Harnessing Inclusive Leadership for Innovation through Organizational Self-Esteem and Power Distance

Abstract

This study investigate the impact of inclusive leadership on innovative work behavior (IWB), emphasizing the mediating role of organizational-based self-esteem (OBSE) and the moderating effect of power distance. Despite the increasing recognition of inclusive leadership's role in enhancing employee well-being and organizational outcomes, its potential to drive innovation in service industries remains understudy. Drawing on social exchange and self-determination theories, this quantitative, cross-sectional study collected data from 315 professionals in Karachi’s IT sector using a structured survey. The data were analyzed using partial least squares structural equation modeling (PLS-SEM). The findings demonstrate that inclusive leadership significantly enhances IWB, with OBSE acting as a vital psychological mechanism in this relationship. Inclusive leaders foster a sense of self-worth among employees, which in turn drives creativity and innovation. Moreover, power distance moderates the relationship between inclusive leadership and OBSE, with stronger effects in high power-distance contexts. These results highlight the importance of cultural considerations in leadership practices. The study contributes to leadership and innovation literature by providing empirical evidence on how inclusive leadership can optimize employee innovation through psychological and cultural mechanisms. Practical implications include guiding managers and policymakers in adopting inclusive leadership practices to create innovative and inclusive organizational environments.