Entrepreneurial leadership moderating high performance work system and employee creativity on employee performance

Abstract

This study aims to examine and analyze the role of variable entrepreneurial leadership as a moderator on the influence of high-performance work systems and employee creativity on employee performance. In addition, this study also aims to analyze and examine the effect of high-performance work systems on employee creativity, and employee performance, and the effect of employee creativity on employee performance. The study was conducted on cooperative employees in Timor Leste. The number of cooperative employees in Timor Leste is 400 people, taken as a sample of 200 employees. Determination of the number of samples is based on the Slovin formula with a precision of 5%. Determination of the number of samples of employees in each cooperative is carried out proportionally, while the determination of the respondents of the study was conducted randomly. Data analysis was performed with the Smartpls 3.0 program. The results of data analysis show that high-performance work system has a significant positive effect on employee creativity and employee performance, and employee creativity also has a significant positive effect on employee performance. The results of the analysis also found that entrepreneurial leadership plays a role as a moderator of the relationship of high-performance work systems and employee creativity to employee performance

Keywords:

• high-performance work system
• employee creativity
• entrepreneurial leadership
• employee performance

PUBLIC INTEREST STATEMENT

Co-operatives are the economic drivers in Timor Leste, but their existence is very alarming. Several cooperative members dropped out because they found it difficult to get a loan. In addition to this, several cooperative employees also resigned. This is due to the fact that cooperatives offer less hope for a better future. Work systems and leadership styles do not provide opportunities for employees to be creative, so employee performance is not optimal. This study aims to investigate the role of entrepreneurial leadership as a moderating effect of high-performance work systems and employee creativity on employee performance in cooperatives in Timor Leste.

1. Introduction

Cooperatives are the cornerstone of the economy in many countries, including in the country of Timor Leste, but there are still many cooperatives in this country that are lagging behind. This is caused by weak support from the local government. Cooperatives can grow well if only they are strongly supported by local governments. This can be seen from the development of the number of cooperative members and cooperative employees, it seems that the development of the number of cooperative members increased sharply from 2006 to 2012, but starting in 2012 the number of cooperative members has declined. The same thing happened to cooperative employees, from 2006 to 2012 the number of cooperative employees increased, but after 2012 the number of employees decreased.

The decrease in the number of members and employees is due to the weak management of cooperatives, especially in the distribution of credit. Many loans are not returned on time, so the next borrower does not get credit in a timely manner. This has resulted in many cooperative members resigning. The number of cooperative members resigned, causing cooperatives to become increasingly powerless. This is the reason that caused many employees to resign.

This decline is thought to be due to the management of cooperatives that are less professional, as well as the weak creativity of employees, as well as the lack of entrepreneurial spirit of cooperative leaders. Based on these phenomena and problems, this study focuses on the role of entrepreneurial leadership in mediating the relationship of high-performance work systems and employee creativity to employee performance.

Several references say that a decline in the performance of an organization can be caused by a weak organizational work system. Xiomei, Huanqing, and Lingwei (2013) in their research found that work systems significantly influence organizational performance. A better work system will encourage employees to perform better as well. This is also supported by some research results such as (Petros, 2014; Cafferkey & Dundon, 2015; Sutanto & Kurniawan, 2016;; Husin & Gugkang, 2017). Low employee creativity can also cause low employee performance. This is evidenced by the results of Wibowo’s research, 2013; and Shahzadi, 2014. In addition to these factors, the weak entrepreneurial spirit of an organizational leader can also lead to suboptimal employee performance (Sandybayev, 2019; Sani, Ekowati, Wekke, & Idris, 2018), so it is important to increase the entrepreneurial spirit of a leader to encourage increased organizational effectiveness (Mishra & Mishra, 2017). However, several other studies have found different results. Sourchi and Jianqiao (2015) in his research found that high-performance work systems negatively affect employee performance. Meanwhile, Husin and Gugkang (2017) found that high-performance work systems had a weak effect on employee performance. Based on these results, entrepreneurial leadership is seen as a factor that has a role to strengthen or weaken the relationship that occurs between high-performance work systems and creativity on employee performance. According to Lockett, Hayton, Ucbasaran, Mole, and Hodgkinson (2013) entrepreneurial leadership is innovative entrepreneurs who are experimenting aggressively, and they are skilled at practicing transformations of attractive possibilities. If the experiment is carried out appropriately, it can improve performance, on the contrary, if it is less precise it can reduce performance. Entrepreneurial leadership has three important elements namely innovation, proactiveness, and risk-taking (Kuratko, 2007). These elements do not necessarily have a positive impact on performance. Thus, combining High-performance work systems and employee creativity with entrepreneurial leadership can increase or decrease employee performance. Therefore, in this study, we want to know how the influence of entrepreneurial leadership in moderating the influence of High-performance work systems and employee creativity on performance.

2. Theory, previous research, research hypothesis

2.1. High-performance work system

In various literature HPWS is often referred to as high involvement work practice, high-performance work environments, high-performance work systems, high-performance human resource practices, high-performance management practices, and high commitment work systems (Do, 2016). A high-performance work system (hereinafter referred to as HPWS) is one of the strategic HRM practices (Saifalislam, Osman, & AlQudah, 2014). High-Performance Work System/HPWS is a system that designs elements in the HR system to maximize the overall quality of HR capital within the organization. According to Boxall and Macky (2002), HPWS is an important concept concerning human resource management. According to Husin and Gugkang (2017) states that HPWS is a human resource management practice that aims to stimulate employee creativity and organization, in which there are different sets of practices but interrelationships. Chai and Xiao (2018) found that high-performance work systems have a strong relationship with innovation performance. Arefin et al. (2019), state that HPWS as a situational factor influences employees to feel high psychological empowerment, which in turn influences them to be engaged.

The implementation of HPWS has played a key role in increasing the creativity and work effectiveness of employees (Mahdi, 2014; Xiomei et al., 2013). According to Chen, Lin, and Wu (2016) HPWS as a means to motivate employees to perform better. Some research results prove that HPWS has a significant positive effect on employee creativity (Akthar et al. 2016; Chen et al., 2016; Do, 2016; Husin & Gugkang, 2017; Meddour, Majid, & Abdussalaam, 2019; Miao & Cao, 2019; Xiomei et al., 2013).

HPWS aims to create a good work system with the aim that employees perform better. A number of results of the study were able to prove the significant positive effect of HPWS on employee performance, namely research conducted by Akthar (2016), Cafferkey and Dundon (2015), Husin and Gugkang (2017), Meddour et al., (2019), Miao & Cao, (2019), Petros (2014), Sutanto and Kurniawan (2016) and Xiomei et al. (2013). Based on the results of the study, the research hypothesis was built, namely:

Hypothesis 1: HPWS has a significant positive effect on employee creativity

Hypothesis 2: HPWS has a significant positive effect on employee performance

2.2. Employee creativity

Employee creativity is an important aspect of solving employee problems because it encourages finding solutions to existing problems (Sourchi & Jianqiao, 2015). Creativity is one of the basic human needs, namely the need for self-realization (self-actualization) and is the highest need for humans (Maslow, in Munandar, 2017). Employee creativity is also said to make a major contribution to organizational innovation, thus making the organization superior and competitive (Tang & Chang, 2010). According to Munandar (2017), creativity is the ability to make new combinations, based on data, information or elements that exist. The results created are not always new things, but can also be a combination of things that already existed before. Besides, Wenjing, Wei, and Shuliang (2013) states creativity as an action, idea, or product that replaces something old into something new. Guilford (in Munandar, 2017) states that creativity is a divergent thinking ability or the thought of exploring various alternative answers to a problem, which is equally true (Stobbeleir, Ashford, & Buyens, 2011). Whereas according to Rogers and Sophia (2014) creativity is human tendencies to actualize themselves according to their abilities.

According to Chang, Jia, Takeuchi, and Cai (2014) creativity is defined as the ability to explore new ideas that are useful for organizational progress. Lee and Tan (2012), creativity is the ability and expertise of creative thinking individually which accumulates based on education and experience. Yung (in Vasudevan, 2013) states creativity as a skill that brings something new and valuable for others to do more new things and break away from the old. So based on these definitions, creativity is very important concerning increasing employee creativity, organizational performance, organizational competitiveness, and the sustainability of the organization.

According to Craft (2004), creativity is an imaginative activity that produces new and valuable results. Employee Creativity has a significant positive effect on employee performance (Hassan, Malik, Hasnain, Faiz, & Abbas, 2013; Hsu, 2016; Ismail, Iqbal, & Nasr, 2019; Liu, Liu, & Geng, 2013; Shahzadi, 2014; Wibowo, 2013). Based on the results of the research that has been disclosed previously, the research hypothesis can be formulated as:

Hypothesis 3: Employee Creativity has a positive and significant effect on Employee Performance

Based on some studies, where HPWS has a significant positive effect on employee creativity (Akthar, 2016; Chen et al., 2016; Do, 2016; Husin and Gugkang 2017; Xiomei et al., 2013). On the other hand, employee creativity has a significant positive effect on employee performance (Hassan et al., 2013; Ismail et al., 2019; Shahzadi, 2014; Wibowo, 2013). Based on this, the research hypothesis is constructed as follows:

Hypothesis 4: Employee Creativity is positively significant as mediating the relationship between HPWS and Employee Performance

2.3. Entrepreneurial leadership

According to Mamun, Ibrahim, Yusoff, and Fazal (2018) states that entrepreneurial leadership is a combination of leadership and entrepreneurship concepts. The birth of this leadership style because it was realized that the importance of a change in leadership style in managing business (Rahim, 2015). According to Lockett et al. (2013), Entrepreneurial leadership is innovative entrepreneurs experimenting aggressively, and they are skilled at practicing potentially attractive transformations. According to Anju and Mathew (2017), entrepreneurial leadership is defined as leadership that can communicate the vision and develop and utilize opportunities to gain competitive advantage. Entrepreneurial leadership according to Mamun et al. (2018) is a leadership style that can delegate capable of building employees who behave responsibly, can make and determine decisions, and work independently. Entrepreneurial leadership has a character as a leader who is responsive, creative and proactive towards the competitor’s environment and the direction of changing market opportunities (Anju & Mathew, 2017). According to Zainol, Daud, Abubakar, Shaari, and Halim (2018), entrepreneurial leadership is a leadership that creates a climate of entrepreneurial behavior that is expected to bring the organization towards success.

Several studies have found contradictory results in entrepreneurial leadership relations with employee performance. Some studies find a significant positive effect (Jatmika & Andarwati, 2017; Paudel, 2019), but there are also those who find a negative influence (Handoyo, Hamid, & Iqbal, 2015). This indicates that entrepreneurial leadership can strengthen and weaken employee performance. Based on this, the research hypothesis is constructed as follows:

Hypothesis 5: Entrepreneurial leadership significantly moderates the influence of the High-Performance Work System on Employee Performance

Hypothesis 6: Entrepreneurial leadership significantly moderates the influence of Employee Creativity on Employee Performance.

3. Research method

3.1. Research design

This research was designed with a quantitative approach. Quantitative research is a research process that uses data in the form of numbers as a tool to analyze information about what you want to know.

3.2. Population and sample

This research was conducted on 200 cooperative employees spread across 16 credit cooperatives in Timor Leste from a total population of 400 cooperative employees. The technique of determining the number of samples is based on Slovin formula with a precision level of 5%. Determination of the number of samples in each cooperative is carried out proportionally.

3.3. Variable and measurement

The variables involved in this study consisted of independent variables (high-performance work system), mediating variables (employee creativity), moderation variables (entrepreneurial leadership), and the dependent variable (employee performance). The high-performance work system and employee creativity variables were each measured by 13 question items, the entrepreneurial leadership variable was measured through 3 dimensions with 11 question items, and employee performance was measured by 5 questions. The total questions in the questionnaire were 42 items.

3.4. Data collection method

Data collection was carried out through direct interviews with cooperative employees based on prepared questionnaires (shown in the Appendix). The data collection process was carried out from March to April 2019. The questionnaire answers were in the form of a Likert scale with a range of 1 (strongly disagree) to 5 (strongly agree). The collected data is then tabulated and a validity and reliability test is performed.

3.5. Analysis method

Data analysis was carried out based on Smart PLS program version 3.0, through three stages, namely evaluation of measurement models, evaluation of structural models, and testing of research hypotheses. Evaluation of research models includes testing validity through convergent validity (outer loading) and reliability through composite reliability and Cronbach’s Alpha. A set of data is said to be valid convergently if the outer loading coefficient > 0,60 (Chin, 1998, p. 325), and said to be reliable if the composite reliability or Cronbach’s Alpha > 0,70 (Hair, Black, Babin, & Anderson, 2010). Testing the accuracy of the model is done through structural evaluations include R-Square (R²), Q-Square (Q²) with formulation Q² = 1-(1-R²₁)(1-R²₂), and Goodness of Fit (GoF) by formula GoF = Ѵ(AVE x R²). Testing the research hypothesis is based on a p-value of 5% (0.05). The hypothesis can be accepted if the test results show a p-value <0.05, conversely if the p-value> 0.05 then the hypothesis is rejected.

4. Results and discussion

4.1. Evaluation of the measurement model

The results of the measurement model evaluation are based on the value of the outer loading of all indicators of the research variable. The results of research data processing show that the outer loading coefficient of each indicator ranges from 0.697–0.921. This means that all indicators have an outer loading value greater than 0.50, which means that all indicators are valid.

Viewed through discriminant validity, it shows that the root AVE is greater than the correlation coefficient between other variables, as shown in Table 1. This shows that the variables in the research model are valid.

Table 1. Discriminant validity

Variables	M/EL	X/HPWS	Y1/EC	Y2/EP
M/EL	0,859
X/HPWS	0,741	0,798
Y1/EC	0,633	0,611	0,794
Y2/EP	0,656	0,761	0,716	0,897

Source: Data processed, 2019

The reliability of research data is based on reliability composite coefficient and Cronbach’s Alpha, shown in Table 2. Table 2 shows where the composite reliability and Cronbach’s Alpha values are greater than 0.70. This means that all research variables are reliable. Because the research data has been proven valid and reliable, it can be continued in the next process, namely testing the structural model.

Table 2. Composite Reliability and Cronbach’s Alpha

Variables	Cronbach’s Alpha	Composite Reliability
X/HPWS	0,952	0,958
Y1/EC	0,951	0,957
Y2/EP	0,939	0,954
M/EL	0,964	0,969

Source: Data processed, 2019

4.2. Structural model evaluation

Evaluation of structural models is based on the value of R-Square (R²), Q-Square Predictive Relevance (Q²), and Goodness of Fit (GoF). The results of the analysis are shown in Table 3.

Table 3. Coefficient R², AVE

Variables	R-Square	AVE
X/HPWS	-	0,637
Y1/EC	0,658	0,631
Y2/EP	0,854	0,805
M/EL	-	0,739

Source: Data processed, 2019

Based on Table 3, coefficient R² for HPWS to EC is 0.658. This gives a meaning that, employe creativity 65.8% is influenced by high-performance work systems, the rest are other factors. R² values for HPWS and EC to EP are 0.854. This means that 85.4% of employee performance is influenced by a high-performance work system and employee creativity, the rest are other factors beyond the research model.

Q Square Predictive Relevance (Q²), which is calculated based on the formulation Q² = 1 – {(1-R²₁) (1-R²₂)}, resulting in a value of 0.9500. This means that the model has a predictive capacity of 95%. If seen from the GoF value calculated based on the formulation GoF = Ѵ(AVE x R²), it produces a value of 0.7290. Based on the values of Q² and GoF, it can be stated that the research model has good accuracy so that further analysis can be carried out.

4.3. Hypothesis testing

The results of hypothesis testing are based on the results of the 3.0 SmartPLS analysis, which is shown in Figure 1, and Table 4.

Figure 1. Results of SmartPLS Analysis 3.0.

Table 4. Path Coefficient Relationships High Performance Work System, Employee Creativity, Entrepreneurial Leadership, and Employee Performance

HPWS-> EC	0,811	0,000	H1 Accepted
HPWS-> EP	0,257	0,014	H2 Accepted
EC -> EP	0,269	0,048	H3 Accepted
HPWS-> EC-> EP	0,218	0,049	H4 Accepted
HPWS*EL-> EP	0,276	0,002	H5 Accepted
EC*EL -> EP	0,182	0,045	H6 Accepted

Source: Data processed, 2019

Table 4 shows that high-performance work system has a significant positive effect on employee creativity, indicated by the path value of 0.811 and p-value of 0.000 < 0.05. This means that Hypothesis 1 is accepted. A high-performance work system also has a significant positive effect on employee performance, indicated by the path value of 0.257 and p-value of 0.014 < 0.05. This means that Hypothesis 2 is accepted. These results give the sense that increasing high-performance work systems can improve employee creativity and employee performance. This finding is in line with a number of previous research results, namely Akthar (2016), Chen et al. (2016), Do (2016), Husin and Gugkang (2017), Miao and Cao (2019), Xiomei et al. (2013).

Employee creativity also has a significant positive effect on employee performance, indicated by the path value of 0.269 and p-value of 0.048 < 0.05. This means that Hypothesis 3 is accepted. This implies that increasing employee creativity can improve employee performance. These results are in line with the results of research conducted by Hassan et al. (2013), Liu et al. (2013), Wibowo (2013); Shahzadi (2014); Hsu (2016), Ismail et al. (2019).

The indirect effect of a high-performance work system on employee performance through Employee Creativity is also positively significant, this is indicated by the path value of 0.218 and p-value of 0.002 < 0.05. This means that Hypothesis 4 is accepted. That is, employee creativity can make the relationship between high-performance work systems with employee performance better.

The effect of entrepreneurial leadership moderation on high-performance work system relationships on employee performance is also positively significant, as indicated by the path value of 0.276 with p-value 0.002 < 0.05. This means that hypothesis 5 is accepted. The effect of entrepreneurial leadership moderation on employee creativity relationships on employee performance is also positively significant, indicated by the path value of 0.182 with p-value 0.045 < 0.05, then hypothesis 6 is also accepted. Meaning, entrepreneurial leadership is able to strengthen the relationship that occurs between high-performance work systems and employee performance in cooperatives in Timor Leste.

5. Conclusion, limitation, and future research

5.1. Conclusion

The analysis shows that the research model has a good level of accuracy. The results of the study prove that the High-performance work system has a significant positive effect on employee creativity. Improving the work system in a better direction can improve employee creativity. The results of this study were able to confirm the results of previous studies namely (Akthar, 2016; Chen et al., 2016; Do, 2016; Husin & Gugkang, 2017; Xiomei et al., 2013). High-performance work systems also show a significant positive effect on employee performance. That is, Improving the work system in a better direction can encourage increased employee performance. These findings confirm a number of previous research findings which revealed that the High-performance work system had a significantly positive effect on employee performance, Akthar (2016), Cafferkey and Dundon (2015), Husin and Gugkang (2017), Petros (2014), Sutanto and Kurniawan (2016), Xiomei et al. (2013). In another part, Employee creativity has a significant positive effect on employee performance. The meaning, Increased employee creativity can improve employee performance significantly. The results of this study were also able to confirm many previous research results, namely Hassan et al. (2013), Shahzadi (2014), Wibowo (2013).

The results also found that employee creativity acts as a mediator in the relationship of High-performance work systems with employee performance, meaning that employee creativity can improve the relationship between employee creativity and employee performance. On the other hand, entrepreneurial leadership acts as a moderating effect of the High-performance work system and employee creativity on employee performance. That is, entrepreneurial leadership can strengthen the High-performance work system and employee creativity in its effect on employee performance.

5.2. Theoretical and managerial contribution

Academically this research reinforces the results of previous studies which state that entrepreneurial leadership can significantly improve employee performance. This study also found entrepreneurial leadership in cooperatives in Timor Leste can strengthen the influence of high-performance work systems and employee creativity on employee performance.

In management, to improve employee performance in an organization, it is necessary to integrate an increase in entrepreneurial leadership, high-performance work systems and employee creativity.

5.3. Limitation and future research

This research is only conducted at cooperatives, so the results cannot be generalized to other organizations. This research model still needs to be tested in more depth and accurately to obtain more precise results. The researcher also needs to develop this research model by integrating many other relevant variables, so that a more complex and more accurate research model is produced in solving organizational problems.

Additional information

Funding

The authors received no direct funding for this research.

Notes on contributors

Mateus Ximenes

Mateus Ximenes is a Student of Doctor of Management Science at the Faculty of Economics and Business, Udayana University, Denpasar (Bali-Indonesia).

Wayan Gede Supartha

Wayan Gede Supartha is a professor and senior lecturer at the Faculty of Economics, University of Economics and Business, Udayana-Denpasar (Bali-Indonesia). He currently serves as the coordinator of the doctoral management study program.

I Gusti Ayu Manuati Dewi

I Gusti Ayu Manuati Dewi is an associate professor in the faculty of economics at the Udayana University of Economics and Business-Denpasar (Bali-Indonesia). Much research has been carried out relating to human resource management and Micro, Small and Medium Enterprises (MSMEs).

Desak Ketut Sintaasih

Desak Ketut Sintaasih is an associate professor in the faculty of economics at the Udayana-Denpasar University of Economics and Business (Bali-Indonesia). Several studies were carried out relating to human resource management and Micro, Small and Medium Enterprises (MSMEs).

Appendix

Questionnaire High-Performance Work System

The cooperative conducts a rigorous selection process to appoint new candidates

Cooperatives provide sufficient opportunities for training employees

Cooperatives carry out employee training based on needs analysis

Performance appraisal is directly related to employee performance

I am given feedback regarding my work performance at least once a year

The rewards that I received match my performance

I feel my job is safe

Career management gets priority in this cooperative

I got a promotion opportunity for the job I wanted

I am continuously informed about business issues in this cooperative

There is a clear status difference between the management and staff in this cooperative

Cooperative employees are always involved in decision making

Communication between employees runs very well

Questionnaire Employee Creativity

I always suggest new ways to achieve cooperative goals

I always propose new ways to get work done

I always try to find new ways to get work done

I always suggest new ways to improve product/service quality

I always try to find sources of new creative ideas

I am not afraid to take risks

I always fight for ideas/ideas to the leadership

I am always creative in completing work when there is an opportunity

I always make a timetable for implementing basic work to implement new ideas

I often have innovative ideas

I always get a solution to a work problem

I always have a new approach to solving problems

I always recommend using new ways to get work done

Questionnaire Entrepreneurial Leadership

a. Proactiveness

Leaders always try to be responsive to competitors’ actions

Leaders often make cooperatives the first to introduce new products

Leaders often make cooperatives the first to introduce new services

Leaders often make cooperatives the first in introducing new administrative techniques.

Leaders have a strong tendency to put cooperatives at the forefront of competition

b. Innovativeness

I have routinely developed new product lines in the past five years

I have routinely developed service systems in the past five years

I make changes to the service quickly according to the needs of cooperative members

c. Risk-taking

The leader is able to analyze the risks that are likely to occur

Leaders act boldly in facing the dynamic environment.

I am aggressive to maximize the possibility of potential opportunities.

Questionnaire Employee Performance

I always finish work according to the target number of cooperatives.

I always finish my work according to the Cooperative quality standards.

I am always on time in starting work.

I always finish work on time.

I always do good cooperation with fellow colleagues.