The Moderating Effect of Environmental Dynamism on the Relationship between Entrepreneur Leadership Behavior and New Venture Performance

Abstract

Examines the impact of entrepreneur leadership behavior onfirm performance and assesses the moderating influence of environmentaldynamism on the relationship between leadership behavior and firm performance.A discussion of transactional leadership (i.e., the exchange relationshipsbetween leaders and their subordinates) and transformational leadership (i.e.,the process by which leaders and subordinates coordinate their efforts toeffect major change) leads to the development of a model of the moderatingeffect of environmental dynamism on the relationship between leadershipbehavior (transactional and transformational) and new venture performance. This model spawns a number of hypotheses that are tested in light of datafrom a survey of 168 managers from 66 fast-growing new firms. Analysis of thedata reveals that environmental dynamism has a negative moderating effect onthe relationship between transactional leadership and firm performance and apositive moderating effect on the relationship between transformationalleadership and performance. It appears, then, that transactional leadership ismore effective in stable environments, while transformational leadershipthrives in dynamic environments. (SAA)

Keywords: Environmental dynamism, Firm survival, Startups, Firm performance, Leadership styles, Environment, Firm governance, Organizational leadership, Assimilation