TITLE:
Leadership Styles, Firm Characteristics and Business Financial Performance of Small and Medium Enterprises (SMEs) in Tanzania
AUTHORS:
Happy M. Mwakajila, Riziki M. Nyello
KEYWORDS:
Leadership Styles, Firm Characteristics, Business Financial Performance and SMEs
JOURNAL NAME:
Open Journal of Business and Management,
Vol.9 No.4,
July
15,
2021
ABSTRACT: This article investigates the relationship
between leadership styles and business
financial performance of Small and Medium Enterprises (SMEs) in Tanzania. Previous empirical studies mainly focused on a direct influence of a
single leadership style. However, there is a possibility that the
combined leadership styles moderated by firm characteristics to have more
influence on business performance especially in the SMEs setting. Specifically,
the article analyses the relationship between
four leadership styles (i.e. transactional, transformational, combination of
transactional and transformational leadership and, passive-avoidant) and
Business financial performance of SMEs considering the moderating effect of
firm characteristics. Cross sectional survey design was adopted to carry out
the research. The article is guided by Transactional
leadership theory, transformational leadership theory and Contingency
theory while Mean and multiple regressions were used to analyze data elicited
from one hundred and ten (110) randomly selected SMEs. The results revealed
that transformational leadership style and, combined transformational and
transactional leadership styles had significant positive influence on SMEs’ financial performance. On the other hand,
transactional leadership style had significant negative influence on
SMEs’ financial performance. Passive- avoidant leadership style was found to have
insignificant influence on SMEs’ financial
performance. Furthermore, the results revealed that ownership structure
and firm age moderated the influence of transactional leadership style, passive-avoidant leadership style and the
combination of transformational and transactional leadership styles on
SMEs’ financial performance. Among others, the article recommends that SMEs’
leaders have to apply the combination of transformational and transactional
leadership styles if they want to realise relatively high SMEs’ financial
performance.