Transformational Leadership and Perceived Organizational Performance in SMEs in Sindh, Pakistan: The Indirect Association through Organizational Justice

Abstract

The study focused on the relationship between transformational leadership and perceived organizational performance of small and medium sized enterprise (SMEs) owners and managers in Sindh, Pakistan, considering organizational justice as a possible intervening variable. In this cross-sectional study 400 questionnaires were collected with the help of purposive recruitment from Karachi, Hyderabad, Sukkur and Larkana of which 400 were usable. Focal estimates are from a reported partial least-squares structural equation model which included other organizational constructs. Transformational leadership was positively associated with organizational justice (β = 0.613, t = 18.702, p < 0.001); and organizational justice was positively associated with perceived organizational performance (β = 0.185, t = 2.392, p = 0.017). The direct leadership–performance association was not statistically significant (β = −0.052, t = 0.887, p = 0.375). Specific indirect association through justice was reported and was positive (β = 0.113, t = 2.385, p = 0.017). The reported results are in line with the positive specific indirect relationship via organizational justice, with the caveat that the original estimation and resampling procedures need to be verified in order to conclude a causal mediation effect. The sample is also a nonprobability sample, and the respondent sample is also common, as well as insufficient documentation of the overall fitted model, which is limiting interpretation. The results give context-specific evidence that managerial perceptions of leadership and organizational fairness are linked to perceived performance in the SMEs they work in.