The impact of transformational CEOs on the performance of small- to medium-sized firms: does organizational context matter?

Although theory suggests that CEOs who engage in transformational leadership should have a positive effect on firm performance, most empirical examinations using data drawn from larger firms have failed to find support for this linkage. Given that the organizational complexity associated with larger firms has been viewed as a central obstacle to establishing this important link, the authors examined the impact of CEO transformational leadership on firm performance in smaller, privately held firms. After first explaining why the less complex context of these firms provides a setting for transformational CEOs to play a more direct role in enhancing firm performance, they then further clarified the nature of this link by hypothesizing 3 contingencies that they argued are particularly salient: firm size, CEO founder status (founder or nonfounder), and CEO tenure. Results from a multisource survey of CEOs and their top management teams in 121 firms and 2 time-lagged measures of performance, 1 objective and 1 perceived, provided consistent support for these hypotheses.