Understanding Innovation Culture and Leadership using Self Determination Theory

Organizations thrive in an environment that fosters the spirit of creativity and innovative work within a work culture that accepts and nurtures ingenuity, new thinking, and creative problem solving and creativity. Using the lens of the Self-Determination Theory, the study aimed to understand the relationship of leadership and innovation culture through organizational mechanisms that support the psychological needs of autonomy, relatedness and competence of employees. It was hypothesized that innovative leaders predicted perception of innovation culture, and organizational mechanics supporting autonomy, relatedness and competence mediated the influence of innovative leaders to innovation culture. Additonally, it was hypothesized that there were significant differences between family and non-family firms on innovative leadership, autonomy, relatedness, competence and innovation culture, and that there were differences between family firms and non-family firms on the relationship of innovative leader to innovation culture. A survey was conducted among 510 employees from family and non-family firms. Results confirmed autonomy partially mediated the relationship of innovative leadership and innovation culture, while relatedness and competence had no mediating role. Non-family firms were perceived to have more innovative leaders and work culture, and were more likely to have mechanisms supporting autonomy. In both family and non-family firms, autonomy partially mediated the relationship of leadership on innovation culture, while relatedness had no mediating effect. Competence had a mediating role only in non-family firms. This illustrates that employees can be motivated by organizations promoting self-determination and competence. For family firms, in building an environment conducive to positive change, it is key for leaders to provide employees the liberty for decision-making, risk-taking and choice. With the prevalence and dominance of family firms in the business environment, understanding innovative culture impacts the organizations’ stakeholders and the industry as a whole.