Building a Culture of Innovation: The Role of Transformational Leadership in Encouraging Creativity at PT. XYZ

Abstract

This study examines the influence of transformational leadership on employee creativity, with innovation culture as a mediating variable at PT XYZ. The research is motivated by Indonesia’s stagnant position at 55th in the 2025 Global Innovation Index, highlighting the need to strengthen organizational innovation capacity. PT XYZ was selected because its integrated business ecosystem covers nine strategic sectors in education, publishing, and information technology. Using a quantitative causal design, the study involved permanent employees selected through proportionate stratified random sampling. Data were collected using a Likert-scale questionnaire and analyzed through Structural Equation Modeling–Partial Least Squares (SEM-PLS). The findings demonstrate that transformational leadership positively affects innovation culture (? = 0.862) and employee creativity (? = 0.221). Innovation culture also positively influences employee creativity (? = 0.681) and partially mediates the relationship between transformational leadership and creativity, with an indirect effect of 0.587. Intellectual stimulation emerged as the dominant leadership dimension in shaping innovation culture, while learning orientation was the strongest cultural dimension driving creativity. The study’s novelty lies in testing the mediating role of innovation culture within a knowledge-based company operating through a hybrid business model, a context rarely examined in transformational leadership literature. These findings contribute to leadership and innovation theories while offering practical guidance for management. Recommended actions include developing transformational leadership training, strengthening reward systems for innovative ideas, and creating cross-functional collaboration spaces to foster a sustainable innovation culture.