Abstract

In today’s ever-changing environment, the role of small and medium enterprises (SMEs) is crucial for any economy to survive and prosper. In Pakistan, SMEs contribute more than 30% in the economy. The role of effective leaders is vital for any organization. The aim of this paper was to investigate the role of transformational and transactional leadership in shaping the turnover intentions of the employees directly and indirectly through organizational citizenship behavior (OCB). The novelty of this study lies in investigating OCB in its two dimensions, i.e., OCB directed towards the individual (OCBI) and OCB directed towards the organization (OCBO), and along with two leadership styles to study its role in reducing the turnover intentions, especially in SME sector in Pakistan. This study filled the gap in the literature by examining the OCB in its two dimensions, which previously have not been investigated in the SME sector in Pakistan. Six hundred and fifty questionnaires were distributed, and the data were collected from middle-level managers working in SMEs. To test the hypotheses, this study applied the structural equation modelling (SEM) technique using AMOS software. Results of this study showed a negative effect of transformational as well as transactional leadership on turnover intentions; interestingly, OCB directed at individuals did not mediate the relationship of transformational as well as transactional leadership with turnover intentions while OCB directed at organization mediated these relationships. These findings pave the way for top management to implement the leadership style effectively and to promote OCBI and OCBO to reduce the turnover intentions of the employees in SMEs.

Key words: Transformational Leadership, Transactional Leadership, Organizational Citizenship Behaviour, Turnover Intentions