A Study of Transformational Leadership, Strategic Flexibility, and Firm Performance: The Moderating Role of Environmental Dynamism

The relationship between leadership behavior and firm performance has always been a focus of academic research. This study offers a theoretical model that examines strategic flexibility as anintermediate mechanism in the relationship between transformational leadership and firm performance. On the basis of the dynamic environment in China, we tested environmental dynamism as a moderator in this relationship, empirically validated our hypotheses. We conducted questionnaire surveys of the senior managers of 328 companies located mainly in Beijing, Shanghai, and Guangdong, and received 210 valid samples. The results show that strategic flexibility has a fully mediating role in the relationship between transformational leadership and firm performance. Moreover, environmental dynamism was found to moderate the relationship between transformational leadership and strategic flexibility, as well as having moderating effects on the relationship between strategic flexibility and firm performance. These conclusions indicate that strategic flexibility and environmental dynamism influence the effect of transformational leadership on firm performance.