Skip to main content

How Does Perceived Integrity in Leadership Matter to Firms in a Transitional Economy?

Journal of Business Ethics volume 167, pages 623–641 (2020)Cite this article

Abstract

Perceived integrity of managers affects employee attitudes. Yet its impact on employee behavior and organizational performance is unknown. Addressing this gap, we examine the effect of perceived integrity in leadership on both subjective firm performance and objective employee productivity. Applying dynamic capabilities theory, we propose that perceived integrity in leadership may not only directly affect the outcome variables but also moderate the effect of the firm’s multiple-strategy implementation on outcome variables. We test the hypotheses using multiple informants from a transitional economy with an ineffective legal and incomplete institutional environment, which could seriously challenge the leader’s commitment to integrity. As hypothesized, perceived integrity is associated with manager’s perception of firm performance directly and objective employee productivity through its moderating role in the firm’s implementation process of dual strategies. The results illustrate that perceived integrity in leadership plays as an important driver for employee productivity in dual-strategy and non-strategy firms. We provide detailed discussions about the integrity challenge and call for additional future research on this topic.

This is a preview of subscription content, access via your institution.

Access options

Buy single article

Instant access to the full article PDF.

USD 39.95

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Fig. 1
Fig. 2

References

  • Aiken, L. S., & West, S. G. (1991). Multiple regression: Testing and interpreting interactions. Newbury Park, CA: Sage Publications.

    Google Scholar 

  • Atuahene-Gima, K., & Ko, A. (2001). An empirical investigation of the effect of market orientation and entrepreneurship orientation alignment on product innovation. Organizational Science, 12(1), 54–74.

    Google Scholar 

  • Avey, J. B., Palanski, M. E., & Walumbwa, F. O. (2011). When leadership goes unnoticed: The moderating role of follower self-esteem on the relationship between ethical leadership and follower behavior. Journal of Business Ethics, 98(4), 573–582.

    Google Scholar 

  • Bagozzi, R. P., Yi, Y., & Phillips, L. W. (1991). Assessing construct validity in organizational research. Administrative Science Quarterly, 36(3), 421–458.

    Google Scholar 

  • Barreto, I. (2009). Dynamic capabilities: A review of past research and an agenda for the future. Journal of Management, 36(1), 256–280.

    Google Scholar 

  • Berry, J. W. (1980). Introduction to methodology. In H. C. Triandis & J. W. Berry (Eds.), Handbook of cross-cultural psychology (Vol. 2, pp. 1–28). Boston, MA: Allyn and Bacon.

    Google Scholar 

  • Berthon, P., Hulbert, J. M., & Pitt, L. (2004). Innovation or customer orientation? An empirical investigation. European Journal of Marketing, 38(9/10), 1065–1090.

    Google Scholar 

  • Bhuian, S. N., Menguc, B., & Bell, S. M. (2005). Just entrepreneurial enough: The moderating effect of entrepreneurship on the relationship between market orientation and performance. Journal of Business Research, 58(1), 9–17.

    Google Scholar 

  • Bogliacino, F., & Pianta, M. (2009). The impact of innovation on labour productivity growth in European industries: Does it depend on firms’ competitiveness strategies? IPTS Working Paper on Corporate R&D and Innovation 13, pp. 1–26.

  • Bommer, W. H., Johnson, J. L., Rich, G. A., Podsakoff, P. M., & Mackenzie, S. B. (1995). On the interchangeability of objective and subjective measures of employee performance: A meta-analysis. Personnel Psychology, 48(3), 587–605.

    Google Scholar 

  • Boso, N., Story, V. M., & Cadogan, J. W. (2013). Entrepreneurial orientation, market orientation, network ties, and performance: Study of entrepreneurial firms in a developing economy. Journal of Business Venturing, 28(6), 708–727.

    Google Scholar 

  • Brik, A. B., Rettab, B., & Mellahi, K. (2011). Market orientation, corporate social responsibility, and business performance. Journal of Business Ethics, 99(3), 307–324.

    Google Scholar 

  • Brown, M. E. (2007). Misconceptions of ethical leadership: How to avoid potential pitfalls. Organizational Dynamics, 36(2), 140–155.

    Google Scholar 

  • Brown, M. E., Treviño, L. K., & Harrison, D. A. (2005). Ethical leadership: A social learning perspective for construct development and testing. Organizational Behavior and Human Decision Processes, 97(2), 117–134.

    Google Scholar 

  • Chen, F. (2000). Subsistence crises, managerial corruption and labour protests in China. The China Journal, 44(July), 41–63.

    Google Scholar 

  • Child, J., & Tse, D. K. (2001). China and the impacts on international business. Journal of International Business Studies, 32(1), 8–21.

    Google Scholar 

  • Christensen, C. M. (1997). The innovator’s dilemma: When new technologies cause great firms to fail. Boston, MA: Harvard Business School Press.

    Google Scholar 

  • Christensen, C. M., & Bower, J. L. (1996). Customer power, strategic investment, and the failure of leading firms. Strategic Management Journal, 17(March), 197–218.

    Google Scholar 

  • Cohen, A., Fiorini, K., Culham, T., & Bai, H. (2013). The circle of leadership integrity within business organizations. In A. Stachowicz & W. Amann (Eds.), Integrity in organizations: Building the foundations for humanistic management. New York: Palgrave Macmillan Publishers.

    Google Scholar 

  • Conway, J., & Lance, C. (2010). What reviewers should expect from authors regarding common method bias in organizational research. Journal of Business and Psychology, 25(3), 325–334.

    Google Scholar 

  • Craig, S. B., & Gustafson, S. B. (1998). Perceived leader integrity scale: An instrument for assessing employee perceptions of leader integrity. Leadership Quarterly, 9(2), 127–145.

    Google Scholar 

  • Crook, T. R., Todd, S., Combs, J., Woehr, D., & Ketchen, D. (2011). Does human capital matter? A meta-analysis of the relationship between human capital and firm performance. Journal of Applied Psychology, 96(3), 443–456.

    Google Scholar 

  • Davis, A. L., & Rothstein, H. R. (2006). The effects of the perceived behavioral integrity of managers on employee attitudes: A meta-analysis. Journal of Business Ethics, 67(4), 407–419.

    Google Scholar 

  • Dawes, J. (1999). The relationship between subjective and objective performance measures in market orientation: Further empirical evidence. Marketing Bulletin, 10(1), 65–76.

    Google Scholar 

  • Dobni, C. B., & Luffman, G. (2003). Determining the scope and impact of market orientation profiles on strategy implementation and performance. Strategic Management Journal, 24(6), 577–585.

    Google Scholar 

  • Elenkov, D. S., Judge, W., & Wright, P. (2005). Strategic leadership and executive innovation influence: An international multi-cluster comparative study. Strategic Management Journal, 26(7), 665–682.

    Google Scholar 

  • Engelbrecht, A. S., Heine, G., & Mahembe, B. (2017). Integrity, ethical leadership, trust and work engagement. Leadership & Organization Development Journal, 38(3), 368–379.

    Google Scholar 

  • Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39–50.

    Google Scholar 

  • Gong, T. (2015). Managing government integrity under hierarchy: Anti-corruption efforts in local China. Journal of Contemporary China, 24(94), 684–700.

    Google Scholar 

  • Greenwood, M., & Freeman, R. E. (2018). Deepening ethical analysis in business ethics. Journal of Business Ethics, 147(1), 1–4.

    Google Scholar 

  • Grinstein, A. (2008). The relationships between market orientation and alternative strategic orientations. European Journal of Marketing, 42(1/2), 115–134.

    Google Scholar 

  • Harter, J. K., Schmidt, F. L., & Hayes, T. L. (2002). Business-unit-level relationship between employee satisfaction, employee engagement, and business outcomes: A meta-analysis. Journal of Applied Psychology, 87(2), 268–279.

    Google Scholar 

  • Haslam, S. A., Ryan, M. K., Kulich, C., Trojanowski, G., & Atkins, C. (2010). Investing with prejudice: The relationship between women’s presence on company boards and objective and subjective measures of company performance. British Journal of Management, 21, 484–497.

    Google Scholar 

  • Helfat, C. E., & Peteraf, M. A. (2003). The dynamic resource-based view: Capability lifecycles. Strategic Management Journal, 24(10), 997–1010.

    Google Scholar 

  • Hitt, M. A., Beamish, P. W., Jackson, S. E., & Mathieu, J. E. (2007). Building theoretical and empirical bridges across levels: Multilevel research in management. Academy of Management Journal, 50, 1385–1399.

    Google Scholar 

  • Hollander, E. P. (1978). Leadership dynamics: A practical guide to effective relationships. New York: Free Press.

    Google Scholar 

  • Hulpke, J., & Lau, C. (2008). Business ethics in China: A human resource management issue. The Chinese Economy, 41(3), 58–67.

    Google Scholar 

  • Hunt, S. D., & Vasquez-Parraga, A. Z. (1993). Organizational consequences, marketing ethics, and salesforce supervision. Journal of Marketing Research, 30(1), 78–90.

    Google Scholar 

  • Hurley, R., & Hult, G. T. M. (1998). Innovation, market orientation, and organizational learning: An integration and empirical examination. Journal of Marketing, 62(3), 42–54.

    Google Scholar 

  • Ireland, R. D., Kuratko, D. F., & Morris, M. H. (2006). A health audit for corporate entrepreneurship: Innovation at all levels: Part II. Journal of Business Strategy, 27(2), 21–30.

    Google Scholar 

  • James, L. R. (1982). Aggregation bias in estimates of perceptual agreement. Journal of Applied Psychology, 67(2), 219–229.

    Google Scholar 

  • James, L. R., Demaree, R. G., & Wolf, G. (1984). Estimating within-group interrater reliability with and without response bias. Journal of Applied Psychology, 69(1), 85–98.

    Google Scholar 

  • Jaworski, B. J., & Kohli, A. K. (1993). Market orientation: Antecedents and consequences. Journal of Marketing, 57(3), 53–70.

    Google Scholar 

  • Kacmar, K. M., Andrews, M. C., Harris, K. J., & Tepper, B. J. (2013). Ethical leadership and subordinate outcomes: The mediating role of organizational politics and the moderating role of political skill. Journal of Business Ethics, 115(1), 33–44.

    Google Scholar 

  • Katila, R., & Ahuja, G. (2002). Something old, something new: A longitudinal study of search behavior and new product introduction. Academy of Management Journal, 45(6), 1183–1194.

    Google Scholar 

  • Kellerman, B. (2007). Bad leaders. Leadership Excellence, 24(9), 17.

    Google Scholar 

  • Kim, T., & Leung, K. (2007). Forming and reacting to overall fairness: A cross-cultural comparison. Organizational Behavior and Human Decision Processes, 104(1), 83–95.

    Google Scholar 

  • Kimberly, J. R. (1976). Organizational size and the structuralist perspective: A review, critique and proposal. Administrative Science Quarterly, 21(4), 571–597.

    Google Scholar 

  • Kirca, A. H., Jayachandran, S., & Bearden, W. O. (2005). Market orientation: A meta-analytic review and assessment of its antecedents and impact on performance. Journal of Marketing, 69(2), 24–41.

    Google Scholar 

  • Kohli, A. K., & Jaworski, B. J. (1990). Market orientation: The construct, research propositions, and managerial implications. Journal of Marketing, 54(2), 1–18.

    Google Scholar 

  • Kuratko, D. F., Ireland, R. D., & Hornsby, J. S. (2001). Improving firm performance through entrepreneurial actions: Acordia’s corporate entrepreneurship strategy. Academy of Management Executive, 15(4), 60–71.

    Google Scholar 

  • Leff, N. (1964). Economic development through bureaucratic corruption. In A. Heidenheimer & M. Johnston (Eds.), Political corruption (pp. 307–338). New Brunswick, NJ: Transaction Publishers.

    Google Scholar 

  • Li, A., & Cropanzano, R. (2009). Do East Asians respond more/less strongly to organizational justice than North Americans? A meta-analysis. Journal of Management Studies, 46(5), 787–805.

    Google Scholar 

  • Li, Y., Zhao, Y., Tan, J., & Liu, Y. (2008). Moderating effects of entrepreneurial orientation on market orientation–performance linkage: Evidence from Chinese small firms. Journal of Small Business Management, 46(1), 113–133.

    Google Scholar 

  • Lindell, M. K., & Whitney, D. J. (2001). Accounting for common method variance in cross-sectional research designs. Journal of Applied Psychology, 86(1), 114–121.

    Google Scholar 

  • Lukas, B. A., & Ferrell, O. C. (2000). The effect of market orientation on product innovation. Journal of the Academy of Marketing Science, 28(2), 239–247.

    Google Scholar 

  • Lumpkin, G. T., & Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Review, 21(1), 135–172.

    Google Scholar 

  • Menguc, B., & Auh, S. (2006). Creating a firm-level dynamic capability through capitalizing on market orientation and innovativeness. Journal of the Academy of Marketing Science, 34(1), 63–73.

    Google Scholar 

  • Merlo, O., & Auh, S. (2009). The effects of entrepreneurial orientation, market orientation, and marketing subunit influence on firm performance. Marketing Letters, 20(3), 295–311.

    Google Scholar 

  • Miles, R. E., & Snow, C. C. (1978). Organizational strategy, structure, and process. New York: McGraw-Hill.

    Google Scholar 

  • Morgan, T., Anokhin, S., Kretinin, A., & Frishammar, J. (2015). The dark side of the entrepreneurial orientation and market orientation interplay: A new product development perspective. International Small Business Journal, 33(7), 731–751.

    Google Scholar 

  • Morgan, N. A., Vorhies, D. W., & Mason, C. H. (2009). Market orientation, marketing capabilities, and firm performance. Strategic Management Journal, 30(8), 909–920.

    Google Scholar 

  • Moriarty, R. T., & Kosnik, T. J. (1989). High-tech marketing: Concepts, continuity, and change. Sloan Management Review, 30(4), 7–17.

    Google Scholar 

  • Ncube, L. B., & Wasburn, M. H. (2006). Strategic collaboration for ethical leadership: A mentoring framework for business and organizational decision making. Journal of Leadership & Organizational Studies, 13(1), 77–92.

    Google Scholar 

  • Olson, E. M., Slater, S. F., & Hult, G. T. (2005). The performance implications of fit among business strategy, marketing organization structure, and strategic behavior. Journal of Marketing, 69(3), 49–65.

    Google Scholar 

  • Pablos, P. O. D., & Lytras, M. D. (2008). Competencies and human resource management: Implications for organizational competitive advantage. Journal of Knowledge Management, 12(6), 48–55.

    Google Scholar 

  • Palanski, M. E., & Yammarino, F. J. (2007). Integrity and leadership: Clearing the conceptual confusion. European Management Journal, 25(3), 171–184.

    Google Scholar 

  • Palanski, M. E., & Yammarino, F. J. (2009). Integrity and leadership: A multi-level conceptual framework. Leadership Quarterly, 20(3), 405–420.

    Google Scholar 

  • Pastoriza, D., & Ariño, M. A. (2013). Does the ethical leadership of supervisors generate internal social capital? Journal of Business Ethics, 118(1), 1–12.

    Google Scholar 

  • Pearson, G. J. (1993). Business orientation: Cliché or substance? Journal of Marketing Management, 9(3), 233–243.

    Google Scholar 

  • Pillay, P. (2014). Integrity leadership. African Journal of Public Affairs, 7(2), 27–38.

    Google Scholar 

  • Podsakoff, P. M., MacKenzie, S. B., Lee, J. Y., & Podsakoff, N. P. (2003). Common method biases in behavior research: A critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5), 879–903.

    Google Scholar 

  • Podsakoff, P. M., & Organ, D. (1986). Self-reports in organizational research: Problems and prospects. Journal of Management, 12(4), 531–544.

    Google Scholar 

  • Prottas, D. J. (2008). Perceived behavioral integrity: Relationships with employee attitudes, well-being, and absenteeism. Journal of Business Ethics, 81(2), 313–322.

    Google Scholar 

  • Rosenbusch, N., Brinckmann, J., & Bausch, A. (2011). Is innovation always beneficial? A meta-analysis of the relationship between innovation and performance in SMEs. Journal of Business Venturing, 26(4), 441–457.

    Google Scholar 

  • Rubera, G., & Kirca, A. H. (2012). Firm innovativeness and its performance outcomes: A meta-analytic review and theoretical integration. Journal of Marketing, 76(3), 130–147.

    Google Scholar 

  • Schwab, B. (1996). Research notes and communications: A note on ethics and strategy: Do good ethics always make for good business? Strategic Management Journal, 17(6), 499–500.

    Google Scholar 

  • Sharif, M. M., & Scandura, T. A. (2014). Do perceptions of ethical conduct matter during organizational change? Ethical leadership and employee involvement. Journal of Business Ethics, 124(2), 185–196.

    Google Scholar 

  • Simons, T. L. (2002). Behavioral integrity as a critical ingredient for transformational leadership. Journal of Organizational Change Management, 12, 89–104.

    Google Scholar 

  • Simpson, P. M., Siguaw, J. A., & Enz, C. A. (2006). Innovation orientation outcomes: The good and the bad. Journal of Business Research, 59(10/11), 1133–1141.

    Google Scholar 

  • Singh, S., Darwish, T. K., & Potocnik, K. (2016). Measuring organizational performance: A case for subjective measures. British Journal of Management, 27, 214–224.

    Google Scholar 

  • Stern, N., McKee, D., & Rose, G. M. (2007). Developing the organization’s sensemaking capability: Precursor to an adaptive strategic marketing response. Industrial Marketing Management, 36(6), 731–744.

    Google Scholar 

  • Stock, R. M., & Zacharias, N. A. (2011). Patterns and performance outcomes of innovation orientation. Journal of the Academy of Marketing Science, 39(6), 870–888.

    Google Scholar 

  • Suh, T. (2005). Exploring a global pattern of e-business activities and strategic orientation. Journal of the American Academy of Business, 6(1), 309–314.

    Google Scholar 

  • Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13), 1319–1350.

    Google Scholar 

  • Teece, D. J., & Pisano, G. (1994). The dynamic capabilities of firms: An introduction. Industrial and Corporate Change, 3, 537–556.

    Google Scholar 

  • Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18, 509–533.

    Google Scholar 

  • Toor, S., & Ofori, G. (2009). Ethical leadership: Examining the relationships with full range leadership model, employee outcomes, and organizational culture. Journal of Business Ethics, 90(4), 533–547.

    Google Scholar 

  • Van Bruggen, G. H., Lilien, G. L., & Kacker, M. (2002). Informants in organizational marketing research: Why use multiple informants and how to aggregate responses. Journal of Marketing Research, 34(4), 469–478.

    Google Scholar 

  • Vij, S., & Bedi, H. S. (2016). Are subjective business performance measures justified? International Journal of Productivity and Performance Management, 65(5), 603–621.

    Google Scholar 

  • Wall, T. D., Mitchie, J., Patterson, M., Wood, S. J., Sheehan, M., Clegg, C. W., et al. (2004). On the validity of subjective measures of company performance. Personnel Psychology, 57(1), 95–118.

    Google Scholar 

  • Walsh, G., & Beatty, S. E. (2007). Customer-based corporate reputation of a service firm: Scale development and validation. Journal of the Academy of Marketing Science, 35(1), 127–143.

    Google Scholar 

  • Wedeman, A. (2012). Growth and corruption in China. China Currents, 11(2), 1–9.

    Google Scholar 

  • Wei, Y. S., Samiee, S., & Lee, R. P. (2014). The influence of organic organizational cultures, market responsiveness, and product strategy on firm performance in an emerging market. Journal of the Academy of Marketing Science, 42(1), 49–70.

    Google Scholar 

  • Wiklund, J., & Shepherd, D. (2005). Entrepreneurial orientation and small business performance: A configurational approach. Journal of Business Venturing, 20(1), 71–91.

    Google Scholar 

  • Xin, K. R., & Pearce, J. L. (1996). Guanxi: Connections as substitutes for formal institutional support. Academy of Management Journal, 39(6), 1641–1658.

    Google Scholar 

  • Yu, O. (2008). Corruption in China’s economic reform: A review of recent observations and explanations. Crime, Law and Social Change, 50(3), 161–176.

    Google Scholar 

  • Zahra, S. A. (2008). Being entrepreneurial and market driven: Implications for company performance. Journal of Strategy and Management, 1(2), 125–142.

    Google Scholar 

  • Zhou, K. Z., Gao, G. Y., Yang, Z., & Zhou, N. (2005). Developing strategic orientation in China: Antecedents and consequences of market and innovation orientations. Journal of Business Research, 58(8), 1049–1058.

    Google Scholar 

  • Zhou, K. Z., Li, J. J., Zhou, N., & Su, C. (2008). Market orientation, job satisfaction, product quality, and firm performance: Evidence from China. Strategic Management Journal, 29(9), 985–1000.

    Google Scholar 

  • Zinkhan, G. M. (2002). Relationship marketing: Theory and implementation. Journal of Market-Focused Management, 5, 83–89.

    Google Scholar 

Download references

Acknowledgements

We sincerely appreciate the help that Neil Morgan provided us.

Funding

The third author acknowledges the financial support provided by the Hong Kong Research Council (CERG CityU 1176/97H).

Author information

Authors and Affiliations

  1. Texas A&M International University, 5201 University Blvd, Laredo, TX, 78041, USA

    Yinghong Susan Wei

  2. Kenan-Flagler Business School, University of North Carolina at Chapel Hill, CB #3490, Chapel Hill, NC, 27599-3490, USA

    Hugh O’Neill

  3. Shenzhen University, Nanhai Ave 3688, ShenZhen, Guangdong, 518060, P. R. China

    Nan Zhou

Authors
  1. Yinghong Susan Wei
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Hugh O’Neill
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Nan Zhou
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Yinghong Susan Wei.

Ethics declarations

Conflict of interest

The authors declare that they have no conflict of interest.

Ethical Approval

This is a retrospective study with complete anonymity. However, informed consent was obtained from all individual participants included in the study. This article does not contain any studies with animals performed by any of the authors.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Wei, Y.S., O’Neill, H. & Zhou, N. How Does Perceived Integrity in Leadership Matter to Firms in a Transitional Economy?. J Bus Ethics 167, 623–641 (2020). https://doi.org/10.1007/s10551-019-04168-x

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-019-04168-x

Keywords

  • Perceived integrity in leadership
  • Ethics
  • Ethical leadership
  • Employee productivity
  • Subjective firm performance
  • Strategy implementation
  • Innovation orientation
  • Market orientation