From empowering leaders to innovative work behavior of SME employees: the mediating role of psychological well-being and psychological capital

Building employee innovative work behavior (IWB) is important to achieve a competitive advantage, especially for small and medium enterprises (SMEs). Considering the importance of employee innovative behavior, this research aims to examine the extent to which empowering leadership (EL) drives IWB through psychological well-being (PWB) and psychological capital (PC). The survey method was used to collect data by distributing questionnaires to SME employees in Indonesia using a purposive sampling method, and 244 responses were obtained. The PLS-SEM technique was then applied to assess each hypothesis in this study. The results of this study confirm that all hypotheses have been successfully accepted. EL positively affects employee PWB, PC, and IWB. In addition, employee PWB and PC positively affect IWB. Furthermore, employee PWB and PC mediate the influence of empowering leadership on IWB. This study provides an important contribution for SME managers in strengthening employee IWB by implementing empowering leadership and paying attention to employee PWB and PC.