ETHICAL LEADERSHIP AND SOCIAL INNOVATION TENDENCY: A STUDY OF SOCIAL ENTERPRISES

Abstract

In recent years, owing to the growing need to solve ever rising social problems, the world has witnessed proliferation of prosocially vibrant organizations, the social enterprises. Underpinning their objective marked by a strong social bottom line, these organizations are actively engaged in maximizing social impact. However, the 21st century’s complex, dynamic and uncertain competitive environment poses diverse challenges exposing social enterprises to the risk of mission drift, deteriorating their capability to deliver social value, and making it difficult for them to sustain their socially responsible stance, hence offers a threat to their survival. For these enterprises to successfully navigate this environment, social innovation that facilitates capitalizing on the market opportunities with better utilization of assets and resources and simultaneously holds huge potential for social value creation is a must. Social innovation is today considered the essence of social enterprise activity and most importantly a major contributor to organizational effectiveness. Given this significance of social innovation, sound innovation management in the social enterprises is absolutely necessary and entails great responsibility at the managerial level for encouraging social innovation among employees so as to mobilize their creative potential towards achievement of high social performance. Managers thus need to be increasingly savvy about enacting the apt leadership behaviors that may be effective in promoting the tendency for social innovation among their employees. Unfortunately, the study and understanding of the relationship of leader behavior to employees’ social innovation tendency is by and large lacking. It is therefore worthy to undertake an indepth study into how various leader aspects such as behavior and ethics contribute towards fostering social innovation among employees in the social enterprises. In view of this, the purpose of the present study is to empirically examine the effect of ethical leadership on the social innovation tendency among employees in social enterprises; also the employees’ perceived social capital and perceived CSR are hypothesized as mediators through which the ethical leader is likely to influence their social innovation tendency. To this end, a model was developed and tested using the Structural Equation Modeling analysis on a sample of 210 employees associated with various social enterprises in India. The results indicate that ethical leadership has both, a direct and indirect effect on employees’ social innovation tendency, where the indirect effect of ethical leadership involves influencing employees’ perceived social capital and perceived CSR, which in turn influence their tendency for social innovation. Precisely, perceived social capital and perceived CSR emerge as partial mediators in the relationship between ethical leadership and social innovation tendency. The results are thus suggestive of the prominent role that ethical leadership holds in giving impetus iv to social innovation among employees. Also by corroborating the earlier unexplored mediation effects they provide important influence paths for social enterprise leadership in the pursuit of innovation. Significantly, they augment the existing innovation literature, and the body of work pertaining to the influence of ethical leadership on employee outcomes. Overall, the study offers a framework that brings together the popular domains of ‘leadership’, ‘social capital’, ‘CSR’ and ‘innovation’ to facilitate an enhanced understanding of the impact of leadership on employee innovation in the social enterprises. Accordingly, it puts forward key implications for theory and also social enterprise practitioners seeking to encourage innovation in their endeavours aimed at achieving the enterprise’s objective of creating positive social impact.