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Electronic copy available at: http://ssrn.com/abstract=1420665Electronic copy available at: http://ssrn.com/abstract=1420665
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Leadership’s Impact on Employee Engagement: Differences among
Entrepreneurs and Professional CEOs
Final Submitted Version to Leadership and Organizational Behavior Journal,
Accepted for Publication: Sept. 2008
Nancy Papalexandris
Athens University of Economics and Business,
Derigny 12, Athens 104 34, Greece
tel: +30 697 4537247, +30 210 8203475
e-mail: papalexandris@aueb.gr
url: http://www.mbc.aueb.gr/hrm/papalexandris
Professor Nancy Papalexandris, PhD, is the Director of the MSc in Human Resource
Management and ex Vice Rector of Academic Affairs and Personnel of the Athens University
of Economics and Business. She holds a Master degree from New York University and a
Ph.D. from the University of Bath in the UK. She has written several books and published
many articles in the area of human resource management, organisational behaviour and
culture, issues in public administration, corporate communications and women in
management. She has published articles in various international journals and has organised
and participated in a number of international conferences.
Eleanna Galanaki
Athens University of Economics and Business,
Derigny 12, Athens 104 34, Greece
tel: +30 697 4537247, +30 210 8203475
e-mail: eleanag@aueb.gr
url: http://www.mbc.aueb.gr/hrm/galanaki
Eleanna Galanaki holds a BSc in Economics, a MSc in Human Resource Management and a
PhD in Human Resource Management. She is a lecturer at the Athens University of
Economics and Business, Department of Marketing and Communication. Her research
interests include outsourcing of management functions, management information systems,
leadership and entrepreneurship. She has published in several scientific journals and books
and lectured in various undergraduate and postgraduate classes in business courses. More
information on her can be found at her personal website:
http://www.mbc.aueb.gr/hrm/galanaki
Electronic copy available at: http://ssrn.com/abstract=1420665Electronic copy available at: http://ssrn.com/abstract=1420665
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Leadership’s Impact on Employee Engagement: Differences among
Entrepreneurs and Professional CEOs
ABSTRACT
Purpose: This study aims at identifying similarities and differences between the leadership
practices of managing entrepreneurs and professional CEOs and to investigate how these
impact on their immediate subordinates’ satisfaction, commitment, motivation, and
effectiveness (Engagement).
Design: A multiple-respondents survey, aiming at CEOs and their immediate subordinates
was conducted. Factor analysis, correlations and moderated regression analysis were used in
order to reach conclusions
Findings: Two leadership dimensions are found to be most influential: (a) being a good
manager/mentor and (b) articulating vision. Although good manager/mentor characteristics
prove crucial for both types of CEOs, the effect of vision articulation on subordinates is
moderated by the type of company the CEO is leading. No significant differences are found in
the leadership style that the two types of CEOs adopt, except for their calmness and self-
possession, which is lower among entrepreneurs.
Implications: The findings raise questions regarding the differences in subordinate
expectations from owners- CEOs, as opposed to professional CEOs and points at certain
characteristics which could be developed in order to enhance leadership effectiveness in both
groups of top managers.
Originality/Value: The study underlines the importance of sound vision development and
articulation in entrepreneur-run firms, as it appears that people working for such firms expect
more direction from the Head. It is also sustained that good management and mentoring is
essential in any kind of firm, in order to develop an effective, committed and motivated Top
Management Team, which will bring corporate success
Keywords: Leadership, Entrepreneur, CEOs, Top Management, Vision
Type: Research Paper
INTRODUCTION
The effect of the Chief Executive Officer’s (CEO) leadership style has been largely debated,
as it is considered to have multiple level effects on every employee. These effects may be
either direct or indirect, through the impact that CEO leadership has on upper management.
The CEO is the person from whom it is expected to give direction, vision and identity to the
firm. This role may be even more prominent in companies managed by the owner or founder.
In this paper we attempt to shed some light on the effect of the CEO leadership style on
employee engagement, in companies run by their owner or founder compared to ones run by
professional CEOs.
The underlying hypothesis of the study is the assumption that owner/entrepreneur1 Chief
Executives will not only differ from professional ones in traditional entrepreneurial aspects
usually attributed to them, such as risk taking propensity, vision, determination, self- esteem,
etc.(Baum and Locke, 2004, Kuratko and Hodgetts, 2004), but also in the way they are
perceived and meet the expectations of their immediate subordinates. This means that the
team surrounding the CEO will expect a different CEO leadership behavior, when the firm is
1 From this point on, the terms owner/ founder and entrepreneur will be used interchangeably, and they
will refer to CEOs who are the owners or founders of the firm.
3
run by the owner, as opposed to when it is run by a professional CEO.
The study is based on the data of a 50-CEOs survey carried out in Greece in 2004, as part of
Phase II of the GLOBE project (Global Leadership and Organizational Behavior
Effectiveness Research Project) (Den Hartog et al., 1999, R.; House et al., 2001a,
Papalexandris, 2006). Phase II of the Globe project originally aims at studying the impact of
Chief Executives’ (CEOs) behavior on the psychological state of their immediate
subordinates, distinguishing between companies run by the entrepreneur or a professional
CEO. Aspects of the psychological states assessed are the CEO’s subordinates’ commitment,
effectiveness, motivation and satisfaction 2.
THEORETICAL BACKGROUND
Entrepreneurship and Leadership
Entrepreneurship is a relatively new discipline, whose originality and self-sufficiency as a
separate and distinct field of inquiry has often been debated (Shane and Venkatraman, 2000).
Arguably, if the results of entrepreneurial research are not sufficiently unique, then the study
of phenomena, such as the birth of new firms and the management of small business, should
come under already existing and more established fields of study. Some attribute the
emergence of entrepreneurship as a distinct field of study to its dual footings on psychology
and economics, which have contributed to the creation of a separate identity (Vecchio, 2003).
Therefore, entrepreneurship, as a field, is based on pure economics if we see it as (a) the
mechanism that converts technical information to products and services (Arrow, 1969), as (b)
the mechanism that enables the discovery and mitigation of economic inefficiencies (Kirzner,
1997), or as (c) the innovation that drives change in products and services (Schumpeter,
1934).
However, if we approach it from the point of view of the characteristics of the entrepreneur or
the entrepreneurial behaviors developed in the process, entrepreneurship draws from
organizational behavior and psychology at large.
In the attempt to answer essential questions, concerning the entrepreneur on the one hand and
the entrepreneurial process on the other, several approaches and schools of thought have
emerged (Cunningham and Lischeron, 1991). For the purposes of the current paper, we will
focus on the so-called “Leadership School of Thought on Entrepreneurship” (ibid.) which
sustains that entrepreneurs, as leaders of people, depend on others to accomplish purposes and
objectives. Therefore, in order to succeed, they need to motivate, direct and lead their people.
The leadership school of entrepreneurship, as a non-technical management school approach,
suggests that the successful entrepreneur must also be an effective leader/mentor who will
define a vision of what is possible and attract people to transform this vision into reality.
Moreover, founders serve as leaders/managers during the entire process and they are engaged
continuously in the creation of the firm’s culture (Schein, 1983). Following the mid-80’s,
when the management and leadership attributes of entrepreneurs and small business owners
came to the centre of interest in the relevant literature (Ratnatunga and Romano, 1997), this
School has followed closely the advancements of the Leadership literature in general. As a
matter of fact, there have been numerous authors who identify converging and overlapping
themes and theories in the disciplines of Leadership and Entrepreneurship (Cogliser and
Brigham, 2004, Vecchio, 2003).
Approaches to Leadership
Several theories prevailed in the early days of leadership, but very few of them were
2 The authors would like to thank Professors Robert House and Mansour Javidan for their invaluable
contribution that made the project Globe possible.
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subsequently applied in the study of entrepreneurship (Cogliser and Brigham, 2004).
Indicatively, we should mention: the Traits Theory (Stogdill, 1948), the Managerial
Motivation Theory (Mcclelland, 1965), the Task-oriented/Relations-oriented behavior (Likert,
1961), the Managerial Grid (Blake and Mouton, 1964), Path-Goal Theory (R.J.; House, 1971)
and the Contingency Theory (Fiedler, 1971). Although some of these approaches have been
applied in the study of entrepreneurship, they have not been used to investigate the leadership
profile of the entrepreneur, but rather to answer questions of other Schools of Thought of
Entrepreneurship, such as the Classic or the Psychological Characteristics School of
Thought(Ratnatunga and Romano, 1997). For example, McClelland’s Managerial Motivation
Theory has been extensively used in Entrepreneurship, but mostly applying the motive
imagery profile to explain the decision to “entreprendre” (Apospori et al., 2005). More
recently, some later leadership theories have been applied more extensively in the study of
entrepreneurial firms and, what is more, in agreement to the notion of the Leadership School
of Entrepreneurship. Such theories are the Charismatic Leadership (R. J. House, 1977, R. J.;
House et al., 2001b), Transformational Leadership (Bass, 1985), Visionary Leadership
(Westley and Mintzberg, 1998), Authentic Leadership (Luthans and Avolio, 2003) and the
Shared Leadership (Ensley et al., 2003) theory. We will develop in brief some of these
theories and the way in which they have been applied in the study of Entrepreneurship, as
they help to shed some light in the topic under study.
Charismatic, Transformational, and Visionary Leadership
With the original work of R. House (1977), in the mid-70’s a new genre of leadership theory
has emerged in the organizational literature, alternatively referred to as “charismatic”,
“transformational”, “visionary” or “inspirational” (R. J.; House and Shamir, 1993, Conger
and Kanungo, 1987, R. J.; House et al., 2001b, Shamir et al., 1993, Den Hartog et al., 1999,
Waldman and Yammarino, 1999, Podsakoff et al., 1996). This set of theories focus on
exceptional leaders who display extraordinary effects on their followers. Such leaders
transform the values, needs, preferences and aspirations of followers from self-interests to
collective interests, while at the same time, they cause high commitment of the followers to
the leader’s mission so that they “perform above and beyond the call of duty” (R. J.; House
and Shamir, 1993: 577).
The connecting element of those leadership theories is the leader’s vision and its adoption by
followers. As Baum et. al. (1998) have put it, all those approaches share three common
components: (a) communicating a vision, (b) taking various actions to implement the vision
and (c) possessing a charismatic personality style. In Charismatic Leadership, vision and its
effective communication leads to its deeply held adoption by the followers. In
Transformational Leadership, as opposed to transactional leadership, leaders and followers
coordinate their efforts to reach higher level goals that result in major changes, dictated by
vision (Ensley et al., 2006, Visser et al., 2005, Ardichvili, 2001). Transactional Leadership,
on the other hand, is focused on exchange relationships between leaders and their followers:
the leader clarifies expectations, administers rewards and punishments and closely monitors
subordinates to ensure goals are met. Finally, visionary leadership is performed through the
leader’s vision.
The concept of charismatic or transformational leadership has been used to investigate the
success of entrepreneurs as leaders in diverse research settings. Indicatively, we mention
studies and theoretical frameworks on the effect of transformational leadership on new
venture, individual, and organization- level performance (Ensley et al., 2006, Waldman and
Yammarino, 1999, Ardichvili, 2001). Vision, in particular, and vision communication at
large, have been extensively studied as determining factors of the success of the entrepreneur
as a leader (Baum and Locke, 2004, Baum et al., 1998, Tarabishy et al., 2005)
Shared Leadership
The notion and importance of shared leadership, a new stream of leadership theory, emanated
ironically from the critique on leadership theory and the belief that leadership may not have as
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much of an impact as all the interest in it would suggest (Ensley et al., 2003). Interest on
shared leadership comes from the admission of the role of teams and especially Top
Management Teams in entrepreneurial success (Ensley et al., 2000). Research on shared
leadership in intrapreneurial teams and entrepreneurial teams (Ensley, 1999) suggests that
shared leadership is more important for team effectiveness than the leadership exhibited by
the team leader.
Entrepreneurial Leadership
Finally, a new term, introduced in some studies is “Entrepreneurial Leadership”. One study
worth mentioning was conducted by Gupta et. al., in 2004 and it effectively introduced and
defined the concept of entrepreneurial leadership. This study was based on Globe phase I data
(therefore achieving globally useful conclusions) and proposed a construct for entrepreneurial
leadership (Gupta et al., 2004). This construct consisted of two major functions of the
entrepreneurial leader, i.e. scenario enactment and cast enactment. The former consists of
framing the vision, absorbing uncertainty and clarifying the path for the followers, whereas
the latter consists of building commitment and specifying the limits of follower’s behavior.
Importance of the CEO’s leadership style
As shown from the above analysis, the leadership style of the entrepreneurial firm’s leader
has attracted the interest of numerous leadership and entrepreneurship researchers in the past.
It has moreover been shown that the leadership style of the CEO on one hand (Hoffman and
Hegarty, 1993, Waldman et al., 2001, Baum and Locke, 2004, Baum et al., 2001, Tarabishy et
al., 2005), as well as of the Top Management Team (Hambrick and Mason, 1984, Ensley et
al., 2000, Ensley et al., 2003), on the other, is pivotal for the organizational performance in
total. This conception is in overall agreement with the classic Upper Echelons Theory
(Hambrick and Mason, 1984).
The effects of CEOs’ leadership on organizational performance, although suggested in
numerous studies (Podsakoff et al., 1996), have been studied in a very limited number of
studies (Tarabishy et al., 2005).
As a matter of fact, CEO leadership is important for two distinct effects that it bears on
organizational performance:
• Effect on organizational performance, as a result of distant leadership, i.e.
leadership bypassing middle levels of management and felt directly at lower
echelons (Yammarino, 1994, Waldman and Yammarino, 1999)
• Effect on organizational performance as a result of the higher effectiveness of the
Top Management Team surrounding the CEO, due to the direct CEO leadership
effects on top managers- members of the Top Management Team.
For the aims of the present study, we focus on the latter effect, i.e. the effect of CEO
leadership on the Commitment, Effectiveness, Motivation, and Satisfaction of his/her
immediate subordinates/ collaborators, i.e. top managers of the firm. As shown in previous
studies (Podsakoff et al., 1996, Pearce et al., 1997), the CEO’s leadership style affects all the
above measures of subordinate performance. For the sake of economy of space and in order to
avoid repetition, we will refer to this set of characteristics/ states of the collaborators of the
CEO, as “Engagement”. We believe that engagement, as a “positive, fulfilling, work-related
state of mind that is characterized by vigor, dedication and absorption” (Salanova and
Schaufeli, 2008), successfully portrays the composite state of “commitment, effectiveness,
motivation and satisfaction”, used in this study. On the other hand, the reader should bear in
mind that there is a wide range of literature on engagement which is worth studying, but
which falls outside the scope of this paper.
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OBJECTIVES OF THE STUDY
In view of the above, the present study sets the following objectives:
1. To measure CEO leadership dimensions
2. To establish which CEO leadership dimensions have an immediate effect on their
subordinates’ Commitment, Effectiveness, Motivation, and Satisfaction
(Engagement)
3. To investigate whether the relation between leadership dimensions and immediate
subordinates’ engagement is affected by the type of CEO (i.e. owner/ entrepreneur or
salaried/ professional manager)
RESEARCH HYPOTHESES
Based on transformational leadership and entrepreneurial leadership theories developed
above, our first objective is to confirm that the leadership behavior of the CEO will consist of
two distinct axes: transformational and transactional effects (transformational/transactional
leadership approach), or, otherwise, scenario enactment and cast enactment (as termed in the
entrepreneurial leadership approach). This leads to the first proposition and the subsequent
hypotheses that the paper aims to confirm:
P1: The leadership behavior of CEOs consists of two major dimensions, in agreement
to the entrepreneurial leadership theory: one related with clarifying expectations, rewarding,
and monitoring and another one related with vision, vision communication and charismatic
effects.
H1.1: CEOs will exhibit a set of leadership attributes that are connected with good
management-mentor practice, such as clarifying expectations, rewarding and monitoring.
H1.2: CEOs will exhibit a set of leadership attributes that are connected with the articulation
and enabling of vision realization.
The second objective is to examine the relation of CEOs’ position on the different leadership
dimensions with the commitment, satisfaction motivation and effectiveness (Engagement) of
their immediate subordinates (top managers). This leads to the second proposition and
subsequent hypotheses.
P2: Specific leadership patterns of the CEO are connected with higher subordinates’
engagement.
H2.1: Better management and mentoring skills will be related with higher subordinates’
engagement.
We expect that better management and mentoring practice increases the satisfaction,
motivation and commitment of the subordinates of a leader in all cases, as it reduces
uncertainty, while it allows to take initiatives and therefore increases the interest in the job, as
a substantial amount of research has shown in the past (Ambrose and Kulik, 1999, Tammy
and Kimberly, 2006) .
H2.2: Better articulation of vision will be related with higher subordinates’ engagement.
As several studies, either in leadership or in entrepreneurship have shown, effective
communication of the vision by the top has direct effect on venture growth (Baum and Locke,
2004, Baum et al., 1998, Ensley et al., 2000). This can be attributed to the fact that knowledge
of “where we are heading”, reduces uncertainty, gives direction and allows for the setting of
clear goals.
H2.3: Better self-management and inner balance will be related with higher subordinates’
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engagement.
To be in good terms with oneself, to be calm, to have introspection, to be fair and self-poised
is a leader’s safeguard for handling challenging situations effectively. Therefore, it reduces
uncertainty among his immediate subordinates and increases credibility, thus improving
engagement. These leadership qualities fall within the recently introduced notion of self-
leadership (Neck et al., 1999)
H2.4: Better collaboration with people/ sociability will be related with higher subordinates’
engagement.
Collaboration with people and sociability should be connected with subordinate’s higher
engagement, as the leader will most probably establish relations with his/her subordinates.
Although recent research has shown the importance of some solitude for the leader in order to
excel (Bourantas, 2005), leadership, as an interactive function involving two parties,
demands from the leader to develop meaningful relationships with his immediate
subordinates, and this becomes very important for their engagement. Moreover, as noted
above, good relations with at least some of the subordinates is an essential part of
Transformational Leadership.
H2.5: More bureaucratic leadership style will be negatively related with higher subordinates’
engagement.
Putting much emphasis on processes is a leadership approach, connected with the theories of
Max Weber (Weber, 1947) and the bureaucratic approach to running a business. Although
bureaucracy sometimes proves necessary (Hales, 2002), it is usually negatively connected
with employees’ commitment and motivation, especially when emphasis on processes
overshadows other motivational effects.
The third objective of the study is to explore the relationship of the above mentioned major
leadership style dimensions and their different way of affecting the commitment,
effectiveness, motivation and satisfaction (engagement) of subordinates, depending on
whether a company is entrepreneurial or not. This has been studied in different research
settings, where it has been found that Entrepreneurs are more effective when adopting a
transformational, rather than transactional leadership style (Ensley et al., 2006, Waldman and
Yammarino, 1999, Ardichvili, 2001)as well as when effectively communicating their vision
(Baum and Locke, 2004, Baum et al., 1998, Tarabishy et al., 2005).
P3: The leadership style of the CEO will be connected with subordinates’
engagement, in a different way, depending on whether the CEO is an entrepreneur or a
professional manager..
H3.1: The firm being run by the owner instead of a professional CEO will moderate the
relationship of diverse CEO leadership dimensions with subordinates’ engagement
RESEARCH METHODOLOGY
a. Sample
The level of analysis of the study was the CEO of each company. In each case, information on
the CEO was taken by the CEO in person and by (a) his immediate subordinates and (b) top
managers of the firm. A total of 24 entrepreneur- CEOs and 27 professional CEOs
participated in the study. A very high response rate (72.86%) was achieved, as 51 out of the
70 CEOs initially contacted provided usable data.
By entrepreneurial companies (run by entrepreneur-CEOs), we mean companies managed by
1st of 2nd generation founder or members of the founder’s family. In established companies
8
(run by a professional CEO) management is taken up by professionals or is in the hands of
third or further generation owners.
All companies studied employed over 30 employees, following guidelines of the Globe II
project and were very successful in their respective fields of activity. An attempt was made to
match activities of companies in the two groups, so that their activities would have a minimal
effect on subsequent analyses.
b. Data Collection
The survey consisted of 3 types of questionnaires, which were designed by Robert House and
his team for the purposes of Globe phase II project:
A questionnaire for the CEO’s immediate subordinates (questionnaire A). This was
completed by at least two subordinates of the CEO who collaborated very closely
with him
A questionnaire for members of top management who are immediate subordinates of
the CEO, but who don’t necessarily have a very close or daily collaboration with him
(questionnaire B). This questionnaire was completed by at least two members of the
top management in each company examined
A questionnaire for the CEO that focused on information regarding the company and
its main strategic focus. This was completed by the CEO personally (CEO
questionnaire).
Double completion of each subordinates’ questionnaire was applied in order to increase
interrater reliability and reduce common source bias (Dionne et al., 2002, James et al., 1993).
First, agreement to participate in the research was achieved by the CEOs, who would then
propose a number of immediate subordinates, based on the research guidelines. All CEO
leadership characteristics were measured through a combination of questions from
questionnaires A and B, according to the Globe phase II design.
c. Methods of Data Analysis
Confirmatory Factor Analysis and Reliability Analysis were first conducted in order to
confirm the scale composition for the 30 behavior concepts (leadership characteristics of
CEOs and commitment, effectiveness, motivation and satisfaction of the subordinates),
according to the Globe phase II design.
Later on, Exploratory Factor Analysis was applied on the leadership characteristics of the
CEOs, in order to extract some pertaining leadership types of CEOs and check for H.1.1 and
H1.2. At this stage 5 factors/ major leadership dimensions were identified.
Pearson correlations were computed in order to examine the direction of relations among the
five main leadership types of CEO and subordinates’ engagement. Those were separately
computed for entrepreneurial and established firms, in order to check for the type of company
effect on the way CEO leadership styles affect engagement of the immediate subordinates.
Finally, linear regression analysis was used, in order to check for the leadership dimensions
predicting subordinates’ commitment, effectiveness, motivation and satisfaction
(engagement). When conducting regression analysis interaction terms were introduced to
check for the effect of the company type (entrepreneurial or established) on the relation
(Baron and Kenny, 1986, Frazier et al., 2004).
The SPSS 14 statistical software was used throughout the above analyses.
d. Questionnaire Items
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A set of 28 CEO behavior characteristics, according to the Globe research framework, was
studied:
1.Autocratic, 2.Decisive, 3.Diplomatic, 4.Face Saver, 5.Visionary, 6.Inspirational, 7.Integrity,
8.Bureaucratic, 9.Administratively Effective, 10.Autonomous, 11.Malevolent, 12.Performance
Oriented, 13.Power Sharing, 14.Humane, 15.Calmness, 16.Information Source,
17.Communicator, 18.Role Clarification, 19. Directive, 20.Shows Self-Confidence,
21.Fair, 22.Intellectually Stimulating, 23.Follower Confidence, 24.Team Oriented, 25.Risk
taker, 26.Noncontingent praise, 27.Self-Protective, 28.Indirect.
The scales used for measuring each of these characteristics, as well as those used for
measuring subordinates’ commitment, effectiveness, motivation and satisfaction were used in
previous studies, where they had exhibited high structural reliability (Cronbach’ s a>0.6) (R.
J.; House et al., 2001b). The scales were initially tested and confirmed during the Phase I
Globe project and they were subsequently agreed upon by researchers (CCIs) in 60 countries
for Phase II. As a matter of fact, most of the scales used were cross- culturally confirmed
(Den Hartog et al., 1999) during Phase I of the Globe Project.
All items were measured at a 7-point Likert-type scale. They were further tested for structural
reliability, using the data of the current study. The Kaiser-Meyer-Olin (KMO) Measure of
Sampling Adequacy (KMO>0.5 is considered acceptable, with values close to 1 considered as
ideal) and the Bartlett’s test of Sphericity (P<0.05 is the rule of thumb) were used in order to
assess whether Factor Analysis is appropriate for the data in hand (George and Mallery, 2002:
256). The Cronbach’s a indicator was used to assess structural reliability of each scale.
Confirmatory Factor Analysis Results and Reliability Analysis results for the 28 scales in the
current study are summarized in Table 1, below. As mentioned in the Research Hypotheses
above, an additional trait we examined was the composite measure for commitment,
effectiveness, motivation and satisfaction (engagement) of the managers/CEO subordinates.
Confirmatory Factor and Reliability Analysis results for this scale are also summarized in
Table 1, below.
Æ Insert Table 1 around here
As can be noticed from Table 1, most scales were characterized by good structural reliability
and appear to be measuring the same underlying concept. Most problematic seem to be the
concepts of “risk taking”, and ‘”directiveness”, which were therefore excluded from
subsequent analyses.
FINDINGS
At the second stage of the analysis, Exploratory Factor Analysis was applied on the above 28
leadership aspects, in order to identify major CEO leadership dimensions, which was the first
objective of the study.
Table 2, below, summarizes the factor analysis results for the main CEO leadership types.
The factors were extracted using Principal Component Analysis with Varimax Rotation and
Kaiser Normalization.
As can be seen in Table 2, five factors were extracted. The first factor gathers characteristics
that are often related with good management practices, such as “administratively effective”,
“performance oriented”, “role clarifying”, “integrity”, “self- confident” and “intellectually
stimulating”, whereas others are related with good mentoring/ people developing practices,
10
such as “follower confident”, “power sharing”, “communicator”. This is why we decided to
call this factor “Management/Mentoring Skills”. The second factor is related to vision,
articulation of vision and setting the base for future success, such as: “inspirational”,
“visionary”, “decisive”, “information source”, “team oriented”, and “humane” and we named
it “Articulation of Vision”. The third factor is related to self management and inner balance
and gathers the following characteristics: “calm”, “(non) autocratic”, “diplomatic” and “fair”.
A person scoring high on this factor is expected to be a person with inner balance and self
management, so that except from calmness and fairness, he/she will be able to act as a
diplomat and to avoid showing an autocratic face to followers. The fourth factor is comprised
by characteristics considered as generally negative, at least for leaders, such as “indirect”,
autonomous”, “malevolent” and “self- protective”. Altogether, this factor indicates poor
collaboration with other people and low sociability. Finally, “bureaucratic” did not load on
any other factor, so it should be considered as a factor in itself. A bureaucratic leader
establishes and follows closely procedures, rituals, norms, policies, rules and conventions.
Æ Insert Table 2 around here
As stated above, Pearson Correlations were computed, in order to explore the relations among
the scores on major leadership dimensions and subordinates’ commitment, effectiveness,
motivation and satisfaction. Those were computed separately for entrepreneurial and
established firms, in order to check for different patterns in these two groups of companies.
Tables 3 and 4, below, summarize statistically significant Pearson correlations. Those marked
with two asterisks are significant at the 0,001 level (two-tailed). Correlations among different
leadership dimensions are not depicted, as they are not significant, because the leadership
dimensions were computed based on varimax exploratory factor analysis, so they are
orthogonal and thus uncorrelated.
Æ Insert Table 3 around here
Æ Insert Table 4 around here
As can be seen from Tables 3 and 4, above, the CEO leadership dimensions that are mostly
related with higher subordinate commitment, effectiveness, motivation and satisfaction differ
between entrepreneurial and established firms.
That is, in both types of firms, people management and mentoring capabilities of the CEO are
highly correlated with subordinates’ commitment, effectiveness, motivation, and satisfaction
(engagement). However, in entrepreneurial firms, for the CEO to be visionary and future
oriented (decisive, visionary and inspirational) and to involve his/her subordinates in his
vision (information source, humane, team oriented) are positively related with higher
subordinates’ engagement (H2.1, H2.3). This is not the case in established firms, though,
where only the “good manager and mentor” dimension is related with higher subordinates’
engagement (H2.1). As for the remaining leadership dimensions identified through factor
analysis, none had significant correlation with subordinates’ engagement (H2.5, H2.7, H2.9
not sustained)
It should be noted at this point that no significant difference in the ratings of entrepreneurial
11
and Professional CEOs at the 5 leadership dimensions was found, except for the “Inner
Balance” dimension (calm, non-autocrat, fair, diplomatic), where the entrepreneurial CEOs
appear to score significantly lower than professional ones (t=2.866, P=0.006, df:49).
Entrepreneur- CEOs are perceived by their subordinates as less calm, more autocratic, less
diplomatic and more unfair than professional CEOs. This may be attributed to the higher
stress that entrepreneurs generally experience, due to higher risk and complexity situations
they are facing (Kuratko and Hodgetts, 2004). Scoring similarly on all other leadership types,
though, it is sustained that the two groups studied are similar in terms of leadership
dimensions, so these do not explain the different relations we may find in the way leadership
dimensions affect engagement in each of the groups.
Linear Regression Analysis
In order to test for the moderation effect of the type of company on the relation among CEO
leadership dimensions and subordinates’ engagement the above analysis of correlations was
not considered sufficient, so the Baron and Kenny methodology (1986) was used. At first, a
series of stepwise linear regression analyses was applied, in order to identify the leadership
dimensions that actually may have an effect on subordinates’ engagement. This series of
analyses is not presented here for economy of space. They agree though with the above
correlation analysis, as the “good manager” and “vision articulation” leadership dimensions
appear to predict subordinates’ engagement, whereas other leadership dimensions do not
explain a high percentage of the overall variance of engagement.
So, stepwise linear regression was used, in order to check whether the introduction of the
interaction term (otherwise product term), in this case “articulates vision*type of company”
improved the predicting power of the model. In other words, the interaction term was
introduced to check whether the fact that a company is entrepreneurial or professional affects
significantly the weight of the effect of the leadership dimensions on subordinates’
engagement.
Æ Insert Table 5 around here
Æ Insert Table 6 around here
Æ Insert Figure 1 around here
As can be seen from Table 5, above, the introduction of the interaction term improves the
predicting power of the model, since model 2 is able to explain 54% (R2) of the total variance
of engagement, as opposed to 48%, when the interaction term was not included (model 1).
What is more, the coefficient of the interaction term appears to be significant at the 0.05 level
(Table 6), therefore making its introduction meaningful. Therefore, it appears that the
articulation of vision by the CEO improves subordinates’ engagement, but only in the case of
entrepreneur CEOs, not professional ones. Therefore, according to the Beta values in Table 6,
the model 2 regression is as follows:
ENGAGEMENT = 0.005 + 0.587*(good manager/mentor) + 0.056*(articulates vision)
+ 0.483*(articulates vision* entrepreneur CEO)
12
Finally, figure 1, above, is provided to graphically depict the above relationship. In simple
words, it shows that the vision articulation improves subordinates’ engagement considerably
in Entrepreneurial companies (noted as 1), while it does not have any remarkable effect on
subordinates’ engagement in Professionally managed companies.
DISCUSSION
According to the above analysis, we can see that most of the original hypotheses are sustained
from the current data. This means that all three propositions (P1, P2, and P3) are supported
from the current data and may be further tested in future analyses.
Specifically, in accordance to the first proposition, as well as to the subsequent hypotheses
H1.2 and H1.3, the leadership behavior of CEOs exhibits 5 dimensions, of which two major
ones can be considered as relative to Vision/ Vision Articulation on the one hand and setting
goals, clarifying expectations, rewarding and monitoring on the other.
Moreover, hypothesis H1.1 is also confirmed, as, according to the factor analysis conducted,
leadership behavior of CEOs can be effectively synopsized into 5 diverse dimensions: (a)
good management and mentoring, (b) vision articulation, (c) self-management and inner
balance, (d) collaboration with others and (e)bureaucratic inclinations.
In addition to that, we can see that our second proposition, P2 is also sustained, as the scores
of the CEOs on some of the five leadership dimensions appears to be related with engagement
of their immediate subordinates. Thus, it appears that “good management and mentoring” is a
good predictor for engagement in both types of companies, whereas “articulation of vision” is
a good predictor in the case of entrepreneurial companies only. This means that hypotheses
H2.1 and H2.2 are sustained. No significant relation with other leadership dimensions of the
CEOs was established, which means that H2.3, H2.4 and H2.5 are not sustained by our data.
Therefore, inner balance, collaboration / sociability and bureaucratic aspects are not
connected to subordinates’ engagement, as originally hypothesized.
Finally, it was shown, through correlation analysis and regression with interaction term
analysis, that the relationship of some leadership style dimensions affect in a different way the
commitment, effectiveness, motivation and satisfaction (engagement) of subordinates,
depending on whether a company is its owner or not. Specifically, the way that “vision
articulation” affects subordinates’ engagement is moderated by the type of firm. So, including
the “vision articulation” quality of the leader helps predict subordinates’ engagement in a
better way in the case of entrepreneurial companies, but not in professional ones. This may be
attributed to different aspirations of people working in companies whose head is the owner
from those working in companies run by a salaried professional.
CONCLUSIONS
The objectives of this study were to measure CEO leadership dimensions, to establish which
CEO leadership dimensions have an immediate effect on their subordinates’ engagement and
to investigate whether the above relation among leadership dimensions and engagement is
affected by the type of CEO (i.e. entrepreneur or professional manager).
The CEO leadership dimensions were established through Exploratory Factor Analysis. As
shown in Table 2, five factors were extracted, “Manager/Mentor Skills”, “Articulation of
Vision”, “Self- Management and Inner Balance”, “Collaboration with other people/
Sociability” and “Bureaucratic”
Of these five sets of characteristics, only two were found to be related with subordinate’s
engagement: “Good Manager/Mentor”, for both Entrepreneurs and Professional CEOs and
“Articulation of Vision”, only for Entrepreneurs. In addition to that, a moderating effect of the
type of CEO (owner or professional) was found to exist on the effect of CEO leadership
13
dimensions on subordinate engagement.
We believe that this study presents particular theoretical and practical interest, because there
is limited previous research work identifying leadership styles of entrepreneurs and
professional top managers. Although, intuitively, many have claimed that entrepreneurs top
managers have different leadership attributes, the most commonly proven difference among
entrepreneurs and professional managers is actually transformational as opposed to
transactional leadership (Ardichvili, 2001, Visser et al., 2005). According to the present
study’s findings, leadership styles of entrepreneurs are not too different from professional
CEOs. They actually only differ significantly in calmness and autocratic behavior, probably
because, in agreement with conventional wisdom, entrepreneurs having to bear the risk
involved in entrepreneurial activities operate, as a rule, in very stressful situations and are
under a lot of uncertainty (Kuratko and Hodgetts, 2004). However, as it was shown, different
leadership styles motivate, satisfy, commit and increase the effectiveness of subordinates in
each group.
Theoretical Implications
A major finding of the present research is that the leadership behavior adopted by CEOs has
different effects on motivation, commitment and satisfaction of their immediate subordinates,
depending on the type of company they are in. Although this is in accordance with traditional
contingency leadership approaches, the finding that immediate collaborators have different
expectations from their CEO, depending on whether he/she is a professional manager or an
entrepreneur is quite new. Our findings imply that there is a dialectic relation between the
leadership style of the CEO and the expectations of the employees that shape their
engagement.
More specifically, entrepreneurs/ owner CEOs are expected not only to be good managers and
mentors, but also to be visionary and to pass on their vision to their followers, in order for the
latter to be committed, motivated and satisfied. This implies that entrepreneur- CEOs’
capacity to articulate vision diminishes subordinates’ uncertainty and makes them feel that
they can count on the CEO. On the other hand, professional CEOs are not expected to convey
this message of visionary- scenario enacting leadership, probably because subordinates
perceive them as less identified with the organization’s destiny than entrepreneur- CEOs.
Practical Implications
Although vision, idea generation and determination are traditional characteristics attributed to
entrepreneurs, notably at the initial stages of creating an enterprise, it is shown in this study
that the entrepreneur as a leader, as opposed to the leader of an established company, is
expected to continuously provide vision to his/her followers. In other words, vision is a
prerequisite in order to create a new company, but it is also a prerequisite at the later stages of
the company’s life cycle (for example when the transition from “entrepreneurial” to
“professional/established” is taking place), as it appears to increase motivation among
collaborators of the entrepreneurial leader.
This is important, if we take into account the low survival rate of new companies, especially
at the growth stage, when succession and firm control issues usually arise. At this stage,
entrepreneurs are usually encouraged to develop a more managerial profile (Kuratko and
Hodgetts, 2004, O'neil, 1983, Terpstra and Olson, 1993). According to the present research,
however, entrepreneurs should be mostly encouraged to safeguard their entrepreneurial
inclinations, especially vision development and articulation, as this proves necessary for their
success as leaders of their companies.
Certainly, both types of CEO need to be good managers, able to impact on their subordinate’s
engagement at the same time. This points to the importance of developing managerial/
14
leadership competencies, especially for those aspiring to top management positions.
Entrepreneurial CEOs need to have extra abilities in conveying their vision to their immediate
subordinates. This is not just a positive attribute, but it becomes imperative, in order to
achieve high subordinates’ engagement. Although this shows a distinction in the leadership
styles that entrepreneur and professional CEOs use, stronger vision development and
articulation can be a real challenge for professional CEOs as well. Given the fact that
established/professionally run firms face change and transition at a constantly growing rate,
their people’s engagement will tend to demand more and more the better understanding and
involvement in a company’s future plans and vision, as well as the reassurance that a
visionary articulate leader can offer. Furthermore heads of units or divisions often encouraged
to act as “intrapreneurs” in large companies, should adopt a leadership style that puts
emphasis on the visionary characteristics usually portrayed by entrepreneurs.
Last but not least, this study has once more underlined the importance of basic leadership
factors, which we named “good management- mentoring”. This is the best predictor for
subordinates’ engagement, in any type of firm. Back to the basics, then, with good and sound
management practices and administrative effectiveness, which at the same time encourages
subordinates to develop ideas, take initiatives and contribute with all kinds of innovative input
to their company’s improved performance. This emphasizes once more the necessity for
management and leadership development programs within firms, well designed internal
communication programs, opportunities for interaction and sharing of mission and objectives.
With reference to this study’s limitations, we must admit that we faced the serious limitation
of small sample size that is common when the study involves gathering information from
multiple sources, as a way to avoid common source bias. Nevertheless, given that the
propositions put forward from the current data have substantial theoretical implications, we
propose that they should be further tested in larger samples, preferably in a cross-country
setting, in order to validate the present findings. Also, the fact that the authors used the
methodology and questionnaire developed by a number of Scholars (Globe Project) implies
that the findings can be further used in comparing cross country data and derive useful
information concerning entrepreneur- CEO behavior and ways of enhancing it in international
settings.
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TABLES AND FIGURES
Table 1: CFA and Reliability Analysis results Summary for 28 leadership characteristics
Leadership Characteristic
Number of
Items in
Scale
KMO test for
appropriateness
of FA
Bartlett’s
test of
Sphericity Cronbach’s a
1. Autocratic 6 0.637 0.000 0.798
2. Decisive 3 0.501 0.000 0.743
3. Diplomatic 4 0.544 0.000 0.690
4. Face Saver 2 0.500 0.068 0.410
5. Visionary 9 0.777 0.000 0.830
6. Inspirational 7 0.665 0.000 0.829
7. Integrity 10 0.725 0.000 0.872
8. Bureaucratic 3 0.629 0.000 0.793
9. Administratively
Effective 4 0.776 0.000 0.817
10. Autonomous 4 0.680 0.000 0.732
11. Malevolent 6 0.801 0.000 0.815
12. Performance Oriented 5 0.672 0.000 0.809
13. Power Sharing 6 0.711 0.000 0.734
14. Humane 7 0.700 0.000 0.790
15. Calmness 4 0.628 0.000 0.740
16. Information Source 2 0.500 0.000 0.747
17. Communicator 2 0.500 0.000 0.780
18. Role Clarification 9 0.860 0.000 0.915
Directive 2 0.500 0.144 0.350
19. Shows Self-
Confidence 5 0.731 0.000 0.817
20. Fair 4 0.498 0.013 0.486
21. Intellectually
Stimulating 7 0.733 0.000 0.804
22. Follower Confidence 3 0.580 0.000 0.750
23. Team Oriented 5 0.643 0.000 0.641
Risk taker 3 0.520 0.373 0.311
24. Noncontingent praise 2 0.500 0.000 0.413
25. Self-Protective 5 0.532 0.000 0.568
26. Indirect 2 0.500 0.000 0.569
Commitment,
Effectiveness, Motivation
and Satisfaction
(Engagement)
20 0.667 0.000 0.855
18
Table 2: Rotated Component Matrix of Exploratory Factor Analysis for main CEO leadership
types
Management
and
mentoring
skills
Articulation
of vision
Self-
management
and inner
balance
Collaboration
with other
people –
sociability
Processes/
bureaucratic
inclinations
Follower
Confident .809 -.021 .376 -.144 -.072
Power Sharing .771 .173 .347 -.185 -.069
Communicator .767 .154 .346 -.247 -.233
Role Clarifying .763 .463 .224 .131 .029
Intellectually
Stimulating .763 .415 .235 -.034 .176
Performance
Oriented .728 .459 -.146 -.126 .275
Self Confident .694 .073 -.016 -.257 .383
Administratively
Effective .647 .395 .003 .056 .411
Integrity .576 .309 .400 -.475 .019
Inspirational .328 .875 .189 -.133 .024
Visionary .298 .821 .269 -.088 .007
Decisive .072 .811 .170 -.372 .061
Team Oriented .438 .691 .242 -.340 -.089
Information Source .127 .617 -.070 -.512 .184
Humane .377 .589 .422 -.219 -.087
Calmness .138 .159 .734 -.041 .307
Autocratic -.327 -.038 -.676 .391 .235
Diplomatic .085 .527 .666 -.119 .286
Fair .345 .308 .660 -.094 -.121
Indirect -.149 -.113 -.015 .717 .198
Autonomous .049 -.363 -.116 .691 .045
Malevolent -.179 -.232 -.500 .645 -.121
Self Protective -.255 -.088 -.475 .608 .116
Bureaucratic .108 .020 .104 .192 .840
Cronbach’s a 0.938 0.931 0.809 0.786 -
* Rotation converged in 17 iterations.
Table 3: Significant Correlations for CEO leadership dimensions and “Commitment,
Effectiveness, Motivation and Satisfaction” (only for Entrepreneur- CEOs)
Management
and mentoring
skills
Articulation
of vision Self-
management
and inner
balance
Collaboration
with other
people –
sociability
Processes/
bureaucratic
inclinations
Commitment,
Effectiveness,
Motivation and
Satisfaction
(Engagement)
0,520**
P=0,000 0,684**
P=0,000 0,171
P=0,424 0,044
P=0,839 0,125
P=0,559
19
Table 4: Significant Correlations for CEO leadership types and “Commitment, Effectiveness,
Motivation and Satisfaction” (only for Professional CEOs)
Management
and mentoring
skills
Articulation
of vision Self-
management
and inner
balance
Collaboration
with other
people –
sociability
Processes/
bureaucratic
inclinations
Commitment,
Effectiveness,
Motivation and
Satisfaction
(Engagement)
0,697**
P=0,000 0,015
P=0,942 0,321
P=0,102 -0,234
P=0,239 0,274
P=0,167
Table 5: Model summary- stepwise regression for “Commitment, Effectiveness, Motivation
and Satisfaction” as dependent
Model R R
Square
Adjusted
R
Square F
Change df1 df2 Sig. F
Change
1 Predictors: Constant,
Articulates vision,
Good manager-mentor .694(a) .481 .458 21.315 2 46 .000
2 Predictors: Constant,
Articulates vision, Good
manager-mentor, Articulates
vision* entrepr
.736(b) .541 .510 5.888 1 45 .019
Table 6: Model summary- regression coefficients for “Commitment, Effectiveness,
Motivation and Satisfaction” as dependent
B Std. Error Beta t Sig.
(Constant) .000 .105 .004 .997
Good manager-mentor .602 .104 .614 5.784 .000
1
Articulates vision .315 .104 .321 3.019 .004
(Constant) -.005 .100 -.048 .962
Good manager-mentor .587 .099 .599 5.919 .000
2
Articulates vision .056 .146 .057 .382 .704
Articulates
vision*entrepr .483 .199 .361 2.427 .019
20
Figure 1: Interaction graph of type of vision articulation with company type (entrepreneur/
owner run or not) on subordinates’ “Commitment, Effectiveness, Motivation and
Satisfaction” (extracted with the Interaction! Software)
