Purpose – The purpose of this paper is to investigate the relationship of leadership styles (paternalistic, authentic and democratic) with relationship-based employee governance and open service innovation. Design/methodology/approach – Data were collected using a structured questionnaire from 422 medical professionals working in the Malaysian healthcare sector. Findings – Results of several statistical analyses showed that the three leadership styles positively influence relationship-based employee governance and open service innovation. Results also confirmed the mediating role of relationship-based employee governance in the relationships between the three leadership styles and open service innovation. Research limitations/implications – This research used a cross-sectional study design; use of a longitudinal research design in future research can provide a better interpretation of the underlying causality. A policy insight can be drawn from this research to generate awareness about effective leadership styles and the role of relationship-based employee governance in the successful implementation of open service innovation in the Malaysian healthcare sector. Originality/value – This paper contributes to leadership, open innovation, and organizational governance literature by highlighting how leadership styles affect relationship-based employee governance and open innovation. It also offers policy insights to practitioners in the Malaysian healthcare sector on how to enhance open service innovation outcomes.

Introduction

Recent research has shown that majority of the European and American organizations have embraced the open innovation model to build competitive advantage (von Briel and Recker, 2017). In this regard, the extant literature indicates that leadership plays a vital role in building a competitive advantage by creating organizational synergies and overcoming resistance to change when new initiatives are introduced (Lerner and Tirole, 2005). Past research has examined the role of different leadership styles – transformational, transactional and participative – in making organizations innovative (see Engelen et al., 2014; Kang et al., 2015; Lee and Cavusgil, 2006; Sarros et al., 2008). Evidently, leaders stimulate followers’ psychological processes for innovative behavior (Gong et al., 2009; Lee, 2008), knowledge creation and sharing procedures (Goh, 2002; Von Krogh et al., 2012) and intellectual capital (Putri, 2015). These elements are essential attributes of the open service innovation paradigm (Chesbrough, 2011). Many studies show that leaders play a key role in the deployment of open innovation as a source of competitive advantage (Chen et al., 2016; Chesbrough, 2011; Fleming and Waguespack, 2007; Laursen and Salter, 2006). Despite these theoretical developments, the influence of leadership styles on the successful deployment of open service innovation is an area which has not received its due attention (Chesbrough, 2011; Lerner and Tirole, 2001; Perrone et al., 2003). Against this backdrop, this paper aims to examine the role of leadership in open service innovation. A majority of leadership research has focused on generic leadership styles such as transformational, transactional and laissez-faire leadership styles (see Engelen et al., 2014; Kang et al., 2015; Lee and Cavusgil, 2006; Sarros et al., 2008). The advances in leadership theory in the last four decades have resulted in the emergence of new leadership styles such as paternalistic, democratic and authentic leadership styles (Aycan, 2006).