Investigating the Influence of Transformational Leadership on Firm Performance: Evidence from Selected Industrial Parks in Ethiopia

Abstract This study examines the influence of transformational leadership (Transf.Lead.) on firm performance (FirmPR.) in selected industrial parks in Ethiopia. It focuses on four leadership dimensions: idealized influence, inspirational motivation, individualized consideration, and intellectual stimulation. The study employs both descriptive statistics and structural equation modeling (SEM). It uses an explanatory research approach to analyze data collected from 308 management-level employees across various firms in seven industrial parks. Economic, social, and environmental metrics assess the company's performance. The results indicate that transformative leadership has a strong and statistically significant positive effect on company performance (β = 0.449, C.R. = 3.549, p < 0.001). These findings align with research conducted locally and globally, showing that transformational leadership enhances organizational outcomes, especially in performance-driven industrial settings. The report recommends incorporating transformational leadership behaviors into human resource practices, adjusting leadership strategies to meet triple-bottom-line performance goals, and implementing leadership development programs. The findings provide practical insights for policymakers, the Investment Commission, the Industrial Park Development Corporation, park managers, firms in industrial parks, and organizational development practitioners.