Empirical Investigation of the Effect of Transformational Leadership on Organisational Innovation in Nigerian Banks

Transformational leadership is theorised to drive organisational innovation, yet empirical evidence of this relationship within Nigerian banking institutions, where innovation is increasingly strategically important, is limited in the recent literature. This study empirically investigated the effect of transformational leadership dimensions on organisational innovation in 15 Nigerian commercial banks with nationwide operations. Transformational leadership was measured by idealised influence, inspirational motivation, intellectual stimulation, and individualised consideration using the Multifactor Leadership Questionnaire. Organisational innovation was measured by product innovation rate, process innovation frequency, and technology adoption speed. Data were collected from 480 middle and senior managers across bank branches in Lagos, Abuja, Kano, and Enugu. Structural equation modelling was employed. Results confirmed that intellectual stimulation was the strongest predictor of both product innovation (standardised coefficient = 0.54, p < 0.001) and process innovation (coefficient = 0.49, p < 0.001). Inspirational motivation significantly predicted technology adoption speed (coefficient = 0.42, p < 0.001). Idealised influence had a significant effect on product innovation but not process innovation. The mediating effect of psychological safety was confirmed, with psychological safety partially mediating the intellectual stimulation-innovation relationship. The study fills an empirical gap in transformational leadership-innovation research for Nigerian banking and concludes that leader behaviours that stimulate intellectual challenge and psychological safety are the most innovation-generative. Recommendations include intellectual stimulation competency development in the Chartered Institute of Bankers of Nigeria's leadership programmes. Keywords: transformational leadership, organisational innovation, Nigerian banks, intellectual stimulation, structural equation modelling