Leadership styles and SME performance: the mediating effect of market orientation
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Date
2017
Authors
Miya, Nkopane Washington
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Publisher
University of the Free State
Abstract
The need for effective leadership has increased tremendously as a result of the complexity of businesses and tough competition in today's business environment. Every business requires effective leaders to steer the business through turbulent times and envision a future. As such , one of the driving forces for the future success of small and medium enterprises (SMEs) is the development of good leadership. Furthermore, for businesses to compete and survive in the current highly contested global market place, they have to more be more aware and alert about the needs of their customers. Being more aware and alert about the customers needs means businesses have to engage in market orientation. The leadership styles of top managers play vital roles in shaping the organisational culture which leads to the implementation of good market orientation. The primary objective of this study is to examine the mediating of market orientation on the leadership-performance relationship. The empirical study was carried out in the Mangaung Metropolitan Municipality ( Bloemfontein, Botshabelo and Thaba'Nchu). A total of 354 questionnaires were distributed, 250 questionnaires were received from the respondents, however only 229 were considered in the study because they were fully completed and generated a response rate of 64.7%.
Key findings of the study showed that:
• SME owners/ managers engage in supportive, achievement oriented, transactional leadership styles.
• SME owners/ managers highly engaged in customer orientation, but only moderately engage in competitor orientation and inter-functional coordination.
• SME owner/managers perform better in terms of non-financial performance, but only have a moderate performance in terms of financial performance.
With regards to the impact of leadership styles on SME performance (Financial and non-financial performance), the results established that supportive , participative, achievement, consultative, democratic, and transformational leadership styles have a positive relationship with non-financial performance. With respect to financial performance, the results show
that only democratic and transactional leadership styles have a positive relationship with financial performance and this result are significant at the 5% level.
• With regards to the dimensions of market orientation, the result revealed customer orientation and competitive orientation have a significant positive relationship with non-financial performance, while all three construct of MO (customer orientation, competitive orientation, and inter-functional coordination) have a positive relationship with financial performance.
• With regards to the mediating relationship between market orientation and leadership styles, the results established a partial and full mediation. In terms of the full mediation, this study established that competitor orientation fully mediates the relationship between consultative leadership style and non-financial performance; customer orientation fully mediates the relationship between laissez-faire leadership style and non-financial performance; and competitor orientation fully mediates the relationship between democratic leadership style and financial performance. In terms of a partial mediation, this study showed that customer orientation partially mediates the relationship between supportive leadership style and non-financial performance; competitor orientation partially mediates relationship between supportive leadership style and non-financial performance; competitor orientation partially mediates the relationship between participative leadership style and non-financial performance; customer orientation partially mediates the relationship between participative leadership style and non-financial performance; customer orientation partially mediates the relationship between achievement leadership style and non-financial performance; competitor orientation partially mediates the relationship between achievement leadership style and non-financial performance; competitor orientation partially mediates the relationship between democratic leadership style and non-financial performance; customer orientation partially mediates the relationship between transformational leadership style and non-financial performance; competitor orientation partially mediates the relationship between transformational leadership style and non-financial performance; and competitor orientation partially mediates the relationship between transactional leadership and financial performance.
• The recommendations are provided more in depth in chapter 7 of the literature chapters.
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Keywords
Dissertation (M.Com. (Business Management))--University of the Free State, 2017, Effective leadership, Business environment, Market orientation, Leadership-performance relationship