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LODJ
38,6 Transformational leadership and
corporate entrepreneurship
Cross-level mediation moderation evidence
812 Yi-Ying Chang
Business Administration,
Received 3 October 2015
Revised 18 November 2016
National Taiwan University of Science and Technology, Taipei, Taiwan, and
Accepted 18 November 2016 Che-Yuan Chang and Chung-Wen Chen
National Taiwan University of Science and Technology, Taipei, Taiwan

Abstract
Purpose – The purpose of this paper is to examine how transformational leadership may relate to corporate
entrepreneurship by adopting a multilevel approach. The authors also theorized and tested the top-down and
bottom-up intermediate process linking transformational leadership and corporate entrepreneurship.
Design/methodology/approach – Multisource data across different timeframes were collected from
129 managers and 244 employees from 55 units of 27 firms.
Findings – The results showed that transformational leadership and corporate entrepreneurship were
positively related at the unit level. Furthermore, unit-level collective efficacy mediated the relationship
between unit-level transformational leadership and unit-level corporate entrepreneurship. The authors also
found that the firm-level empowerment climate moderated the indirect effect of unit-level collective efficacy on
the relationship between unit transformational leadership and unit-level corporate entrepreneurship.
Originality/value – First, the goal of this study is to extend the single focus of transformational leadership
on corporate entrepreneurship (e.g. Ling et al., 2008) and develop a more thoughtful approach on determining
how transformational leaders influence corporate entrepreneurship across levels. This study responds to calls
for research to look at the impact of unit-level transformational leaders, such as middle managers, across
levels (Ren and Guo, 2011) and creates a multilevel framework in which transformational leaders at the unit
level influence the appearance of corporate entrepreneurship at the unit level.
Keywords Transformational leadership, Corporate entrepreneurship, Firm-level empowerment climate,
Cross-level evidence, Unit-level collective efficacy
Paper type Research paper

There is increasing attention in understanding the mechanisms to enhance corporate

entrepreneurship (i.e. the sum of a firm’s product innovation, business venturing, and strategic
renewal activities, Ling et al., 2008). In search for understanding corporate entrepreneurship,
scholars have recently explored leadership perspective (e.g. Ling et al., 2008). Four main
dimensions of transformational leadership have been studied: charisma: creating and presenting
an attractive vision of the future; inspirational motivation: energizing subordinates to go beyond
self-interest; intellectual stimulation: stimulating subordinates to challenge assumptions and
view problems from new perspectives; and individualized consideration: focusing on
subordinates’ development by offering support, encouragement, and coaching (Bass, 1985).
Transformational middle managers can not only stimulate interest in corporate
entrepreneurship, but also impact the ability of their subordinates to carry out these
activities when their subordinates collectively make efforts for their tasks (Cheung and
Wong, 2011; Hornsby et al., 2002). For instance, middle managers can use their
transformational leadership behaviors to inspire their subordinates by expanding and
Leadership & Organization
Development Journal raising their followers’ goals and offer them with confidence to go beyond the anticipations
Vol. 38 No. 6, 2017
pp. 812-833
particular in the implied or clear exchange agreement (Cheung and Wong, 2011). Unit-level
© Emerald Publishing Limited transformational leaders as middles are not only critical in “carrying out strategy
0143-7739
DOI 10.1108/LODJ-10-2015-0219 (downward influence)”, but also afford unique information and perspectives useful to firm in
adapting strategy in response to operational needs and environmental demands and Cross-level
opportunities (upward influence) (DeChurch et al., 2010, p. 1081). mediation
Notwithstanding all of this accrued knowledge, studies have not examined the relationship moderation
between mid-level transformational leaders and corporate entrepreneurship at the unit level.
For instance, previous studies (e.g. Bass et al., 2003; Liao and Chuang, 2007) mainly focus on evidence
the impact of unit-level transformational leaders on the followers’ performance such as
employee service performance or followers’ task performance (e.g. Chi and Pan, 2012) or 813
followers’ perceptions toward the leader such as leader-member exchange (Wang et al., 2005)
and trust in supervisors (MacKenzie et al., 2001) or motivational mediators such as intrinsic
motivation (Shin and Zhou, 2003) or self-concordant goals (Bono and Judge, 2003). Although
prior studies help in understanding what and how unit-level transformational leaders’
influence followers’ performance, one potential mediator (such as collective efficacy) and
unit-level work outcomes such as unit-level corporate entrepreneurship has received much
less attention. Moreover, previous studies mainly focused on conceptualizing transformational
leaders at the individual-level (e.g. Piccolo and Colquitt, 2006), which implies that leaders
might not perform in an identical manner toward all followers (Chi and Pan, 2012). However,
transformational leaders should be able to demonstrate consistent behaviors and actions
toward their followers, which produce a collective experience and shared mindset among
followers (Chi and Pan, 2012) such as unit-level transformational leaders. Thus, the first
research question of this study is the following:
RQ1. Is the unit-level transformational leader related to unit-level corporate entrepreneurship?
This question connects to the issue of multilevel intermediate linkages, which has received
little attention in corporate entrepreneurship research (Hornsby et al., 2002). Previous research
has focused mainly on the different activities used by chief executive officers (CEOs) and top
managers to support corporate entrepreneurship at the organizational level (Chen et al., 2014;
DeChurch et al., 2010). Furthermore, few attempts have been made to explore how much effort
unit-level transformational leaders put into cultivating the ability of the unit’s subordinates to
promote or facilitate different level of impacts (DeChurch et al., 2010) such as corporate
entrepreneurship at the unit level.
Much of the previous research has focused on corporate entrepreneurship at a single level
(e.g. Simsek and Heavey, 2011), despite the recognition that corporate entrepreneurship can
occur at multiple levels, including the lower level of the organizational hierarchy
(Hornsby et al., 2009). As a result, the question of whether the same antecedent (e.g. unit-
level transformational leaders) will similarly promote corporate entrepreneurship at the
unit level remains unanswered (Hornsby et al., 2009). As individual managers may perform
differently in a unit context, it is premature to speculate that CEO transformational leadership
would have the same relationship with unit-level work outcomes (DeChurch et al., 2010) such
as corporate entrepreneurship as it has with firm-level corporate entrepreneurship (e.g. Jung
et al., 2003). This study examines how the relationships of unit-level transformational leaders
may influence the occurrence of corporate entrepreneurship at the unit level through various
multiple intermediate mechanisms. Overall, this study aims to extend transformational
leadership and corporate entrepreneurship perspectives and research to both unit-and
cross-level relationships.
This research aims to make several contributions. First, the goal of this study is to extend the
single focus of transformational leadership on corporate entrepreneurship (e.g. Ling et al., 2008)
and develop a more thoughtful approach on determining how transformational leaders influence
corporate entrepreneurship across levels. This study responds to calls for research to look at the
impact of unit-level transformational leaders, such as middle managers, across levels (Ren and
Guo, 2011) and creates a multilevel framework in which transformational leaders at the unit
level influence the appearance of corporate entrepreneurship at the unit level.
LODJ Second, although research has recently examined the direct effect of firm-level
38,6 transformational leadership on corporate entrepreneurship (e.g. Ling et al., 2008), studies
have not established an understanding of those mechanisms through which transformational
leadership at the unit level may influence the development of corporate entrepreneurship
across levels (e.g. Wales et al., 2011). This study develops and tests a mediation mechanism
that links unit-level transformational leaders with corporate entrepreneurship at the unit level
814 and uncovers unit collective efficacy as the transitional mechanism. Collective efficacy
refers to a unit efficacy’s confidence to encourage subordinates to accomplish their tasks
(Bandura, 1997). Previous research on collective efficacy has focused chiefly on the
consequences of collective efficacy such as organizational outcomes; on the other hand, little is
known about the drivers of collective efficacy (Walumbwa et al., 2004). The importance of
understanding the role of collective efficacy at the unit level is not only to explore the
mediating effect of collective efficacy on unit-level outcomes such as corporate
entrepreneurship, but also to provide a greater understanding of those transformational
leadership behaviors that affect corporate entrepreneurship at the unit level.
Third, to advance the understanding of the effectiveness of unit transformational
leaders in promoting corporate entrepreneurship at the unit level, this research argues
that a firm’s empowerment climate may act as a vital contingency driver. A firm’s
empowerment climate comprises information sharing, autonomy through boundaries, and
unit responsibility and accountability (Blanchard et al., 1995). Spreitzer (2007) has
theorized that a firm’s empowerment climate may inspire subordinates to embark on the
pursuit of innovation and strategic renewal activities. Unfortunately, the research on
empowerment climate has focused mainly on its outcomes, while very little research has
looked at the boundary effects of empowerment climate. Although there have been
previous calls for more research on the boundary effects of empowerment climate
(Spreitzer, 2007), it is still unclear whether organizations with a strong empowerment
climate can improve the ability of transformational leadership at the unit level to
encourage the appearance of corporate entrepreneurship.

Theory and hypothesis

Previous research has noted that a relationship between transformational leaders and work
outcomes such as innovation and strategic renewal activities (e.g. Chen et al., 2014;
Cheung and Wong, 2011; Zacher and Rosing, 2015). According to Bass (1985),
transformational leaders motivate their subordinates to transcend their own interests for
the benefit of the group. Consequently, transformational leaders can review more
thoroughly the inputs and efforts made by their subordinates at the unit level. Bass (1985)
further argued that transformational leaders are able to encourage their subordinates to
think innovatively and search for new ways to perform their tasks. This line of assumption
implies that transformational leaders, especially middle managers at the unit level, can
encourage their subordinates to solve problems and become more involved in seeking new
opportunities to pursue innovation and strategic renewal activities. This point has received
empirical support (e.g. Chang, 2016; Krishnan, 2012). Scholars (e.g. Chen et al., 2014) have
revealed that transformational leadership is linked to the promotion of change and product
innovation in organizations.
Although there is a theoretical basis to presume that transformational leadership
behavior will affect the emergence of corporate entrepreneurship, this area of research has
received little consideration. According to Bass (1998), transformational leaders
demonstrate respect and confidence, and motivate their subordinates to reframe
problems, take risks, and advance old conditions in new ways. These leaders encourage
their members at the unit level to get involved in innovation through an open approach to
decision of a unit’s search of product and strategic renewal actions (Vera and Crossan, 2004).
Further, transformational leaders are caring, offering individual members support, Cross-level
mentoring and coaching (Vera and Crossan, 2004). Transformational leaders can also mediation
affect their followers’ performance and attitudes through communicating their visions moderation
(Krishnan, 2012) and moving away from standing that does not maintain their goals
(Chen et al., 2014; Moriano et al., 2014). When establishing new opportunities for product evidence
innovation and strategic renewal actions, transformational leaders focus on individual
members’ needs for achievement and growth. As a result, followers are more involved in 815
creating new opportunities for business ventures and product innovation within
organizations. Some researchers (e.g. Bass, 1985) have argued that transformational
leaders can foster increased cooperation among their followers to be close to their
organization and work toward a unit goal. Such leaders utilize their unit members’ diverse
backgrounds and experiences and create a mechanism for effective conflict resolution
(Vera and Crossan, 2004). Transformational leaders at the unit level can foster the learning
of their followers in the context of organizational change (Vera and Crossan, 2004) such as a
unit’s pursuit of product innovation and new business ventures. Also, transformational
leaders at the unit level can promote followers’ ability and motivation of their followers by
fostering a collective identity and vision for the pursuit of innovation and corporate
entrepreneurship at the unit level (Chang, 2016; Schweitzer, 2014). They encourage their
subordinates to meet organizational targets through intense interaction within units and by
promoting improvement in the context of strategic renewal actions. Moreover,
transformational leaders are able to form their followers’ identification, value
internalization, preference to contribution to a unit’s goals by exerting their influence on
these followers (Bass, 1985; Krishnan, 2012). For example, previous studies (e.g. Schweitzer,
2014; Zacher and Rosing, 2015) found that transformational leaders can support an
innovative culture that encourages their followers to engage in creative thoughts, risk
taking and innovative work ways. Unit-level transformational leaders can influence unit-
level followers toward unit-level goals such as unit-level corporate entrepreneurship
through using their verbal and symbolic behaviors to change followers’ collective
perceptions and motivate all followers in the unit (Chi and Pan, 2012; Shamir et al., 1993).
Unit-level transformational leaders can also use “frame alignment” behaviors (e.g. talk the
vision and clearly express the ideology toward the unit members) to cause followers’ values/
beliefs to and unit-level goals to be more congruent (Burns, 1978). In other words, the unit-
level transformational leaders clearly intensify the importance of unit values and then
attach them with unit members’ values and goals by using verbal and representative
discussions in public (e.g. making a speech or seminar) (Chi and Pan, 2012; Shamir et al.,
1993). Accordingly, transformational leaders at the unit level may foster radical
entrepreneurship at the unit level. In line with the above concepts of transformational
leadership and corporate entrepreneurship literature, as shown in the literature, this study
proposes the following hypothesis:
H1. Unit-level transformational leadership is positively related to the appearance of
unit-level corporate entrepreneurship.
Unit-level transformational leadership and unit-level corporate entrepreneurship: mediating
role of unit-level collective efficacy
There is rationale to presume that transformational leaders can influence collective efficacy
at the unit level. Shamir (1999) proposed that one of the most influential features of
transformational leadership is the ability of these leaders to increase their followers’
collective motivation. For example, unit-level transformational leaders can motivate their
unit members through displaying “role modeling” to increase unit-level followers and
showing such motivational behaviors to the whole unit (Chi and Pan, 2012). Drawing from
social identification perspective, this study reasons that transformational leadership leads to
LODJ the emergence of unit-level collective efficacy. First, according to social identification
38,6 perspective, an individual’s belief regarding a group/unit or organization is self-defining
(Pratt, 1998). Transformational leaders can enhance their followers’ perception of collective
efficacy by combining the self-efficacy of followers with the mission of the unit, “such that
followers” behavior for the sake of unit becomes self-expressive (Kark and Shamir, 2002).
Second, transformational leaders at the unit level can increase unit-level collective efficacy
816 by offering emotional and ideological rationalizations that combine the individual identities
of followers to form the collective identify of the unit (Kark and Shamir, 2002; Walumbwa
et al., 2004). Transformational leaders at the unit level can boost their followers’ perceptions
of collective efficacy by emphasizing a positive vision, communicating high performance
expectations, and articulating confidence in the ability of followers to contribute to the
mission and goals of their units (Shamir et al., 1993). Researchers (e.g. Avolio et al., 2001)
have argued that by encouraging subordinates to cooperate more fully to performance
collective tasks at the unit level, leaders can affect how the subordinates view their own
abilities, level of generosity, integrity, and information exchange behaviors. Furthermore,
unit-level transformational leaders can motivate their unit-level followers to provide high
levels of innovation through carrying out continuous improvements in the products and
services (e.g. Patiar and Mia, 2009). Unit-level transformational leaders can also request
to increase unit-level followers’ awareness of task outcomes, stimulate unit-level followers to
perform in the interests of units (Richardson and Vandenberg, 2005). Moreover,
transformational leaders at the unit level can stress the importance of the mission and
goals of the unit and highlights shared interests of unit members. This can create more
chances for unit members to appreciate unit achievement and the contributions of other unit
members, which results in the building of a collective identity (Kark and Shamir, 2002;
Walumbwa et al., 2004). For example, in their study of leadership and organizational
outcomes, Searle and Hanrahan (2011) found that transformational leaders can nurture
opportunities to motivate their followers with connected visions and a supportive context to
actualize the efficiency of organizations. Transformational leaders at the unit level can
establish their unit members’ collective efficacy by elevating the consciousness of unit
members to the efforts and involvement of all members, and by stressing the significance of
self-sacrifice for the common benefit of the unit members (Bass, 1998).
Unit-level collective efficacy can influence the corporate entrepreneurship activities of
subordinates in several ways. Bandura (1997) argued that individuals will solve the problems
they face within a unit in a similar way to how they would solve their own problems. Further,
unit members with high collective efficacy tend to be skeptical of negative feedback and thus
they are immune to the effects of such feedback (Silver et al., 1995). Accordingly, it is possible
that unit members with a lower level of collective efficacy fail to work collectively to pursue
new business ventures and understand the change of strategic renewal actions. On the other
hand, unit members with higher collective efficacy may make decisions collectively as a unit
regarding new venture activities or strategic renewal activities (Volkema and Gorman, 1998).
In the context of the formation of a new business venture, unit members work collectively to
make decisions and increase the effectiveness of the new venture. This is because the success
of a new business venture is dependent on the collective understanding of unit members about
strategic issues and opportunities (West, 2007). Researchers (e.g. Ginsberg, 1989; Prahalad and
Bettis, 1986) have indicated that unit collective efficacy is increasingly important if the new
venture or strategic renewal activities are to persist over time. This is because the new venture
or strategic renewal activities require the collective efficacy of unit members in order for them
to succeed in overcoming the variable conditions of such ventures or activities (West, 2007).
In fact, the collective efficacy of the unit members can assist unit members to develop a shared
and idiosyncratic understanding that meets the changing perspective of new ventures or
strategic renewal activities (Mohammed and Ringseis, 2001). As other variables may affect the
positive relationship between unit-level transformational leadership and unit-level corporate Cross-level
entrepreneurship such as a new business venture or a unit’s pursuit of product innovation mediation
(e.g. collective potency) (Ensley and Pearson, 2005), this study expects that collective efficacy moderation
at the unit level will partially mediate the relationship between unit-level transformational
leadership and unit-level corporate entrepreneurship. evidence
Overall, the preceding discussion proposes the following hypothesis:
H2. Unit-level collective efficacy partially mediates the relationship between unit-level 817
transformational leadership and unit-level corporate entrepreneurship.

Moderating role of firm-level empowerment climate: unit-level transformational leadership

and unit-level corporate entrepreneurship
There is reason to consider that a strong empowerment climate operates as a situational
enhancer (Howell et al., 1986), which further reinforces the partially mediating effect of
unit-level collective efficacy on the relationship between unit-level transformational
leadership and unit-level corporate entrepreneurship. First, drawing from climate
perspective (Schneider, 2000), this study expects that the empowerment climate creates
an organizational context that supports unit members to pursue new business ventures or
product innovation. This is because the empowerment climate gives unit members a
strategic focus under which they can undertake innovation and strategic renewal activities
(Seibert et al., 2004). Moreover, an organization with an empowerment climate creates a
context within which unit employees can evaluate the meaning of organizational structures
and practices associated with information sharing, boundaries and team accountability,
related to a unit’s search for a new business venture.
Second, as previous research (e.g. Hofmann et al., 2003) has stated, a social climate within a
firm emphasizes or de-emphasizes the content-specific role expectations for employees when
they react to the influence of their leaders. This research further argues that when the focal
unit is surrounded by a firm-wide condition that encourages a high level of information
sharing and autonomous action with a clear vision and goals, unit-level transformational
leaders are more likely to stimulate high collective efficacy in unit employees, as what the unit
leaders stress within the unit echoes the firm’s empowerment climate. Accordingly, a unit’s
pursuit of product innovation, a new business venture, or strategic renewal activities are
enhanced, bringing about more corporate entrepreneurship. By contrast, unit-level
transformational leaders in an organization without an empowerment climate may be less
efficient, because the climate promoted by these leaders may result in low collective efficacy
for the unit employees. As a result, unit employees with high collective efficacy who are
working toward a new business venture or strategic renewal activities within the unit may be
inhibited, thus reducing the chance that unit-level corporate entrepreneurship will emerge.
Third, unit-level transformational leaders can trigger higher level of innovation and
business ventures through fostering delegating decisions making and authority at the unit
level. As Guzzo and Dickson (1996) have hypothesized that the group context (in this case,
the firm-level empowerment climate) is a critical component to leverage for maximizing
group effectiveness such as unit-level corporate entrepreneurship. Previous studies
(e.g. Richardson and Vandenberg, 2005) indicated that unit-level transformational leaders
can be influenced by the contextual characteristics (in this case, firm-level empowerment
climate) to encourage unit-level followers to operate in the benefits of unit-level work
outcomes such as unit-level corporate entrepreneurship.
As discussed earlier, unit-level transformational leaders foster unit-level corporate
entrepreneurship under the influence of a firm’s empowerment climate, and this study
reasons that firm-level empowerment climate promotes information sharing among unit
employees and unit accountability for decision-making autonomy, which further enhances
LODJ the mediating effect of unit-level collective efficacy on the relationship between
38,6 transformational leaders and corporate entrepreneurship at the unit level. At a high level
of unit-level collective efficacy, individual unit employees are likely to perform their job
independently from their leader’s direction and control due to the impact of the firm’s
empowerment climate ( Jung and Sosik, 2002). In the context of empowerment within the
organization, unit transformational leaders often encourage their followers’ involvement in
818 unit work by underscoring the importance of cooperation in executing collective tasks,
offering the opportunity to learn from joint experience, and delegating authority to their
followers to undertake any necessary action for effective unit outcomes (Bass, 1985;
Jung and Sosik, 2002) such as a unit’s pursuit of product innovation or a new business
venture. Consequently, unit employees influenced by a firm-wide empowerment climate will
seek an innovative and creative approach to product innovation or a new business venture
or strategic renewal activities without the fear of penalty ( Jung and Sosik, 2002).
For instance, previous research (e.g. Jung, 2001) has argued that unit transformational
leaders who encourage a cooperative and participative decision-making process and
authority through a firm’s empowerment climate are important drivers for innovative and
creative solutions in a focal unit’s pursuit of product innovation, new ventures, or strategic
renewal activities. In combination, the above-mentioned arguments suggest the following
hypothesis (Figure 1):
H3. The firm-level empowerment climate moderates the indirect effect of unit-level
collective efficacy on the relationship between unit-level TFL and unit-level corporate
entrepreneurship, such that the effect is greater when the firm-level empowerment
climate is stronger.

Method
Sample and data
This study tested the proposed theoretical framework using data from manufacturing and
high technology industries in Taiwan (details see Table I). These firms were randomly
selected from company registrations in Taiwan. Each firm operates in markets with various
environmental dynamisms (Simsek, 2007). The choice of the research samples was due to
the fact that manufacturing and high technology industries faced rapidly changing
consumers’ needs and an uncertain competitive and technological environment (Ministry of
Economic Affairs, 2014). In other words, these industries faced a dynamic environment as
prior studies (e.g. Simsek, 2007) indicated. This research followed Ling et al.’s (2008)
classification in the field of transformational leadership and corporate entrepreneurship
research, these function areas of managers and employees included research and
development (R&D), marketing and sales, operation and other.

Firm-level
Empowerment Climate

Unit-level 0.19*

Figure 1.
Transformational Corporate
Transformational Collective Efficacy Entrepreneurship
leadership and Leadership 0.28** 0.57***
corporate
entrepreneurship
Notes: *p < 0.10; **p < 0.05; ***p < 0.01
Variable Breakdown %
Cross-level
mediation
Sector moderation
1. Manufacturing 12 40.0
2. High technology 18 60.0 evidence
Total 30 100.0
Function area 819
Managers 120 100.0
1. R&D 20 16.7
2. Marketing & sales 32 26.7
3. Operation 28 23.3
4. Other 40 33.3
Employees 240 100.0
1. R&D 40 16.7
2. Marketing & Sales 64 26.7
3. Operation 56 23.3 Table I.
4. Other 80 33.3 Sample distribution

In early 2014, we sent surveys to selected participants together with a supporting letter from
the CEO of the firm. The surveys were developed in English and translated into Chinese
using the back-translation method (Brislin, 1980). A total of 164 managers and 328
employees were surveyed across 82 units of 41 firms.
Excluding the invalid questionnaires, the final sample of this study included 60 units in
30 companies. The final valid respondents were 120 management positions (73.2 percent)
and 240 employees (73.2 percent). In the sample of this study, the average tenure of the
unit-level managers was 6.54 years. Manufacturing and high technology industries are
represented by the firms in the sample (Table I). Following Armstrong and Overton (1977),
this study also compared early (first 10 percent) and late (last 10 percent) respondents to
assess non-response bias on each dimension of corporate entrepreneurship. No significant
differences appeared from these dimensions.
In order to reduce common method bias, this study collected data from multiple sources.
First, 164 managers from 41 firms were chosen randomly from a list provided by the human
resource manager each firm. These participants were told the study’s purpose and were
asked to rate unit-level corporate entrepreneurship. Second, at least two employees from
each unit rated unit-level employee collective efficacy and unit-level transformational
leadership. Third, two senior managers from each firm’s headquarters rated the firm-level
empowerment climate.
Table I presents sample distribution. The questionnaires are attached in the Appendix.

Measures
Unit-level corporate entrepreneurship. Unit-level corporate entrepreneurship was measured
using a 17-item scale adapted from Simsek (2007). The rwg statistic may overestimate the
degree of agreement and result in values greater than 1, which are difficult to interpret.
Consequently, this study followed the strategy suggested by Schneider et al. (2002) and
adopted (sign-reversed) standard deviation values as the measure of choice for indexing
consensus. Because of the high level of agreement between raters within the same unit
(mean rwg ¼ 0.95, ICC(1) ¼ 0.42, ICC(2) ¼ 0.95), this study averaged the responses of
managers within each unit to create an aggregated measure of unit-level corporate
entrepreneurship. This study used the main study data – 120 managers’ ratings of unit-level
corporate entrepreneurship – to conduct a CFA. Following previous studies, we accounted
for measurement error of our variables by forming parcels of indicators for each latent
LODJ construct using the random assignment technique (i.e. Landis et al., 2000; Gong and
38,6 Fan, 2006). Our theorized model with four randomly created parcels under each factor fitted
the data well ( χ2 ¼ 3.44, df ¼ 2, p W0.10, RMSEA ¼ 0.08, CFI ¼ 0.98, goodness-of-fit index
(GFI) ¼ 0.99, Tucker-Lewis index (TLI) ¼ 0.98) (Simsek, 2007). The results indicated that the
measure was valid and reliable. In this study, unit-level corporate entrepreneurship showed
good reliability (α ¼ 0.93).
820 Unit-level transformational leadership. This study used the 20-item Multifactor
Leadership Questionnaire (MLQ Form 5X-Short), developed by previous studies
(Avolio et al., 1999; Bass and Avolio, 1995), to possess convergent and discriminate
validity. The measure has four unique dimensions, and it was adapted on a seven-point
scale. Two senior employees from each unit rated the items. This study followed previous
research (e.g. Bass and Avolio, 1995) and used the four dimensions to create an index of
transformational leadership. Our theorized model with four randomly created parcels under
each factor fitted the data well ( χ2 ¼ 4.64, df ¼ 2, p o0.01, RMSEA ¼ 0.07, CFI ¼ 0.99,
GFI ¼ 0.99, TLI ¼ 0.99). The rwg statistic may overestimate the degree of agreement and
result in values greater than 1, which are difficult to interpret. Consequently, this study
followed the strategy suggested by Schneider et al. (2002) and adopted (sign-reversed)
standard deviation values as the measure of choice for indexing consensus. Tests showed
that employees from the same firm had a high level of agreement regarding unit-level
transformational leadership (mean rwg ¼ 0.96, ICC(1) ¼ 0.45, ICC(2) ¼ 0.95). The results
indicated that the measure was valid and reliable. In this study, unit-level transformational
leadership showed good reliability (α ¼ 0.94).
Firm-level empowerment climate. This study used the 30-item empowerment climate scale
developed by previous studies (Blanchard et al., 1995) to possess convergent and discriminate
validity. Two unit managers from each firm’s headquarters rated the firm-level empowerment
climate. Our theorized model with four randomly created parcels under each factor fitted the
data well ( χ2 ¼ 2.96, df ¼ 2, po0.01, RMSEA ¼ 0.06, CFI ¼ 0.99, GFI ¼ 0.99, TLI ¼ 0.98). Tests
revealed that the two unit managers from each firm’s headquarters had a high level of
agreement regarding firm-level empowerment climate (mean rwg ¼ 0.97, ICC(1) ¼ 0.36, ICC
(2) ¼ 0.93). In this study, firm-level empowerment climate showed good reliability (α ¼ 0.95).
Unit-level employee collective efficacy. This study used a 12-item collective efficacy scale
developed by Chen et al. (2002), and it was adapted on a seven-point scale. The 12 items
showed good reliability (α ¼ 0.94). Our theorized model with four randomly created parcels
under each factor fitted the data well ( χ2 ¼ 2.88, df ¼ 2, p o0.01, RMSEA ¼ 0.04, CFI ¼ 0.99,
GFI ¼ 0.99, TLI ¼ 0.99). Consequently, this study followed the strategy suggested by
Schneider et al. (2002) and adopted (sign-reversed) standard deviation values as the measure
of choice for indexing consensus. Tests showed that directors from the same firm had a high
level of agreement regarding unit-level employee collective efficacy (mean rwg ¼ 0.93,
ICC(1) ¼ 0.38, ICC(2) ¼ 0.94). In this study, unit-level employee collective efficacy showed
good reliability (α ¼ 0.94).
Control variables. First, this study controlled for size effect (number of employees in a
firm, number of subordinates under a manager, and number of top management team in a
firm), environmental uncertainty, and industry sectors (dummy variable), because these are
linked to a firm’s motivation to adjust to changing resource conditions (Simsek, 2007).
Second, study controlled for firm age and unit age (Darnall and Edwards, 2006; Hayton,
2005; Hmieleski and Ensley, 2007; Kang et al., 2015). Third, this study controlled for unit
level manager’s tenure (Simsek, 2007).

Results
Table II presents descriptive statistics and correlations.
 Mean SD 1 2 3 4 5 6 7 8 9 10 11 12

1. Firm size 2370.15 6367.74 –

2. Firm age 22.67 12.17 0.47*** –
3. Unit size 24.27 26.15 0.54*** 0.42*** –
4. Unit age 16.09 14.11 0.47*** 0.72*** 0.26** –
5. Managers’ tenure in the
current job 6.54 4.07 0.06 0.23* 0.23* 0.37*** –
6. TMT team size 65.43 207.74 0.45*** 0.08 0.09 0.16 0.10 –
7. Environmental uncertainty 5.21 0.90 0.27** 0.05 0.02 0.34*** −0.05 0.25* –
8. Sector 0.40 0.49 −0.04 −0.13 −0.14 0.09 0.51*** 0.29** −0.03 –
9. Unit-level employee collective
efficacy 5.49 0.74 0.02 0.03 0.11 −0.14 −0.34*** −0.17 0.01 −0.46*** –
10. Unit-level transformational
leadership 5.33 0.63 0.07 0.06 0.08 0.00 −0.22* −0.20 0.34*** −0.36*** 0.61*** –
11. Firm-level empowerment
climate 5.19 0.52 0.07 −0.07 −0.01 0.05 −0.17 0.17 0.36*** −0.12 0.60*** 0.39*** –
12. Unit-level corporate
entrepreneurship 4.70 0.80 0.31** 0.16 0.15 0.21 −0.19 0.19 0.28** −0.21 0.59*** 0.53*** 0.69*** –
Notes: *p o0.10; **po 0.05; ***po 0.01
evidence

821
moderation
mediation
Cross-level

deviations and
Means, standard
Table II.

correlations
LODJ This study tested the hypotheses using hierarchical linear modeling (HLM) analyses
38,6 because the data were multilevel in nature (Hofmann and Gavin, 1998). This study group
mean-centered the interpretation for the HLM results in the model because the method
produced an unbiased within-group estimate (Hofmann and Gavin, 1998).
Before conducting HLM analyses, this study examined the degree of between-group
variance in individual-level employee collective efficacy and unit-level corporate
822 entrepreneurship. Results of null models revealed that 26 percent of the variance in
individual-level employee collective efficacy and 39 percent of the variance in unit-level
corporate entrepreneurship resides between individuals (the grouping variable). The χ2 tests
revealed that the between-individual variances were significant (i.e. the intercept terms
significantly varied across individuals).
H1 proposed that unit-level transformational leadership is positively related to the
appearance of unit-level corporate entrepreneurship. The result of Model 1 revealed that
unit-level transformational leadership was positively related to unit-level corporate
entrepreneurship (γ ¼ 0.65, p o0.01) (Model 1, Table III). Thus, H1 is supported.
H2 predicts that unit-level collective efficacy mediates the relationship between unit-level
transformational leadership and unit-level corporate entrepreneurship. To examine the
mediation effect of unit-level employee collective efficacy on the relationship between
unit-level transformational leadership and unit-level corporate entrepreneurship, this study
followed Kenny et al. (1998) procedure. The results in Models 2 and 3 revealed that unit-level
transformational leadership was significantly related to unit-level employee collective
efficacy (γ ¼ 0.28, po 0.05), unit-level employee collective efficacy mediated the relationship
between unit-level transformational leadership and unit-level corporate entrepreneurship
(γ ¼ 0.57, po 0.01, Model 3) (Table III), and the effect of unit-level transformational
leadership remained significant but was reduced in magnitude (γ ¼ 0.47, po 0.01, Model 3)
(Table III). Thus, H2 is supported.
H3 proposes a positive cross-level interaction between firm-level empowerment climate
and unit-level employee collective efficacy in predictions of unit-level corporate
entrepreneurship. In Model 4, this study regressed the slope estimates for unit-level
corporate entrepreneurship obtained from Level 1 on empowerment climate at Level 2 to
test this interaction (Bryk and Raudenbush, 1992). Moreover, as spurious cross-level
interaction may be found if between-groups interactions are not controlled for (Hofmann
and Gavin, 1998), this study included the interactions of firm-level employee collective
efficacy and firm-level empowerment climate at Level 2. The results revealed that the cross-
level interaction was significant (γ ¼ 0.19, p o0.10, Model 4). H3 is supported.

Robust check
To further examine the robustness of the results obtained from the HLM analyses, we tested
the hypotheses using Mplus multilevel structural equation modeling (SEM) (Preacher et al.,
2010). We found that the pattern of results from the Mplus multilevel SEM was highly
consistent with that from the HLM analyses, offering additional confidence in our statistical
inferences (Tables IV and V).

Discussion
Although middle managers as leaders are essential to effectively direct followers and units,
empirical findings about the possible mechanisms through which transformational
leadership behaviors affect corporate entrepreneurship across levels are mainly lacking to
date (Hornsby et al., 2002; Ling et al., 2008). This current study aimed to extend the
understanding of leadership processes by clarifying how transformational leaders inspire
their followers at the unit level to foster the emergence of corporate entrepreneurship across
levels (Kark and Shamir, 2002; Jung et al., 2008; Ling et al., 2008).
 Cross-level
mediation
moderation
evidence

823

Table III.
Hierarchical linear
modeling results:
effects of unit-level
transformational
Notes: TFL, unit-level transformational leadership; CEF, unit-level collective efficacy; EC, leadership on unit-
firm-level empowerment climate; CE, unit-level corporate entrepreneurship. *p < 0.10; **p < 0.05; level corporate
***p <0.01 entrepreneurship

First, the finding of a positive relationship between unit-level transformational leaders and
unit-level corporate entrepreneurship is a pace ahead in discovering the process through
which the transformational leadership of middle managers affects the emergence of
corporate entrepreneurship at the lower level of the organizational hierarchy as part of work
outcomes. More specifically, the present study was one of the few attempts to have revealed
the direct effect of unit-level transformational leadership behaviors on a unit’s pursuit of
product innovation, new business ventures, and strategic renewal activities. That is, the
LODJ Estimate LLCI UCLI
38,6
Part A: direct effect (standardized estimates)
Unit-level TFL → Unit-level CE 0.29** 0.07 0.52
Unit-level TFL → Unit-level CEF 0.52*** 0.31 0.74
Unit-level CEF → Unit-level CE 0.21** 0.05 0.37

824 Part B: indirect effect (standardized estimates)

Unit-level TFL → Unit-level CEF → Unit-level CE 0.11** 0.02 0.20
Part C: moderated effect (standardized estimates)
Table IV.
Two-level moderated Firm-level EC → Unit-level CE 0.31 −0.18 0.79
mediation model: Firm-level EC × Unit-level CEF → Unit-level CE 0.20*** 0.07 0.33
paths, estimate, and Notes: LLCI, lower level of the 95% confidence interval; UCLI, upper level of the 95% confidence interval.
their significance *p o0.10; **p o0.05; ***p o0.01

Table V. Approach Total Direct Indirect

Total, direct,
and indirect effects of Unit-level TFL → Unit-level
unit-level TFL on CEF → Unit-level CE 0.40*** 0.29** 0.11**
unit-level CE Notes: *po 0.10; **p o0.05; ***p o0.01

empirical evidence of this study supports the view that research on (transformational)
leadership should intentionally separate the unit and firm level of analysis. This result is
consistent with calls in previous studies for more research to integrate different levels of
analysis (Braun et al., 2013; Schriesheim et al., 2006; Yukl, 1999).
Second, although several leadership scholars have suggested that transformational
leaders can influence unit-level followers’ ability and identity of performing their job
effectively (e.g. Shamir et al., 1993), very few studies have examined this relationship at the
lower level of organizations such as units (DeChurch et al., 2010). Our findings show that
unit-level transformational leaders positively related to their follower’s effectiveness toward
corporate entrepreneurship at the unit level by advancing unit-level followers’ collective
abilities and munificence. To our knowledge, this study is one of the first to use unit-level
collective efficacy as the mechanism to explain the unit-level transformational leadership
and unit-level collective outcomes such as corporate entrepreneurship linkage. As such, our
findings contribute to the leadership literature by adding functional mediator to explain
how the effects of transformational leaders at the lower level such as unit level explain
(Colquitt and Zapata-Phelan, 2007). This also extending previous leadership studies in that
the effects of transformational leaders at different levels on growing phenomenon at
different of generalization (DeChurch et al., 2010).
Third, the study offered empirical evidence that unit-level collective efficacy mediated
the relationship between unit-level transformational leadership and unit-level corporate
entrepreneurship. Certainly, transformational leadership emerges to indicate that the unit
has the ability to perform the job effectively, such that unit members develop a shared
perception of the unit’s abilities, benevolence, and integrity by raising the needs of unit
members from self to collective interests ( Jung and Sosik, 2002). The perceptions in turn
contribute to corporate entrepreneurship at the unit level.
Fourth, this study empirically validated and extended theoretical propositions
(Schneider, 2000; Seibert et al., 2004) and empirical findings (Dinh et al., 2014;
Spreitzer, 2008) in relation to that there is a cross-level moderating effect of a firm-level
empowerment climate on the indirect effect of unit-level collective efficacy on the Cross-level
relationship between the unit-level transformational leadership and unit-level mediation
corporate entrepreneurship. In line with previous studies’ arguments and findings moderation
(e.g. Bandura, 1997), a firm-level empowerment climate is an important situational enhancer
for the mediating effect of unit-level collective efficacy. This implies that unit employees in evidence
this context are more likely to perform those tasks for which they believe they hold the
required sources and skills ( Jung and Sosik, 2002). Accordingly, these unit employees are 825
more positive in executing these tasks within the unit than those employees who do not hold
collective cognition with shared interests and who are not embedded with a firm-wide
empowerment context. This findings further extends the understanding of cross-level
studies on the transformational leadership and corporate entrepreneurship in that lower
organizational level of transformational leadership used by middle managers tend to rely on
higher organizational level of contextual variables to foster lower level of corporate
entrepreneurship at the unit level. This implies that a unit with higher level of innovation
and new venture creation activities has a main focus on harvesting a delegated environment
or empowered situation across levels. This finding also echoing prior studies
(e.g. Andersson et al., 2014; Mathieu and Chen, 2011) in that the cross-level interaction
effects advances the knowledge of lower level of leaders could adopt transformational
leaders to promote lower level of new innovation and new venture development under the
influence of a firm-wide empowerment context.

Practical implications
As more organizations combine units in the search for new business ventures or strategic
renewal activities (e.g. multi-unit multinational corporations, multi-unit banks), the consideration
of effective leadership may need to be revised by switching its focus from a one-to-one to a
one-to-unit leadership building process ( Jung and Sosik, 2002). This requires the leaders,
especially the middle managers at the unit level, to think about how to motivate their followers
collectively by highlighting a higher level of collective ability and belief, common interests and
shared goals. Several studies on collective efficacy have revealed that unit performance and
desired work outcomes, such as a unit’s search for product innovation, are not simply a
statistical sum of the individual employees’ abilities and skills (Cohen and Bailey, 1997).
Also, firms especially at the unit level need to think how to encourage middle managers to
promote the development of unit-level corporate entrepreneurship as the results of this study
indicated. For example, firms could provide training opportunities for middle managers as
transformational leaders to improve their communication skills to promote the corporate
common interests and shared targets regarding corporate entrepreneurship. Furthermore, the
findings of the current study imply that the selection, training and development for middle
managers at the unit level. For instance, interviewing practices might offer the opportunity to
predict that effectiveness of middle managers if structured around situational questions like
transformational experiences in intellectual stimulation. Conventionally, interview at the middle
managers tends to focus on evaluating technical expertise, with less focus on the interpersonal
abilities of middle managers at the unit level. Therefore, organizations may not only need to
interview middle managers’ technical abilities, but also need to design appropriate interview
questions to assess the ability of stimulating unit-level followers. Training practices can be
designed to indicate the importance of and techniques for improving intellectual stimulation at
the unit level. This is because traditionally most organizations chiefly focused on the possession
of technical skills of middle managers at the unit level. Hence, there is a need for organizations to
focus on interpersonal and planning skills of the middle managers at the unit level. For instance,
organizations may need to offer training modules to enhance middle managers’ ability through
clearly written communication and formal speech-making processes as previous studies
indicated (e.g. Bass et al., 2003; Lowe et al., 1996).
LODJ Moreover, leaders, especially middle managers at the unit level, may need to consider the
38,6 impact of an organizational-wide empowerment climate on the formation of collective ability
and beliefs and ultimately on the promotion of more corporate entrepreneurship at the unit
level, as illustrated by the findings of this study. For instance, middle managers can cultivate
the work culture to hold regular meetings with employees at the unit level. This can help unit
employees to understand the units’ main goal towards innovation and venture creation.
826 Also, middle manager can delegate their employees to organize unit meeting regarding
current new challenges and opportunities for innovation and strategically renewal activities
at the unit level. Hence, firm should prioritize the development of unit-level collective efficacy
and organizational-wide empowerment climate to optimize the implementation of middle
managers’ transformational leadership behaviors in order to focus on innovation and new
venture formation.

Limitations and future research

Several limitations emerge from the findings of this study. First, a challenge for multilevel
leadership research and corporate entrepreneurship research is the appropriate evaluation
of leadership and corporate entrepreneurship related constructs. For instance, Schriesheim
et al. (2009) criticized the MLQ because of its item structure, which cannot clarify the
individual level and team levels of leadership behavior. Future multilevel and cross-level
research may attempt to develop scales for multilevel use and validate the measurement of
multilevel leadership (Chun et al., 2009; Dionne et al., 2014). Second, there are some important
variables that need to be considered as mediating and moderating variables (e.g. group
potency and organizational culture). Such variables may affect leadership process, unit
dynamics and eventually the unit members’ perceptions of unit effectiveness and unit
performance. Third, more research on multilevel leadership across different cultural
contexts is necessary. Future research can examine the mediating effect and boundary
influence of collective efficacy and empowerment climate in different cultural settings such
as South Korea and Japan.

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Appendix. The questionnaires Cross-level
mediation
Items measuring unit-level corporate entrepreneurship moderation
(1) Spending heavily (well above the unit average) on product development. evidence
(2) Introducing a large number of new products to the market.
(3) Acquiring significantly more patents than its major competitors. 831
(4) Pioneering the development of breakthrough innovations in its unit.
(5) Spending on new product development initiatives.
(6) Entering new markets.
(7) Acquiring companies in different industries.
(8) Establishing or sponsoring new ventures.
(9) Finding new niches in current markets.
(10) Financing start-up business activities.
(11) Creating new semi-autonomous and autonomous units.
(12) Divesting unprofitable business units.
(13) Changing its competitive approach.
(14) Reorganizing operations, units, and divisions to ensure increased coordination and communication.
(15) Redefining the industries in which it competes.
(16) Introducing innovative human resource programs.
(17) First in the unit to introduce new business concepts and practices.

Items measuring firm-level empowerment climate

(1) We receive the information needed to help us understand the performance of our firm.
(2) We share information with others to help them understand the performance of our firm.
(3) We demonstrate trust in people by sharing sensitive information about firm performance.
(4) When we need information about our firm’s performance, it is readily available for us to
access.
(5) When mistakes are made, we focus on correcting the problem not on who to blame.
(6) When mistakes are made, we try to learn from the mistakes.
(7) People in our firm get information about the firm’s performance in a timely fashion.
(8) We share information about firm’s performance so that people can act responsibly to improve
performance.
(9) We share information in ways that break down traditional hierarchical thinking.
(10) We get information into the hands of frontline people so they can make responsible decisions.
(11) We share a common vision for our firm at all levels of the firm.
(12) In our firm we strive to live up to our vision.
(13) We work together to translate the vision into specific goals and timelines for everyone in
the organization.
(14) We have a shared set of values that guide our actions in this firm.
LODJ (15) We create new structures, policies, and practices that help people use their knowledge
38,6 and motivation.
(16) We create structures and procedures that encourage and expect people to take initiative in
improving firm’s performance.
(17) We set high standards in our firm and tolerate nothing but continuous performance
improvement.
832
(18) We use structures and guidelines to help people learn to act with responsibility and autonomy.
(19) We work together in our firm to make everyone accountable for their actions and for results
in the firm.
(20) We use our performance management process to promote a sense of partnership between
levels of the firm.
(21) We use teams as the focal point of responsibility and accountability in our firm.
(22) In our firm, teams now make many of the decisions that management used to make.
(23) We act as though the diversity of people in our firm is an asset, rather than something that
must be managed.
(24) We provide team and individual training that helps teams operate more efficiently.
(25) We work hard in our firm to develop effective, self-directed teams.
(26) Our teams act as though they “want to” improve firm’s performance, not as though “someone
has told them they have to improve”.
(27) Teams feel a keen sense of responsibility for the firm’s cost effectiveness and quality
of operations.
(28) Teams place significant importance on being flexible in providing outstanding customer service.
(29) Teams recognize there will be some tough times, and they are prepared to handle those
difficult times.
(30) We see examples of leadership being exhibited by people throughout our firm.

Items measuring unit-level transformational leadership (using Multifactor Leadership

Questionnaire (MLQ Form 5X-Short))
(1) The unit managers instill pride in being associated with them.
(2) The unit managers go beyond their own self-interest for the good of our unit.
(3) The unit managers act in ways that builds our respect.
(4) The unit managers display a sense of power and confidence.
(5) The unit managers talk to us about their most important values and beliefs.
(6) The unit managers specify the importance of having a strong sense of purpose.
(7) The unit managers consider the moral and ethical consequences of their decisions.
(8) The unit managers emphasize the importance of having a collective sense of mission.
(9) The unit managers talk optimistically about the future.
(10) The unit managers express their confidence that we will achieve our goals.
(11) The unit managers talk enthusiastically about what needs to be accomplished.
(12) The unit managers articulate a compelling vision of the future.
(13) The unit managers re-examine critical assumptions to question whether they are appropriate.
 (14) The unit managers seek differing perspectives when solving problems. Cross-level
(15) The unit managers suggest new ways of looking at how we do our jobs. mediation
(16) The unit managers get us to look at problems from many different angles. moderation
(17) The unit managers treat us as individuals rather than just members of a unit.
evidence
(18) The unit managers focus us on developing our strengths.
(19) The unit managers spend time teaching and coaching us.
833
(20) The unit managers treat each of us as individuals with different needs, abilities, and aspirations.

Items measuring unit-level collective efficiency

(1) Successfully coordinate among unit members.
(2) Work together as one unit.
(3) Successfully follow the unit’s game plans.
(4) Respond appropriately to unexpected situations.
(5) Maintain the unit’s poise, even when things go wrong.
(6) Perform effectively.
(7) Communicate well with each other.
(8) Effectively adjust to any adverse situation.
(9) Make proper changes in the unit’s game plan if necessary.
(10) Cooperate well with each other.
(11) Provide moral support for unit members.
(12) Perform better than most other units.

Corresponding author
Yi-Ying Chang can be contacted at: y.chang@mail.ntust.edu.tw

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