_____________________________________
Can ethical leadership enhance team
creativity:
trust and knowledge sharing as mediators
_____________________________________
Human resource management Master Thesis
University of Groningen
Faculty of Economics and Business
Supervisor: prof. dr. B.A. Nijstad
Abstract
During the last decade, ethical leadership has gained increased attention by both researchers and practitioners. Until now, most research has focussed on the influence of ethical leadership on the behaviour of followers. However, there are suggestions that ethical leadership can enhance performance such as team creativity, although, to date empirical research investigating this relationship is limited. This research contributes to the existing literature by examining the aforementioned relationship using interpersonal trust within teams and knowledge sharing as sequential mediators. To test the relationship, data was collected from 43 teams and their direct supervisors. Team members evaluated their leader’s ethical leadership, interpersonal trust within teams and the level of knowledge sharing within the team. The direct supervisors rated team creativity. As proposed, ethical leadership was positively related to interpersonal trust within the team. This suggests that ethical leaders do not only influence their followers on a dyadic level, but also on the team level. Furthermore, trust within teams positively influenced knowledge sharing. However, no relationship was found between knowledge sharing and team creativity. Thus, no evidence was found which supports the proposed relationship between ethical leadership and performance.
Introduction
(Gu et al, 2015). Thus, this study will not only contribute to the ethical leadership-performance literature, but it will also fill a gap in the leadership-creativity literature.
I anticipate that ethical leaders cultivate trust within a team through the fact that ethical leaders foster two-way communication and exhibit trustworthy, honest and fair behaviour (Trevino et al, 2003). According to Mooradian, Renzl and Matzler (2006) trust is a necessary aspect for knowledge sharing within teams, since team members are more comfortable sharing knowledge when they trust that their shared knowledge will not be expropriated by others. I further anticipate that, since in high-trust teams more knowledge is shared, more (creative) ideas are shared and identified, which in turn leads to more creative and high quality solutions within the team (Zand, 1972). As indicated before, despite the potential benefits ethical leadership may have on performance, the relationship between ethical leadership, trust, knowledge sharing and team creativity has never been examined empirically. In fact, as Chen and Hou (2016) point out, research aiming to investigate a (positive) relationship between ethical leadership and creativity is underdeveloped, whereas leadership is an important predictor of creativity (Chen & Hou, 2016; Lee, Gillespie, Mann & Wearing, 2010). Thus, the main contribution of this study is to increase knowledge in the proposed relationship between ethical leadership and performance in the form of team creativity.
Theoretical background and Hypotheses
Ethical leadership
others. Accordingly, leaders exhibiting ethical behaviour can positively influence the ethical behaviour of followers, especially when ethical behaviour is rewarded whereas unethical behaviour is disciplined (Jordan, Brown, Treviño & Finkelstein, 2013). Interestingly, Trevino, Brown and Hartman (2003) acknowledged that the ethical conduct of ethical leaders in their private lives was as important as the ethical conduct in their professional life. Both correlated positively with employees’ perception of their ‘ethical’ leader.
Another important aspect of ethical leadership is allowing employees to participate in decision making, and providing them with voice (Chen & Hou, 2016; Den Hartog & De Hoogh, 2009). Ethical leaders listen to their employees and build their confidence (Trevino et al, 2003). As mentioned before, however, the effects of ethical leadership on team creativity have not yet been researched.
Ethical leadership and trust
cooperation and even retaliation behaviour (Costa, Roe & Taillieu, 2001; Den Hartog & De Hoogh, 2009). Research shows that management climate and leadership styles are important antecedents of trust within teams (Alexopoulos & Buckley, 2013).
Previous studies acknowledge the important role leaders play in enhancing trust in interpersonal relationships, on the individual level, but also on a group level (Den Hartog & De Hoogh, 2009). Although most research has studied the relationship between leadership style and trust in leader, Den Hartog (2003) found in her research that transformational leadership was positively related to interpersonal trust within teams. In a later study Den Hartog and De Hoogh (2009) found support for a positive relationship between ethical leadership and trust in management and more generally a positive relationship between trust in co-workers. However, these results were small and focussed on trust in co-workers rather than trust within teams. Similarly, I expect that ethical leadership will relate positively to interpersonal trust within teams. Den Hartog and De Hoogh (2009) describe that ethical leaders promote trust, loyalty and commitment to the organization by showing trustworthy and fair behaviour. Furthermore, Avolio, Gardner, Walumbwa, Luthans and May (2004) found that leaders who exhibit moral standards encourage positive expectation of others, which in turn strengthens levels of trust in the leader and within teams. However, ethical leadership is more than being an example of trustworthiness and ethical conduct. Ethical leaders also involve their employees in decision making, and they provide them with voice (Chen & Hou, 2016). In this way employees feel empowered, and they will be able to express themselves more clearly, not only towards their leader, but also towards their team. Employees will share and express their feelings, thoughts and opinions on a more frequent basis with both their leader and the rest of the team, resulting in a more complete understanding of the other employees. Thus, I expect that through combining these two expects of ethical leadership interpersonal trust will be enhanced.
Hypothesis 1: Ethical leadership is positively related to interpersonal trust within teams.
Trust and knowledge sharing
aspects of knowledge management is knowledge sharing, which means that employees are able to utilize their individual knowledge and that they are able to share this knowledge with peers (Yang & Wu, 2008). Another widely used definition was suggested by Argote and Ingram (2000) who defined knowledge sharing as a process through which one unit (can be an individual, but also a group) is effected by experiences of others. Nonaka and Takeuchi (1995) emphasized the importance of interaction between individuals. Furthermore, many researchers found that an individual’s trust in others is a determining factor for knowledge sharing (Hsu, Ju, Yen & Chang, 2007; Abrams, Cross, Lesser & Levin, 2003; Mooradian et al., 2006). For knowledge sharing in teams it is important that team members trust each other that their shared knowledge is interpreted in the right way, and that it will not be used against them (Alexopoulos & Buckley, 2013). This relates back to the two notions of trust, namely security and perceived competency level. Moreover, research found that when trust is absent, team members engage in knowledge sharing to a lesser extent (Ardichvili, Page & Wentling, 2003). Therefore, trust is an important factor for engaging in knowledge sharing. Recently, Sankowska (2013) found that when there is a high level of interpersonal trust within teams and the organization, the frequency of knowledge sharing increases. Moreover, trust also increases the quality of knowledge sharing (Mooradian et al., 2006; Sankowska, 2013). Thus, in line with previous theory, I propose that through interpersonal trust within a team, knowledge shared (within the team) increase and it will be more effective. I hypothesize that:
Hypothesis 2: interpersonal trust within teams is positively related to knowledge sharing.
Mediating role of interpersonal trust between ethical leadership and knowledge sharing.
ambiguity within the team (Trevino et al., 2003). Ethical leadership is a facilitator for interpersonal trust within a team, thereby also enhancing knowledge sharing. According to previous studies, interpersonal trust is an important antecedent for knowledge sharing amongst team members (Alexopoulos & Buckley, 2013). More recent studies, even suggest that interpersonal trust increases the quality of knowledge shared (Sankowska, 2013).
I propose that employees are positively stimulated by the trustworthy and fair behaviour of their ethical leader to trust their fellow team members, which will lead to more and effective knowledge sharing within the team. Therefore, there is a positive indirect effect (Preacher, Rucker & Hayes, 2007) of ethical leadership on knowledge sharing, since ethical leadership effects interpersonal trust within a team, and interpersonal trust within a team, in turn effects knowledge sharing. Thus, I hypothesize that:
Hypothesis 3: The relationship between Ethical leadership and knowledge sharing is mediated by interpersonal trust within a team.
Knowledge sharing and team creativity
Creativity is known to be one of the factors for a firm to be able to adapt in the fast changing environment (Knippenberg, Van Ginkel & Barkema, 2012). Over centuries different definitions of creativity arose. Sometimes, creativity and innovation are used interchangeably, but in her research Amabile (1988, p. 126) made a clear distinction. According to her ‘creativity is the
production of novel and useful ideas by an individual or group of individuals working together’.
She distinguished innovation as ‘the successful implementation of creative ideas within an
organization’ (Amabile, 1988, p. 126). In this study I will focus only on the aspect of creativity.
Choi (2013) state that if team members possess non-overlapping knowledge and resources, and knowledge is shared amongst the team members it benefits the teams’ creativity level.
Knowledge sharing is a group process, since it is an interaction pattern among team members (Zhang, Tsui and Wang, 2011). This process broadens the groups knowledge resource, whereas a lack of knowledge sharing inhibits collaboration and therefore team creativity. Zhang et al. (2011) studied the relationship between knowledge sharing and team creativity in Chinese work groups, and found a significant positive effect. Thus, within the existing literature, evidence points out that there is a relationship between knowledge sharing and creativity both on the individual as well as the team level. Therefore, in line with previous research, I propose that knowledge sharing within a team will lead to higher team creativity. I hypothesize:
Hypothesis 4: Knowledge sharing is positively related to team creativity
Sequential mediating role between ethical leadership and team creativity
Until this point, I have outlined the expected positive relationship between ethical leadership and knowledge sharing mediated through interpersonal trust within teams. Furthermore, I have argued for the positive relationship between knowledge sharing and team creativity. This brings me to suggest that there is a positive indirect relationship between ethical leadership and team creativity. As I earlier explained, ethical leaders enhance interpersonal trust through exhibiting trustworthy and fair behaviour (Den Hartog & De Hoogh, 2009), as well as providing voice to their employees (Chen & Hou, 2016). This will increase levels of interpersonal trust within the team. Furthermore, Interpersonal trust within a team increases knowledge sharing (Alexopoulos & Buckley, 2013; Sankowska, 2013). Consecutively, knowledge sharing among team members enhances team creativity and offers high quality idea generation (Leenders, Van Engelen and Kratzer, 2003; Zand, 1972). This leads to the following Hypothesis:
Figure 1: The conceptual model
Method
Sample and data collection procedure
Data was collected in a sample of 56 teams and their direct supervisor; all teams came from organization within the Netherlands. Teams came from different sectors ranging from the secondary to quaternary sector. Also the type of teams varied in the sample, and included production teams, project teams and consulting teams, amongst others. In order to collect the data, I used two different online questionnaires where all items were formulated in Dutch. One survey was designed for the team members while the other was directed towards their supervisors. The survey for the team members asked them to report on the supervisor’s leadership style, trust within the team and knowledge sharing among the team members. The survey for the supervisor contained measures of the team’s creativity, thus the data came from two sources. We made use of this data collection method to avoid common method bias (Podsakoff, MacKenzie & Lee, 2003).
supervisors responded. However, this resulted in 43 usable team to use in the analysis, due to the fact one team had two supervisors and for some teams only the supervisor responded. This provides a team response rate of 77%. Unfortunately, we are not able to report on the overall response rate within the teams since we do not know the exact team size of many of the teams. The average number of respondents per team was 4. The majority of the respondents of the team members were female (65%). The average age of the team members was 37.90 years (SD = 13.04); their average tenure within the firm was 8.47 years (SD = 9.50); and the average team membership was 3.89 years (SD = 4.26). The gender of the supervisors was spread equally, with 23 being male and 23 being female; the average age of the supervisors was 42.70 years (SD = 12.16); tenure within the firm 7.30 years (SD = 7.25); and the average time being the direct supervisor of the team was 3.41 years (SD = 3.92)
Measurements
All the items that we used within this study were rated on a 5-point Likert scale where 1 represented ‘strongly disagree’ and 5 ‘strongly agree’. I used validated, existing measurement scales which were all originally in English. Some item scales had already been translated into Dutch, however some still needed to be translated. The Cronbach’s alpha was checked for all scales.
Ethical leadership
Ethical leadership was measured using the 10-item ethical leadership scale, which was developed and validated by Brown et al. (2005). The reason for choosing this scale was that nowadays most studies focusing on ethical leadership use this scale. The 10- items needed to be translated into Dutch. Sample items include ‘My immediate supervisor makes fair and balanced decisions’ and ‘Disciplines employees who violate ethical standards’. The Cronbach’s alpha (α) was .86.
Interpersonal trust within teams
Knowledge sharing
To measure Knowledge sharing the 5-item scale from Connelly and Kelloway (2003) was used. Again this scale still needed to be translated in Dutch. Sample items are ‘People in this team are willing to share knowledge/ideas with others’ and ‘People in this team keep their best ideas to themselves’, which is reversed scored. The Cronbach’s alpha (α) was .85.
Team creativity
Li, Fu Sun and Yang (2015) adapted the 3- item measure of individual creativity from Zhou and George (2001) to the team level. The procedure to adapt a scale from individual to team level is consistent with previous research on team creativity. The items still needed to be translated into Dutch. A sample item is ‘Team comes up with new and practical ideas in solving problems’. The Cronbach’s alpha (α) was .72. As aforementioned, team creativity was evaluated by the supervisor.
Control variables
Demographic characteristics of both the team members and the supervisor may affect the relationships that are tested in this study. Therefore, I checked whether these variables correlated. However, all of these demographic control variables mentioned above did neither correlate significantly with the depended variable nor with the mediators. Therefore, I decided to not included these variables as control variables. Furthermore, since this study investigates the relationship between ethical leadership and team creativity, I must control for other leadership styles, in order to find the unique effect of ethical leadership on team creativity. I chose to control for the following leaderships styles: consideration, which is relational-oriented; and initiating structure, which is task-oriented (Yukl, Gordon and Taber, 2002). Many researchers have shown that different leadership styles have some overlap with each other (Brown et al., 2005; Yukl, 2013). For example, consideration, transformational and ethical leadership share common attributes.
Consideration and initiating structure
decides what shall be done and how it shall be done’. I needed to translate the items into Dutch. The Cronbach’s alpha (α) was .80 for consideration and (α) .81 for initiating structure.
Aggregation of data
The conceptual model, that is tested in this study, is on the team level. In Accordance with Mierlo, Vermunt and Rutte (2008), we first collected data trough individual survey responses. Next the data was aggregated to the team level. This is said to be the most common approach in organizational science (Klein, Conn, Smith & Sorra, 2001). Ethical leadership, interpersonal trust within teams and knowledge sharing can be seen as team attributes which stem from the individual member perceptions. It is supposed that all team members share the same perceptions and there should be consensus within the team. Therefore, these variables are also called shared constructs (Molleman, 2005). Thus, as Klein et al. (2001) suggest it is necessary to aggregate the aforementioned variables from the individual level to the team-level. Although there are several procedures which can be used to justify aggregation to the team level, one widely used method is calculating the intra-class correlation (ICC) (Molleman, 2005). The ICC indicates the ratio of between group variance and total variance (Molleman, 2005). The ICC gives an estimation of the degree that the individual ratings of team members are similar to each other. If the ICC provide a value of around .20 or higher it is justified to aggregate the individual responses into a team level measurement (Molleman, 2005). The ICC is calculated with the following equation:
𝑏𝑒𝑡𝑤𝑒𝑒𝑛 𝑔𝑟𝑜𝑢𝑝 𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒 𝑡𝑜𝑡𝑎𝑙 𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒 =
𝑏𝑒𝑡𝑤𝑒𝑒𝑛 𝑔𝑟𝑜𝑢𝑝 𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒
𝑏𝑒𝑡𝑤𝑒𝑒𝑛 𝑔𝑟𝑜𝑢𝑝 𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒 + 𝑤𝑖𝑡ℎ𝑖𝑛 𝑔𝑟𝑜𝑢𝑝 𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒
Data analysis
To test the hypothesized sequential mediation model I used PROCESS by Andrew Hayes, specifically model 6. Hayes (2012) refers to this model as serial multiple mediator models. In our model the mediators are restricted to two. Thus, the direct effects and indirect effects of the independent variable Ethical Leadership on the depended variable Team Creativity are investigated through the mediating variables interpersonal trust within teams and knowledge sharing.
Results
Descriptive statistics
Table 1
Means, standard deviations, reliabilities, and correlations among study variables.
Variable mean SD 1 2 3 4 5 6 1. Ethical leadership 4.01 0.33 1 2. consideration 4.04 0.37 .35* 1 3. Initiating structure 3,67 0.54 -.22 .11 1 4. Team trust 4.06 0.33 .48** .41** -.21 1 5. Knowledge sharing 4.25 0.37 .27 .31* -.01 .69** 1 6. Team Creativity 3.65 0.71 .15 .44** -.11 .21 .22 1 N= 43 * P < 0,05. ** < 0,01.
Figure 3: Results of hypothesized model
Hypothesis testing
Table 2
Results of hypothesized model Predictor Trust Model 1 Model 2 Knowledge Sharing Model 1 Model 2 Team Creativity Model 1 Model 2 Consideration β = 0.27* (t = 2.15) β = 0.02 (t = 0.14) β = 0.91* (t = 2.84) Initiating structure Β= -0.10 (t = -1.21) β = 0.09 (t = 1.10) Β= -0.26 (t = -1.26) Ethical Leadership β = 0.47 * β = 0.33* (t = 3.46) (t = 2.27) β = -0.08 β = -0.06 (t = -0.52) (t = -0.37) β = 0.15 β= -0.12 (t = 0.38) (t = -0.37) Trust β = 0.83 ** β= 0.85** (t = 5.58) (t = 5.29) β = 0.16 β= -0.23 (t = 0.32) (t = -0.46) Knowledge Sharing β = 0.29 β= 0.30 (t = 0.70) (t= 0.79) Indirect effects β
1 2 SE 1 2 LLCI 1 2 ULCI 1 2 Indirect effect 1= EL à Tr à KS
0.39 0.28 0.15 0.14 0.16 0.04 0.64 0.59 Indirect effect 2= EL à Tr à Crea
0.08 -0.07 0.24 0.18 -0.36 -0.49 0.60 0.24 Indirect effect 3= EL à Tr à KS à Crea
0.11 0.08 0.22 0.15 -0.28 -0.15 0.64 0.48 Indirect effect 4= EL à KS à Crea
-0.02 -0.02 0.11 0.11 -0.31 -0.29 0.17 0.19
Discussion
The aim of this study was to examine whether or not ethical leadership enhances performance, a relationship which gained increased attention over the past years, but for which empirical evidence was lacking. In this study, performance was studied as team creativity, which is an important factor for a firm’s competitive advantage and thus, survival. I proposed that ethical leadership increased team creativity through two sequential mediators, namely interpersonal trust within teams and knowledge sharing. The results revealed that interpersonal trust mediated the relationship between ethical leadership and knowledge sharing. Therefore, the first three hypotheses were supported. However, the second mediation step was not supported, ethical leadership was not positively associated with team creativity through the mechanism of knowledge sharing. Thus, no support for the fourth and fifth hypotheses were found.
Implications
The findings add to existing leadership literature and creativity literature in several meaningful ways. First, as indicated, ethical leadership is indeed positively related to interpersonal trust within teams. Previously, den Hartog and de Hoogh (2009) found a small, but significant, relation between ethical leaders and followers trust in co-workers. I now found strong support for the relation between ethical leadership and the level of trust within a team. The results of this study suggest that ethical leaders promote trust, loyalty and commitment in individual followers, and in turn followers extend that trust towards their team members. Thus, I extended the work of den Hartog and de Hoogh (2009) by showing that the relationship between leadership and trust at the team level is strengthened. Indeed, the findings of this research imply that leaders and their leadership style can influence group processes to a great extent. Leaders need to be aware that there is not only a dyadic influence but leader influence also exists at the team level.
sharing, and it adds that ethical leadership indirectly influences knowledge sharing through the mediating effect of trust within teams.
However, this study did provide an important practical implication, since it has shown that ethical leadership stimulates healthy group dynamics, here in the form of interpersonal trust within teams. Thus, managers are able to enhance trust within the team through their leadership. Future research should investigate if ethical leadership stimulates other group dynamics like team cohesion, communication and satisfaction.
Limitations and future directions
Conclusion
This study focused on developing knowledge whether or not ethical leadership enhanced performance, a proposed relationship which gained increasing attention, though empirical research was limited. I set out to investigate if ethical leadership positively influenced team creativity. Indeed, a positive indirect relationship between ethical leadership and knowledge sharing was found, using interpersonal trust within teams as a mediator. Ethical leaders show trustworthy and fair behavior, and encourage followers to express themselves more often by providing them voice. Both behaviors together increase interpersonal trust within teams. Next, in line with previous research interpersonal trust within teams was positively related to knowledge sharing. This relationship indicates that ethical leadership can stimulate effective and healthy group processes. However, the second mediating step was not confirmed since knowledge sharing did not correlate with team creativity. Therefore, I need to acknowledge that no evidence was found in the proposed relationship between ethical leadership and team creativity as a performance outcome. Future research needs to further investigate the relationship using both moderators and a bigger sample size, as well as different performance outcomes.
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