Existing literatures have explored the positive effect of leadership style on innovation atmosphere from a team perspective. However, much attention has been paid to transformational leadership style, whereas studies on transactional leadership style are not available. To this end, this paper explores the relationship between the two leadership styles and innovation atmosphere in enterprises. The intermediary role that trust and individual identification play in the relationship between leadership style and innovation atmosphere is examined as well. We conduct a survey on 294 respondents and run hierarchical regression and adjustment regression. The results show that (1) transformational leadership style can facilitate to build trust and individual identification; (2) transformational leadership style is more helpful for building innovation atmosphere; (3) it is easier for leaders with transformational leadership style to build trust and that trust positively affects innovation atmosphere; (4) trust and individual identity are helpful for creating innovation atmosphere; (5) trust and individual identification play an intermediary role between transformational leadership style and innovation atmosphere; (6) trust does not play an intermediary role between transactional leadership style and innovation atmosphere, whereas individual identity does. Implications from the findings are discussed.

Introduction

With the rapid development of social economy and the changing of business environment, market competition is getting fierce. In order to cope with competition, enterprises must innovate continuously (Li & Zheng, 2014). As more and more enterprises start to improve their competitiveness via technological innovation, innovation becomes an important value-added activity. The importance of technological innovation for economic growth has been widely recognized in existing literature (Achi et al. 2016; Chen and Chen, 2016; Cheng et al. 2018; Kumar and Chanda 2018; Li, 2017; Li, Xu and Zhao 2018; Lu 2017; Sachdeva et al. 2016; Sharma & Chanda 2017; van de Werff et al. 2017; Vuletic et al. 2017; Wekerle, Trabasso, Loures da Costa, Villela, Brandão, & Leonardi, 2017; Xu et al., 2014, 2017, 2018; Xu and Duan, 2018; Zhang et al. 2018). Emerging economies have made significant contributions to the global economy in recent years (Lebedev, Peng, Xie, & Stevens, 2015; Li, 2013; Padmanathan, Govindarajan, Ramachandaramurthy, Selvi, & Jeevarathinam, 2018; Qiao & Yang, 2015). Particularly, China has made a great success in economic development. In order to promote a long-term healthy development of economy, Chinese government vigorously encourages technological innovation and entrepreneurship. It is hoped that the socio-economic change can get more vitality from technological entrepreneurship. But other than providing impetus, knowledge economy also sets higher requirements for enterprises to generate innovation. The complexity of technology, the uncertainty of innovation, and the finiteness of resources generate challenges for enterprises. As such, it is important for enterprises to achieve effective and efficient technological innovation guided by proper leadership. Meanwhile, enterprises need an innovation-friendly atmosphere that inspires their creativity and promotes technological innovation (Li & Zheng, 2014; Tsai, Horng, Liu, & Hu, 2015). Enterprises need to know well about how to build innovationfriendly atmosphere and what factors affect the atmosphere. Among the many factors, leaders’ leadership style is found to determine the atmosphere for enterprises to perform innovation (Li & Zheng, 2014; Noruzy, Dalfard, Azhdari, Nazari-Shirkouhi, & Rezazadeh, 2013).