Structural impacts on the occurrence and effectiveness of transformational leadership: An empirical study at the organizational level of analysis

The Leadership Quarterly 21 (2010) 765–782

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The Leadership Quarterly j o u r n a l h o m e p a g e : w w w. e l s ev i e r. c o m / l o c a t e / l e a q u a

Structural impacts on the occurrence and effectiveness of transformational leadership: An empirical study at the organizational level of analysis Frank Walter a,⁎, Heike Bruch b,1 a b

University of Groningen, Faculty of Economics and Business, Department for HRM & OB, Landleven 5, 9747 AD Groningen, The Netherlands University of St. Gallen, Institute for Leadership and HRM, Dufourstrasse 40a, 9000 St. Gallen, Switzerland

a r t i c l e

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Keywords: Transformational leadership Organizational structure Centralization Formalization Organization size

a b s t r a c t This article empirically investigates the role of organizational structure in the transformational leadership (TFL) process. We examine organizational centralization, formalization, and size as antecedents of an organization's TFL climate, and as moderators of the relationship between TFL climate and productive organizational energy (POE). Hypotheses are tested using a sample of 125 organizations. Results show that both the centralization and size of an organization are negatively related to its TFL climate, whereas formalization has a positive association. Further, while there is a positive linkage between TFL climate and POE, both centralization and formalization moderate this relationship. The TFL climate–POE linkage is diminished under conditions of high centralization, and it is enhanced under conditions of high formalization. These findings point to the role of organizational structure as a boundary condition for both the occurrence and the effectiveness of TFL in organizations. The paper concludes by acknowledging its limitations and discussing its implications for practice and research. © 2010 Elsevier Inc. All rights reserved.

Research has found ample evidence demonstrating the beneficial consequences of transformational leadership (TFL; e.g., Judge & Piccolo, 2004). The behaviors generally associated with TFL include articulating a captivating vision, acting as a charismatic role model, fostering the acceptance of common goals, setting high performance expectations, and providing individual support and intellectual stimulation for followers (Podsakoff, MacKenzie, Moorman, & Fetter, 1990; see also Bass, 1985). Such leadership has been shown to enhance both follower performance (e.g., McColl-Kennedy & Anderson, 2002) and organizational success (e.g., Waldman, Javidan, & Varella, 2004). Nevertheless, researchers are increasingly acknowledging that leadership does not take place within a virtual vacuum, but is subject to important contextual influences (Osborn, Hunt, & Jauch, 2002; Porter & McLaughlin, 2006). For example, theorists have argued that an organization's structural set-up may shape TFL processes, suggesting that such leadership occurs more frequently and is more effective in organizations with organic rather than mechanistic structures (Kark & Van-Dijk, 2007; Pawar & Eastman, 1997). Similarly, theories have been advanced emphasizing that structural features may be associated with the emergence and effectiveness of charismatic leadership behaviors (e.g., Roberts & Bradley, 1988; Shamir & Howell, 1999; Weber, 1947; 1976).2 Nevertheless, the role of organizational structure has largely been ignored in empirical research on such leadership (Porter & McLaughlin, 2006; Shamir & Howell, 1999) and, therefore, more work is needed to reach a better understanding of the development and the boundary conditions of TFL and to help organizations more effectively reap the potential benefits associated with this type of leadership.

⁎ Corresponding author. Tel.: +31 50 363 3849. E-mail addresses: [email protected] (F. Walter), [email protected] (H. Bruch). 1 Tel.: +41 71 224 2370. 2 We concur with the large body of literature that has emphasized the conceptual overlap between transformational and charismatic leadership (e.g., Conger & Kanungo, 1998; House & Aditya, 1997). Hence, while focusing on TFL, we also draw on the charismatic leadership literature in outlining our arguments. 1048-9843/$ – see front matter © 2010 Elsevier Inc. All rights reserved. doi:10.1016/j.leaqua.2010.07.006

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The limited evidence available suggests that organic rather than mechanistic structures may provide a more viable context for the emergence of TFL behaviors (e.g., Pillai & Meindl, 1998; Shamir, Goldberg-Weill, Breinin, Zakay, & Popper, 2000). Researchers have argued, however, that it may be problematic to capture organizations along a continuum from organic to mechanistic structures, and to relate such aspects to the occurrence of specific leadership behaviors (Atwater, 1995; House, 1991). After all, the organic-vs.-mechanistic distinction covers a wide variety of organizational characteristics, including task specialization and abstractness, the definition of rights and obligations, vertical versus horizontal interaction tendencies, reliance on top-down instructions, and the prevalence of local versus general knowledge (Burns & Stalker, 1994, p. 120). Conceptualizing organizational structure in such a broad manner may result in a relatively superficial depiction of the structure–leadership linkage (Atwater, 1995; Howell, 1997). Further, even though existing theoretical concepts refer to the role of organizational structure in TFL, empirical research has typically focused on structural impacts at lower levels (e.g., Pillai & Meindl, 1998; Shamir et al., 2000). Given the problems associated with generalizing relationships across levels of analysis (Ostroff, 1993a), additional work seems necessary to determine the transferability of previous findings to the organizational level. Finally, by focusing on structural facets as antecedents of TFL, empirical research has largely overlooked structural influences on the implications of such leadership. Even though theory suggests that the design choices organizations make create conditions for the emergence of TFL behaviors and shape the consequences of such leadership (Pawar & Eastman, 1997; Shamir & Howell, 1999), “there is a lack of empirical information on the moderating effect of the organizational context on leadership effectiveness” (Koene, Vogelaar, & Soeters, 2002, p. 194; see also Hunter, Bedell-Avers, & Mumford, 2007). The present study addresses these issues. First, rather than differentiating organic from mechanistic structural set-ups, this research focuses on specific facets of organizational structure, namely centralization, formalization, and organization size (Atwater, 1995; House, 1991). These facets represent key constructs in what has been labeled a “traditional view” on organizational structure (Brass, 1984, p. 519). Further, centralization, formalization, and organization size have been found to be only weakly related to each other (Schminke, Cropanzano, & Rupp, 2002; Tannenbaum & Dupuree-Bruno, 1994) and, therefore, should not be assumed to have parallel effects (Atwater, 1995). Considering these dimensions individually may contribute to a more differentiated understanding of the role of organizational structure, and it may point organizational decision-makers toward specific intervention opportunities to nurture TFL. Second, this study is located at the organizational level of analysis, conceptualizing TFL as an organization-level climate variable (cf. Chen & Bliese, 2002; Ostroff & Bowen, 2000). It investigates the association between organizational structure, on the one hand, and the emergence and effectiveness of an organization's TFL climate (i.e., the degree to which leaders throughout the organization direct TFL behaviors toward their followers) on the other. Hypotheses are tested in a sample of 125 independent organizations, supplementing earlier, lower-level work. Third, we consider the moderating role of organizational structure in the relationship between TFL climate and an important outcome variable, namely productive organizational energy (POE; Bruch & Ghoshal, 2003). POE has been defined as “the extent to which a company has mobilized its emotional, cognitive, and behavioral potential in pursuit of its goals” (Cole, Bruch, & Vogel, 2005, p. 2). Thus, POE seems well suited to comprehensively capturing the consequences of TFL climate at the organizational level of analysis, along various (i.e., affective, mental, and behavioral) dimensions, and to examining organizational structure as a moderator of the effectiveness of TFL climate. As Atwater (1995, p. 466) noted, investigating such interactive relationships is a logical “next step in the research process”, once contextual impacts on the occurrence of specific leadership behaviors have been examined. To sum up, this study investigates organizational centralization, formalization, and size both as antecedents of TFL climate and as moderators of the relationship between TFL climate and POE (see Fig. 1). Thus, we extend previous theorizing and put such theory to an empirical test, complementing the predominantly conceptual perspective that has characterized this line of inquiry to date. 1. TFL climate: Conceptual issues and emergence mechanisms As implied earlier, we define TFL climate as the degree to which leaders throughout an organization direct TFL behaviors toward their followers. Thus, TFL climate originates from the behaviors of individual leaders, but it emerges as a shared property of

Fig. 1. The overall conceptual model. (H = Hypothesis).

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the organization as leaders in the organization act in a similarly transformational manner, causing followers to perceive their leaders' TFL in similar terms (Conger & Kanungo, 1987; Morgeson & Hofmann, 1999). TFL climate, therefore, reflects followers' shared perceptions of their leaders' TFL behaviors throughout the organization (Chan, 1998; Klein & Kozlowski, 2000). This is in line with the perspective of James and colleagues, who defined organizational climate as the “typical” or “average” way an organization's members perceive their work environments (James, 1982, p. 220; see also James et al., 2008). Also, our conceptualization of TFL climate concurs with the more general notions of leadership climate that have recently been advanced (e.g., Bliese & Halverson, 1998; Bliese, Halverson, & Schriesheim, 2002; Gavin & Hofmann, 2002). For TFL climate to emerge from individual leaders' behaviors (and followers' perceptions thereof), sufficient similarity within, and differences between, organizations are required (Bliese et al., 2002; Chen, Mathieu, & Bliese, 2004). Only then is it justified to speak of TFL climate as a shared property of an organization (Chan, 1998; James et al., 2008). Various mechanisms may account for such within-organization homogeneity, and between-organization heterogeneity, by contributing to processes through which “individual-level attitudes and behaviors become shared and produce an emergent collective structure of attitudes, norms, and behaviors” at the organizational level of analysis (Currall, Towler, Judge, & Kohn, 2005, pp. 617–618; see also Klein, Dansereau, & Hall, 1994). First of all, organizations may attract, select, and retain specific types of individuals through their policies and processes (Ostroff & Bowen, 2000). Such attraction–selection–attrition cycles should contribute to the similarity of people within an organization and to differences from other organizations' members (Schneider, 1987). Second, socialization processes may lead newcomers to adapt their behaviors to organizational standards through interactions with incumbent employees, attenuating differences among an organization's members (Schneider & Reichers, 1983). Finally, employees within the bounded context of an organization typically face common experiences and social influences that may evoke convergent response tendencies, further increasing within-organization homogeneity and accentuating differences to other organizations (Kozlowski & Hattrup, 1992). To summarize, organizations can be expected to attract, select, and retain specific types of leaders, to socialize these leaders in a specific manner, and to expose them to specific experiences and social influences (Klein et al., 1994). Leaders' transformational behaviors within an organization should, therefore, exhibit substantial similarity, while such behaviors should be distinct from leaders in other organizations. Further, with followers throughout the organization being exposed to similar levels of TFL, their perceptions of such leadership should also be relatively homogeneous (Conger & Kanungo, 1987; Kozlowski & Hattrup, 1992). Bommer, Rubin, and Baldwin (2004) indeed demonstrated that peers' TFL behaviors within an organization (as rated by direct followers) tend to be similar. Thus, we believe that it is conceptually justified to consider TFL as a climate variable at the organizational level of analysis (Chan, 1998; James et al., 2008). 2. Theoretical background We concur with the definition of organizational structure as “the enduring characteristics of an organization reflected by the distribution of units and positions within the organization and their systematic relationships to each other” (James & Jones, 1976, p. 76). Centralization reflects the degree to which authority is concentrated within an organization (Schminke, Ambrose, & Cropanzano, 2000). Specifically, we focus on what Hage and Aiken (1967, p. 78) labeled “hierarchy of authority” (i.e., the concentration of decision-making power with regard to work tasks) because this type of centralization may have particularly strong impacts on employees' behaviors in their jobs (Lambert, Hogan, & Allen, 2006). Formalization is defined as “the extent to which rules, procedures, instructions, and communications are written” within an organization (Pugh, Hickson, Hingins, & Turner, 1968, p. 75). Finally, as is common practice (e.g., Schminke et al., 2000, 2002), we define organization size as the total number of employees working in an organization. This conceptualization seems particularly appropriate for the present purpose because it emphasizes social aspects that may be relevant for leadership processes (Koene et al., 2002). Scholars have suggested various conceptual models linking organizational context characteristics to members' behaviors. When considering structural influences on TFL climate, these models provide useful theoretical starting points. Oldham and Hackman (1981, p. 68), for instance, have proposed the “job-modification framework” which argues “that the structural properties of organizations influence employee reactions by shaping the characteristics of their jobs”. Stewart's (1982) demands– constraints–choices model leads to similar conclusions. As Stewart argued, jobs in organizations are characterized by demands (i.e., tasks that must be done) and constraints (i.e., factors that limit what can be done). These aspects determine an organization's members' area of discretion, in which members can make choices regarding the activities they perform. Together, demands, constraints, and choices critically shape the behaviors of an organization's members. Researchers have noted, for instance, that contextual characteristics (e.g., organizational structure) may influence leadership processes by shaping members' demands and constraints and the choices they make (Green, Anderson, & Shivers, 1996; Hammer & Turk, 1987; Osborn & Hunt, 1975). By influencing leaders' demands and constraints, the organizational structure may either facilitate or restrict opportunities to demonstrate TFL behaviors and, within the remaining area of discretion, shape leaders' choices on whether to engage in such actions. Similarly, structural aspects may affect followers' demands, constraints, and choices, influencing their reaction to TFL behaviors and, consequently, the effectiveness of such leadership (Howell, 1997). Thus, structural features are likely to operate both as antecedents and as boundary conditions of leaders' TFL behaviors and, by extension, of an organization's TFL climate (Pawar & Eastman, 1997; Shamir & Howell, 1999). One should note that even employees in similar situations may encounter (or perceive) different job characteristics, demands, and constraints, and differ in the choices they make (Stewart, 1982). That is, variations in leaders' behaviors and followers' responses within an organization remain possible (e.g., based on individual differences; Bono & Judge, 2004). Nevertheless, with structural features such as organizational centralization, formalization, and size representing shared properties of the overall

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organization (Ambrose & Schminke, 2003), we would expect such characteristics to impact on all members' job characteristics, demands, constraints, and choices to some extent and, accordingly, to shape their performance of TFL behaviors and/or their reactions towards such leadership, influencing both the strength and the effectiveness of an organization's TFL climate. 3. Hypotheses development 3.1. Organizational structure as an antecedent of TFL climate 3.1.1. Centralization and TFL climate We propose that centralization is inversely associated with TFL climate. Particularly, centralization is suggested as influencing the job characteristics of leaders throughout the organization, placing specific demands and constraints on leaders and shaping leaders' choices so as to prevent them from engaging in TFL behaviors. As Pawar and Eastman (1997) argued, upper level leaders in highly centralized organizations are often overburdened by the multitude of operational decisions passed upwards through the hierarchy because decision-making authority is concentrated at the top. This is likely to absorb upper level leaders' attention, and limit their ability to focus on overarching issues and develop an inspirational, long-term vision for the organization. In line with this, Sarros, Tanewski, Winter, Santora, and Densten (2002) demonstrated employees' ratings of top managers' TFL to be negatively associated with centralization. Similarly, lower and middle level leaders are likely to remain preoccupied with the implementation of operational directives in centralized settings, also reducing their ability to identify and articulate visionary aspirations (Howell, 1997; Pawar & Eastman, 1997). Thus, visionary behaviors seem less likely as the degree of centralization increases, reducing the organization's TFL climate. Further, centralization may hamper TFL climate by constraining leaders' opportunities to engage in innovative and charismatic actions. Highly centralized organizations have been suggested as inhibiting employees' awareness of potential innovations by diminishing their involvement in work-related decisions, constraining available communication channels, and hindering employees' access to important information (Tannenbaum & Dupuree-Bruno, 1994; Wally & Baum, 1994). Further, centralized structures may leave members with limited autonomy and control over organizational resources, restricting their ability to initiate and test novel ideas (Russel & Russel, 1992). Leaders in centralized settings may, therefore, find it difficult to approach work problems in an innovative, intellectually stimulating manner and to portray a charismatic image by acting in bold, unconventional ways (Avolio & Bass, 1988; Shamir, House, & Arthur, 1993). Finally, leaders in centralized organizations may choose not to engage in TFL, even within their areas of discretion, because they may not perceive such behavior as necessary to achieve their goals. In such settings, leaders throughout the hierarchy are able to rely on their “position, reward and sanction power” because they are equipped with strong formal authority (Howell, 1997, p. 11). Hence, there is little need for the personal sources of influence that transformational leaders utilize when enacting role-modeling behaviors, communicating an inspirational vision, fostering the acceptance of common goals, or providing individualized support (House, 1991; Tosi, 1991). In sum, the TFL climate in a centralized organization is likely to remain limited. Organizations with low centralization, in contrast, may preserve leaders' abilities to articulate inspirational visions and perform intellectually stimulating and charismatic actions, and they may maintain leaders' willingness to engage in such behaviors to a greater extent. This is in line with the arguments put forward by Shamir and Howell (1999), who suggested that charismatic leadership occurs more frequently in weak rather than strong situations (i.e., in situations of greater ambiguity, less conformity pressure, and limited social guidance; Mischel, 1977). Decentralized structures offer greater autonomy to leaders and reduce their dependence on organizational authorities, thus creating relatively weak situations that may better enable leaders to engage in TFL behaviors. Hypothesis 1. TFL climate will be more pronounced in organizations with low rather than high centralization. 3.1.2. Formalization and TFL climate Traditionally, formalization has been seen as having unfavorable consequences for employees' behaviors (Organ & Greene, 1981). Early-on, however, researchers have also pointed towards potential positive implications. As Organ and Greene (1981, p. 238) noted, for example, a formalized structural set-up “might even facilitate the work of professionals if it improved coordination and communication”. Similarly, Podsakoff, MacKenzie, and Bommer (1996) found a positive relationship between individual employees' perceptions of formalization and their TFL ratings. We suggest, accordingly, that formalization is positively associated with TFL climate, because it may benefit relevant job characteristics and favorably influence the demands, constraints, and choices of leaders throughout the organization. Formalization may unburden leaders from specific demands and constraints that might otherwise distract them from TFL and diminish the organization's TFL climate. Formalized structures contribute to organizational efficiency through the provision of written rules, procedures, and regulations (Hetherington, 1991). As Howell, Dorfman, and Kerr (1986) suggested, formalization can, therefore, substitute for operational, efficiency-oriented leadership (e.g., path–goal clarification). Rather than investing their efforts in such behaviors, leaders in formalized settings can focus on more far-reaching, transformational activities, such as articulating visionary aspirations, role-modeling behaviors, or stimulating followers' extraordinary performance. The presence of clear-cut guidelines, procedures, and policies may further promote TFL climate by clarifying organizational requirements (Michaels, Cron, Dubinsky, & Joachimsthaler, 1988; Podsakoff, Williams, & Todor, 1986). As Sine, Mitshuhashi, and Kirsch (2006, p. 123) noted, formalization contributes to clarity with regard to who is supposed to perform what tasks in an

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organization, clearly delineating what employees can or cannot decide and empowering individuals “to make decisions on behalf of their organization”. Thus, leaders in formalized settings should have a clear picture of what is expected from them, what actions are appropriate, and how to deal with contradictory demands. They should therefore be in a better position to develop visionary aspirations, to foster the acceptance of common organizational goals among followers, and to be a role model of appropriate goaldirected behaviors. Third, formalization may increase the likelihood that leaders deliberately choose to engage in transformational behaviors, further nurturing an organization's TFL climate. As Paglis and Green (2002) argued, leaders' willingness to exert effort on the organization's behalf hinges, at least partially, on their attitudes toward the organization (see also Bommer et al., 2004). Research indicates that, by reinforcing an organization's predictability and outlining its members' responsibilities, formalized structures can strengthen employees' commitment to, and identification with, the organization (Michaels et al., 1988; Organ & Greene, 1981; Podsakoff et al., 1986). We therefore argue that formalization will enhance leaders' motivation to engage in TFL behaviors that require substantial effort such as developing and articulating visions, acting as role models, fostering the acceptance of organizational goals, and intellectually stimulating followers. Overall, we expect formalized organizations to exhibit strong TFL climate. In weakly formalized settings, in contrast, TFL climate is likely to suffer from leaders' need to focus on efficiency-oriented rather than visionary and charismatic behaviors, from their lack of orientation and role clarity, and from their limited motivation to act in a transformational manner. Hypothesis 2. TFL climate will be more pronounced in organizations with high rather than low formalization. 3.1.3. Organizational size and TFL climate Various researchers have suggested that an organization's size may influence leaders' behaviors, speculating, for instance, that large organizations may provide a “confronting context” for TFL (Berson, Shamir, Avolio, & Popper, 2001, p. 58). Based on this, we hypothesize that organization size will be negatively associated with TFL climate. A large organization's size may adversely affect leaders' job characteristics, impose specific demands and constraints on them, and negatively color their decisions on engaging in TFL behaviors. Large organizations are typically characterized by greater complexity than small ones because they have a greater number of employees and specialized work units, and have more diverse contacts with their environments (Tushman & Romanelli, 1985). Leaders in large organizations may, therefore, find it difficult to fully understand the organization's objectives and to capture their contributions to these goals, and they may feel only limited responsibility for achieving such aspirations (Ghobodian & Gallear, 1997; James & Jones, 1976). Thus, a large organization's size may weaken its TFL climate by depriving leaders of their ability to develop an overarching vision, to role-model goal-directed behaviors, and to promote the acceptance of organizational goals. Further, the growing coordination requirements associated with increasing organizational size may promote an emphasis on conventionality and efficiency rather than on innovation (Payne & Mansfield, 1973). Thus, we argue that a large size will further diminish key aspects of an organization's TFL climate, reducing leaders' capabilities to perform charismatic, counter-normative actions, to develop innovative visions, to stimulate novel approaches, and to encourage followers to creatively question the status quo. A study by Berson and colleagues (2001) has, accordingly, found organization size to reduce the inspirational content of leaders' vision statements. Finally, an organization's size may weaken its TFL climate by biasing leaders against choosing to engage in TFL behaviors because large organizations may evoke negative attitudes and curb leaders' motivation to invest their efforts on the organization's behalf (Bommer et al., 2004; Paglis & Green, 2002). Providing support for this notion, research has shown that members of large organizations often experience a sense of alienation due to their perceived anonymity, with organization size being inversely related to employees' job satisfaction, organizational commitment, and perceptions of justice (Pierce & Gardner, 2004; Ragins, Cotton, & Miller, 2000; Schminke et al., 2002). As a consequence, small organizations should generally exhibit stronger TFL climates than large ones. They are likely to enable leaders to more fully capture their contributions to organizational goals, preserve leaders' ability to communicate visionary aspirations, to engage in charismatic actions, and to stimulate innovative approaches, and retain leaders' motivation to perform such TFL behaviors. Hypothesis 3. TFL climate will be more pronounced in small rather than large organizations. 3.2. Organizational structure as a moderator of TFL climate effectiveness 3.2.1. The energizing effect of TFL climate As noted earlier, productive organizational energy (POE) reflects the degree to which organizations have mobilized their employees' emotional, cognitive, and behavioral potentials in pursuit of common goals (Bruch & Ghoshal, 2003). Originating from individual employees, POE manifests itself as an emergent construct at the organizational level through mechanisms of social interaction (Klein et al., 1994; Morgeson & Hofmann, 1999) and affective contagion (Hatfield, Cacioppo, & Rapson, 1994). Further, POE constitutes a multi-dimensional phenomenon (Cole et al., 2005). It reflects employees' joint experience of positive affect (i.e., emotional energy), their shared cognitive activation in pursuit of common goals (i.e., cognitive energy), and their collective efforts to achieve such goals (i.e., behavioral energy). While these dimensions are conceptually and empirically distinct, they have been shown to be positively related to one another and to collectively reflect an organization's POE level (Cole et al., 2005). Even though

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this line of inquiry is in an early stage of development, POE has been linked to higher levels of company functioning in qualitative research (Bruch & Ghoshal, 2003, 2004), and quantitative evidence is starting to accumulate that shows that POE enhances a workunit's shared commitment and job satisfaction (Bruch, Vogel, & Cole, 2006; Cole et al., 2005). We argue that an organization's TFL climate will benefit all three dimensions of POE and, thus, will be positively associated with its overall POE level. TFL theories have emphasized the “intense emotional component” of such leadership (Bass, 1985, p. 36; see also Ashkanasy & Tse, 2000). The charismatic role-modeling, the visionary aspirations, and the individualized consideration that transformational leaders provide have been suggested as promoting followers' “emotional attachment to the leader” and strengthening their “emotional and motivational arousal” (Shamir et al., 1993, p. 577). Further, with transformational leaders frequently expressing positive feelings (Bono & Ilies, 2006; Gardner & Avolio, 1998), they are likely to transfer such emotions to followers (Sy, Côté, & Saavedra, 2005). In line with this, researchers have demonstrated that TFL enhances both individual followers' (Bono, Foldes, Vinson, & Muros, 2007) and work groups' (Pirola-Merlo, Härtel, Mann, & Hirst, 2002) positive affect. As TFL climate represents the shared tendency of leaders in the organization to demonstrate TFL behaviors, we would expect a similar linkage at the organizational level. TFL climate may constitute an ambient stimulus (Hackman, 1992) that influences the organization as a whole, promoting positive feelings within followers and strengthening an organization's emotional energy. Similarly, strong TFL climate may mobilize an organization's cognitive energy because transformational leaders convey a visionary image of the future, promote organizational goals, and formulate high performance expectations, generating similarly positive images, goals, and expectations among followers (Podsakoff et al., 1990; Shamir et al., 1993). Also, such leaders' intellectual stimulation may induce followers “to appreciate, dissect, ponder and discover what they would not otherwise discern” (Lowe, Kroeck, & Sivasubramaniam, 1996, pp. 415–416). Researchers have indeed shown TFL to enhance the creativity and critical-independent thinking of followers (Dvir, Eden, Avolio, & Shamir, 2002; Sosik, Kahai, & Avolio, 1999). Further, Koene and colleagues (2002) reported a positive association between general managers' charismatic leadership and an organization's readiness to innovate. Thus, if leaders across the entire organization engage in TFL behaviors (i.e., TFL climate is high), cognitive energy may be strengthened. Followers' thinking is likely to be directed toward the common vision, goals, and expectations communicated by such leaders, and followers will be encouraged to explore new work approaches. An organization's TFL climate should also be positively associated with its behavioral energy. In particular, the role-modeling and vision of transformational leaders may encourage followers to emulate their leaders' actions and to put effort into realizing the respective vision (Shamir et al., 1993). TFL should, therefore, result in proactive, energetic actions among followers (Cross, Baker, & Parker, 2003; Dutton, 2003). On this basis, transformational and charismatic leaders have been suggested as serving as champions of change (Howell & Higgins, 1990), guiding followers' behaviors to the pursuit of collective aspirations, and strengthening followers' efforts (Dvir et al., 2002; Sosik, 2005) and work performance (Judge & Piccolo, 2004). Hence, pronounced TFL climate should stimulate followers' purposeful action-taking throughout the organization. To summarize, strong TFL climate should be associated with high POE because it promotes an organization's emotional, cognitive, and behavioral energy. Organizations with a low TFL climate, in contrast, are less likely to see these beneficial outcomes. In such situations, followers' collective positive emotions, their shared cognitive activation, and their common pursuit of organizational goals should be less pronounced. Preliminary evidence by Bruch et al. (2006) supports this argument as TFL was found to indirectly enhance POE through collective empowerment at the department level. Hypothesis 4. There will be a positive association between an organization's TFL climate and its POE. Importantly, we expect an organization's structure to moderate this relationship. By shaping members' job characteristics and influencing their demands, constraints, and choices (Oldham & Hackman, 1981; Stewart, 1982), structural aspects may influence followers' reactions to their leaders' transformational behaviors and, consequently, the implications of an organization's TFL climate (Howell, 1997).

3.2.2. Centralization, TFL climate, and POE Centralization may decrease the receptivity of followers to their leaders' TFL behaviors, weakening the TFL climate–POE linkage. First, leaders in centralized organizations may find it harder to stimulate their followers' positive emotions through TFL. By limiting employees' control over work decisions and reducing their autonomy, centralization has been shown to trigger work alienation (Sarros et al., 2002), and to diminish employees' job satisfaction (Wallace, 1995) and justice perceptions (Schminke et al., 2000, 2002). With such negative attitudes, leaders' promotion of organizational goals and role-modeling may do little to engage followers emotionally. Followers may perceive the respective aspirations and actions as possessing little authenticity, and they are likely to regard such leadership with suspicion rather than enthusiasm and excitement. Thus, even if leaders throughout the entire organization exhibit TFL behaviors, emotional energy may not be generated in centralized settings. Similarly, centralization may weaken the relationship between TFL climate and cognitive energy. Centralized organizations exclude members from participating in important decisions, with decision-making being concentrated at the top of the hierarchy (Melcher, 1976). Such participation may, however, be critical for TFL to deliver cognitive impacts. It has been argued that employee participation is a key prerequisite for the generation of new ideas, because participation grants access to relevant information and facilitates awareness of possible innovations (Tannenbaum & Dupuree-Bruno, 1994; Wally & Baum, 1994). Thus, with centralized structures limiting followers' opportunities for innovativeness, transformational leaders may be unable to energize followers in the search for novel problem solutions or to stimulate followers' cognitive activation in the pursuit of common goals.

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Centralization is also likely to diminish the association between TFL climate and behavioral energy. By inducing negative job attitudes in employees (Sarros et al., 2002; Schminke et al., 2000, 2002), centralization may reduce followers' motivation to act upon TFL. For instance, followers seem less likely to emulate their leaders' role-modeling of goal-directed behaviors if they regard organizational goals with suspicion. Further, centralization may limit employees' autonomy and discretion (Payne & Mansfield, 1973) to such an extent that they are unable to follow their leaders' role model and vision, even if they are motivated to do so. Thus, “the message of the visionary may be lost” in centralized settings, preventing followers from pursuing their transformational leaders' course (Boal & Bryson, 1988, p. 25). Thus, the relationship between TFL climate and POE is likely to be constrained in centralized structures. In decentralized organizations, followers should react more positively to their leaders' vision and performance expectations, they should have greater opportunities to explore novel ideas in response to leaders' intellectual stimulation, and they should be in a better position to act upon leaders' role-modeling, preserving the TFL climate–POE linkage. Hypothesis 5. Centralization moderates the relationship between TFL climate and POE. This relationship will be more pronounced in organizations with low rather than high centralization.

3.2.3. Formalization, TFL climate, and POE While some theorists have suggested that TFL effectiveness will be diminished in bureaucratic, formalized organizations (e.g., Pawar & Eastman, 1997), empirical research has found no support for this contention (Podsakoff et al., 1996). In fact, it has recently been argued that transformational leaders may actually “exert stronger effects in bureaucratic organizations” (Mumford, Antes, Caughron, & Friedrich, 2008, p. 145), with meta-analytic evidence demonstrating that such leadership is more influential in military rather than civilian (Judge & Piccolo, 2004) and in public rather than private settings (Lowe et al., 1996). Hence, our contention is that formalization is more likely to enhance rather than weaken the TFL climate–POE linkage, by strengthening the receptivity of followers throughout the organization to leaders' TFL behaviors. Followers' positive emotions may benefit to a greater extent from TFL in more formalized settings, contributing to the association between TFL climate and emotional energy. As outlined earlier, it has been demonstrated that formalization improves employees' perceptions of justice (Schminke et al., 2000, 2002), organizational commitment and identification (Organ & Greene, 1981; Podsakoff et al., 1986), and job satisfaction (Wallace, 1995). Leaders should be able to build upon these positive attitudes of their followers in promoting organizational goals and visions and role-modeling goal-directed behaviors, thus strengthening the affective consequences of these aspects of TFL climate. Such leadership should be in line with followers' favorable attitudes, eliciting positive feelings by reinforcing followers' views (Clore & Byrne, 1974). Formalization may also contribute to the link between TFL climate and cognitive energy. With written regulations outlining members' responsibilities (Michaels et al., 1988; Organ & Greene, 1981), employees may better understand how organizational objectives relate to their daily work. Followers may then find it easier to connect the visions and goals communicated by transformational leaders to their own job tasks and to incorporate such aspirations in their thinking. Similarly, given that formalized structures clarify organizational processes (Sine et al., 2006), followers may be able to develop more viable solutions in response to leaders' intellectual stimulation. Thus, formalization may enable leaders to more effectively enhance their followers' cognitive activation. Finally, formalization may strengthen the link between TFL climate and behavioral energy. By defining the scope of a leader's authority, formalization constrains arbitrary actions while adding legitimacy to leaders' behaviors within the remaining area of discretion (Atwater, 1995; Wallace, 1995). Thus, to the extent that leaders' role-modeling and vision are in line with organizational rules, followers should more readily accept such behaviors. Followers throughout the organization are then more likely to emulate the behaviors demonstrated by their leaders, to embrace their leaders' vision, and to act upon such aspirations. To summarize, TFL climate and POE should be strongly related in more highly formalized situations. However, low formalization may limit followers' receptivity to TFL by impairing their job attitudes, reducing their ability to relate leaders' aspirations to their daily work, and decreasing the perceived legitimacy of leaders' transformational behaviors. As a consequence, the positive association between TFL climate and POE is likely to be weaker.3 Hypothesis 6. Formalization moderates the relationship between TFL climate and POE. This relationship will be more pronounced in organizations with high rather than low formalization.

3.2.4. Organization size, TFL climate, and POE Researchers have frequently pointed to the relevance of organizational size for leadership effectiveness (Bass, 1990). Recently, for instance, Koene et al. (2002) found the performance impacts of charismatic leadership to be more limited in large rather than small stores. Along the same lines, we expect increasing organizational size to lower followers' receptivity to TFL, weakening the relationship between TFL climate and POE.

3 This is not to say that TFL climate will be unrelated to POE under conditions of low formalization. Transformational leaders' charismatic actions and visions may enhance followers' energy even if followers' initial attitudes are negative, and such leadership may gain legitimacy in its own right (e.g., by defining a common identity; Shamir et al., 1998). Accordingly, scholars have demonstrated the effectiveness of TFL even in relatively unfavorable situations (e.g., Zohar, 2002). Nevertheless, we argue that the positive effects of TFL climate will be more pronounced in more formalized organizations.

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First, increasing organizational size should reduce the affective consequences of TFL climate. Due to the inherent complexity of large organizations (Tushman & Romanelli, 1985), the psychological distance between leaders and followers is likely to be greater (Payne & Mansfield, 1973). It has been suggested that the beneficial consequences of individually considerate leadership are less pronounced in psychologically distant situations (Antonakis & Atwater, 2002; Shamir, 1995). Accordingly, followers in large organizations may perceive leaders' individualized consideration as superficial, reducing the impacts of this type of TFL behavior on followers' positive emotions. Similarly, with increasing organizational size evoking negative job attitudes (e.g., Ragins et al., 2000; Schminke et al., 2002), followers in large organizations may find only limited appeal in the visionary goals promoted by transformational leaders, further weakening the association between TFL climate and emotional energy. An organization's size may also decrease the link between TFL climate and cognitive energy. The objectives of large organizations are typically more complex (Iaquinto & Fredrickson, 1997; Tushman & Romanelli, 1985) and remain more abstract to employees (Ghobodian & Gallear, 1997) than those in smaller organizations. Followers in large organizations may, therefore, find it difficult to comprehend the visions and goals communicated by transformational leaders and to understand how such objectives influence their own jobs. Also, followers in such settings are less likely to recognize how their development of innovative work approaches may benefit the overall organization. Thus, followers should be less willing to incorporate the aspirations of transformational leaders into their own thinking and to engage in cognitive efforts in response to leaders' intellectual stimulation. Finally, the greater psychological distance between leaders and followers in large organizations (Payne & Mansfield, 1973) may reduce the association between TFL climate and behavioral energy by diminishing the effectiveness of transformational leaders as role models. In such circumstances, followers are less likely to emulate their leaders' exemplary behaviors because they feel less closely related to their leaders (Roberts & Bradley, 1988). Thus, leaders' charismatic actions may do little to stimulate proactive, goal-directed behaviors in followers. To summarize, the TFL climate–POE linkage is likely to be limited in large organizations. In smaller organizations, in contrast, followers may feel more closely related to their leaders, their job attitudes may be more favorable, and they may find it easier to comprehend the relevance of leaders' aspirations for their own work. Smaller organizations, therefore, may provide a more viable context for TFL to be effective. We would emphasize that these arguments do not contradict earlier suggestions that TFL is relevant for large organizations (e.g., Bennis & Nanus, 1985; Tichy & Devanna, 1990). However, rather than examining an organization's TFL climate, this earlier work tended to focus on the transformational behaviors of top managers. Our theoretical argument, in contrast, suggests that the TFL behaviors demonstrated by the large majority of leaders, including those on middle and lower hierarchical levels, will be more effective in small rather than large organizations. Hypothesis 7. Organizational size moderates the relationship between TFL climate and POE. This relationship will be more pronounced in small rather than large organizations.

4. Method 4.1. Data collection and sample description Data for this study were collected in cooperation with an agency located in Germany that specializes in benchmarking small-tomedium sized enterprises. Initially, the agency solicited participation from 147 organizations, based on the constraints that the organizations should (a) be located in Germany and (b) have fewer than 5000 employees. Each organization was promised a detailed benchmarking report in return for their participation. Twenty-two organizations decided not to participate, or failed to provide sufficient data, resulting in an organizational-level response rate of 85% (n = 125). Participating organizations represented companies from a variety of industries (46% manufacturing, 31% services, 10% finance and insurance, 10% trade, and 3% logistics and construction) and ranged in size from 13 to 4745 employees (median = 154). Omitting organizations with 1000 or more employees (n = 12) and 20 or fewer employees (n = 2) did not change the pattern of results. Thus, we included all 125 sample organizations in our hypothesis testing. As in earlier research (e.g., Ambrose & Schminke, 2003; Schminke et al., 2000, 2002), participant organizations therefore represented diverse industries and sizes, increasing the likelihood of finding substantial variation in other structural facets (such as centralization and formalization). To ensure equivalence of data collection, standardized procedures and survey formatting were employed across all organizations. Data were collected from various sources. First, general information (the organization's size, industry affiliation, etc.) were gauged through a key informant survey which was completed by each organization's Human Resources executives or another top management team member. Second, employee survey data were collected to gather information on TFL climate, centralization, formalization, and POE. Participating organizations sent a standardized e-mail to their employees through their Human Resources department or from a senior manager's e-mail address, describing the study's purpose and providing a link to a web-based survey hosted by an independent company (in a few instances, computer terminals were installed to enable the participation of employees without own company e-mail address). Based on an algorithm programmed into the survey web-site, respondents were randomly directed to one of two survey versions, implementing a split-sample design in order to alleviate concerns about common method bias (Dickson, Resick, & Hanges, 2006; Erdogan, Liden, & Kraimer, 2006; Podsakoff, MacKenzie, Lee, & Podsakoff, 2003; Rousseau, 1985). The first version measured centralization, formalization, and POE, whereas the second version measured TFL climate. Both survey versions used established measures that were translated to German through professional translators following a double-blind backtranslation procedure (Schaffer & Riordan, 2003). Respondents were assured full anonymity.

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In total, 16,144 employees voluntarily participated in the study. The average within-organization response rate was 48% (std. dev. = 26%). Respondents were equally distributed between version 1 (49%; n = 7,984) and version 2 (51%; n = 8160) of the survey. Between 4 and 758 version 1 surveys were completed per organization (median = 30), and between 3 and 753 version 2 surveys were completed per organization (median = 28). Of the respondents, 48% were male and 45% female, with 7% choosing not to indicate their gender. The majority were between 26 and 45 years old (59%), and had been employed by their organization for more than 4 years (65%). Participants came from all major divisions of their organizations and represented different hierarchical levels (2% top management; 9% middle management; 13% first-line supervisors; 69% employees without leadership responsibility; 7% no answer). 4.2. Measures 4.2.1. Centralization and formalization Both centralization and formalization were captured in employee survey version 1 with measures previously used by Schminke and colleagues (2000, 2002), using a five-point response scale from 1 (strongly disagree) to 5 (strongly agree). These 5-item measures are derived from Hage and Aiken (1969; centralization) and Pugh et al. (1968; formalization). They were averaged to form overall scores for centralization (sample item: “Even small matters have to be referred to someone higher up for a final answer”) and formalization (sample item: “The company has a large number of written rules and policies”). In line with previous research (e.g., Ambrose & Schminke, 2003; Schminke et al., 2000, 2002), we aggregated employees' ratings to the organizational level. To justify these aggregations, we used intraclass correlation coefficients (ICC1 and ICC2; Bliese, 2000) and interrater agreement statistics (rwg; James, Demaree, & Wolf, 1984). While there are no absolute standards (Lance, Butts, & Michels, 2006), ICC1 values based on a significant F statistic from a one-way analysis of variance, ICC2 values of more than .60, and median rwg values of more than .70 are usually considered sufficient (Chen et al., 2004; Kenny & La Voie, 1985). Thus, aggregation to the organizational level was appropriate for both centralization (ICC1 = .09; F124, 7673 = 7.51; p b .001; ICC2 = .87; and median rwg = .60) and formalization (ICC1 = .22; F124, 7331 = 17.51; p b .001; ICC2 = .94; and median rwg = .79). Although the median rwg value for centralization was lower than desirable, the ICC values indicate that (a) a significant amount of the variance in individuals' ratings was explained by their organization membership and (b) organizations could reliably be distinguished by their mean centralization scores. Thus, it seems justified to aggregate this variable (Bliese, 2000; Koene et al., 2002). Internal consistency estimates for centralization and formalization at the organizational level were .97 and .80, respectively. 4.2.2. Organizational size An organization's size was captured in the key informant survey by asking for the number of employees (converted to full-time equivalents). This commonly used measure is largely interchangeable with alternative size measures (Agarwal, 1979). Koene et al. (2002), for example, reported a correlation of .99 between the number of employees and an organization's gross sales. In line with previous research, we log-transformed the number of employees to reduce skewness (e.g., Schminke et al., 2000, 2002). 4.2.3. Transformational leadership climate TFL climate was captured in employee survey version 2 using the instrument developed by Podsakoff and colleagues (1990, 1996). Prior research has frequently employed this measure and has provided evidence for its psychometric soundness (e.g., Agle, Nagarajan, Sonnenfeld, & Srinivasan, 2006; Bommer et al., 2004). The instrument consists of twenty-two items assessing six dimensions of TFL, namely providing a role model, articulating a vision, communicating high performance expectations, fostering the acceptance of common goals, providing intellectual stimulation, and providing individualized support. To measure an organization's TFL climate, we adopted a direct consensus model, in line with the recommendations of Chan (1998) and James et al. (2008). As noted earlier, leaders across an organization characterized by TFL climate will direct similar TFL behaviors toward their followers, and followers should therefore perceive their immediate leaders' TFL in similar terms (Conger & Kanungo, 1987). Further, Javidan and Dastmalchian (1993) noted that employees are in a particularly good position to provide accurate information about their direct leaders' behaviors due to their social proximity. On this basis, employees were asked to assess the extent to which their direct leaders exhibited TFL behaviors on a seven-point scale from 1 (strongly disagree) to 7 (strongly agree). Based on the acceptable fit of a second-order confirmatory factor analysis (CFA) model, in which all items loaded onto their respective TFL dimension, and these dimensions, in turn, loaded onto one common TFL factor (χ² = 13059.37; df = 203; CFI = .917; TLI = .897; RMSEA = .088), we averaged all items to compute an overall TFL score (Agle et al., 2006; Bommer et al., 2004). Aggregation statistics supported the view that this TFL measure was meaningful at the organizational level, with ICC1 = .05, F124, 7881 = 4.86, p b .001, ICC2 = .78, and median rwg = .83. Thus, we aggregated employees' TFL ratings into a single organization-level measure of TFL climate (for a similar approach, see Ryan, Schmit, & Johnson, 1996). Internal consistency reliability at the organizational level was .97. 4.2.4. Productive organizational energy We assessed an organization's POE in employee survey version 1 using the instrument developed by Cole and colleagues (2005). To the authors' knowledge, this is the only available measure of POE. It is designed to capture the multi-dimensional nature of this construct, including employees' emotional (sample item: “...feel enthusiastic in their job”), cognitive (sample item: “...are mentally alert”), and behavioral (sample item: “...will go out of their way to ensure the company succeeds”) energy. Respondents were asked to rate five items for cognitive energy and four items for behavioral energy on a five-point scale from 1 (strongly disagree) to 5 (strongly agree), and five

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emotional energy items on a five-point scale from 1 (never) to 5 (frequently, if not always). Based on the acceptable fit of a second-order CFA model, in which the items for emotional, cognitive, and behavioral energy loaded onto separate factors and these factors, in turn, loaded onto one common POE factor (χ²=2052.23, df =75; CFI =.959; TLI= .942; RMSEA =.057), we averaged all item responses to form an overall POE score (Cole et al., 2005).4 Further, given appropriate statistical support (ICC1 = .07; F124, 7723 = 5.91; p b .001; ICC2 = .83; and median rwg =.84), we aggregated individuals' ratings to the organizational level. Internal consistency at the organizational level was .95. 4.2.5. Control variables It is possible that employees' hierarchical level might influence their survey ratings. TFL may, for instance, occur to a greater extent at higher hierarchical echelons (Bruch & Walter, 2007), and employees may rate their job characteristics more favorably the higher their hierarchical positioning (Robie, Ryan, Schmieder, Parra, & Smith, 1998). Our organization-level measures might, therefore, be influenced by the hierarchical distribution of respondents in the sample organizations. To control for this, we computed the average hierarchical level for the respondents within each organization (1= top management, 2 = middle management, 3 = first-line supervisor, 4 = employee without leadership responsibility) and considered this as a sample covariate.5 Second, it has been suggested that one should control for within-organization response rates when examining organization-level relationships to accommodate potential sampling bias (e.g., Lincoln & Kalleberg, 1996). Accordingly, we included the participating organizations' response rates in the employee surveys as a covariate. Third, to control for industry differences biasing the relationships obtained, we considered each organization's affiliation with one of five broad industry categories (i.e., manufacturing, services, finance and insurance, trade, logistics and construction) as a control variable (Dickson et al., 2006; Sine et al., 2006). Organizations were assigned five dummy-coded variables indicating their affiliation with each of the above industries (1 = belongs to this industry; 0 = does not belong to this industry). Finally, organization-level research has frequently used organization size as a control variable (e.g., Agle et al., 2006; Waldman, Ramírez, House, & Puranam, 2001). In the present study, size was a variable of substantive research interest. It was therefore included in all hypotheses tests, effectively controlling for potential biasing effects. 4.3. Data analyses The proposed hypotheses were tested at the organizational level using two independent hierarchical regression analyses (Cohen & Cohen, 1983). To address Hypotheses 1 to 3 (pertaining to the structural antecedents of TFL climate) we regressed an organization's TFL climate on the control variables (step 1) and on centralization, formalization, and organization size (step 2). To address Hypotheses 4 to 7 (pertaining to the TFL climate–POE linkage and its moderators) we regressed POE on the control variables and on centralization, formalization, and organization size in a first step. In step 2, we inserted TFL climate, before adding the cross-products of TFL climate and centralization, formalization, and organization size as a final step. Before creating the interaction terms, the respective variables were grand mean-centered, and significant interactions were depicted graphically (Aiken & West, 1991).6 5. Results 5.1. Descriptive statistics Means, standard deviations, and bivariate correlations for all study variables are presented in Table 1. As expected, TFL climate was negatively associated with both centralization (r = −.48; p b .001) and organization size (r = −.31; p b .001), but positively associated with formalization (r = .20; p b .05) and POE (r = .57; p b .001). Notably, organizational centralization, formalization, and size were only weakly interrelated, indicating that the respective measures captured largely independent structural facets. Further, both TFL climate and POE were less pronounced than the lower respondents' average hierarchical positioning (r = −.20 and −.21, respectively; p b .05). TFL climate (r = .25; p b .01) and POE (r = .27; p b .01) were particularly strong in service companies, whereas trade companies exhibited relatively low POE (r = −.28; p b .01), as compared to organizations from other industries. Organizations from the manufacturing, finance and insurance, or logistics and construction industries, by contrast, did not differ significantly from other industries in either TFL climate or POE, and the within-organization response rate was not significantly related to these criterion variables. Based on Becker's (2005) observation that the inclusion of impotent controls (i.e., those uncorrelated with criterion variables) diminishes statistical power and yields biased parameter estimates, we decided to control for (a) the respondents' average hierarchical level and (b) an organization's affiliation with either the service or the trade industry (as opposed to other industries) in hypothesis testing. As a further check, we repeated all our analyses without the control variables. The results largely remained unchanged, indicating that the covariates considered do not constitute a viable alternative explanation for our findings. 4 The average standardized factor loading of the observed indicators onto their respective first-order factors was .71, and the average standardized factor loading of these first-order factors onto the second-order POE factor was .88 (p b .001). 5 Other ways of capturing the hierarchical distribution within organizations (e.g., percentage of managerial versus non-managerial employees) yielded equivalent results. 6 Based on an anonymous reviewer's suggestion, we also examined potential curvilinear relationships between our study variables (e.g., curvilinear influences of organizational structure on TFL climate and of TFL climate on POE). We did not, however, find conclusive evidence for such non-linear linkages.

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Table 1 Descriptive statistics and correlations. Correlations Variable 1. Centralization 2. Formalization 3. Org. size (log) 4. TFL climate 5. POE 6. Average hierarchical level 7. Response rate 8. Manufacturing 9. Services 10. Finance/insurance 11. Trade 12. Logistics/construction

M

SD

1

2

3

4

5

6

2.39 3.20 2.24 4.95 3.70 3.40 0.48 0.46 0.31 0.10 0.10 0.04

.46 .49 .56 .40 .24 .26 .26 .50 .47 .30 .30 .20

.03 .08 −.48⁎⁎⁎ −.61⁎⁎⁎ .15 −.04 −.01 −.09 .03 .01 .16

.19⁎ .20⁎ .08 .11 .02 .01 .01 .09 −.13 −.01

−.31⁎⁎⁎ −.22⁎ .19⁎ −.56⁎⁎⁎ .06 −.17 .19⁎ −.02 −.01

.57⁎⁎⁎ −.20⁎ .12 −.13 .25⁎⁎ −.16 .02 −.06

−.21⁎ .16 −.01 .27⁎⁎ −.10 −.28⁎⁎ −.04

.24⁎⁎ −.03 −.08 .29⁎⁎ −.06 −.08

7

−.07 .21⁎ .05 −.17 −.14

8

9

10

11

−.61⁎⁎⁎ −.30⁎⁎ −.30⁎⁎ −.19⁎

−.22⁎ −.22⁎ −.14

−.11 −.07

−.07

Note. n = 125 organizations. ⁎⁎⁎p b .001; ⁎⁎p b .01; ⁎p b .05 (two-tailed). TFL = transformational leadership; POE = productive organizational energy; log = common logarithm.

5.2. Hypotheses testing Results of the hierarchical regression on TFL climate are provided in Table 2. Organizational centralization, formalization, and size were significantly associated with TFL climate in step 2. Supporting Hypothesis 1, centralization was negatively related to TFL climate (β = −.44; p b .001). Conversely, and as predicted in Hypothesis 2, there was a positive association between formalization and TFL climate (β = .29; p b .001). Further, organization size and TFL climate were negatively related (β = −.29; p b .001), supporting Hypothesis 3. Thus, all hypotheses pertaining to the antecedents of TFL climate were supported. Collectively, centralization, formalization, and organization size accounted for more than 30% of the variance in TFL climate, over and above the control variables. Table 3 depicts the results of the moderated hierarchical regression on POE. TFL climate was positively related to POE in step 2 (β = .30; p b .001), after the control variables were taken into account. Thus, Hypothesis 4 was supported. Step 3 found that the interaction coefficients of TFL climate with both centralization (β = −.14; p b .05) and formalization (β = .12; p b .05) were significant, lending initial support to Hypotheses 5 and 6. The interaction between TFL climate and organization size, in contrast, did not reach conventional levels of significance (β = .12; p = .08). Hypothesis 7 was therefore rejected. Together, the interaction terms contributed an additional 4% to the explanation of POE. In comparison with past research, this is quite notable. As McClelland and Judd (1993) argued, even moderator effects accounting for as little as 1% of variance should be considered relevant in field research. To fully support Hypotheses 5 and 6, the form of these interactions should conform to the predicted patterns. To confirm this, we plotted the regression lines of TFL climate on POE under two conditions, respectively: low and high centralization, and low and high formalization. Supporting Hypothesis 5, Fig. 2 shows that the positive relationship between TFL climate and POE was more pronounced under conditions of low rather than high centralization. Further, Fig. 3 shows that the TFL climate–POE linkage was more pronounced under conditions of high rather than low formalization, thus adding support to Hypothesis 6.7 6. Discussion This study has examined the role of organizational structure in shaping the occurrence and effectiveness of TFL in organizations. We found that, combined, organizational centralization, formalization, and size explain more than 30% of the variance in organizations' TFL climate. As hypothesized, both centralization and organization size were negatively related with TFL climate, whereas there was a positive association for formalization. Moreover, we found that both centralization and formalization moderated the TFL climate–POE linkage, with centralization reducing and formalization strengthening this positive relationship.8 Organizational structure, therefore, seems to constitute an important contextual boundary condition both for the development and for the consequences of TFL climate. This research contributes to the TFL literature in various ways. First, our results support previous theoretical arguments pointing to a potential linkage between organizational structure and TFL (Pawar & Eastman, 1997; Shamir & Howell, 1999). This investigation is among the first to empirically address this issue at the organizational level. Thus, it increases confidence in the viability of prior theorizing. Considered collectively, findings from earlier, lower-level research (e.g., Pillai & Meindl, 1998; Shamir et al., 2000) and the current study suggest that the relationship between structure and TFL can be generalized across levels of 7 We also tested Hypotheses 4 to 7 for emotional, cognitive, and behavioral energy separately, as suggested by an anonymous reviewer. Supporting Hypothesis 4, TFL climate was positively related to all three dimensions. Hypothesis 5 (a negative moderating role for centralization) was supported for cognitive and behavioral energy, but not for emotional energy. Hypothesis 6 (a positive moderating role for formalization) was supported for behavioral energy, but not for the other two dimensions, even though all the interaction coefficients were in the expected direction. Finally, mirroring the results for overall POE, Hypothesis 7 (a negative moderating role of organization size) was not supported for any of the three individual POE dimensions. More details can be obtained from the first author. 8 Contrary to our hypothesis, such a moderated relationship was not observed for organization size. Given that this interaction term did approach conventional levels of significance, but was in the opposite direction than expected, further investigations into the role of organization size may be fruitful.

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Table 2 Hierarchical regression analysis on transformational leadership climate. Transformational leadership climate Variables entered Average hierarchical level Services Trade Centralization Formalization Organization size (log) ΔR2 R2 (adjusted R2)

Step 1 −.18⁎ .25⁎⁎ .06

.10⁎⁎ (.08)

Step 2 −.09 .17⁎ .09 −.44⁎⁎⁎ .29⁎⁎⁎ −.29⁎⁎⁎ .32⁎⁎⁎ .42⁎⁎⁎ (.39)

Note. n = 125 organizations. Standardized regression weights are shown. ⁎⁎⁎p b .001; ⁎⁎p b .001; ⁎p b .05 (two-tailed). log = common logarithm.

analysis, with the structural characteristics of work units, departments, and organizations influencing the extent to which leaders engage in such behaviors. Future research directly examining this conclusion would be highly interesting. Second, this study addresses calls for a more thorough investigation of contextual moderators in TFL research (Shamir & Howell, 1999; Yukl, 1999). Reinforcing the skepticism that various academics (e.g., Conger, 1999; Vandenberghe, 1999) have voiced regarding claims about the near-universal effectiveness of TFL (Bass, 1997), our results indicate that the positive impacts of such leadership may depend, at least to some extent, on an organization's structure. Thus, we accord with Shamir and Howell's (1999) view that while TFL “is potentially applicable to most organizational situations, it is not equally applicable to all situations” (p. 278). Finally, our study moves beyond the broad distinction between organic versus mechanistic settings that has characterized earlier research (Pillai & Meindl, 1998; Shamir & Howell, 1999; Shamir et al., 2000) and contributes to a more differentiated depiction of the relevance of organizational structure to TFL processes. Centralization, for instance, seems to have distinctly negative consequences, diminishing both the occurrence and the effectiveness of TFL climate in organizations. Formalization, in contrast, is beneficial both as an antecedent of TFL climate and as a moderator of the TFL climate–POE linkage. Finally, even though a large organizational size imposes constraints on the occurrence of TFL behaviors, it appears to have only limited relevance in shaping the effectiveness of TFL climate. Hence, this study demonstrates the benefits of considering specific structural facets when investigating the context in which TFL takes place. 6.1. Practical implications The present findings suggest several options for organizations striving to enhance the occurrence and the effectiveness of TFL. Organizations frequently focus on leadership development and training to nurture TFL behaviors in their leaders (Bass & Riggio, 2006). However, given the present findings, we would agree with Bommer et al.'s (2004, p. 206) conclusion that “although training/educating managers in the ‘how’, ‘when’, and ‘why’ of TLB [transformational leadership behavior] is well advised, it is unlikely to be sufficient in the absence of a context supporting TLBs”. It seems vital for organizations to adjust their structures so as to provide a viable context for TFL climate to flourish. Decentralization may be critical in this respect. By delegating authority to leaders and followers throughout the organization, and by allowing employees' far-reaching autonomy in decision-making in their daily tasks, organizations may be able to create favorable contextual conditions for TFL and to remove barriers to the beneficial consequences of such leadership (see also Spreitzer & Quinn, 1996). Similarly, formalization may constitute an important tool as it may enhance both the occurrence and the effectiveness of TFL climate. Organizations may draw on these effects by providing employees with clear-cut, reliable processes and guidelines. In line with Schminke et al. (2000, p. 296), however, we would caution that “very strictly formalized organizations may display ‘too much of a good thing’” and diminish employees' discretion. It may be critical, therefore, for formalized rules to be designed such that they benefit organizational functioning, rather than counter-productively interfere with employees' work (Schminke et al., 2000). To effectively nurture TFL climate, it seems crucial to carefully adjust both the degree and the content of organizational regulations and guidelines. This research also suggests that large organizations may find it particularly difficult to nurture TFL climate although both large and small organizations do seem to benefit from the energizing effects of TFL climate to a similar extent. Decision-makers in large organizations, therefore, seem well advised to closely monitor the respective leadership climate. They should seek creative ways to offset the potentially negative implications of their organization's size for the development of TFL behaviors, for instance by placing particular emphasis on decentralization and appropriate formalization. 6.2. Limitations and research implications Several limitations to the present research call for attention in interpreting the results. First, all data were collected at one point in time. Therefore, causality cannot unambiguously be inferred. As Pawar and Eastman (1997) noted, organizational context factors may both influence and be influenced by TFL behaviors. Similarly, besides TFL climate strengthening POE, leaders within an organization may feel stimulated by such energy, contributing to their transformational behaviors. Based on the theoretical arguments outlined earlier, we believe that the directions of causality assumed in this study are more likely than the reverse. Nevertheless, further evidence based on (quasi-) experimental or longitudinal study designs is needed before claims of causality

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Table 3 Moderated hierarchical regression analysis on productive organizational energy. Productive organizational energy Variables entered Average hierarchical level Services Trade Centralization Formalization Organization size (log) Transformational leadership (TFL) climate TFL climate ⁎ centralization TFL climate ⁎ formalization TFL climate ⁎ organization size (log) ΔR2 R2 (adjusted R2)

Step 1 −.11 .13 −.24⁎1⁎⁎ −.57⁎⁎⁎ .11 −.16⁎

.52⁎⁎⁎ (.50)

Step 2 −.08 .07 −.27⁎⁎⁎ −.44⁎⁎⁎ .02 −.07 .30⁎⁎⁎

.05⁎⁎⁎ .58⁎⁎⁎ (.55)

Step 3 −.03 .10 −.25⁎⁎⁎ −.42⁎⁎⁎ .00 −.05 .33⁎⁎⁎ −.14⁎ .12⁎ .12 .04⁎ .62⁎⁎⁎ (.58)

Note. n = 125 organizations. Standardized regression weights are shown. ⁎⁎⁎p b .001; ⁎p b .05 (two-tailed). log = common logarithm.

are defendable. Similarly, our use of self-report measures for most variables raises concerns about possible method bias. It should be noted, however, that we employed multiple data sources and used a split-sample design to address such concerns (Podsakoff et al., 2003). Also, research has shown that it is virtually impossible to “create” moderated relationships (as proposed in Hypotheses 5–7) through common method variance (Evans, 1985). And finally, we estimated a series of CFA models that successively forced the indicators for each pair of our focal variables to load onto one common factor. All of these models fit the data significantly worse than a baseline model with separate factors for each variable (p b .001). We therefore do not believe that method bias can fully account for our findings. Second, the generalizability of our findings is limited because all the participant organizations were located in Germany. Hofstede (2001) has shown that the German national culture is characterized by relatively high levels of individualism and masculinity, by relatively low levels of power distance, and by medium levels of uncertainty avoidance and long-term orientation. With such factors shaping leadership processes (House, Hanges, Javidan, Dorfman, & Gupta, 2004), the relationships found in this study might follow different patterns in other countries. Even though the relevance of TFL has been demonstrated in various countries (Bass, 1997), it has been found that “some characteristics of national culture can influence the emergence, perceptions, and effects” of such leadership (Judge, Woolf, Hurst, & Livingston, 2006, p. 209). More collectivistic cultures, for instance, may provide more fertile ground both for the emergence and for the effectiveness of TFL behaviors (Javidan & Carl, 2004; Walumbwa & Lawler, 2003). Thus, scholars could achieve greater cross-cultural validity by sampling organizations from diverse national backgrounds. Third, it may be beneficial to include additional measures of organizational climate (e.g., Ostroff, 1993b) in future research to provide greater confidence in the discriminant validity of TFL climate. Researchers have advocated numerous, often inconsistent, definitions of organizational climate (Glick, 1985). We followed James and colleagues' (2008; James, 1982) approach by viewing organizational climate as employees' typical perceptions of the work environment. Others, in contrast, have defined organizational climate as referring to shared perceptions of “only instituted company procedures and top management actions” (Zohar & Luria,

Fig. 2. Interactive effects of TFL climate and centralization on POE. (+1 Std. Dev. = one standard deviation above the mean. − 1 Std. Dev. = one standard deviation below the mean.).

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Fig. 3. Interactive effects of TFL climate and formalization on POE. (+1 Std. Dev. = one standard deviation above the mean. − 1 Std. Dev. = one standard deviation below the mean.).

2005, p. 617; see also Zohar, 2002). It may be interesting to examine the transferability of our findings toward such alternative conceptualizations. Related to this, our use of POE as a single dependent variable should be mentioned as a limitation. We focused on POE because it may constitute a proximal, organization-level outcome that comprehensively captures the consequences of TFL climate (Bruch & Ghoshal, 2003; Dutton, 2003). Future research may extend the present findings by using additional outcome variables. It may be particularly interesting to include objective performance indicators such as accounting returns, growth measures, and stock market performance (Combs, Crook, & Shook, 2005). With such measures representing more distal consequences of structure and leadership climate, it may be valuable to investigate the chain of events linking these constructs. An organization's structure may influence its TFL climate which may, in turn, influence the level of POE and other collective perceptions, attitudes, and behaviors. These, in turn, may shape organization-level performance outcomes (Harter, Schmidt, & Hayes, 2002; Ostroff, 1992; Ryan et al., 1996). Research examining such mediated relationships may contribute to a better understanding of the structure–performance linkage (Sine et al., 2006) and may add greater clarity to the controversial association between leadership and organizational performance (Agle et al., 2006; Colbert, Kristof-Brown, Bradley, & Barrick, 2008; Kaiser, Hogan, & Craig, 2008). Fourth, the low response rates within participating organizations might suggest a risk of sampling bias. Nevertheless, our average within-organization response rate of 48% compares favorably to those reported in earlier research (e.g., Griffith, 2006; Lincoln & Kalleberg, 1996). Moreover, the within-organization response rate was unrelated to our substantive study variables, with the exception of organization size. And finally, post-hoc analyses revealed that the pattern of results remained unchanged (a) when including within-organization response rate as a covariate and (b) when omitting organizations with response rates below 20% (n = 25). Hence, we believe that the present findings are unlikely to be biased by within-organization response patterns. Lastly, House (1991) argued that an assessment of the overall structure of larger, multi-divisional organizations may be problematic because different divisions may have different structural set-ups. Thus, the inclusion of some relatively large organizations (as compared to the median of 154 employees per organization in our sample) may have influenced our findings. Significantly, however, House further suggested that even for larger organizations, specific structural dimensions (such as the ones employed in this study) “can be analytically applied for descriptive and predictive purposes” (p. 26). Also, empirical evidence derived from our aggregation statistics for both centralization and formalization (as for TFL climate and POE) showed that it was justified to utilize these constructs at the organizational level. We would add that our sample consisted mainly of small-to-medium sized, rather than large, organizations, and results were robust when we excluded organizations with more than 1000 employees (n = 12). Beyond addressing the limitations of our study, the present findings suggest several interesting new directions for future research. Even though this study concluded that several structural features act as antecedents and moderators of TFL climate, it has not exhaustively considered all possible facets of the organizational context. Scholars could extend the present model by examining other structural dimensions such as specialization, standardization, and configuration (Atwater, 1995; Pugh et al., 1968), or by focusing on an organization's departmental set-up (such as functional vs. product-oriented departmentalization; Jackson, Schuler, & Rivero, 1989). Besides such structural aspects, it may be interesting to consider an organization's technology and competitive strategy. As Shamir and Howell (1999) noted, charismatic leadership is more likely to emerge and to be effective when an organization is involved with complex technologies because there will be a greater need for leaders to emphasize broad, distal goals and stimulate followers' creativity. Further, the competitive strategies that organizations pursue (Porter, 1980) may shape the occurrence of specific leadership behaviors, with innovation strategies, in particular, promoting TFL climate. As Jackson et al. (1989) noted, companies pursuing such strategies require committed, proactive employees who exhibit high creativity, and TFL may be particularly relevant in achieving these effects (Dvir et al., 2002; Shamir, Zakay, Breinin, & Popper, 1998). In addition, future research on TFL climate could focus on environmental context factors (Mumford et al., 2008; Pawar & Eastman, 1997). The present study has shown that an organization's industry affiliation can be associated with its TFL climate, with

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such leadership occurring more frequently in service organizations than in other industries (see Table 1).9 Further, organizational environments can be described by their dynamism and complexity (Mericle, 1980) and by their munificence or scarcity (March & Simon, 1985). Both dynamic environments (i.e., those characterized by frequent changes) and complex environments (i.e., those characterized by multiple stakeholders and responsibilities) could enhance the occurrence and effectiveness of TFL climate because they call for the visionary guidance, the role-modeling, and the innovative orientation that transformational leaders exhibit (Mumford et al., 2008; Shamir & Howell, 1999). Similarly, environments characterized by scarcity rather than munificence (i.e., by limited resources) may strengthen TFL climate. Such circumstances often represent crisis situations because the organization has to operate under adverse conditions. In spite of somewhat inconclusive evidence, scholars generally agree that crisis situations promote TFL behaviors, giving leaders the opportunity “to take bold and forceful actions” and rendering followers more receptive to leaders' guidance (Shamir & Howell, 1999, p. 260). As an anonymous reviewer noted, it may also be worthwhile to incorporate ethical considerations in future research on TFL climate and its outcomes (e.g., POE). We see the POE construct as essentially value-free, because the potentials mobilized in highenergy organizations can be utilized for both ethical and unethical ends. That is, even though POE reflects the collective activation of positive human characteristics (e.g., shared positive affect, cognitive liveliness, and engagement; Bruch & Ghoshal, 2003), these features may be directed toward either ethically commendable or reprehensible objectives. Some scholars have differentiated authentic from pseudo-TFL, with the former incorporating moral considerations and the latter disregarding such concerns (Bass & Steidlmeier, 1999). With authentic leadership strengthening followers' identification, optimism, and trust (Avolio, Gardner, Walumbwa, Luthans, & May, 2004), favorable effects on POE are likely. The role of pseudo-TFL seems more complex. On the one hand, such leaders may energize followers through grandiose visions and impression management (Bass & Steidlmeier, 1999). On the other hand, the relentless demands imposed by pseudo-transformational leaders may deplete followers' resources and trigger shared feelings of resignation and a lack of POE in the long-run (Bruch & Ghoshal, 2003; Conger, 1990). Hence, even though POE may itself be value-free, such energy seems more likely to benefit from an organization's authentic rather than pseudo-TFL climate. Empirical research differentiating between such TFL climates and linking them to POE (and other outcomes) is required to examine the validity of this reasoning. Finally, future work could move beyond a focus on TFL and investigate contextual impacts on other types of leadership climate. Early research by Hunt, Osborn, and Schuler (1978) demonstrated, for instance, that leaders' reward and punishment behaviors may at least to some extent be contingent on organizational characteristics. It may be fruitful, therefore, to examine the relevance of organizational structure and other contextual features for the occurrence and effectiveness of an organization's exchange-based or transactional leadership climates (Howell, 1997). To conclude, we hope that our study provides a valuable basis for future research to build upon in further clarifying the contextual antecedents and boundary conditions of various leadership processes in organizations. References Agarwal, N. C. (1979). 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