Leading well pays off: Mediating effects and multi-group analysis of strategic performance

PURPOSE – The purpose of this paper is to reveal the mediating role of leadership style on the relationship between strategy and company performance. DESIGN/METHODOLOGY/APPROACH – The study uses empirical data gathered from top managers in a stratified sample of 476 Danish private businesses. FINDINGS – The results show the mediating effects of leadership styles on strategic performance. In particular, both supportive and directive leadership styles partially mediate the effect of the differentiation strategy, while the supportive leadership style displays a stronger mediating effect than the directive one. The multi-group analysis shows the moderating impact of the manager’s tenure, managerial level, strategy clarity, industry, and business environment risk. RESEARCH LIMITATIONS/IMPLICATIONS – The study is limited by its nature and the specificity of the national context in which it was conducted. In this vein, the evidence collected here can be enlarged and complemented by having access to panel data or the generalization of some results to neighboring or other developed countries. PRACTICAL IMPLICATIONS – Several implications of the findings for managerial practices are discussed. ORIGINALITY/Value – There are very few discussions of the mediating effect of leadership style between strategy and performance. The paper fills the gap by examining the role of leadership style planning on the relationship between those two variables in Denmark. KEYWORDS Differentiation strategy, Leadership styles, Corporate performance, Mediating effect, Contingency factors PAPER TYPE Research paper