The role of transactional leadership in the social performance of the maquiladora industry

Abstract

Purpose – This study examines the relationship between three dimensions of transactional leadership, contingent reward, active management by exception, and passive management by exception, and their impact on the company’s social performance in the Mexican maquiladora industry. Theoretical framework – A literature review of 120 articles on transactional leadership and organizational performance identifies 24 variables observed in the three dimensions of transactional leadership and 10 variables for social performance. Design/methodology/approach – A questionnaire was applied to managers in the maquiladora industry and 156 responses were obtained. Structural equation modeling (SEM) based on partial least squares (PLS) was applied to test six hypotheses or relationships between the transactional dimensions and social performance. Findings – There is a strong relationship between the dimensions of transactional leadership and social performance, except for the passive management by exception dimension, which shows no direct or positive effect on social performance. Practical & social implications of research – In the Mexican maquiladora industry, passive management by exception is negatively impacted by contingent reward and hurts social performance, and managers must avoid this dimension. However, contingent reward strongly supports passive management by exception and social performance. Originality/value – This research provides a framework for developing Mexico’s maquiladora industry leaders, indicating the most important dimensions and activities required to guarantee social performance.