Transformational Leadership and Financial Performance: The Mediating Roles of Learning Orientation and Firm Innovativeness

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Ploychompoo KITTIKUNCHOTIWUT / Journal of Asian Finance, Economics and Business Vol 7 No 10 (2020) 769–781 769769
Print ISSN: 2288-4637 / Online ISSN 2288-4645
doi:10.13106/jafeb.2020.vol7.n10.769
1
First Author and Corresponding Author. Assistant Professor,
Mahasarakham Business School, Mahasarakham University,
Thailand [Postal Address: Kantarawichai District, Muang City, Maha
Sarakham Province, 44150, Thailand]
Email: ploychompoo.k@acc.msu.ac.th
© Copyright: The Author(s)
This is an Open Access article distributed under the terms of the Creative Commons Attribution
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original work is properly cited.
Transformational Leadership and Financial Performance: The Mediating
Roles of Learning Orientation and Firm Innovativeness
Ploychompoo KITTIKUNCHOTIWUT
1
Received: July 28, 2020 Revised: September 06, 2020 Accepted: September 10, 2020
Abstract
This study attempts to examine the relationships between transformational leadership, learning orientation, firm innovativeness, and
financial performance. Specifically, the moderating effect of learning orientation and firm innovativeness. The data collected from 606
SMEs in Thailand were evaluated using the structural equation modeling, typifying that quantitative research. The results revealed that
transformational leadership had a positive effect on learning orientation. Similarly, transformational leadership had a positive effect on firm
innovativeness. Further, the study found that transformational leadership had a positive indirect effect on financial performance through the
mediation of learning orientation. The results of the study found that transformational leadership had a positive indirect effect on financial
performance through the mediation of firm innovativeness. Transformational leadership and learning orientation to improve innovation
within the organization, including organizations and leaders among themselves. Especially, innovative firms inculcate ideals of promise to
learning, open-mindedness, and shared vision. Furthermore, practitioners can use the findings of this study when they perform their role
of leaders to challenge creativity and innovation among followers. Finally, those developments would influence a procedure of evidence
procurement, evidence distribution and shared explanation that escalations equally individual and administrative effectiveness owing to its
influence going on products.
Keywords: Transformational Leadership, Learning Orientation, Firm Innovativeness, Financial Performance, Small and Medium-sized
Enterprises
JEL Classification Code: C54, D23, L25
organizational and operative level in which teams and
employees of the organization were assumed learning
opportunities, leadership support and empowerment as well
(Yoon, Song, Lim, & Joo, 2010; Mughal et al., 2019). In
this concept, leadership is the mechanism of supporting or
motivating a group of people to work towards achieving
a common goal, where it can be leading employees and
workers with a strategy to achieve a vision (Tajeddini, 2015).
Besides, a leader has different actions such as a pure
vision nearby future, explicit and clear objectives that
inspires assistants to set their goals and long-term vision.
In this regard, leadership is the process of inspiration others
especially influence the workers to raise their abilities
for organizational success (Demir et al., 2019; Torlak &
Kuzey, 2019; Ali et al., 2020; Mohammed et al., 2020).
Transformational leadership in selling with the data and
perception of administration and reduced. Particularly about
the resource and capital management, which results in
superior intricacy of the challenges being targeted by people
day afterward day, particularly in the bright of technical
1. Introduction
In the current era of globalization, there exists immense
competition due to local and international competitors. For
this reason, organizations are enforced to accept activities
that are performance oriented and shows a central role in
organizational expansion. Several support devices are
approved by organizations to increase the human resource
accessible to them. These devices were advanced at

Ploychompoo KITTIKUNCHOTIWUT / Journal of Asian Finance, Economics and Business Vol 7 No 10 (2020) 769–781770
growth and the evidence insurrection (Budur, 2018; Budur
et al., 2018). Furthermore, given the increasingly complex
world of economic and social structures, especially in terms
of the different uses of economic capital (Demir, 2019;
Torlak et al., 2019) most leaders and entrepreneurs involved
in expanding their businesses are kept abreast of inclusive
vicissitudes in organization strategies and systems (Budur
et al., 2019).
Learning is one of the utmost essential skills for inclusive
businesses that makes it possible to scope business and
cooperative goals. Currently, the capability to have quicker
learning and the ability to transformation compared to an
organization’s competitors offers the base for supportable
competition. As an outcome, today’s administrations started
to deed with a focus on learning to stay in the market and
be successful in competition. Learning orientation is an
administrative charge that is definite as the capability to
produce, disseminate, and use of knowledge. It affects the
evidence desirable and how it will be construed, evaluated,
and shared (Calantone, Cavusgil & Zhao, 2002). Learning-
oriented organizations are in a continuous pursuit for how
people and administrations can learn organized. However,
the effort has extended to comprise innovativeness as a
mediating factor (Akgün et al., 2007; AragónCorrea et
al., 2007; Keskin, 2006; Rhee et al., 2010). In particular,
academics have initiate that learning orientation has an
impact on performance and that innovativeness is a mediating
influence that likewise straight distresses performance
(Calantone et al., 2002; García-Morales et al., 2007). As
well as, a great share of studies on learning orientation and
firm innovativeness does not explanation for significant
proportions of firm innovativeness.
The narrow operationalization of firm innovativeness
that is as often as possible utilized prepares not explanation
for measurements such as items, forms, marketplaces,
and organization innovativeness. Aimed at instance, a
business could be imaginative at progressing forms to
decrease charges then not inventive by presenting unused
items to unused marketplaces. In case the point is to
construct unused information in a modern field, an essential
operationalization of firm innovativeness container be
invaluable. Nevertheless, these outcomes essential remain
confirmed by an additional in-depth operationalization of
the tenure founded on an extended antiquity of innovation
inspection. Besides, previous academics have affirmed that a
global and dependable degree for measuring innovativeness
does not yet happen in the literature (Deshpande & Farley,
2004). This scholarship pursues to fill this gap with the aid
of utilizing an extensive meaning of firm innovativeness
and a second-order construct appraised by using three first-
order indicators: product, process, and business system
innovativeness.
In addition, a study by Llorens Montes et al., (2005) found
that organizational learning effects both the organizational
and practical innovation gap and performance, but they
also found that transformation leadership has a direct effect
on financial performance; organizational learning has a
direct effect on performance. However, there is no clear
evidence as to whether innovativeness and orientation
towards learning play a part or full mediating role in
the relationship between transformation leadership and
financial performance. The mainstream of educations on the
relationships amongst transformational leadership, learning
orientation, firm innovativeness and financial performance
have ignored the direct effect of learning orientation and
firm innovativeness on financial performance (Hult et al.,
2004; Rhee et al., 2010). Therefore, this study examines the
relationships among transformational leadership, learning
orientation, firm innovativeness and financial performance
in the context of small and medium- sized enterprises
(SMEs). The moderating effect of learning orientation and
firm innovativeness will also be studied.
2. Literature Review and Hypotheses
Development
Transformational leadership theory, according to Burns
(1978), is composed of four components: (a) idealized
influence, (b) inspiring motivation, (c) intellectual
stimulation, and (d) individualized consideration (Bass,
1999, 2006; Kirkbride & Kirkbride, 2006; Lim & Ployhart,
2004; Avolio & Gardner, 2005). Idealized influence states
to leaders who, because of their unusual abilities and high
principles of moral conduct, act as dense role replicas for
their followers (Bass, 2006; Avolio & Gardner, 2005). The
leaders distribute a strong vision and mission for their
organization to their followers, and in effect receive a great
degree of support and hope from their groups (Bass, 2006;
Avolio & Gardner, 2005). The second component’s inspiring
encouragement concerns the potential of leaders to inspire
followers to succeed above standards (Jain, 2015).
Hovering followers’ understanding of the mission
and purpose of the organization, empowering them in all
substance and keeping them loyal to the association are
the main sides of inspiring motivational transformational
leadership (Kirkbride & Kirkbride, 2006; Sarros & Santora,
1995). Therefore, transformational leaders would perform in
such a means that inspires and motivates groups (Das, 2017).
Labors to be innovative and inventive by interrogative
potentials, reframing complications, and impending new
knowledge stimulate their supporters. There is still no general
censure of the errors committed by individual representatives
(Avolio & Bass, 1995; Bass, 2006). Intellectual stimulation
is often associated through the role of leaders in promoting

Ploychompoo KITTIKUNCHOTIWUT / Journal of Asian Finance, Economics and Business Vol 7 No 10 (2020) 769–781 771
imagination and ingenuity amongst groups (Metwally & El-
bishbishy, 2014).
Groups are expected to pursue new styles, and their
proposals are not blamed for differing after the proposals of
the leader (Bass, 2006). Individualized attention bandages
the disruptive leadership practices of leaders who use this
leadership style to take into account the needs of their
followers and are equipped to promote the creation of
positive organizational practices (Kirkbride & Kirkbride,
2006; Sarros & Santora, 1995). It in terms of needs and
desires are recognized. The conduct of the chief calls for
the understanding of human distinctions (Bass, 2006).
Relevant transformational capabilities of leaders who are
conventions for the use of the skills of a leader and the
effective performance of the jobs of a leader (Das, 2017). In
particular, in describing firm learning orientation, scholars
used the resource-based view (RBV) primarily to highlight
learning orientations as unique, important, inimitable, and
idiosyncratic organizational tools that can work in harmony
to build superior company efficiency and development
(Barney, 1991; Lonial & Carter, 2015).
An expansion of the Resource-Based View RBV
viewpoint on fluid capacities conceptualizes learning
orientations in terms of ‘ability (1) to sense and form
opportunities and challenges, (2) to grab opportunities,
and (3) to sustain profitability by improving, integrating,
preserving and, where possible, reconfiguring the intangible
and tangible properties of the market enterprise.
2.1. Transformational Leadership and Learning
Orientation
Transformational leadership refers to a creative leadership
style in which leaders encourage individual focus, inspire
followers, provide mental stimulation, assert idealized
authority, stimulate development, and provide inspiring
encouragement (Jung et al., 2003; Yukl, 1999). Earlier,
Blanchard et al., (1993) added the concept of leadership
through situational leadership that claimed that a single
leadership style was working and dependent on the situation.
Successful leadership will produce exceptional outcomes
(Kouzes & Posner, 2006). Because of its performance rates
above further types of leadership, i.e. transactional and
laissez-faire, transition leadership is generally recognized
around the world (Bono & Judge, 2004; McColl-Kennedy &
Anderson, 2002). Rasool et al. (2015) considered innovative
leadership to be creative, utilizing self-deprecating humor,
and encouraging to followers that eventually contribute to
improving physician efficiency in the strength division.
Besides, Bass et al., (2003) maintained that transformational
leadership increases the feasibility of entity performance.
Transformational leadership consuming motivational outfits
canister pass effective organizational learning orientation to
administrations (Geh, 2014), that can thrive organizational
learning (Purushothaman, 2015).
Moreover, learning orientation is conceived as a fixed
of ideals influencing the point to which a group is fulfilled
through the concepts it has in routine (Argyris & Schon,
1978), its rational replicas (De Geus, 1988), and its main
reasons (Bettis & Prahalad, 1995), which could or might
not take needed their market-based basis. It effects the
grade to which practices are possible to encourage the
core competency of generative learning (Sinkula et al.,
1997). It can likewise remain defined as a procedure of
knowledge collection, distribution of knowledge and shared
understanding that growths individual and organizational
output unpaid to its direct influence on results (Kaya &
Patton, 2011). It is often seen as the grade to which companies
proactively enquiry prevailing opinions and performs,
and their effect on administrative performance (Argyris &
Schon, 1978). It stretches visions that have the possible to
revolution behaviors (Huber, 1991; Slater & Narver, 1995)
through influencing on workers the continuous need to
increase and spread their abilities and information (Kohli
et al., 1998). Notably, learning orientation consists of four
aspects, including learning engagement, mutual purpose,
open-mindedness and intra-organizational information
exchange (Calantone et al., 2002; Hurley & Hult, 1998; Hult
& Ferrell, 1997; Hult, 1998; Sinkula et al., 1997; Moorman
& Miner, 1998). Learning engagement is characterized as
an administrative attribute, which is probable to promote a
learning environment (Sinkula et al., 1997). Therefore, the
research hypothesis is as follows:
H1: Transformational leadership has a positive influence
on learning orientation.
2.2. Transformational Leadership and Firm
Innovativeness
These academics deliberate the affiliation between
firm innovativeness and transformation leadership in R&D
subdivisions as well as the offices of plan management.
The properties of transformational leadership on firm
innovativeness in administrations have generally remained
a focus of attentiveness among researchers. Scholars in
the literature have received specific descriptions of firm
innovativeness. While some of these definitions reflect a
company’s ability to produce innovative products (Wang &
Ahmed, 2004). Others focus on innovative related cultures
or behaviors reflecting an inclination or innovation capacity
(Seda Mengü, 2015; Hurley & Hult, 1998). Besides,
Knowles, et al., (2008) presented a concept representing the
product and behavioral engineering strengths of a company.

Ploychompoo KITTIKUNCHOTIWUT / Journal of Asian Finance, Economics and Business Vol 7 No 10 (2020) 769–781772
incentives for growth. They assign flexibility and procedure
their bigger expertise and ability to grow their groups
through continuous learning phases that foster creativity
(Avolio & Gibbons, 1998; Bass, 1985; Dvir et al., 2002).
Leaders can boost the imagination of followers through their
abuse of the structure of organizational learning (Phipps
et al., 2012). Transformational leadership orients followers
through information sharing, strengthening employee goals,
awareness, abilities, and learning expectations, which
eventually leads to enhanced creativity.
We promote knowledge collection and dissemination,
and mutual use of data that helps improve innovation.
Transformational leaders are likewise clever to intrinsically
influence their groups to learn novel ideas, concepts, and
skills, apiece resulting in resourceful behavior (Joo & Lim,
2009). Therefore, when linked with a learning orientation,
transformative leadership assistances to improve the equal
of creativeness as transformative leaders generate learning-
oriented environments done inspirational motivation,
idealized influence, individual consideration and intellectual
stimulation (Arendt, 2009), which encourages followers to
accomplish extraordinary things, develop fair and equitable
strategies. Therefore, the research hypothesis is as follows:
H3: Transformational leadership has a positive influence
on financial performance mediated by learning orientation.
2.4. Transformational Leadership and
Financial Performance Mediated by Firm
Innovativeness
Leadership is a key component of corporate progress
and performance from institutional and economic efficiency
(Flanigan et al., 2017). Bearing in mind that leadership
positively affects financial performance (Lee & Lee,
2018). The Financial Analysis includes metrics related
to the corporate plan (Westerfield, 2003; Parast et al.,
2015). Measuring financial efficiency, in other words, can
demonstrate how the strategy’s execution leads to results.
A financial outlook would produce good effects, affecting
other outcomes (Kang et al., 2014). It is also important
to monitor and balance the Financial Perspective with
other non-financial perspectives. The transformational
leadership’s emphasis on maintaining partnerships with
consumers, vendors, and stakeholders, or on product quality,
must be matched with other financial metrics and positively
affect them, which is also relevant to every other market
metric (Kovach et al., 2015). In addition, Transformational
leadership actions would improve financial results in line
with McMurray et al. (2013) a study which showed that
transformational leadership promoted creativity in the
Knowles et al., (2008) The scholars describe innovativeness
as “the ability to produce and/or implement new goods,
production process, and market structure” Wang & Ahmed,
(2004), have provided five dimensions of firm innovation
in response to various conceptualizations of firm innovation
in study streams which result in difficulties in comparing
findings across studies. The five aspects are product
innovation, business advancement, process innovation,
organizational advancement and technical innovativeness.
Work going on the causes of company performance and
imagination takes established an extensive variety of
influences after the separate level, such as the input style of a
leader, to the collection equal, such as job arrangements and
styles of contact, to the administrative equal, such as policy,
function, community and environment (Damanpour, 1991).
Our research attentions on the person equal, investigating
the connection among the actions of transformational
leadership and the expectations of leaders about the firm
innovativeness of their employees. Nonetheless, additional
way of understanding the linkage among transformation
leadership and company creativity is founded on the basic
idea essential transformational leadership theory that
transformation leadership workers/followers view their
jobs as more important and are thus additional self-engaged
(Bono & Judge, 2003). Therefore, in link with the research
by McMurray et al. (2013) we expect transformational
leadership actions to improve firm innovativeness. Therefore,
the research hypothesis is as follows:
H2: Transformational leadership has a positive influence
on firm innovativeness.
2.3. Transformational Leadership and
Financial Performance Mediated by
Learning Orientation
Study has demonstrated that transformational leadership
(Sosik et al., 1998) and learning orientation (Janssen & Van
Yperen, 2004) are elements of workplace creativeness. In
this research, learning orientation was identified such as a
possible interface among transformational leadership and
financial success for learning orientation allows workers to
gain a thoughtful of their surroundings and strengthen their
knowledge of effective tactics, encouraging them to effort
vigorously and actively (Sujan et al., 1994). Transformational
leaders offer dangerous support to their employees’ learning
and increase by modeling learning behavior, encouraging
people to donate novel ideas, and safeguarding the distribution
of knowledge that fosters creativity. In fact, transformational
leaders view groups as individuals, display respect aimed at
their particular challenges and working solutions, and offer

Ploychompoo KITTIKUNCHOTIWUT / Journal of Asian Finance, Economics and Business Vol 7 No 10 (2020) 769–781 773
workplace. Since innate and prosocial incentive is correlated
with transformational leadership, and since transformational
leadership is correlated with creativity, mediation is likely
to occur. In addition, we expect the association among
transformational leadership and financial performance to
remain driven through firm innovativeness. Therefore, the
research hypothesis is as follows:
H4: Transformational leadership has a positive influence
on financial performance mediated by firm innovativeness.
3. Research Framework
Based on the literature review, the framework for the
study is illustrated in (Figure 1). The conceptual model of
transformational leadership and financial performance:
the mediating roles of learning orientation and firm
innovativeness is presented in Figure 1.
4. Research Method
4.1. Sample Characteristics and Data Collection
This study surveys a quantitative methodological
approach to test the suggested model by using a questionnaire
to collect data. The survey instrument is a multi-item
measure. All the variables were measured expending five-
point Likert scales. The key informers were asked for the
levels of arrangement with declarations of items ranging
from1 (strongly disagree) to 5 (strongly agree). The items
were established from the prevailing scales of to each
variable for this study explicitly. The hypothesized CFA
measurement ideal consists of 16 measurement items and
four latent constructs. The comprehensive measurement
model is outlined in Figure 2. The SPSS version 16 and
AMOS software programs were used to understand and
evaluate the causal effects. Schumacker and Lomax,
(1996) advised a process of situation suitable illustrative
samples that is 10-20 samples per variable, depending on
the complexity of the model. Processes aimed at improving
the efficiency of companies and the effects of those
procedures are crucial. We tested our hypothesis for this
cause by focusing on the population for this study being the
small and medium-sized enterprises (SMEs) in Thailand.
API portal recruits research: www.sme.go.th/(2020). The
research involves in particular commerce, operation, export,
agriculture, food production, wearing clothing production,
the export of other non-metallic mineral goods, manufacture
of other metal resources like machinery and equipment,
and other manufacturing. The researchers analyzed the
information to prevent potential duplications arising from
collaborator participation in the dataset. A mail investigation
process was used for the collection of data via questionnaire.
The principals included in this study were the directors
or managers. Regarding the questionnaire’s mailing, 18
samples became undeliverable since some businesses no
longer existed or had moved to undisclosed areas. Deducting
the undeliverable from the original 986 sent the correct post
was 968 surveys receiving 610 responses. Of the surveys that
were conducted and returned, only 606 were available. The
effective response rate was approximately 62.60 percent.
The response rate for a mail survey is deemed reasonable,
deprived of a satisfactory follow-up process, and above 20
percent, rendering to Aaker, Kumar, and Day (2001).
Figure 1: Framework of the Study
Transformational
Leadership
Learning
Orientation
Financial
Performance
Firm
Innovativeness
H1
H2
H3
H4

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Additionally, the use of a business sample based on a
relatively homogeneous economic, industrial, political, socio-
cultural, technical, and legal area minimizes the influence
of factors that cannot be regulated on qualitative research
(Adler, 2015). We opted for this sense for several reasons.
Small and medium-sized businesses (SMEs) are relatively
well developed and have seen a marginally higher rate of
growth relative to the economy as a whole in recent years.
Besides that, small and medium-sized enterprises (SMEs) in
Thailand are in a regional environment where the recognition
of organizational researchers is comparatively low. Building
on the knowledge of the core aspects of this research, prior
interactions with interested CEOs and scholars, and new
interviews with interested CEOs and academics. In fact,
a bias test on non-response was conducted by comparing
early and late responses. Business features include sector
types, amount of capital expenditure, market time, and
number of workers, and core informants who self-reported
both buildings (Armstrong & Overton, 1977). As for non-
response bias, t-test statistical tests were performed, and;
the results exhibited no significant differences. Therefore, a
non-response bias is of no concern in this data.
4.2. Measurement
Besides, the first-order measures ranging from 1
(strongly disagreeable) to 5 (strongly agreed) were
calculated using a five-point Likert scale. Transformational
leadership will be assessed as a second-order construct by
five first-order indicators: idealized influence, inspirational
motivation, intellectual stimulation, and individualized
consideration (Burns, 1978). Three first-order metrics
were used to assess firm innovativeness as a second-
order construct: product innovation, process innovation,
and business system innovation. The scale of company
innovation was based on earlier studies (Avlonitis et al.,
1994; Deshpandé et al., 1993; Knowles et al., 2008; Wang
& Ahmed, 2004). Furthermore, learning orientation was
restrained as a second-order construct and calculated by
four first-order measures founded on Calantone et al.
(2002) research and numerous previous studies (Galer &
van der Heijden, 1992; Hult & Ferrell, 1997; Sinkula et al.,
1997). The following four sub-dimensions are attention to
learning, shared vision, openness to change, and sharing of
knowledge intra-organizationally. Three objects are used
to calculate each of the measurements. The three items
with higher standard loadings based on Calantone et al.
(2002) study will be selected. Consequently, four measures
focused on Dess & Robinson, (1984), will be used to assess
financial performance. Such elements are revenue income,
sales growth rates, asset after-tax returns, and overall
profitability. The products will be assessed using a self-rated
subjective scale, with respondents being asked to assess the
facility level of their firm relative to that of their industry
competitors.
5. Results and Discussion
There were three parts to the data analysis: 1) Analysis of
Factor Loadings, Cronbach’s Alpha Coefficients, Composite
Reliability (CR), and Average Variance Extraced (AVE)
for multiple item scales used this study in Table 1. Table 1
shows the all variables that have factor loading scores as
between 0.797 – 0.894 are greater than the 0.40 cut-off and
are statistically significant (Nunnally & Bernstein 1994).
Additionally, Cronbach’s alpha for all variables are shown
between 0.843 – 0.890 are greater than 0.70 (Nunnally &
Bernstein, 1994). Moreover, the Composite Reliability
values were ranged between 0.791 – 0.961 are greater than
0.70 (Hair et al., 2010). The Average Variance Extraced
values were ranged between 0.586 – 0.860 are greater
than 0.50 (Hair et al., 2010). Therefore, all constructs of
the validity and reliability of measurement can be applied
for further analysis, and 2) Table 2 presents the descriptive
statistics and correlation matrix for all variables. With respect
to potential problems relating to multicollinearity, variance
inflation factors (VIFs) were used to provide information on
the extent to which nonorthogonality among independent
variables inflates standard errors.
The VIFs range from well below the cutoff value of 10
as recommended by Neter, Wasserman, and Kutner (1985),
means that the independent variables are not correlated
with each other. Therefore, there are no substantial
multicollinearity problems encountered in this study.
3) Analysis of the three variables of transformational
leadership, the four variables of learning orientation, the
four variables of firm innovativeness, and four variables
of financial performance. Hypothesis testing was carried
out using confirmatory factor analysis (CFA) to measure
the validity of the model fit to the empirical data. The
hypothesis model and empirical data were tested using
structural equation modeling (SEM) which can lead to path
analysis in order to be able to test the model and hypothesis
(Wiratchai, 1999). Regarding the research framework, the
model of confirmatory factor analysis and analysis of the
structural equation model is shown in Figure 2. The result
showed a good model fit with the empirical data within the
expected level (Table 3).

Ploychompoo KITTIKUNCHOTIWUT / Journal of Asian Finance, Economics and Business Vol 7 No 10 (2020) 769–781 775
Table 1: Results of Measure Validation
Construct Indicator Factor Loadings Cronbach’s Alpha Composite Reliability AVE
Transformational
Leadership (TL)
TL1
TL2
TL3
TL4
0.797
0.856
0.859
0.834
0.856 0.960 0.858
Learning Orientation
(LO)
LO1
LO2
LO3
LO4
0.807
0.845
0.851
0.831
0.853 0.791 0.586
Firm Innovativeness
(FI)
FI1
FI2
FI3
FI4
0.803
0.849
0.831
0.814
0.843 0.934 0.779
Financial
Performance (FP)
FP1
FP2
FP3
FP4
0.857
0.894
0.858
0.867
0.890 0.961 0.860
Table 2: Descriptive statistics and correlation matrix
Variables TL LO FI FP FA FS
Mean 4.196 4.086 3.907 3.989 3.910 3.790
S.D. 0.579 0.611 0.519 0.547 0.085 0.730
TL 1
LO 0.659** 1
FI 0.409** 0.580** 1
FP 0.377** 0.546** 0.695** 1
FA 0.253** 0.418** 0.426** 0.564** 1
FS 0.199** 0.349** 0.401** 0.553** 0.499** 1
***p < 0.01, **p < 0.05, *p < 0.10
Table 3: Statistics from Fitting Evaluation
Goodness-of-Fit Measure Recommended Value Structural Model (result)
CMIN/DF 2.0 - 5.0 (Diamantopoulos & Siguaw, 2000) 3.870
GFI ≥0.900 (Diamantopoulos & Siguaw, 2000) 0.930
AGFI ≥0.900 (Diamantopoulos & Siguaw, 2000) 0.905
CFI ≥0.900 (Kelloway, 2015) 0.972
NFI ≥0.900 (Schumacker & Lomax, 2010) 0.962
RMSEA ≤0.080 (Schumacker & Lomax, 2010) 0.069
TLI ≥0.900 (Schumacker & Lomax, 2010) 0.975
RMR ≤ 0.050 (Diamantopoulos & Siguaw, 2000) 0.966

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In summary, the transformational leadership of the
learning orientation, firm innovativeness, and the financial
performance as hypothesized. As a result, the model used for
measurement can be applied using structural equation model
measurement to analyze future causal influence. Table 3
Statistics from fitting evaluation of the transformational
leadership, learning orientation, firm innovativeness, and
financial performance in research. The overall direct and
indirect effects related to the transformational leadership of
learning orientation influencing the financial performance,
transformational leadership of firm innovativeness
influencing the financial performance are expressed in
Table 4. As revealed in Figure 2 and Table 4, suggest that
transformational leadership has a positive effect on learning
orientation (β= 0.792, p < 0.001). Hence, hypothesis 1 is
supported. Similarly, transformational leadership has a
positive effect on firm innovativeness (β= 0.513, p < 0.001).
Thus, hypothesis 2 is supported. This result demonstrates
that transformational leadership has a positive indirect effect
on financial performance through the mediation of learning
orientation (β= 0.156, p < 0.001). Hence, hypothesis 3 is
supported. The results indicate transformational leadership
has a positive indirect effect on financial performance
through the mediation of firm innovativeness (β= 0.751, p <
0.001). Thus, hypothesis 4 is supported.
6. Conclusions
The results of present research recommend that
transformational leadership have a positive effect on learning
orientation. The outcomes direct that transformational
leadership have a positive influence on firm innovativeness.
Figure 2: The Structural Equation Model
Table 4: Direct and Indirect Effects of Variables
Hypothesis Relationship Std Beta Std Error t-value Conclusion
H1 TL LO 0.792 0.049 16.127*** Supported
H2 TL FI 0.513 0.044 11.585*** Supported
H3 TL LO FP 0.156 0.039 3.956*** Supported
H4 TL FI FP 0.751 0.052 14.535*** Supported
***p < 0.001, **p < 0.01.

Ploychompoo KITTIKUNCHOTIWUT / Journal of Asian Finance, Economics and Business Vol 7 No 10 (2020) 769–781 777
Consistent with Rusliati et al. (2020), which suggests that
leadership will successfully effect business development
when sustained by several characteristics, such as manage
the business, capture opportunities, personal integrity, and
communication. Besides, leadership and organizational
culture of employees must to be improved to increase
job satisfaction (Paais & Pattiruhu, 2020). Business
innovativeness as introducing innovations novel to the
business, whether the innovation is expressed in goods,
procedures, and administration or advertising strategies
(Weerawardena, O’Cass, & Julian, 2006). Leadership has
influence on employee performance, job satisfaction, and
work motivation (Pancasila et al., 2020). Transformational
leadership that persons inside the firm are inspired to absorb
and more accessible to novel information. Additionally,
innovative firms frequently approve cross-functional players
(Kuratko et al., 2001) quite than outdated severe and graded
structures, to enable infrastructures that, in turn, take round
an organization-wide agreement of areas and instructions.
Therefore, innovative firms inculcate ideals of promise to
learning, open-mindedness, and shared vision.
This empirical evidence implies that transformational
leadership has affected financial performance. This study
shows the moderating effect of firm innovativeness.
Considering this, financial success has affected
transformational leadership. This work also shows the
moderating effect of learning orientation. This conclusion
is consistent by Weerawardena et al. (2006); Liao et
al. (2008), which suggests that the additional creative
leadership, the extra innovation in the organization.
Consequently, this research promotes learning orientation
to improve innovation within the organization, including
organizations and leaders among themselves. Instead
of learning inertia by a productive, novel method,
organizations and leaders can learn. If the direction of
thinking should affect financial performance positively
(Liao, Fei & Liu, 2008). According to García-Morales et
al. (2008), transformational leadership has remained create
to have an important influence on learning orientation and
firm innovativeness. Similarly, in the education done by
Bakar and Mahmood (2014), learning orientation was found
to partially mediate the association among transformational
leadership and financial performance. Such effects were
nevertheless reliable through folks reported through
(Calantone et al., 2002). They revealed innovation in
business as a crucial factor for financial success. These
finding on firm creativity often suggest that the indirect
effects of transformation leadership on financial output
that depend on the context of the study. Such findings also
match prior literature (Calantone et al., 2002; Damanpour
et al., 1989; Deshpandé & Farley, 2004; Narver & Slater,
1990; Rhee et al., 2010).
This can be difficult for companies to be creative though.
In particular, product and process advancement can involve
substantial investments. However, in some cases, companies
will face a time delay between the innovation and the gains
it creates. Besides, being innovative involves risk, and there
is no guarantee of success. For instance, Jenssen (2003)
initiate that it is regularly the adopter and not the stable
that generates the innovation that accepts the assistances.
However, the association among firm innovativeness and
financial performance was important and positive, and this
demonstrations that businesses in the small and medium-sized
enterprises (SMEs) in Thailand can gain from being innovative.
This empirical evidence implies that transformational
leadership has affected financial performance. This is reliable
through our estimate and concept; although transformative
leadership generates a productive inside situation and extends
the latitude for learning orientation to ensue, to have a
positive influence on performance, the vision of leadership in
medium to large companies must be effectively shared among
all members of the organization (Harrison & Leitch, 2005).
Transformational leadership will be used to assess financial
performance. For instance, elements are revenue income,
sales growth rates, and overall profitability. The products will
be assessed increased financial performance.
7. Limitations
There are drawbacks to research like other studies. It is
a cross-sectional analysis that explores a given opinion in
time. Deprived of longitudinal data, assumptions concerning
destiny cannot be strained. Generalize companies that had
left the commercial were not comprised in the sample, and
the results obtainable in this object can solitary for enduring
companies. It is an essential limitation to be considered,
specifically when firm innovation and financial performance
are primary topics here, though researchers change in their
views on how these two aspects impact firms ended time.
Besides, one subjective methods were used to evaluate
financial performance. While this is a standard approach for
assessing financial performance, and while earlier trainings
have exposed clear linkages among subjective and quantitative
financial performance indicators (Dess & Robinson Jr,
1984), this dimension of research is often perceived as one
of its drawbacks. Several types of research mixed subjective
and objective measurements (Aragón-Correa et al., 2005),
and others used one objective procedures (Jenssen, 2003).
While most researchers establish a relationship between
firm innovation and financial performance when companies
consider themselves efficient when using quantitative
measurements Jenssen (2003), found no evidence of this
connection. Ultimately, similar research to the current one
expending an empirical degree of financial performance may

Ploychompoo KITTIKUNCHOTIWUT / Journal of Asian Finance, Economics and Business Vol 7 No 10 (2020) 769–781778
give additional legitimacy to the conclusions reached on the
relations among transition leadership, learning focus, firm
innovation, and financial performance.
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