial and non-financial indicators (Halim et al., 2023). Broader perspectives also call for recognizing multiple dimensions of performance, incorporating insights from various stakeholders and using diverse data sources to achieve a more accurate and holistic evaluation (Andersen et al., 2016). Tangen (2003) further argues that combining different performance dimensions helps create a more balanced and meaningful assessment, preventing the blind spots associated with single-metric evaluations.

Consistent with these developments, the present study adopts a comparative and internally reflective approach to measuring performance at the organizational level, ensuring methodological alignment with assessments of transformational leadership and creativity and innovation. Drawing on Darroch (2005), the measures include both financial indicators, such as profitability and non-financial indicators, including market share and sales growth. These measures integrate external comparisons (e.g., “Compared with the industry average, our organization is more profitable”) with internal historical assessments (e.g., “We are more profitable than we were five years ago”). This aligns with Ngah and Ibrahim’s (2010) view of performance as a comparison between expected and actual outcomes, deviations from plans and progress toward specific objectives. It also reflects Koohang et al.’s (2017) conceptualization of organizational performance as evidence of an organization’s development and advancement.

3. Hypotheses Development

3.1. Transformational Leadership

3.1.1. Inspirational Motivation (IM)

Inspirational motivation, as a core dimension of transformational leadership, plays a critical role in shaping employees’ creative and innovative behaviors by articulating a compelling vision, fostering shared meaning, and strengthening intrinsic motivation (Bass & Steidlmeier, 1999). Transformational leaders who demonstrate inspirational motivation encourage employees to challenge the status quo, generate novel ideas, and engage in innovative work practices (Shin & Zhou, 2003; Khalili, 2016). They promote knowledge sharing and empower employees to think beyond routine solutions, thereby enhancing creative problem-solving and innovation orientation within organizations (Jyoti & Dev, 2015; Prasad & Junni, 2016). Management support and emotional encouragement at work also help employees be more creative (Ghaleb & Piaralal, 2024; Samydevan et al., 2021). Empirical studies have further supported the positive association between inspirational motivation and innovation outcomes in contemporary organizational settings (Uddin, 2013; Sethibe & Steyn, 2016). Therefore, the study proposes the following hypothesis:

H1a. 

Inspirational motivation is positively associated with creativity and innovation.

Inspirational motivation directly influences organizational performance by aligning employee effort with organizational goals, enhancing goal commitment, and fostering resilience in the face of challenges (Agazu et al., 2025; Gumusluoglu & Ilsev, 2009; T. L. Michaelis et al., 2018). By articulating a clear and compelling vision, leaders increase intrinsic motivation and coordinated action among employees, which strengthens productivity and organizational outcomes (Jung et al., 2008; Donate & Sánchez de Pablo, 2015). Motivated employees with confidence, positive mindsets, and alignment of personal and organizational goals contribute more effectively to organizational objectives (Bono & Judge, 2004; Doody & Doody, 2015; Rawung et al., 2015). Despite the extensive focus on transformational leadership, the independent influence of inspirational motivation on organizational performance remains underexplored, warranting separate examination. Consequently, the following hypothesis is formulated:

H2a. 

Inspirational motivation is positively associated with organizational performance.

3.1.2. Idealized Influence (ID)

Idealized influence reflects the extent to which leaders act as role models by demonstrating ethical conduct, integrity, and commitment, thereby shaping followers’ attitudes and behaviors toward creative and innovative work practices (Phipps et al., 2012). Leaders who display strong idealized influence build trust, admiration, and respect, which encourages employees to pursue challenging goals and engage in innovative problem solving (Shin & Zhou, 2003; Arendt, 2009). Through consistent alignment between values and actions, such leaders create a sense of psychological safety that enables employees to take calculated risks and explore unconventional ideas without fear of negative consequences (Shamir et al., 1993; Boerner et al., 2007). Empirical evidence indicates that idealized influence strengthens employees’ intrinsic motivation, enhancing their willingness to contribute novel ideas and experiment with new approaches (Howell & Higgins, 1990; M. Y. Chen et al., 2012; Shafi et al., 2019). Therefore, the study proposes the following hypothesis:

H1b. 

Idealized influence is positively associated with creativity and innovation.

Idealized influence also contributes to organizational performance by fostering trust, admiration, loyalty, and respect toward the leader, motivating employees to exceed expectations (Chu & Lai, 2011). Leaders exhibiting idealized influence prioritize individual needs for achievement and growth, serve as coaches or mentors, and cultivate a supportive organizational climate that enhances learning and engagement (Jung et al., 2008). This leadership dimension encourages employees to accept directives confidently and pursue challenging tasks, thereby improving commitment and overall performance (Mittal & Dhar, 2015; I. J. Chen & Paulraj, 2004). Although typically studied as part of transformational leadership, idealized influence can independently influence organizational outcomes through increased employee motivation, satisfaction, and engagement. Consequently, the following hypothesis is formulated:

H2b. 

Idealized influence is positively associated with organizational performance.

3.1.3. Individual Consideration (IC)

Individualized consideration reflects a leader’s capacity to recognize and respond to the unique needs, strengths, and developmental potential of each employee, thereby creating a work environment that supports creative and innovative behaviors (Bass, 1985; Oldham & Cummings, 1996). Leaders who adopt coaching and mentoring roles provide personalized support, constructive feedback, and learning opportunities that enhance employees’ confidence to explore new ideas and approaches (Oldham & Cummings, 1996; Sosik et al., 1998). Empirical evidence suggests that such individualized leadership practices improve individual performance, teamwork, and overall organizational effectiveness, which are closely linked to innovation capability (Koys, 2001; Schermerhorn & McCarthy, 2004). When employees perceive genuine concern for their growth and well-being, they are more likely to reciprocate through higher levels of creative engagement and innovative problem solving (Ng, 2016). Accordingly, the following hypothesis is proposed:

H1c. 

Individualized consideration is positively associated with creativity and innovation.

Individualized consideration contributes to organizational performance by providing tailored coaching and development opportunities, enhancing employees’ competencies, confidence, and engagement (Boga & Ensari, 2009; Judge & Piccolo, 2004; Muchiri & Cooksey, 2011). Leaders’ attention to individual needs strengthens motivation and collaboration, which improves overall productivity and organizational outcomes (Zacher et al., 2014; Koohang et al., 2017). Individualized consideration also promotes job satisfaction, engagement, and motivation, leading to higher levels of collective effort and productivity across the organization (Snell et al., 2013). As employees perform more effectively and collaboratively, overall organizational performance is expected to improve. Therefore, the following hypothesis is formulated:

H2c. 

Individualized consideration is positively associated with organizational performance.

3.1.4. Intellectual Stimulation (IS)

Intellectual stimulation refers to a leader’s ability to encourage employees to think differently and view problems from new perspectives (Avolio & Bass, 2002; Gilmore et al., 2013). Leaders who demonstrate intellectual stimulation promote questioning of existing practices and support creative problem solving, which strengthens employees’ innovative capabilities (Kelly, 2003). Prior studies show that such leadership behavior helps build an organizational culture that supports experimentation and innovation (Den Hartog, 1997; B. Michaelis et al., 2010). Empirical research consistently reports a positive relationship between intellectual stimulation and both employee creativity and organizational innovation (Shin & Zhou, 2003; Jung et al., 2008; Lee et al., 2015). More recent evidence indicates that intellectually stimulating leaders enhance employees’ creative confidence and innovative work behavior (Ghimire et al., 2021; Liu et al., 2021). Based on this evidence, this study proposes the following hypothesis:

H1d. 

Intellectual stimulation is positively associated with creativity and innovation.

Intellectual stimulation directly improves organizational performance by encouraging critical thinking, problem-solving, and the challenging of assumptions (Bass & Riggio, 2006; Bass & Avolio, 1994). Leaders who promote experimentation and empower employees foster proactive behaviors and alignment with organizational objectives, which enhances task efficiency, adaptability, and overall effectiveness (Boga & Ensari, 2009; Smothers et al., 2016). This leadership dimension aligns individual effort with organizational goals by motivating employees to contribute beyond formal job requirements, thereby improving task efficiency, adaptability, and overall effectiveness (Mittal & Dhar, 2015; Anjali & Anand, 2015). As a result, intellectually stimulating leadership practices are expected to positively influence organizational performance. Therefore, the following hypothesis is proposed:

H2d. 

Intellectual stimulation is positively associated with organizational performance.

3.2. Creativity and Innovation

Creativity and innovation are conceptually distinct yet closely related constructs. Creativity refers to the generation of novel and useful ideas, whereas innovation involves the implementation and application of those ideas within organizational contexts (Amabile, 1988; Anderson et al., 2014). Although analytically separable, these processes are highly interdependent at the organizational level, particularly in dynamic industries. Accordingly, this study examines creativity and innovation concurrently while acknowledging their conceptual distinction. Creativity and innovation are widely recognized as critical determinants of organizational performance (McKinley et al., 2014). The generation and application of new knowledge, alongside the enhancement of existing capabilities, enable organizations to improve processes, products, and services, thereby boosting performance (Shahin et al., 2017). Studies have highlighted that the impact of organizational creativity on performance is context-dependent, with factors such as industry characteristics, cultural environment, and organizational resources influencing this relationship (Sarooghi et al., 2015). Organizations with strong innovation capabilities, supported by a culture that values creativity, are better equipped to adapt to dynamic environments and achieve superior outcomes (Hult et al., 2004; Johnson et al., 1997). Empirical studies consistently demonstrate that creativity and innovation contribute positively to business performance by fostering novel solutions and enhancing competitive advantage (Ramalingam et al., 2015, 2021). Therefore, this study proposes the following hypothesis:

H3. 

Creativity and innovation are positively associated with organizational performance.

3.3. The Mediating Role

Creativity and innovation function as critical mechanisms through which transformational leadership translates into superior organizational performance, as they shape how organizational structures, communication patterns, and resource flows are mobilized to generate new ideas and implement improvements (Eisenhardt & Martin, 2000). The existing literature emphasizes that transformational leadership enhances performance indirectly by fostering an environment in which employees are intrinsically motivated to experiment, share knowledge, and pursue novel solutions (Gumusluoglu & Ilsev, 2009). Inspirational motivation strengthens employees’ sense of purpose and commitment, encouraging idea generation and implementation aligned with organizational goals; idealized influence builds trust and psychological safety, enabling risk-taking and creative effort; individualized consideration nurtures employee capabilities through mentoring and developmental support; and intellectual stimulation promotes critical thinking, problem reframing, and continuous learning. Together, these dimensions cultivate a climate that converts leadership inputs into creative processes and innovative outputs, which, in turn, enhance organizational effectiveness and adaptability (Amabile, 1996; Sher & Lee, 2004; Sarros et al., 2008). Consistent with process-oriented perspectives on leadership and performance, this study posits that creativity and innovation act as central intervening mechanisms linking transformational leadership behaviors to organizational outcomes.

H4a–d. 

Creativity and innovation mediate the relationships between each dimension of transformational leadership (inspirational motivation, idealized influence, individualized consideration, and intellectual stimulation) and organizational performance.

Figure 1 presents the theoretical framework derived from the above discussion.

4. Methodology

4.1. Study Design and Data Collection

The population of this study comprises managerial and executive-level employees within the major mobile network operators in Malaysia, namely Celcom, Maxis, Digi, and U Mobile, which collectively dominate the national mobile telecommunications market (MCMC, 2019). These organizations represent the core of the Malaysian mobile services industry and account for the majority of mobile subscriptions. The target respondents include senior managers, middle managers, junior managers, and executives who possess a minimum of one year of tenure in their current organization and at least five years of experience in the telecommunications industry. In addition, participants were required to hold at least a bachelor’s degree or an equivalent professional qualification to ensure their ability to comprehend and respond accurately to the English language questionnaire. This population was deemed appropriate as these individuals are positioned to provide informed evaluations of transformational leadership practices, organizational creativity and innovation, and overall organizational performance.

Data collection was conducted using a structured, self-administered online questionnaire distributed through email and professional communication platforms. A total of 360 questionnaires were distributed to the targeted respondents across the four mobile network operators. Prior to distribution, potential respondents were contacted to explain the objectives and relevance of the study, thereby enhancing response quality and participation rates (Saunders et al., 2015). The survey included a cover letter outlining the purpose of the research, the voluntary nature of participation, and assurances regarding confidentiality and anonymity. The data collection process was carried out over a period of approximately three to four months, with periodic monitoring to assess response trends and to conduct preliminary screening for completeness and consistency. The use of an online survey was considered appropriate for reaching geographically dispersed respondents and for facilitating efficient data management (Hair et al., 2019).

Convenience sampling was employed to select respondents due to its practicality in accessing managerial personnel within organizational settings and within the study time frame (Etikan et al., 2016). Of the 360 questionnaires distributed, 314 usable responses were retained for final analysis after excluding incomplete and inconsistent submissions, resulting in a usable response rate of 87.2 percent. This response rate exceeds commonly accepted thresholds in organizational research and supports the adequacy of the final sample size (Asiamah et al., 2017). Ethical considerations were strictly observed throughout the study. Informed consent was obtained through voluntary participation and explicit acknowledgment at the beginning of the questionnaire. Confidentiality, privacy, and anonymity were ensured through secure data storage and restricted access. Procedural remedies were implemented to reduce potential common method bias, including respondent anonymity, use of well-validated scales, and counterbalancing the order of questionnaire items. All data were used solely for academic purposes in accordance with established ethical standards for social science research (Saunders et al., 2015). This study employed the examplary research practocs from previous tsudies (Jiang et al., 2023; Wider & Wider, 2023).

4.2. Measurement Instruments

The measurement instruments for this study were adapted from established and validated scales to ensure conceptual rigor and content validity. Organizational performance was measured using items derived from Darroch (2005) and Pedro et al. (2015), while the transformational leadership construct was operationalized based on the framework and items adapted from Jyoti and Dev (2015). Transformational leadership was measured through four dimensions, namely idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration, with each dimension assessed using five items. The scales selected for this study have been widely applied in organizational and leadership research and were deemed appropriate for capturing the strategic and behavioral dynamics of mobile telecommunications organizations. All constructs are treated as organizational-level constructs. Individual employee responses were aggregated to the organizational level to ensure consistency across constructs.

Creativity and innovation were measured using an instrument adapted from Kasia and John (2007), which captures key organizational factors that facilitate innovative behavior and creative practices. The final survey instrument comprised 56 items in total, including 5 items for idealized influence, 3 items for inspirational motivation, 4 items for intellectual stimulation, 5 items for individualized consideration, 30 items for creativity and innovation, and 9 items for organizational performance. All items were measured using a 5-point Likert scale ranging from 1 strongly disagree to 5 strongly agree. Adaptation procedures included reviewing original items for contextual relevance, removing items that were redundant or unclear, and modifying wording to fit the Malaysian telecommunications context. The final 56-item questionnaire is provided in Appendix A. This scaling approach is widely accepted in behavioral and management research for capturing attitudinal and perceptual data and facilitates robust statistical analysis in structural equation modeling and related multivariate techniques (Hair et al., 2019).

4.3. Data Analysis

The collected data were coded and entered into IBM Statistical Package for Social Sciences, SPSS Version 29, for preliminary screening and descriptive analysis. All analyses were conducted at the organizational level using aggregated scores to maintain consistent levels of measurement across constructs. Subsequently, Partial Least Squares Structural Equation Modeling (PLS-SEM) was employed using SmartPLS Version 4 to test the proposed research model. No control variables were included, as the study focuses on examining the direct relationships among transformational leadership, creativity, innovation, and organizational performance. The analysis followed a two-step procedure, beginning with the assessment of the measurement model to examine reliability and validity of the constructs, followed by evaluation of the structural model to test the hypothesized relationships (Hair et al., 2019). PLS-SEM was selected over CB-SEM due to its suitability for complex models, providing robust and efficient estimation of path coefficients (Ringle et al., 2020).

5. Results

Table 1. Respondent Profile.

Categories	Frequency	Percent (%)
Age
30–44 years old	172	54.8
45–54 years old	114	36.3
55–64 years old	28	8.9
Gender
Male	270	86.0
Female	44	14.0
Highest Education
Bachelor’s degree	272	86.6
Master’s degree	27	8.60
Doctorate	2	0.60
Others	14	4.10
Position
Executive	241	76.8
Junior Manager	42	13.4
Middle Manager	7	2.2
Senior Manager	24	7.6
Working Period in Telecommunication Industry
5–9 years	107	34.1
10–14 years	125	39.8
>14 years	82	26.1
Working Period in current Organization
<5 years	40	12.7
5–9 years	164	52.2
10–14 years	70	22.3
>14 years	40	12.7

presents the demographic profile of the 314 respondents, showing that the sample was predominantly middle-aged, between 30 and 44 years (54.8 percent) and male (86 percent), with the majority holding a bachelor’s degree (86.6 percent). Most respondents occupied executive positions (76.8 percent) and had substantial experience in the telecommunications industry, primarily between 10 and 14 years (39.8 percent), while tenure in their current organization was mainly 5 to 9 years (52.2 percent). These characteristics indicate that the sample comprises a highly experienced, educated, and executive workforce, making it well-positioned to provide informed insights on transformational leadership, creativity, innovation, and organizational performance within the Malaysian telecommunications sector.

5.1. Measurement Model

The measurement model was assessed by examining indicator reliability, internal consistency reliability, and convergent validity, as presented in

Table 2. Reliability Analysis and Convergent Validity.

Construct	Cronbach’s Alpha	Composite Reliability	AVE
Idealized Influence (ID)	0.929	0.929	0.779
Individual Consideration (IC)	0.890	0.895	0.700
Inspirational Motivation (IM)	0.840	0.860	0.757
Intellectual Stimulation (IS)	0.866	0.873	0.713
Creativity and Innovation (C&I)	0.902	0.904	0.774
Organizational Performance (OP)	0.933	0.939	0.656

. All constructs demonstrated strong internal consistency, with Cronbach’s alpha values ranging from 0.840 to 0.933 and composite reliability values between 0.857 and 0.939, exceeding the recommended threshold of 0.70 (Hair et al., 2019). Most indicators exhibited factor loadings above 0.70; however, a small number of items recorded loadings between 0.60 and 0.70. These indicators were retained because their removal did not result in a meaningful improvement in composite reliability or average variance extracted, both of which remained above the recommended cutoff of 0.50. This decision is consistent with PLS-SEM guidelines, which suggest that indicators with loadings between 0.40 and 0.70 may be retained when overall construct reliability and convergent validity are satisfactory and when indicator deletion does not substantially enhance measurement quality (Hair et al., 2019).

The discriminant validity of the constructs was assessed using the heterotrait–monotrait ratio of correlations, as reported in

Table 3. Discriminant Validity–HTMT Ratio.

Constructs	C&I	IC	ID	IM	IS	OP
C&I	-
IC	0.905	-
ID	0.789	0.776	-
IM	0.786	0.681	0.888	-
IS	0.842	0.807	0.885	0.888	-
OP	0.675	0.577	0.518	0.524	0.457	-

. The majority of HTMT values were below the conservative threshold of 0.90, indicating satisfactory discriminant validity among the study constructs (Hair et al., 2019). Although the HTMT value between creativity and innovation and individualized consideration marginally exceeded the recommended cutoff (0.905), all remaining construct pairs were within acceptable limits. Given the strong internal consistency, adequate convergent validity, and the overall pattern of HTMT results, the measurement model demonstrates sufficient discriminant validity. These findings support the empirical distinctiveness of the constructs and confirm the suitability of the measurement model for subsequent structural model analysis.

5.2. Structural Model

Following the measurement model assessment, the structural model was evaluated for collinearity, model fit, and predictive accuracy. Collinearity was assessed using variance inflation factor (VIF) values, which ranged from 1.436 to 4.372, remaining below the recommended threshold of 5, indicating no multicollinearity concerns (Hair et al., 2011). Model fit was confirmed using the standardized root mean square residual (SRMR), which yielded 0.065, below the recommended cutoff of 0.08, indicating a good fit between the model and the observed data (Hu & Bentler, 1999). The model demonstrated substantial explanatory power, with R² values of 0.739 for creativity and innovation and 0.414 for organizational performance, while Q² values above zero confirmed predictive relevance. Out-of-sample predictive validity assessed using PLSpredict showed that most indicators had lower RMSE and MAE values compared to the linear benchmark, indicating at least medium predictive power and supporting the robustness of the model for hypothesis testing (Danks & Ray, 2018; Shmueli et al., 2019).

Hypothesis testing was conducted using bootstrapping to evaluate the significance of structural paths. Hypothesis 1 proposes that the four transformational leadership dimensions positively influence creativity and innovation. The findings reveal tht inspirational motivation (H1a, β = 0.201, t = 3.106, p = 0.002), individual consideration (H1c, β = 0.520, t = 8.534, p < 0.001), and intellectual stimulation (H1d, β = 0.176, t = 2.382, p = 0.017) were significant, whereas idealized influence (H1b, β = 0.052, t = 0.624, p = 0.533) was not. Hypothesis 2, examining the direct effects of transformational leadership dimensions on organizational performance, showed that only intellectual stimulation (H3d, β = 0.261, t = 2.772, p = 0.006) was significant, while inspirational motivation, idealized influence, and individual consideration were not (H2a–c). Hypothesis 3, positing a positive relationship between creativity and innovation and organizational performance, was supported (β = 0.579, t = 4.210, p < 0.001), indicating that creative and innovative practices are key drivers of performance outcomes. These findings suggest that transformational leadership enhances organizational performance primarily through fostering creativity and innovation, with intellectual stimulation exerting an additional direct influence.

Figure 2 presents the PLS-SEM results of the research framework, showing the significance levels (p-values) for each hypothesized relationship, while

Table 4. Structural Path Coefficients and Hypothesis Testing.

Path	Path Coefficient (β)	Sample Mean	Standard Deviation	T Statistics	p Value	Significance Level
H1a: IM → C&I	0.201	0.198	0.065	3.106	0.002	***
H1b: ID → C&I	0.052	0.045	0.084	0.624	0.533	n.s.
H1c: IC → C&I	0.529	0.540	0.062	8.534	0.000	***
H1d: IS → C&I	0.176	0.171	0.074	2.382	0.017	**
H2a: IM → OP	0.112	0.095	0.175	0.639	0.523	n.s.
H2b: ID → OP	0.111	0.124	0.131	0.846	0.398	n.s.
H2c: IC → OP	0.105	0.094	0.105	1.004	0.315	n.s.
H2d: IS → OP	0.261	0.257	0.094	2.772	0.006	***
H3: C&I → OP	0.579	0.586	0.137	4.210	0.000	***

Notes: N = 314; Inspirational Motivation (IM), Idealized Influence (ID), Individual Considerations (IC) and Intellectual Stimulation (IS), Organizational Performance (OP), Creativity and Innovation (CI); *** (p < 0.00); ** (p < 0.01); n.s. (not significant).

provides the detailed path coefficients and corresponding statistical results.

5.3. Mediating Effect

This study examined the mediating role of Creativity and Innovation (CI) in the relationships between transformational leadership dimensions and organizational performance (OP). Bootstrapping results showed significant indirect effects for IM → CI → OP (β = 0.116, t = 2.597, p = 0.009) and IC → CI → OP (β = 0.306, t = 3.669, p < 0.001), while the effects of ID → CI → OP (β = 0.030, t = 0.587, p = 0.557) and IS → CI → OP (β = 0.102, t = 1.959, p = 0.050) were non-significant (

Table 5. Mediation Analysis.

Hypothesis	Mediation Path	Path Coefficient (β)	T Value	p Value	Mediation Type
H4a	IM → CI → OP	0.116	2.597	0.009	Full mediation
H4b	ID → CI → OP	0.030	0.587	0.557	Not significant
H4c	IC → CI → OP	0.306	3.669	0.000	Full mediation
H4d	IS → CI → OP	0.102	1.959	0.050	Not significant

Note: p-values < 0.05 indicate statistically significant mediation.

). Analysis of total, direct, and indirect effects confirmed that CI fully mediates the influence of IM and IC on OP. These results indicate that transformational leadership enhances organizational performance primarily through fostering creativity and innovation, emphasizing CI as a key mediating mechanism.

6. Discussion and Conclusions

The findings of this study provide nuanced insights into the role of transformational leadership in fostering creativity, innovation, and organizational performance within Malaysia’s mobile network operators. The results indicate that inspirational motivation, intellectual stimulation, and individualized consideration positively impact creativity and innovation, whereas idealized influence does not. Inspirational motivation enhances innovation by articulating a compelling vision, instilling optimism, and fostering confidence among employees, which encourages engagement in radical problem-solving (Bass & Riggio, 2006). Intellectual stimulation prompts employees to question assumptions and explore alternative solutions, fostering exploratory and innovative thinking (M. Y. Chen et al., 2012). Individualized consideration supports creativity by mentoring employees and accommodating their unique abilities, which motivates them to generate novel solutions (Kim, 2014). The absence of a significant effect for idealized influence suggests that ethical role modeling and emphasizing shared values alone may be insufficient to stimulate creativity without actionable engagement (I. J. Chen & Paulraj, 2004). This finding may also reflect contextual characteristics of the telecommunications industry, where operational standardization and performance pressures may limit the extent to which symbolic leadership behaviors translate into observable creative outcomes.

Creativity and innovation were confirmed as significant predictors of organizational performance, highlighting their strategic value in enhancing operational and financial outcomes. Organizations that prioritize creative behaviors are better positioned to respond to complex, turbulent business environments, maintain competitiveness, and improve overall effectiveness (Muñoz-Pascual & Galende, 2017). Rather than merely confirming prior research, this finding analytically reinforces the argument that creativity and innovation function as strategic capability-building mechanisms that convert leadership influence into measurable performance outcomes. The findings suggest that transformational leadership contributes indirectly to performance by fostering a creative climate, enabling employees to devise innovative solutions that enhance organizational processes and outcomes (Anderson et al., 2014; Lerro et al., 2023).

Only intellectual stimulation among transformational leadership traits demonstrated a direct positive effect on organizational performance, indicating its role in driving employee engagement, problem-solving, and goal attainment (Anjali & Anand, 2015; Smothers et al., 2016). The non-significant effects of inspirational motivation, idealized influence, and individualized consideration suggest that these traits influence performance primarily through indirect pathways, such as creativity and innovation, or may require contextual factors not captured in this study to translate into measurable outcomes (Rawung et al., 2015). One possible explanation is that performance in telecommunications organizations is closely tied to technical problem-solving capabilities, which align more directly with intellectual stimulation than relational leadership behaviors. In addition, the performance indicators may capture short-term outcomes, whereas dimensions such as idealized influence and individualized consideration may exert longer-term cultural effects. These results therefore point to contextual and temporal boundary conditions rather than theoretical insignificance.

The mediating role of creativity and innovation was significant for the paths from inspirational motivation and individualized consideration to organizational performance, demonstrating full mediation. Employees respond to visionary and personalized leadership by engaging in creative problem-solving, which subsequently enhances performance (Avolio & Bass, 2002). In contrast, the mediating effect was not supported for idealized influence and intellectual stimulation, suggesting that other mechanisms, such as professional or career commitment, may be more relevant in translating these leadership traits into performance outcomes (Van Rossenberg et al., 2022). For idealized influence, trust and ethical modeling alone may be insufficient to drive innovation-related performance without complementary structural support. For intellectual stimulation, the significant direct effect but non-significant mediation indicates that its influence on performance occurs independently of creativity. These findings underscore that transformational leadership dimensions contribute to organizational outcomes in distinct ways.

In conclusion, this study demonstrates that transformational leadership impacts organizational performance through differentiated pathways rather than uniform effects across dimensions. Intellectual stimulation directly enhances performance, while inspirational motivation and individualized consideration operate through the mediation of creativity and innovation. These results underscore the importance of fostering a leadership culture that actively stimulates, mentors, and motivates employees to generate creative solutions. By doing so, organizations can achieve sustainable improvements in performance, highlighting the need for context-specific leadership strategies that align with both organizational and employee priorities.

7. Implications

This study advances transformational leadership theory by explicating how leadership behaviors translate into organizational performance through creativity and innovation. Moving beyond aggregate conceptualizations, the findings demonstrate that transformational leadership dimensions exert differential effects, intellectual stimulation emerging as the only behavior directly enhancing performance, while inspirational motivation and individualized consideration operate indirectly through creativity and innovation, and idealized influence shows non-significant effects on both creativity and performance. This challenges the dominant assumption of uniform leadership effects and reinforces the need for behavior-level analysis (Bass & Riggio, 2006). By modeling creativity and innovation as an organizational capability and anchoring the framework in Social Exchange Theory, the study extends prior work by clarifying how each leadership dimension contributes differently to innovation-driven performance, highlighting both significant and non-significant relationships in the context of Malaysian mobile network organizations.

Practically, the findings underscore that leadership effectiveness lies not merely in motivation or role modeling but in actively stimulating employees’ cognitive engagement with problems. Organizations, especially in fast-paced industries such as telecommunications, should prioritize leadership development that strengthens intellectual stimulation while institutionalizing structures and support mechanisms that enable creativity to materialize into performance gains. Aligning leadership behaviors with an innovation-supportive climate allows firms to better leverage employee contributions, sustain competitiveness, and improve performance outcomes in saturated and dynamic markets.

8. Limitations and Future Research

Despite its contributions, this study has several limitations that open avenues for future research. Methodologically, the cross-sectional design restricts causal inference, as leadership behaviors, creativity and performance may evolve; thus, longitudinal designs would be valuable for capturing dynamic relationships. Contextually, the focus on Malaysia’s mobile telecommunication sector limits generalizability, suggesting that future studies should replicate the framework across industries, regions and national contexts, including comparative analyses between locally owned and foreign-affiliated firms to account for cultural and ownership influences on leadership and innovation practices. The reliance on self-reported survey data also introduces the potential for social desirability effects; future research could adopt mixed-method or multi-source approaches, archival performance data or qualitative interviews to enrich interpretive depth. In addition, the model may be extended by incorporating complementary organizational mechanisms such as knowledge management, human resource practices, organizational commitment or employee engagement, as well as by examining creativity and innovation as multidimensional constructs to better capture their nuanced effects. Expanding sample size and employing diversified data collection modes would further strengthen robustness and external validity, thereby advancing theory development and practical relevance in leadership and innovation research.