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Master Thesis

Does Size Matter?

Looking at the dynamics between organizational size, leadership

style and decentralization in small Dutch firms

Master Accountancy & Control, variant Control

Faculty of Economics and Business, University of Amsterdam

Date:

23 June, 2014

Name:

Mario Slaman

Student number: 10222499

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Inhoudsopgave

Abstract ... 3

1. Introduction ... 3

2. Literature review and hypotheses ... 7

2.1 Organizational size and decentralization ... 7

2.2 Leadership styles ... 9

2.2.1 Transactional leadership style ... 10

2.2.2 Transformational leadership style ... 10

2.3 Influence of leadership styles on the relation between organizational size and decentralization ... 11

2.4 Hypotheses development ... 11

3. Research methodology... 12

3.1 Sample selection ... 12

3.2 Survey instruments and data measuring ... 13

4. Results ... 14

5. Conclusion and discussion ... 17

References ... 19

Appendix A: Questionnaire ... 22

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Abstract

Above 99% of the Dutch organizations are labeled as small firms. This research is looking to find evidence for the relation between leadership styles, organizational size and decentralization in micro and small Dutch firms. The predictions are that (1) firm size has a positive relation with decentralization, (2a) smaller firms are more likely to have a transformational leadership style, (2b) less small firms are more likely to have a transactional leadership style, (3a) transformational leadership has a positive relation with decentralization and (3b) transactional leadership has a negative relation with decentralization. This research uses a questionnaire to gain the data from respondents. Only for hypothesis 3a was found some significant evidence. A limitation of this research is that is only concerns micro and small Dutch firms. It proposes future research to investigate whether making the distinction between transactional and transformational leadership styles is justified for micro and small businesses.

Keywords: Leadership style, organizational size, decentralization, small Dutch firms.

1. Introduction

In management accounting research, popular areas of interests are leadership, leadership style, culture, performance, innovation, centralization versus decentralization, organization and their ever changing relationships. It seems that organizational size, i.e. the total number of workers in an organization (Abernethy et al., 2010), is an underestimated research determinant (Meijaard, 2005). Nagar (2002, p. 385) associates firm size with all critical organizational design choices. Matías-Reche et al. (2008) claim that the size of an organization influences its level of decentralization directly. Since determining the degree of decentralization is a critical organizational design choice, we must assume that the degree of decentralization is related to firm size. Other researchers find that the relation between size and centralization is not clear-cut (Young and Tavares, 2004). Findings from my culture-specific research might support either theory. Because the literature lacks clarity for the relation between size and decentralization, my research could provide a contribution to the issue.

Besides the organizational size, research seems to address also the geography variable randomly. For example, when Ogbonna and Harris (2000) focus on leadership style,

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organizational culture and performance, they mention dutifully that “a multi-industry sample of one thousand units was drawn from the FAME database of registered United Kingdom firms,” but the geography has no further significance for research, results and conclusion. Jung et al. (2003) investigate the dynamics between transformational leadership and organizational innovation at 32 Taiwanese electronics and telecommunications industries, they find among others “that transformational leadership by the top manager can enhance organizational innovation directly” and, surprisingly, “that companies, which delegate more autonomy to employees, are less rather than more innovative.” One factor they suggest as explanation for the latter unexpected finding is geography and culture specific, namely the island nation Taiwan. In Taiwan, they state, “cultural values are relatively high in power distance (Hofstede, 1997)” and “employees with a high power distance cultural disposition may feel confused when left alone to figure out what they need to do and how to accomplish their goals.” On the other hand, when Abernethy et al. (2010) research whether leadership style has an effect on the control choices within an organization, for example on the degree of delegating decision rights, they chose for their survey “profit center managers from a cross section of firms in the service and manufacturing sectors in the Netherlands,” but this geographic variable is further not used in their model. They find that leadership style has no effect on delegation choices within organizations, with the caveat that the model may be subject to omitted variable bias, which could well be the geography variable with its implications.

The role of geography as a possibly significant culture factor in management accounting research does not fit the subject or scope of this thesis. It is mentioned here as a preliminary observation to a thesis project that draws on a small number of exclusively small businesses from a geographically small country that houses almost exclusively small businesses, i.e. businesses with a small number of employees. According to a 2014 report by the Centraal Bureau voor de Statistiek (CBS) over 99% of all businesses in the Netherlands have less than 100 employees. In as far as this would regard organizational size as a culture factor, it could be casually perceived that in general small size is a typical, normative Dutch given, and small with all its implications should therefore be considered a significant organizational culture aspect in all research involving Dutch organizations. In this context, Ogbonna and Harris (2000) refer to Schein noting that ‘leadership and culture are so central to understanding

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either one’ (1985, p. 327).” Hofstede’s seminal work and 1983 essay on the importance of cultural relativity in management and organization proves that “culture matters” and therefore it is relevant for this thesis to take briefly a common-sense, non-scientific, but still objective look at the breakdown of the sweeping “over 99% of all Dutch businesses are small” statement before we attach some significance to it. According to the CBS Statistics Office from early 2014 1.448.000 organizations were registered with the Dutch Chamber of Commerce. Of this total 1.063.405 are a one-man business, 357.470 a small business (> 100 employees) and 7.125 were large (< 100) to super large (< 2000). Separating the one-man businesses as “non-organized,” a total of 364.595 businesses remain of which the 357.470 small businesses employed an estimated 3.023.549 people, and the 7.125 employed by the same estimation method 3.209.625 people. With many small and relatively few large organizations employing workers in the same numerical range, it seems that, at this point in time, the Dutch organized labor force operates rather equal-balanced within the context of “operational size.” It is actually questionable whether research should separate the one-man “non-organized” businesses from organized businesses, as a great many self-employed entrepreneurs are hired by organized companies for a specific time period. During this period they do participate in organized organisations.

The same Ogbonna and Harris (2000), having found that the literature on organizational culture is rich and diverse, state that although some theorists have questioned the universality of a culture-performance link, “sufficient evidence exists to suggest that organizational culture is associated with organizational performance.” This research’ main focus is the relationship between organizational size and decentralization; leadership style is their moderating variable. I chose leadership style in this context as the third determinant, expecting that leadership style is influenced by organizational size and that together they determine the degree of decentralization. For many years leadership has understandably figured as a core topic in management accounting literature (Nahavandi & Malekzadeh, 2007; Berson et al., 2001; Cannella & Monroe, 1997; Wasserman et al., 2001) since the smallest company and every manager deal with leadership issues and every leader handles it per definition differently. Besides, leadership is not essential only for business companies and organizations but for almost every aspect of social life, therefore it is socially relevant for almost everyone. The difference in leadership issues between commercial firms and most every other social organization is that leading a firm is, at the end of the day, all about

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revenue and profit results. Top management has to decide what kind of organizational model is best to optimize worker performance and control results. In a given organizational model management will determine the degree of decentralization, or rather the degree of delegating decision rights. It is a control choice. Most firms show decentralization to the degree that top management chooses not to, or is unable to take every decision for reasons that may range from time limitation, physical limitations, and issues of information asymmetry, to cost and efficiency considerations. Sometimes top management might just not be interested in making all the decisions for unspecifies personality reasons. Information asymmetry and costs of transferring the information to higher levels are part of the agency theory by Jensen & Meckling (1976), which gives us guidelines for top management to make sure that lower-level employees make decisions in the best interest of the company. Burke & Ng (2006) mention that employees nowadays have higher expectations about participating in organizational decision making. This interesting finding could be relevant for the outcome of this research. My research results could also provide a contribution to the research of Burke & Ng (2006). Additionally, the particular nature of the business (ranging for instance from horticulture to service to consultancy to entertainment) and the length and complexity of the production line might play a role in the degree of decentralization. And last but not least, the typical culture of a country’s population, that in the Netherlands is increasingly multi-cultural, will affect leadership, organization, and decentralization. For designing and implementing the appropriate model for best results, the ‘leader’ needs the appropriate experience and expertise. For instance, managing a 100-seat Italian restaurant in a popular tourist area with a kitchen staff of Moroccan descent that communicates in Moroccan and with a waiting staff exclusively of Dutch students will require other leadership style qualities than managing the small Dutch branch of a multinationals sports wear company with a high-educated staff of mixed Dutch and expats.

There are different views about what leadership and leadership style are, and which characteristics leadership requires. The scientific literature offers different definitions for leadership style. This thesis uses the leadership style model of Burns (1978) which distinguishes transactional and transformational leadership style. The leadership styles will be discussed and explained further in chapter two, the theoretical framework. It will also explain why the Burns (1978) model is used rather than others.

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A lot of research has already been undertaken concerning how leadership style influences firm behavior. Most of it focuses on medium or large firms in general, like the research of Abernethy et al. in 2010 who studied firms with over 100 employees and at least three profit centers. Since my research draws on data from exclusively micro and small organizations in the Netherlands, where over 99% of all companies have one hundred or less employees, it will contribute to prior scientific literature on organizational size and culture.

The research question which I will try to answer is:

How does the size of a small Dutch organization influence the degree of decentralization and is this influenced by the leadership style?

The remainder of this paper is structured as follows. The second chapter reveals the literature review and hypotheses. The third chapter is about the research methodology. In the fourth chapter the results of the data analysis will be revealed. The fifth chapter contains the conclusions and discussion. At the end of this thesis there is an appendix stating the references, questionnaire and tables of results used for this research.

2. Literature review and hypotheses

The constructs of this research are organizational size, leadership style and decentralization. The relation that is investigated during this research is as follows:

2.1 Organizational size and decentralization

Dutch firms may be large when measured by revenues and profits but still most of them are small in employee numbers, according to the CBS 2014 statistics. Though the size of revenue and profit may suggest something about organizational size, it likely does not influence decentralization. To measure the degree of decentralization, it should be sufficient to research to what degree decision making responsibilities are transferred from management to lower-level employees. So the number of employees and transferred

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responsibilities to them is relevant for this research, while the size of revenues or profits does not say anything about decentralization although it says something about the organizational size.

One critical organizational design choice is the degree of decentralization (Nagar, 2002). Decentralization can be defined as ‘the hierarchical location of decision making in the organization’ (Morrison and Roth 1993, p. 802). With regards to delegating decision rights, a firm is more centralized when decisions are made at the top, and more decentralized where decision making is more delegated to lower-level employees. Setting the degree of decentralization is all-important for any organization where top management is not able to make all decisions themselves for reasons already mentioned.

The higher expectations nowadays about participating in organizational decision making seem to be caused by a gradual change in mentality and power distance. According to Hofstede (1983) the central issue of power distance is how society deals with the fact that people are unequal. This implies that power structures will arise. In organizations, he says, the level of power distance is related to the degree of decentralization of authority and the degree of autocratic leadership. This relationship shows that decentralization and autocratic leadership are rooted in the “mental programming” of the members of society, not only of those in power but also of those at the bottom of the power hierarchy. Large or small power distance is one of the four of Hofstede’s “dimensions,” largely independent criteria that together constitute a national culture. The other three are: individualism versus collectivism, strong or weak uncertainty avoidance, and masculinity versus femininity. Power distance is defined as the degree to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally (Hofstede, 2014). In the Netherlands the Power Distance dimension is relatively low according to Hofstede (1983), 38 on a scale of 0 – 100, meaning a relatively low tolerance for inequality, and the individualism dimension rather high, 81 on the same scale. This would be consistent with one of the acknowledged Dutch values that individuals expect to be heard or, rather, have a say in any thinkable procedure that requires decision making. While such involvement in the decision making procedure may be important, in itself it does not equate decentralization and delegation of decision making rights.

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2.2 Leadership styles

As Hofstede’s model (1983) already suggests, leadership is a complex and multifaceted construct (Shuck and Herd, 2012), and, not surprisingly, there is a lack of clarity in the many definitions that try to capture it. O’Reilly et al. (2010) write, “Leadership has been used to

describe everything from the effects of first-level supervisors on subordinates’ attitudes to the effects of CEOs on organizational performance (Hofmann & Jones, 2005), from the attributional processes raters use to characterize leaders to the specific activities that leaders engage in (Meindl & Ehrlich, 1987), and from the characteristics of people who emerge as leaders to the effects of actual leaders themselves (Judge, Bono, Ilies, & Gerhardt, 2002)”. To

avoid this lack of precision in definition, O’Reilly et al. (2010), in concurrence with earlier theories of Hogan et al. (1994) and Judge et al., (2002), defined leadership as a person’s ability, in a formally assigned hierarchical role, to influence a group to achieve organizational goals. This definition fits the context of this project since its research centers on size and decentralization, relative to leadership style. I expect that, for the Netherlands, organizational size affects leadership. For instance larger firms require a more elaborate hierarchical structure. My research shows that “large” and “small” are relative variables. All firms from which I draw data for my research are small relative to the large and super large firms in the Dutch economy, but within my sample the large firms have 30 to 40 employees, which make them significant larger relative to the micro firms which have only 2 or 3 employees. In turn this affects decentralization, for the larger the firm is and the more hierarchical roles its organizational structure requires, the more leadership must delegate decision rights to lower-level employees.

Different approaches to leadership styles can be identified. As I have not found a specific model for micro businesses I choose for this research the model by Burns (1978), which – irrespective of organizational size - identifies two different styles of leadership, namely transactional and transformational, originally in a political context,. There are also other models of leadership style, equally general, such as the consideration and initiating structure of Fleishman (1953). I choose Burns’ model and terminology since it is the most widely used nowadays (Shuck and Herd, 2012).

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2.2.1 Transactional leadership style

Transactional leadership is defined as a set of behaviors that motivate and guide followers in the direction of a goal by providing clear expectations and providing resources for the completion of work (Harter et al., 2002). The political leader’s followers are in a business context called workers or lower-level employees. In the leader-employee relationship there is no room for personal relationship, personal development or emotion (Northouse, 2010). So, transactional leadership style represents a strict business relation without personal involvement. Simply stated, transactional leaders give followers something they want in exchange for something the leaders want (Kuhnert et al., 1987). The popular common term for transactional leadership would be barter.

2.2.2 Transformational leadership style

According to Kuhnert et al. (1987) Burns’ transformational leadership style model was adopted and broadened for organizational management purposes by Bass (1985). For transformational leadership style I will use the Bass (1985) model. Bass specifies four characteristic factors of leadership style: (1) individualized consideration, (2) intellectual stimulation, (3) inspirational motivation, and (4) idealized influence. The leader’s personality is likely to be significant for determining in what proportion these four factors play a role in his or her leadership style, but the personality of the employees might not be discarded. Compared to the rather objective transactional leadership style, transformational leadership style is more subjective. Its psychological bias encourages character dynamics, which in turn matches it better with the Hofstede (1983) model that for leadership considers the subjective dimensions individualism / collectivism and power distance most relevant.

Speaking of transformational leadership, Burns (1978) suggests that leadership can be a “transforming” rather than a means-to-an-end performance transaction when the leader influences the follower to focus on superordinate and higher level goals. Typical for a transformational leader is that his or her influence is idealized and inspires followers to espouse and focus on the leader’s vision and goals (Bass, 1998). This type of leader sets challenging goals and expresses his or her confidence that followers can achieve these goals as an inspirational motivation. With regard to intellectual stimulation, Bass claims that transformational leadership appeals to the follower’s rational outlook on work goals, tasks

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relationship with the followers by getting to know the followers’ needs, goals, and interests and responding accordingly (Bass, 1985). Both Bass (1985) and Burns (1978) indicated that transformational leaders operate out of deeply held personal value systems that include such values as justice and integrity. Burns refers to these values as end values — those that cannot be negotiated or exchanged between individuals (Kuhnert et al., 1987).

2.3 Influence of leadership styles on the relation between organizational size and decentralization

I think that the size of an organization could influence the degree of decentralization. The larger an organization is, the higher the degree of decentralization will be as it is impossible to make all decisions at the top due to information asymmetry. The dynamic between leadership style and organizational size is important; I expect that it has a higher influence in small firms where power distance is small. When the style of leading in a small firm isn’t well adjusted, dissatisfied or frustrated expert employees might look for a job elsewhere. For a small firm this could hurt the efficiency of the entire organizational model and overall performance. I assume that in a large decentralized Dutch firm, the impact of leadership style will be relative to the higher or lower position of the employee in the hierarchy or production line, because in a small organization the percentage of employees for one leader is smaller. .

2.4 Hypotheses development

As there is some evidence about the relation between the organizational size and decentralization (Nagar, 2002), I expect a positive relation as the larger the firm is, the more hierarchical levels there probably will be. Therefore I propose the following hypothesis:

Hypothesis 1: Firm size has a positive relation with decentralization for small Dutch firms.

Within the context of Bass’ (1985) leadership model and Hofstede’s (1983) cultural relativity model, I expect that analysis of data of a cross section of Dutch small businesses will support my prediction that transformational leadership is predominant in small firms. Based on the same literature, I expect that transactional leadership is more present in the large firms from this sample. The more complex a firm is, the more difficult it is for the leader to have personal relationships with the lower-level employees and to get to know their needs, goals, and interests. The foregoing leads to the proposal of the following hypotheses:

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Hypothesis 2a: Small Dutch firms are more likely to have a transformational leadership style. Hypothesis 2b: Large Dutch firms are more likely to have a transactional leadership style.

For the reasons mentioned above, my prediction is that larger firms are more likely to have a transactional leadership style. Another prediction is that larger firms are more likely to be decentralized. This would imply that transactional leadership style is more likely to have a positive relation with decentralization, while transformational leadership style has a negative relation with decentralization. Despite the fact that Abernethy et al. (2010) find no evidence for a significant relation between leadership and decentralization, I’m in some way convinced that there is a relation. This is empirically based on my own experience in Dutch firms.

This leads to the last hypotheses:

Hypothesis 3a: Transformational leadership has a positive relation with decentralization in small Dutch firms.

Hypothesis 3b: Transactional leadership has a negative relation with decentralization in small Dutch firms.

3.

Research methodology

3.1 Sample selection

The sample was taken from the clientele of my current employer, which is a small firm (12 employees) of accountants and tax consultants. This company has a very diverse clientele in the Netherlands with a broad spectrum of activities, from hair dresser to design and from administrative consultancy to restaurants, and in size ranging from micro one-man businesses to small companies with up to 40 workers. My employer gave me permission to contact all the clients with personnel, which was a criteria for this research as it concerns decentralization. By contacting 92 organizations with a diversity of activities, I tried to create a cross section of micro and small businesses in the Netherlands. I did not track or try to influence the respondents. To boost the number of respondents, I only encouraged them by sending a second and third invitation.

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There are 42 respondents, consisting of 32 men and 10 women. This means a response percentage of 46%. Although the sample size is somewhat small, I think the validity of the research is not in danger, as the sample is a relevant representation of the many diverse, small organizations in the Netherlands. The function of the respondents in the organization is exclusively owner/manager. The minimum age of the respondents was 27 and the maximum was 62. The average age of the respondents was 45 years, with a standard deviation of 11 years. The highest education level was academic level, while the lowest education level was lower-technical respectively vocational training for 12-16 year olds, with an average education level of higher general secondary education and higher professional education. On average, the years of experience in the present function of the respondents was 14, with a standard deviation of 11 years. The most experienced respondent is holding his/her position for 40 years now, while the less experienced respondent has just started in the function of owner/manager. These descriptive statistics are summarized in a table in appendix B.

3.2 Survey instruments and data measuring

As survey instrument I drew up a questionnaire in Dutch. This questionnaire covered descriptive statistics as well as the variables size, decentralization, transactional leadership style and transformational leadership style (for the questionnaire, see Appendix A). The questionnaire is set up in four steps. The first one is the use of general questions about the control variables gender, age, education and years of working experience. For age and years of working experience absolute numbers can be filled in, while for education there is a seven-point scale ranging from lower education to academic level. The second addresses the variable organizational size, where the numbers of employees are asked. I chose this way of measuring as Abernethy et al already did this the same way in 2004 for Dutch firms. Third one is leadership style, where questions were asked about both variables transactional and transformational leadership style. For leadership style questions, the Multifactor Leadership Questionnaire (MLQ) by Bass & Avolio (1995) was used as this is worldwide one of the best known and most used questionnaires for rating leadership style. It was used as a six-point Likert scale ranging from never to always. Fourth and last are questions about the variable decentralization, which are measured using a seven-point Likert scale ranging from decisions fully made by the owner/manager to decisions fully made by lower-level employee(s). For

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this part the concept of Nagar (2002) was used, also for the reason that this is a world wide accepted concept.

The invite for the questionnaire was sent by e-mail, promising them complete anonymity and, consequently, using a form that could be completed without needing to be printed. The data from the survey is processed using the statistical program SPSS to find evidence for this research, determine relations between the variables and verify the hypotheses. The analyses processed are (i) reliability analysis, (ii) correlations and (iii) linear regression. The reliability analysis is done to check whether the questions are well chosen and fit each other or whether some questions have to be deleted. The correlations show whether the variables and control variables correlate, if there is a relation between them. The linear regression is needed to reveal any possible multicollinearity problems and to finally give a definite answer to the hypotheses.

Finally, I intend to send the finished thesis to all participants as a way to thank them for their participation. They may find something of interest in it that might help them improve the result of their efforts.

4. Results

With this statistical research method, I found no significant evidence to support most of the hypotheses. I did find some evidence for hypothesis 3a, concerning the positive relation between transformational leadership and decentralization. This result was expected for small businesses, though for larger businesses Abernethy et al found in 2010 no evidence for this relation. An explanation for this could be that she investigated quite large firms, with at least 300 employees and three profit centres, while this research focused on micro and small firms.

Besides the hypotheses results, there are also other results of which some are logical and others either interesting or nonsensical. The logical result of the survey, which could provide validity to the result, is the significant positive correlation between age and experience. It’s not always the case, but in general the higher the age of owners is, the more experience in their function they have. Then there is a result stating that there is a significant negative

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women are significantly younger than the men. This probably is nonsense evidence, but maybe something which ought to be investigated in further research. An interesting finding, though, is the high correlation between the transactional and transformational leadership styles. This could imply that, relative to owners/managers of small Dutch organizations, there is no clear distinction between the two leadership styles, in other words they could be more all-round leaders.

In Appendix B, the reliability tests and scale statistics are reported. Transactional leadership

The reliability of the variable Transactional Leadership is very high, as the tested Cronbach’s Alpha is 0,809. Deleting some questions of the questionnaire seems not very effective, as the Cronbach’s Alpha will only go up by 0,008 and the ratio is already very high. This was predicted as the scale used in the questionnaire is the Multifactor Leadership Questionnaire (MLQ) by Bass and Avolio (1995) which is a worldwide standard.

Transformational leadership

The reliability of the variable Transformational Leadership is also very high, as the Cronbach’s Alpha represents a score of 0,929. Also here, deleting a question is not preferred as Cronbach’s Alpha will only go up by 0,002. Here again, the high score was predicted because of the use of the worldwide accepted MLQ.

Decentralization

The reliability of the variable Decentralization is, just as both Leadership styles, very high, with a Cronbach’s Alpha of 0,872. Deleting the last question would raise the Cronbach’s Alpha to 0,901, but as there are only four questions regarding Decentralization I chose not to delete this question, also because the existing ratio is already very high.

Organizational size

The organizational size was originally strongly positive skewed, which seems to be normal for a variable like organizational size. Therefore, I transformed it to a (relative) normal distribution to make it useful for this thesis. The skewness now has an acceptable value of 0,186 instead of the original value of 1,740.

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Correlations

When looking at the correlations between the variables, there are some interesting findings. First, there is a very logical significant positive relationship between the age of a respondent and the years of working experience. Second, there is a positive, significant correlation between transformational leadership and decentralization. The higher the degree of decentralization, the more transformational leadership is present in an organization. Third, there seems to be a positive, significant correlation between transactional and transformational leadership. This could imply that, in small Dutch firms, the leaders have to be more complete and balanced rather than specifically transactional or transformational.

Regression

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F-value is 0,049 for the model including the control variables. Without the control variables, there is no significant F-value and then the model does not perform better than chance. The Tolerance and VIF shows that there are no multicollinearity problems for this analysis, as all the VIF scores are below the commonly used maximum of 10 (Myers, 1990). So for multicollinearity reasons, no variables should be dropped in this research. Despite all this, the T-values are not significant and therefore the hypotheses are not supported. The closest to significance is the relation between transformational leadership and decentralization, with a significance score of 0,056.

5. Conclusion and discussion

According to the result of the regression, this model explained 18.2% of the variance of decentralization. This implies that there is a lot more to explore concerning this topic and

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that there are some other variables which explain something about decentralization. For this thesis I did find some evidence for the positive relationship between transformational leadership style and decentralization within small Dutch organizations. Abernethy et al (2010) though found no relation between leadership and decentralization when looking at Dutch firms. An explanation for this difference could be that her sample existed of large firms in the Netherlands instead of the small firms involved in this research. Another explanation could be that she used leadership as a variable instead of the distinction between transactional and transformational leadership style in this thesis.

A limitation of this research is that the sample size is relatively small. As mentioned before, I don’t think it’s a danger to this research when speaking about validity, as I think it’s a relevant representation of the Dutch organizations.

For future research that involves exclusively micro and small businesses, the question should be asked whether it is justified to make a distinction between transactional and transformational leadership styles. The results of this research might suggest that owners of small firms, at least in the Netherlands, are all-round leaders. It would be interesting to find out whether or not this is also relevant for the larger firms in the Netherlands, and whether or not this is relevant for small business organizations in other countries.

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