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CEO transformational leadership and firm performance: A moderated mediation model of TMT trust climate and environmental dynamism

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Abstract

This study examines the role of top management team (TMT) trust climate in the relationship between CEO transformational leadership (TFL) and firm performance under dynamic environments. The research results based on a sample collected from firms in Vietnam show that TMT trust climate is a key mediator which can convert CEO TFL into better performance outcomes. Moderated-mediation analyses further reveal that the mediating effect of TMT trust climate is more significant in less dynamic environments. Our study contributes to the TFL theory by identifying a critical mechanism that intervenes in the relationship between CEO-level TFL and firm performance. We reveal how CEOs exert leadership influence on subsequent TMT dynamics and performance outcomes by navigating external environments. Moreover, our study offers insights with regard to the trust theory by uncovering TMT-level intragroup trust as a mediator, and thus complements most of prior examinations that focus on the moderating role of trust in workplace team contexts.

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Notes

  1. To identify the moderating pattern of environmental dynamism, we present an interaction plot in Fig. 2, using one standard deviation above and below the mean to capture high and low dynamic environment (n = 152). We do not present the interaction plot based on the 69 sample with objective performance as the pattern of its figure is very similar with that based on the 152 sample firms.

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Acknowledgments

Financial support from the Ministry of Science and Technology, Taiwan (NSC99-2410-H-006-004-MY3) is acknowledged.

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  1. Department of Business Management, National Sun Yat-sen University, 70 Lienhai Rd., Gushan District, Kaohsiung City, 80424, Taiwan

    Hao-Chieh Lin

  2. Department of Business Administration, National Cheng Kung University, Tainan City, 70101, Taiwan

    Trang Thi Ha Dang

  3. Institute of Labor, Occupational Safety and Health, Ministry of Labor, New Taipei City, 22143, Taiwan

    Yu-Sheng Liu

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Lin, HC., Dang, T.T.H. & Liu, YS. CEO transformational leadership and firm performance: A moderated mediation model of TMT trust climate and environmental dynamism. Asia Pac J Manag 33, 981–1008 (2016). https://doi.org/10.1007/s10490-016-9468-x

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