AN EXAMINATION OF THE RELATIONSHIPS BETWEEN
LEADERSHIP STYLE, QUALITY, AND EMPLOYEE
SATISFACTION IN R&D ENVIRONMENTS
Yair Berson
Polytechnic University
Email:yberson@poly.edu
Abstract
The relationship between leadership style of all
managers and the establishment of a quality
environment in an R&D setting is considered in
this empirical study of 51 1 engineers. It is found
that both transformational leadership and
transactional contingent-reward leadership are
related to the establishment of a quality
environment in the R&D part of a
telecommunications firm. However, the impact
of transactional contingent-reward leadership
ceases to be significant once both leadership
styles are considered simultaneously using
structural equations. A transformational
leadership style is also found to be related to
employee satisfaction.
In this empirical study, we consider the role of
leadership style in establishing a quality-oriented
environment in an R&D. This is worthwhile,
since the value of quality management to R&D
has been widely discussed (Chang, P. L. & Hsu,
C . W. 1998; Pearson, Vaughan & Butler, 1998;
Debackere, Van Looy & Vliegen, 1997; Kiella &
Golhar, 1997; Braver, 1995; Dellana and Wiebe,
1995; Roger, 1994; Voss, 1994). Furthermore,
the importance of leadership in an R&D
environment is clearly stated in the literature
(Roger, 1994; Voss, 1994; Yeh, 1996; Maccoby,
1987; Glassman, 1986; Pearson and Davies,
1981; Olsson and Wass, 2001; Oh et al., 1991;
McDonough and Liefer, 1986). Consequently, it
is worth considering the interaction between
leaderhip style and the creation of a quality
management climate in an R&D environment.
We now consider the leadership
literature and its relationship to both R&D and
quality management. An extensive body of
research in organizational behavior has focused
on identifying the leadership styles of
supervisors that enhance work performance (e.g.,
Bass, 1990; House & Aditya, 1997). Among the
most empirically supported models of leadership
is transformational leadership theory (Judge &
0-7803-8150-5/03/$17.00 02003 IEEE 410
Jonathan Linton
Lally School of Management and
Technology
Email: linton@rpi.edu
Bono, 2000). According to this theory, effective
leaders use vision or idealized leadership,
intellectual stimulation, and individualized
consideration to motivate their followers to
excellent performance (Bass, 1985). Numerous
studies found transformational leadership to be a
strong predictor of both individual and
organizational indices of work performance (e.g.,
Barling, Weber, & Kelloway, 1996; Howell &
Avolio, 1993; Judge & Bono, 2000; Lowe,
Kroeck, & Sivasubramaniam, 1996). Research
also indicates that transactional contingent
reward leadership, though less effective than
transformational leadership, is an effective
supervisory style (e.g., Lowe et al., 1996).
Previous researchers have demonstrated the
effective impact of transactional and
transformational leaders on individual and unit
outcomes in research and development settings
(e.g., Keller, 1992; Thite, ZOOO), however, no
study examined the impact of leadership styles
on creating an effective quality climate in R&D
settings.
Prior research has indicated that
transformational leadership has a positive impact
on multiple outcomes in technology
environments (e.g., Howell& Higgins, 1990;
Keller, 1992; Pinto & Slevin, 1989; Thite, 2000).
Howell and Higgins (1990) argued that
champions of innovation have characteristic of
transformational leaders. These leaders rely on
innovation and risk taking more than non-
champions. Pinto and Slevin (1989) found that
aspects of transformational leadership, such as
mission awareness predicted the success of R&D
projects with varying degrees depending on the
stage of the project. In the conceptual or
planning stage, where the operational
environment is typically more project oriented,
mission awareness explained 67% of project
success. The most supportive evidence for
transformational leadership impact in project
settings comes from Keller’s (1992) work. He
found that transformational leadership of project
leaders in three R&D organizations predicted
performance, including project quality at two
points in time, concurrently and a year after
leadership was measured. Keller also found the
type of project to moderate the relationships
between transformational leadership and
performance. Specifically, transformational
leadership was a stronger predictor of project
quality in research projects than in development
projects.
More recent work by Thite (2000) also
provided support for using the Bass’s and
Avolio’s (1990) Multifactor Leadership
Questionnaire (MLQ) in R&D settings. Thite
(2000) examined the relationships between
leadership style and technical quality, cost
performance, meeting deadlines, customer
satisfaction, and overall performance of 72
Information/Technologyfinformation Systems
(ITAS) projects. He found that employees who
worked for successful projects rated their leaders
higher on intellectual stimulation and charisma
(inspirational leadership) than employees who
worked for less successful projects.
Transactional contingent reward leadership also
predicted project success hut to a lesser extent
(Thite, 2000).
These studies indicate that transformational
leadership plays a significant role in enhancing
several aspects of performance in R&D settings.
Keller’s study also indicates that
transformational leaders are especially effective
in boosting project quality, however, Keller
(1992) did not examine the impact of
transformational leadership on creating a quality
climate that is essential for enhancing quality in
R&D settings (Sousa & Voss, 2002). Therefore,
the goal of this study was to demonstrate the
effectiveness of transformational leadership as a
predictor of key aspects of quality in R&D
environment of a high tech organization.
Transformational leadershim transactional
IeadershiD. and quality climate
Previous authors have discussed the role
of transactional and transformational leadership
in quality management (e.g., Anderson et al.,
1994; Dean & Bowen, 1994; Kathuria & Davis,
2001; Sousa & Voss, 2002; Waldman, 1994),
especially with regard to total quality
management (e.g., Anderson et al., 1994; Dean
& Bowen, 1994; Waldman, 1994). Most of these
authors associate transformational and visionary
leadership more than other leadership styles with
effective quality management. Transformational
leaders set values and articulate a vision for their
organization (Dean & Bowen, 1994); they
41 1
highlight continuous improvement and create the
culture that emphasizes customer focus and
teamwork (Anderson et al., 1994). Indeed, the
Malcolm Baldrige Award framework emphasizes
visionary leadership among the criteria for its
National Quality Program.
Overall, researchers tend to agree on the
role of transformational leadership of top
management in enhancing quality management
(Sousa & Voss, 2002). However, there is little
agreement, regarding the role of transformational
and transactional leadership at lower levels of the
organization (Sousa & Voss, 2002). For
example, Dean and Bowen (1994) suggested that
quality management practices could be seen as
substitutes to leadership. In other words,
instituting effective quality management
practices diminishes the need for leadership.
Sousa and Voss (2002) suggested that more
research is needed to examine the relationship
between quality management and lower level
leadership as well as the role of transactional
leadership in quality management.
In this study we examined the extent to
which followers associate the transformational
and transactional leadership of their supervisors
with organizational measures of key quality
practices, such as continuous improvement and
customer focus (Dean & Bowen, 1994).
Transformational leaders of lower level units or
departments, more than transactional leaders, can
reinforce a climate of continuous improvement
and customer focus. Transformational leaders
rely on empowerment that was seen by Deming
as critical for quality management. They have
excellent communication skills necessary for
interdepartmental relationships (Kathuria &
Davis, 2001) and use their incomparable
influence over their followers to enhance the
values of quality and continuous improvement
(Anderson et al., 1994).
While we believe transformational
leadership to be a stronger predictor of quality
management than transactional leadership, we
also expect transactional leadership to contribute
to quality management perception by managing
short-term goals related to implementing the
quality management process (Waldman, 1994).
Bass and Avolio (1994) suggested that
transformational leadership augments
transactional leadership. Effective
transformational leaders build their excellent
relationship with followers on a contractual base
that they have created using their transactional
leadership skills. Hence, we expect
transformational leadership to be a stronger
predictor of quality climate than transactional
leadership, but that transactional contingent
reward leadership will be a significant predictor
of quality climate as well.
Hla: Transformational leadership of R&D
unit managers will predict quality climate
ratings more than transactional leadership
Hlb: Transactional contingent reward
leadership of R&D unit managers will be a
significant predictor of quality climate ratings
Transformational leadershiu, transactional
leadership, and emulovee Satisfaction
Extensive research (see meta-analytic
results of Lowe et al., 1996) has demonstrated
that transformational leaders have employees
who are more satisfied with their jobs than
employees who report to other leaders.
Transactional leadership is also associated with
employee satisfaction, though to a lesser extent
(Lowe et al., 1996). While the relationships
between transformational and transactional
leadership and other outcomes have been
relatively established, no study examined the role
of these leadership styles in predicting
satisfaction of employees in different operational
work environments.
Bass (1997) argued that
transformational leadership is a stronger
predictor of individual and organizational
outcomes than transactional leadership across
multiple contexts, including cultures,
organizational levels, and types of jobs.
However, other researchers (e.g.. Pawar &
Eastman, 1997) suggested that although
transformational leadership may have overall
stronger impact than transactional leadership,
there are certain conditions that increase
organizational receptivity to transformational
leadership such as an R&D environment
We expect that transformational
leadership will have a stronger impact on
employee job satisfaction and overall satisfaction
with the organization in R&D settings. As
indicated, employees in R&D environments may
expect their leaders to be responsible for jobs
that involve more stimulation and attention to the
individual needs of employees (Thite, 2000).
These employees may well expect to be more
aware of organizational strategy and other
relevant long-term information.
H2a: Transformational leadership ratings of
supervisors will be significantly related with
job satisfaction and overall satisfaction of
employees with the organization in R&D
settings.
412
Bass and Avolio (1994) argued that
transactional leadership provides the contractual
basis on which transformational leaders form an
emotional basis. We believe this contractual
basis is important in .R& D settings though less
than transformational leadership.
HZb: The relationships between transactional
leadership ratings of supervisors and
employee satisfaction in R&D environments
will be significant, though less strong than
with transformational leadership.
Method
Measures. Leadership style. Leadership
style was measured using the Multifactor
-
Leadership Questionnaire (MLQ Form 5X)
(Bass & Avolio, 1990). House and Aditya (1997)
indicated that most of the empirical support for
the impact of transformational leadership comes
from research with the MLQ. The MLQ includes
36 items measuring the range of leadership styles
described above including transformational
leadership, transactional and non-transactional or
laissez-faire leadership. All items are assessed on
a five-point scale, where five usually represents
the high response, and one represents the not at
all response. The survey includes four
transformational leadership dimensions:
idealized or charismatic influence (behavior and
attribution), inspirational motivation, intellectual
stimulation, and individualized consideration.
The MLQ also includes a transactional
contingent reward scale, a management-by-
exception scale, and a measure of
avoidandlaissez-faire leadership.
Outcomes. These variables were
obtained from an annual company-wide survey
developed by the HR department. Top
management of the company designed the survey
and it included several measures of quality
climate and employee satisfaction. The company
survey measured quality climate, following a
long-term effort to increase product and service
quality. The quality scale included reference to
key quality issues, including continuous
improvement and customer (internal and
extemal) focus (Dean & Bowen, 1994). It
consisted of five items: “There is a sense of
continuous improvement in products”, “there is
an emphasis on customer focus”, “as part of my
job, I think how to improve products”, “in my
unit there is a process of learning from
mistakes”, and “the products of the company are
of high quality”
Having discussed the hypotheses and
method, the results are now considered.

Results
We tested the hypotheses in two stages.
First we conducted a stepwise regression
analysis to examine each of the hypotheses
separately. Then, we used a structural equation
model to simultaneously test these hypotheses.
In order to simultaneously test
differences, we created a structural equation
model using Amos (Arbuckle, 1999). We
adopted this approach for both methodological
and theoretical reasons. From a methodological
point of view, it allowed us to simultaneously
examine the pathways between the leadership
variables and outcomes, and to test relationships
between variables taking into consideration
measurement error (Byme, 2001). From a
theoretical perspective, our rationale for using
structural equation models comes from Bass and
Avolio’s (1994) and Avolio et al.’s (1999)
argument that transformational, transactional-
contingent reward, and non-transactional
leadership form a full range of leadership
behaviors that have a differential but dependent
impact on performance. For example, Bass and
Avolio (1994) argued that transformational
leadership augments transactional contingent
reward leadership in its impact on performance.
Hence, a simultaneous examination of the impact
of these leadership styles on outcomes would be
more rigorous than separate analyses and would
allow better understanding of these styles’
relative impact on the outcome measures.
In order to test hypothesis 1, examining
differences between transformational and
transactional leadership regarding quality climate
perceptions, we used a stepwise hierarchical
regression predicting quality climate with
transactional-contingent reward leadership and
with an aggregated scale of transformational
leadership, including inspirational leadership,
intellectual stimulation, and individualized
consideration. Hypothesis l a and Ib were both
supported by regression analysis, as
transformational leadership significantly
predicted quality climate (p = .44, P < .01) more
than transactional contingent-reward leadership
( p = .33, P < .01). However, analysis of the
model using structural covariance analysis
(Figure 1) did not support Hypothesis Ib. The
coefficient linking transformational leadership
and quality climate is 0.65 (P<.Ol) and for
transactional contingent-reward the coefficient
between it an quality climate is 0.01
(insignificant).
413
We tested hypothesis 3a by comparing
beta coefficients of transformational leadership
predicting separately job and overall satisfaction.
The analyses indicated that transformational
leadership is a stronger predictor of both job
satisfaction and overall satisfaction. Support for
hypothesis 2b came from a similar set of
regression analyses using transactional
contingent reward and management by exception
as predictors. In a transactional contingent-
reward relationship both job satisfaction and
overall satisfaction are statistically significant, as
hypothesized. Furthermore, the p for
transactional contingent-reward is lower than
transformational in the case of both overall and
job satisfaction, as hypothesized. However if the
data is analyzed using structural covariance
analysis, the link between transactional
contingent-reward and overall satisfaction is
statistically significant (P<.OS) and negative (-
.OS) and the link to job satisfaction is
insignificant. Whereas, the link from
transformational leadership to job and overall
satisfaction are positive and highly significant at
0.64 and 0.71 (P<.01), respectively.
Discussion
While transformational leadership
significantly predicted quality climate
perceptions, the standardized path between
transactional contingent reward leadership and
quality climate perceptions was not significant.
In a simultaneous examination of leadership
styles, employee satisfaction variables and
quality climate perceptions, the role of
contingent reward leadership became less
important than it was in a separate regression
analysis. With the exception of the negative path
between transactional contingent reward
leadership and overall satisfaction, both
transactional contingent reward leadership and
management by exception did not significantly
predict any of the outcome variables. Clearly,
these findings highlight the extraordinary impact
of the transformational leadership of their
supervisors on the extent to which employees
view their units as emphasizing quality.
The consideration of the difference of
impact that leadership has on quality
management is an important question in R&D
management. Sousa and Voss (2002) highlighted
the need for such links by calling for more
studies that links quality management practices
with other best practices. While some authors
(e.g., Waldman, 1994) argued that
transformational leadership should promote
 quality management practices in the workplace
(e.g., Anderson et al., 1994), other authors (e.g.,
Dean & Bowen, 1994) downplayed the need for
leadership and suggested that a strong quality
climate could substitute effective leadership. The
above results provide support for the need for
effective leadership in order to enhance quality
climate in organizations. As much as we can tell,
there has been little or no empirical research
linking leadership and quality practices (Sousa &
voss, 2002).
As anticipated, transformational
leadership was found to be important for a
quality environment. Transactional leadership
had a positive impact on quality climate
perceptions, however that impact was minimized
when considered in the overall model. This
finding is in line with Bass and Avolio (1994)
argument regarding a full-range of leadership
behaviors, where transformational leadership
augments positive effects on performance of
transactional leadership.
Transformational leaders were also
found to have a more positive impact on job and
overall satisfaction in an R&D setting. This is
anticipated since, the overall positive impact of
transformational leadership on satisfaction
measures has been established in previous work
(e.g., Lowe et al, 1996), our findings provide
support for the moderating role of the operational
environment. Interestingly, transactional
contingent-reward leadership is significantly
related to both quality and satisfaction measures
if considered independently, but these relations
are not significant if part of a model with
transformational leadership also being
considered. This is consistent with the full-range
of leadership model (Bass and Avolio, 1994),
this effect was diminished when transactional
contingent reward leadership was examined in a
model together with transformational leadership.
Similarly, management by exception was not
significantly more related with quality climate in
process settings than in project settings,
however, it was significantly related to quality
climate perceptions only in process
environments.
414
Among the contributions of this study is
the emphasis on a leadership style that enhances
quality but also the democratization of the work
place, especially by increasing employee
involvement and by relying on consensus in
decision-making (Bass, 1985). The reliance on
employee involvement and consensus is critical
and timely as evolution in work place
environments stress the importance of a quality
climate in R&D environments (Braver, 1995;
Debackere et al. 1997; Kiella & Goldhar, 1997;
Pearson et al., 1998; Chang and Hsu, 1998).
Implications for Practice.
Our findings stress the importance of
leadership style through all levels of an R&D
organization. This suggests that training
programs and quality enhancement initiatives
that emphasize transformational leadership are
advisable. This is in line with the Baldrige
Award criteria. In preparation for quality
management programs, firms should ensure that
personnel evaluations and policies enable,
emphasize and encourage transformational
leadership. Encouragement of transformational
leadership style throughout the management
ranks will support a quality management
program in an R&D environment. (It is worth
noting that based on the existing literature a
transformational leadership environment is
advisable, even in the absence of interest in
quality management.)
Conclusions
Empirical evidence of the importance of
transformational leadership for establishing
quality environments for an R&D environment
has been offered. Transformational leadership,
more than transactional contingent-reward
leadership, was found to support the
development of a quality environment.
Transformational leadership tends to support
quality as well as satisfaction in R&D
environments. The relationship between
transformational and transactional leadership and
quality were statistically significant with
regression analysis, but only transformational is
statistically significant in the structural equation
model.