Factors Impact on Innovative Work Behavior: A Case Study in Banking Sectors

Introduction

High-quality human resources are the most critical competitive advantage for businesses in the rapidly changing business environment. A highly skilled workforce enhances organizational productivity and quality while facilitating product and service innovation to meet the higher demands of customers. Therefore, organizations are focusing on improving employee capabilities and fostering innovative work behavior through knowledge sharing within the organization and the leadership style of managers.

Vietnamese banks face intense competition, particularly in attracting and retaining high-quality talent and driving innovation. The demand for skilled professionals in fintech, AI, and digital banking has surged, leading to talent competition among top banks (Ha & Hang, 2024). Banks that foster transformational leadership and an innovation-driven culture gain a competitive edge by attracting top talent and accelerating digital transformation (Ha & Hang, 2024).

Transformational leadership (TL), knowledge sharing (KS), and innovative work behavior (IWB) are critical determinants of organizational innovation. TL is extensively acknowledged for its capacity to inspire and energize employees, improving an organizational climate that supports innovation (Podsakoff et al., 1990; Krishnan, 2012). Knowledge sharing, covering the sharing of information, competencies, and expertise among employees, serves as a fundamental mechanism for promoting innovative activities (Yeboah, 2023). This study examines the influence of transformational leadership and knowledge sharing on innovative work behavior, highlighting the dynamic interplay between these factors in driving organizational innovation.

This research focuses on examining the influence of TL and KS on employees’ IWB within the banking sector. By collecting data from employees working in the Banking sectors in Vietnam, a determinant of the impact of TL in enhancing KS practices and fostering innovation among employees was explored. The findings contribute to managerial practices by offering solutions for leaders to develop policies that align with future workforce needs. Additionally, this study provides insights into how future managers can adopt effective leadership styles and collaborate productively with their teams. Moreover, the research highlights the critical influence of transformational leadership, knowledge sharing, and innovative work behavior in shaping a dynamic and innovative organizational culture.

Literature Review

Social Exchange Theory

Social Exchange Theory (SET) is a fundamental theory in organizational behavior, explaining workplace relationships based on reciprocal exchanges (Blau, 1964). The theory suggests that employees engage in social interactions when they perceive potential rewards outweigh costs (Cropanzano & Mitchell, 2005). In an organization, SET underpins leader-member exchange (LMX) and organizational commitment (Wayne et al., 1997). Receiving support and recognition from leaders, employees are more likely to reciprocate with higher performance and loyalty (Wayne et al., 1997). Trust and fairness also play crucial roles in shaping positive exchanges (Aryee et al., 2002).

Moreover, SET is essential in fostering knowledge sharing and IWB (Saif et al., 2024). Employees who are perceived as valued and supported tend to share expertise, leading to collective learning and innovation (Chumg et al., 2016). Strong social exchange relationships reduce turnover intentions, employees tend to stay longer and enhance job satisfaction (Allen et al., 2003). However, imbalanced exchanges, where employees feel under-rewarded, can lead to dissatisfaction and disengagement (Jin & McDonald, 2017).

Conservation of Resource Theory

The Conservation of Resources (COR) Theory illustrates how individuals endeavor to acquire, safeguard, and maintain resources as a means of coping with stress and promoting well-being (Hobfoll et al., 2016). Resources include personal traits, social support, and job-related assets, which are critical in managing workplace demands (Hobfoll et al., 2016). When employees experience resource loss, such as excessive workload or lack of autonomy, stress and burnout increase (Halbesleben et al., 2014). Conversely, gaining resources—such as supportive leadership and career development opportunities—enhances engagement and job satisfaction (Kotze, 2018).

In organizational behavior, COR theory underpins employee resilience, motivation, and innovative behavior (Hobfoll et al., 2016). Employees with sufficient resources are more likely to engage in knowledge-sharing and proactive problem-solving (Lenihan et al., 2019). Transformational leadership fosters a resource-rich environment, enhancing psychological safety and creativity (Carmeli et al., 2014).

Transformational Leadership and Innovative Work Behavior

The principle of transformational leadership theory is clarified in the leader’s capacity to inspire followers to exceed their initial expectations (Krishnan, 2005). TL consists of four key components: inspirational motivation, idealized influence, intellectual stimulation, and individualized consideration (Bass & Avolio, 1994). Researchers proposed that transformational leaders inspire followers by focusing on their values and assisting them in aligning these values with those of the organization (Ariyani & Hidayati, 2018). Additionally, the researcher identified TL as a dynamic relationship in which both leaders and followers mutually inspire one another, leading to value system congruence between them (Krishnan, 2002).

Transformational leadership has been linked to both individual-level outcomes (Hater & Bass, 1988; Krishnan, 2012; Ariyani & Hidayati, 2018) and organizational performance (Krishman, 2012; Lin, 2023) Empirical studies have demonstrated that transformational leadership positively influences follower satisfaction (Sosik et al., 1998; Halbesleben et al., 2014; Liu & Li, 2018; Saif et al., 2024). Moreover, research indicates that transformational leadership enhances employee effort to organizational change (Jung et al., 2003; Krishman, 2012) and shapes organizational conditions (Ariyani & Hidayati, 2018). Given its significant impact on both individual and organizational outcomes, TL is essential for all organizations (Tucker & Russell, 2004).

Innovative Work Behavior (IWB) refers to employees' intentional efforts to generate novel and useful outcomes in the workplace, often described as "everyday innovation" (Battistelli et al., 2014). It reflects proactive engagement in identifying opportunities, developing creative ideas, and implementing solutions that improve organizational processes. Prior research has consistently highlighted employees as key drivers of innovation and emphasized the critical role of IWB in achieving organizational success. Given this significance, human resource-related factors are central to understanding how employees' capacity and motivation for innovation are shaped. Elements such as leadership style, organizational culture, and supportive HR practices greatly influence employees’ willingness to engage in innovative behaviors. These factors not only determine the extent to which employees feel empowered to innovate but also affect their ability to do so effectively. As a result, fostering IWB requires a comprehensive approach that addresses both individual and organizational determinants. Understanding these dynamics is essential for organizations aiming to cultivate a sustained culture of innovation. Studies on IWB have examined various antecedents of individual innovative behavior, primarily focusing on personal and contextual factors. Innovation theory consistently highlights that innovation extends beyond creativity to include the application of ideas (King & Anderson, 2002). Innovative work behavior (IWB) involves generating ideas and taking actions to implement them for improved performance. It contributes to both individual and organizational growth.

According to Farr and Ford (1990), Innovative Work Behavior (IWB) refers to individuals' deliberate efforts to introduce novel and valuable ideas, processes, products, or procedures within the workplace. Such behaviors are intentional and directed toward fostering innovation at the level of work roles, teams, or the broader organization. By engaging in IWB, employees contribute to the development and application of creative solutions that address organizational challenges. Moreover, IWB is recognized as a critical driver of continuous improvement, enabling organizations to adapt and remain competitive in dynamic environments. Therefore, understanding and promoting IWB is essential for sustaining innovation and long-term organizational success.

Empirical findings indicate that ability-enhancing and opportunity-enhancing human resource practices have a positive impact on innovative work behavior. These HR practices create conditions that foster creativity and innovation among employees. Research suggests that this relationship is mediated by two important work environment factors: managerial support and coworker support (Amabile, 1988; Ariyani & Hidayati, 2018). When employees receive strong support from their managers, they feel more encouraged to engage in innovative activities. Similarly, coworker support enhances collaboration and the sharing of new ideas. Numerous studies have shown both direct and indirect positive links between transformational leadership (TL) and innovation. Transformational leaders inspire employees to think creatively and embrace change. As a result, TL plays a crucial role in fostering an innovative work culture. Lin (2023) highlighted that TL has a direct positive impact on employees' innovative work behavior (IWB) and an indirect influence on IWB through an innovation-supportive work environment. Similarly, Sosik et al. (1998) identified a positive correlation between TL and creativity in a computer-mediated brainstorming task. Researchers such as Krishnan (2012) and Carmeli et al. (2014) have connected transformational leadership to an innovative work climate. Their studies suggest that this leadership style fosters creativity and innovation within healthcare teams. As a result, transformational leaders play a crucial role in shaping a supportive and innovative work environment.

Despite these findings, Reuvers et al. (2008) indicated that a limited number of researchers have explicitly examined the direct relationship between TL and IWB. However, Jung et al. (2003) provided further evidence of a positive association between transformational leadership and organizational innovation. Additionally, research conducted by Reuvers et al. (2008) in Australian hospitals agreed a significant positive correlation between TL and IWB.

Collectively, these studies reinforce the theory that transformational leadership plays a crucial role in fostering employees' innovative work behavior, emphasizing its significance in driving organizational innovation.

Thus, this research proposes the following hypothesis:

H1: Transformational leadership positive impacts on Innovative work behavior

Knowledge Sharing and Innovative Work Behavior

Knowledge sharing is defined as the process by which team members engage in the mutual exchange of their knowledge encompassing information, ideas, and expertise, within the context of an organization (Nazim & Mukherjee, 2016). This practice is essential for fostering innovation, as it enables each team member to build on other’s knowledge. By sharing insights, employees contribute to the improvement of products or services, processes, and solutions (Yeboah, 2023). A culture that encourages open communication enhances collaboration and problem-solving. Organizations that prioritize knowledge sharing often experience higher levels of creativity and adaptability. As a result, knowledge exchange becomes a key driver of continuous improvement and innovation.

Transformational leaders have a critical role in encouraging knowledge sharing within organizations. They foster an environment characterized by trust and openness, in which employees are encouraged to share knowledge freely, without concern for potential criticism or threats to their professional status (Liu & Li, 2018; Lam et al., 2021). By fostering strong relationships and open communication, these leaders empower employees to exchange ideas freely. This leadership approach enhances teamwork and strengthens the overall knowledge base of the organization. When employees perceive themselves as valued and supported, they are more inclined to contribute innovative ideas. Ultimately, transformational leadership helps establish a knowledge-sharing culture that drives long-term success.

Researchers have proposed that KS can act as a mediating factor in the relationship between TL and IWB. Shih et al. (2012) suggest that TL strengthens knowledge-sharing practices among employees. As a result, employees become more engaged in exchanging valuable insights and expertise. When leaders prioritize continuous learning and foster a collaborative work environment, knowledge sharing increases. Employees feel more encouraged to share their ideas without hesitation. This open exchange of knowledge leads to the development of new and creative solutions. Furthermore, shared knowledge enhances problem-solving and decision-making processes. Over time, this contributes to the successful implementation of innovative ideas. Therefore, transformational leadership is fundamental in establishing a knowledge-sharing culture that drives innovation.

Therefore, this research hypothesis that

H2: Knowledge Sharing has a relationship to Innovative Work Behavior

Transformational Leadership and Knowledge Sharing

Transformational leadership is a leadership approach that seeks to inspire and motivate employees to surpass expectations by cultivating a shared vision and a strong sense of purpose within the organization (Steinmann et al., 2018; Khan et al., 2020). TL has been extensively studied, with recent debates centering on its dimensional structure across different cultures. Researchers support a unidimensional construct, while others argue for multi-dimensional models. Through inspirational motivation, transformational leaders articulate a compelling vision that energizes employees and aligns them with organizational goals (Steinmann et al., 2018). Intellectual stimulation encourages employees to think creatively and challenge conventional approaches, fostering innovation and continuous improvement

Moreover, transformational leaders emphasize individualized consideration by addressing employees’ unique needs and providing personalized support, which enhances job satisfaction and commitment (Ariyani & Hidayati, 2018). Research has indicated that TL positively impacts organizational performance by increasing employee engagement and motivation (Krishman, 2012; Jin & McDonald, 2017; Alturki et al., 2022). By cultivating a culture of trust and openness, transformational leaders facilitate knowledge sharing, which is crucial for innovation and problem-solving (Jung et al., 2003; Adiga et al., 2023). Furthermore, this leadership style has been linked to higher levels of creativity and adaptability in dynamic business environments (Ranganadhareddy, 2022; Saif et al., 2024). Ultimately, transformational leadership is essential for organizations seeking long-term success in an increasingly competitive and complex global market.

Many studies have explored the mechanisms through which TL affects KS, often focusing on social exchange theory. For instance, a study by Ling et al. (2009) stated that TL enhances leader-member exchange, and leads to increasing KS. The leaders have also been recognized as a facilitating factor. While SET offers a comprehensive understanding of these processes, alternative perspectives may also be relevant. One relevant perspective is the sense-giving process, through which transformational leaders influence and shape followers' perceptions of team characteristics. By influencing how employees interpret their work environment, transformational leaders can effectively motivate knowledge-sharing behaviors within organizations (Chaman et al., 2021; Kachenkova et al., 2022).

The relationship among transformational leadership (TL), knowledge sharing (KS), and innovative work behavior (IWB) is inherently complex and multifaceted, reflecting the dynamic interplay of these organizational constructs. Transformational leaders directly influence innovation by inspiring and motivating their followers. At the same time, they indirectly foster innovation by cultivating a culture of knowledge sharing (Jung et al., 2003; Carmeli et al., 2014; Ariyani & Hidayati, 2018). The leadership approach encourages employees to openly exchange ideas and expertise. A strong knowledge-sharing culture enhances collaboration and collective problem-solving. Employees gain access to diverse knowledge resources, which are crucial for generating creative solutions. By utilizing shared knowledge effectively, teams can develop and implement innovative ideas. Over time, this leads to continuous improvement and organizational growth. Ultimately, transformational leadership is essential in creating an environment that nurtures both knowledge-sharing and innovation.

Empirical research strongly supports the interconnected relationship between TL and IWB. Saif et al. (2024) found that TL has a positive impact on IWB. Their study highlights that KS plays a crucial mediating role in this relationship. The findings suggest that when transformational leaders promote a culture of KS, employees become more engaged in innovative activities. This, in turn, enhances creativity and problem-solving within the organization. Ultimately, fostering knowledge-sharing leads to greater organizational innovation. Therefore, this study proposes the following hypothesis:

H3: Transformational leadership has a positive impact on Knowledge Sharing

Materials and Methods

A survey was designed by applying a structured questionnaire to conduct employees working in Vietnamese banks. To measure respondents' level of agreement, a five-point Likert scale was applied. This scale allowed participants to express their opinions on a standardized range from strong disagreement to strong agreement. The study employed a quantitative analysis research method to ensure data accuracy and reliability. This method was used to assess the reliability of the measurement scale. Additionally, it helped validate the proposed research model. Finally, the research method was utilized to test the hypotheses and draw conclusions.

Table 1. Results of Outer Loadings

Table 1 shows the outer loading results that all items have values ​ arranged from 0.836 to 0.972, higher than 0.7. This suggests that the data possesses sufficient quality for effective evaluation.

Table 2. The results of Construct Reliability and validity

Table 2 shows that the reliability coefficients (Cronbach's Alpha) for the variables Transformational Leadership (TL), Knowledge Sharing (KS), and Innovative Work Behavior (IWB) are 0.952, 0.947, and 0.989, respectively, all higher than 0.7. These results indicate that the measurement scales used in the study demonstrate high internal consistency and are reliable for further analysis. Additionally, Table 2 reports that the Average Variance Extracted (AVE) values range from 0.761 to 0.916, which are well above the recommended minimum value of 0.5. This suggests that the constructs exhibit good convergent validity. Therefore, both the reliability and validity of the measurement scales are confirmed, supporting their suitability for evaluating the proposed research model.

Table 3. Results of Discriminant Validity

Table 3 shows discriminant values are from 0.6664 to 0.759, and all are above 0.5 and below 0.9, ensuring discrimination between variables.

Hypothesis Analysis Results

Table 4. Results of Path coefficients

The results of the Path coefficients analysis in Table 4 indicate that all the hypotheses are supported. This suggests that the proposed relationships in the study are accepted. Therefore, the findings confirm the validity of all the tested hypotheses.

Transformational leadership (TL) has a positive influence on innovative work behavior (IWB) with a path index of 0.733. This indicates that when a team leader adopts a transformational leadership style, it fosters innovation among team members. As a result, employees are more likely to commit to creative problem-solving and idea generation. Ultimately, this leadership approach encourages a culture of innovation within the team.

KS has an impact on IWB with a path index of 0.431, showing that when bankers tend to share knowledge, IWB will increase.

TL positive impacts on KS with a path index of 0.644. When the team leader adopts a transformational leadership style, it creates a collaborative environment that encourages knowledge sharing. This approach motivates team members to exchange information and expertise with one another. As a result, employees become more engaged and open to learning from their peers.

Results and Discussion

The findings of this study reveal that bankers demonstrate a strong preference for group work and actively engage in collaborative behaviors. The results highlight that team-based interactions are an essential part of their work environment, where employees value the dynamics of working collectively toward common goals. Furthermore, the research emphasizes the significant role of leadership, particularly the influence of team leaders on shaping employees' behaviors. Team leaders who effectively communicate clear and positive directions regarding the team’s work orientation contribute to fostering a supportive and goal-focused atmosphere. In addition, when leaders provide constructive feedback and recognize individual contributions, employees are more motivated to engage in team activities. The study also shows that leadership practices promoting professional growth and development further encourage employees to participate actively in team efforts. Notably, under such leadership, employees are more willing to share their knowledge, experiences, and expertise with colleagues, thereby enhancing knowledge-sharing behaviors. This willingness to share knowledge catalyzes innovative work behavior (IWB), as employees feel empowered to propose new ideas and solutions. The positive association between leadership support, knowledge sharing, and IWB underscores the critical role of social and relational factors in fostering workplace innovation. Overall, the results highlight the importance of leadership and team dynamics in shaping a collaborative and innovative organizational culture.

Furthermore, when employees' contributions are recognized and they are motivated to participate confidently in teamwork, they become more proactive in sharing their expertise and feel at ease seeking guidance from their peers. Encouraging team members, respecting their contributions, and fostering a collective focus on achieving outcomes help create an environment where employees understand the importance of teamwork, openly share task-related information and are willing to learn from one another.

These findings align with previous research conducted (Reuvers et al., 2008; Chaman et al., 2021; Saif et al., 2024) and employees in various business sectors. This consistency across different contexts reinforces the notion that transformational leadership by team leaders plays a crucial role in fostering and promoting knowledge-sharing behaviors within teams (Carmeli et al., 2014).

The findings of this study indicate that transformational leadership (TL) plays a crucial role in enhancing innovative work behavior (IWB). When team members are encouraged and motivated, they become more willing to generate and propose creative and innovative ideas in their work. Additionally, they actively share their ideas and seek to persuade others, fostering a culture of knowledge exchange and collaboration. Through the leader’s commitment to supporting team members' development, individuals continuously acquire new knowledge and methodologies, ultimately contributing to the achievement of the team’s overarching goals. 

Furthermore, transformational leaders emphasize respect for diverse perspectives and focus on outcomes, enabling team members to formulate clear and strategic work plans. This approach facilitates the identification of necessary resources and enhances the overall efficiency of idea implementation. 

In particular, organizations should actively apply and promote TL across all management levels. Team tasks should be systematically planned to ensure effectiveness, and leaders should continuously guide their members toward achieving collective goals by emphasizing the long-term benefits and positive implications of their contributions. A Transformational leader must clearly understand their responsibilities, consistently encourage and recognize team efforts, and provide the necessary support to help members accomplish objectives. By fostering TL, organizations can stimulate knowledge-sharing behaviors, encourage continuous learning, and cultivate innovative and creative approaches to work. Consequently, this leadership approach contributes to enhancing the organization's overall competitiveness.

In addition, KS behavior within groups plays a significant role in fostering IWB. When team members actively share new knowledge, information, and task-related insights with their colleagues, it enhances their ability to generate creative and innovative ideas while also increasing their capacity to persuade others. Moreover, a culture of openness and willingness to seek out new knowledge empowers employees to strategically plan the development of new ideas, making it easier for individuals to discover novel methods and approaches for completing their tasks.

The readiness to share ongoing tasks and execution methods enables bankers to exchange valuable information and explore new working ideas that align with the group's collective objectives. This study’s findings are consistent with prior research on the relationship between knowledge sharing and IWB (Chumg et al., 2016; Ha & Hang, 2024)

Given these insights, organizations should implement strategies to enhance knowledge-sharing behaviors at all levels. Beyond leadership influence, knowledge sharing can be strengthened by fostering learning-oriented teams and promoting lifelong learning. Establishing a workplace culture that actively encourages and facilitates knowledge exchange will provide employees with access to diverse knowledge resources, enabling them to learn from one another and develop innovative approaches to their work.

Limitation

While this study provides important insights into the relationship between transformational leadership, knowledge sharing, and innovative behavior, several limitations should be acknowledged. First, the research was conducted with responses from Vietnamese banking employees and has not been extended to other sectors, limiting the ability to make comprehensive comparisons across industries. Future studies should expand the scope of survey participants across various sectors to develop a more holistic understanding and provide more generalizable recommendations.

Additionally, this study primarily focused on identifying the relationship among the three factors without exploring the specific forms and methods of knowledge sharing, the mechanisms of innovative work behavior, or their impact on final group outcomes. Therefore, future research should further investigate the implementation processes of knowledge sharing, the strategies to enhance innovative behavior, and their connection to group and organizational performance. Such an approach would contribute to a more comprehensive understanding of the dynamics between transformational leadership, knowledge sharing, and innovation within organizational contexts.

Conclusion

This study provides valuable insights into the relationship among transformational leadership, knowledge-sharing behavior, and innovative work behavior among young employees in Vietnam's banking sector. The findings highlight the crucial role of transformational leadership in fostering teamwork, enhancing knowledge-sharing practices, and promoting innovation in the workplace. By leveraging these insights, banking institutions can implement strategic managerial practices that encourage collaborative efficiency and continuous innovation.

Acknowledgments: The authors gratefully acknowledge the financial support from the Banking Academy of Vietnam.

Conflict of Interest: N/A

Financial Support: This article was financially supported by the Banking Academy of Vietnam.

Ethics Statement: N/A