1.1 Background of
Aspects such as leadership are becoming increasingly important in
an era of global competition and greater customer demands. Studies so far
indicate that leadership and strategy are positively related (Berkeley 1988).
This relationship arises from the need to make ‘hard choices’. Therefore,
effective leaders ‘must provide the discipline to decide which industry changes
and customer needs the company will respond to while avoiding organizational
distractions and maintaining the company’s distinctiveness’ (Porter 1996).
Leadership is also the main driver of organizational culture. Indeed, Kotter
(2001) suggests that only through leadership can one truly develop and nurture
culture that is adaptive to change. However, there is no agreement to date on
the accepted styles of leadership. The more commonly accepted styles are
transformational and transactional – Bass (1998). Many of these styles have
overlapping attributes with transformational style usually seen as encompassing
the charismatic style. In an empirical study of small firms, the following four
main leadership styles were derived, tested and validated: transformational,
transaction, human resources, and laissez faire styles.
Transformational leadership style is made up of a number of
attributes that relate to the ability to develop a vision for the future, the
development and nurturing of competences, and the use of creativity.
Transformational leaders tend to be charismatic, inspiring and stimulating.
They instill trust, encourage new ideas and allow sufficient flexibility to
meet what are often ambitious targets. In essence, while they have a strong
external orientation, at the same time, they recognize the value of internal
motivational factors. Significant Leadership Traits As mentioned above, effective
leadership often relies upon certain traits held by the leader. Overall,
individuals within leadership roles tend to differ from group members in
several important ways. Effective leaders tend to be: More sociable ?
Original (creative) ? Popular ? Humorous ? Intelligent ? Alert ? Insightful ? Responsible ? Able to take initiative ? Persistent ?
Self-confident ? These leadership traits are important, but it should be noted that
individuals do not become leaders solely because they possess certain traits. More
accurately, the traits a leader possesses need to be relevant to the situation
in which the leader is performing. So leadership effectiveness is based upon
the working relationship between the leader and other group members—or the
appropriateness of the fit between the leader and followers.
Human resources style leaders tend to have a greater employee focus
and work through their employees in order to achieve their overall tasks. There
is inevitably some degree of overlap between these two styles.
Transactional leadership is more internally orientated with a
strong emphasis on control. It offers rewards for work carried out to specified
standards largely to meet the financial and other goals of the firm. While the
control elements of this style are useful, it shows little or no concern for
employee welfare. Laissez faire style has little to offer in today’s dynamic
The antecedent of strategic management as an academic discipline
can be found in the pioneering work of Taylor (1911) and Fayol (1949), who were
among the first to examine the nature of work and industrial organization. In
the twentieth century, the scale and scope of organizations grew. Specifically,
the Second World War created a need for large-scale industrial and economic
organization and demanded strategic planning of production, manpower and
technological research. After the war, these same principles were applied to
peace-time reconstruction. By the 1950s, the Harvard Business School had begun
to teach strategic management, or what was described as ‘business policy’,
emphasizing how senior managers set policy framework and design the most
appropriate strategies for a firm (Henderson, 1984). In their comprehensive review of development
theory and research in the field of strategic management, Hoskisson et al
(1999) suggested that strategic management has emerged over the past century,
drawing on a wide range of academic disciplines, including sociology,
psychology, and economics. In general terms, there has been, in their view, a
swinging pendulum, with research focusing first on the individual firm and the
manager, then on the industry environment, and more recently on the firm
again. Another feature of strategic
management as an academic discipline is its tendency to focus on large
corporations with relatively little attention to small firms (Caloghirou et al,
2004; McAdam et al, 2010; Mazzarol and Reboud, 2009). Until the 1980s few
published studies dealt with small firms and their strategic management
problems. In the 1980s and 1990s, greater attention was given to this issue,
but empirical research studies continued to be limited (McAdam et al, 2010;
Robinson and Pearce, 1984). The focus
has remained on formal business planning rather than strategy development and
implementation among owner-managers and entrepreneurs (Mazzarol and Reboud,
2009). This lack of attention is surprising, according to Caloghirou et al
(2004), since it not only ignores the strategic significance of small firms in
today’s economic environment but also leaves a huge gap in the understating of
the sources of competitive advantages between large firms and small firms.
1.2 Statement of the problem
Studies so far indicate that leadership and strategy are positively
related (Berkeley 1988).
The leaders with the traits of honesty and integrity, self
confidence and vision, and cognitive ability encourage new ideas and allow
sufficient flexibility to meet what are often ambitious targets or strategies.
In essence, while they have a strong external orientation, at the same time,
they recognize the value of internal motivational factors for the firm.
Leaders who don’t have these characteristics, it is difficult to
face firm strategic direction appropriately. Leadership is also the main driver
of organizational culture. Indeed, Kotter (2001) suggests that only through
leadership can one truly develop and nurture culture that is adaptive to
change. However, there is no agreement to date on the accepted styles of
Leaders who think cognitively, who have self-confidence and vision,
drive motivation, achievement, tenacity. Those who don’t these characteristics
cannot be effective leaders with good qualities. The strategic significance of
small firms in today’s economic environment but also leaves a huge gap in the
understating of the sources of competitive advantages is highly tagged to these
Observers have long believed that personal traits such as integrity
would be important to perceptions of leadership effectiveness and research has
borne that out. For example, survey research has linked perceived leader
effectiveness with perceptions of the leader’s honesty, integrity, and
trustworthiness. Honesty was the highest ranked trait of both emerging and
entrenched groups. The younger group also valued leaders who motivated others,
were receptive to people, had a positive outlook, and used good communication
So that this study seeks to investigate leadership traits and firm