The influence of leadership on product and process innovations in China: The contingent role of knowledge acquisition capability Jeanine Chang a,1 , Xuan Bai b, ⁎, Julie Juan Li a,2 a Department of Marketing, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong Special Administrative Region b Department of Marketing, School of Business Administration, Southwestern University of Finance and Economics, No. 555, Liutai Avenue, Wenjiang District, Chengdu, Sichuan, PR China abstract article info Article history: Received 13 March 2014 Received in revised form 24 January 2015 Accepted 5 March 2015 Available online xxxx Keywords: Transformational-charismatic leadership Transactional leadership Product innovation Process innovation Knowledge acquisition capability Building upon upper echelon theory and a dynamic capability perspective, this study investigates the relative effectiveness of two types of leadership on product and process innovations in emerging economies. The authors found that in China transformational-charismatic (TC) leadership has a stronger effect on product innovation, while transactional leadership has a stronger effect on process innovation. The authors further study the bound- ary conditions of leadership and empirically examine the contingent effects of organizational level capability on the relationships between leadership and innovation. The moderating effects are intriguing: knowledge acquisi- tion capability strengthens the effect of TC leadership on process innovation and that of transactional leadership on product innovation. However, knowledge acquisition capability attenuates the positive relationship between TC leadership and product innovation as well as the positive relationship between transactional leadership and process innovation. © 2015 Elsevier Inc. All rights reserved. 1. Introduction Innovation is widely regarded as a powerful driver of competitive advantage and business growth (Ar & Baki, 2011; Dess & Picken, 2000), particularly in markets characterized by rapid technological change, dynamic uncertainty and intense competition (Hult, Hurley, & Knight, 2004). Firms seek to survive and grow through innovation, especially in emerging economies (Iyer, LaPlaca, & Sharma, 2006). The fact that the Chinese government considers innovation-oriented development as a key strategy to modernize its economy underscores the importance of innovation in China. Effective leadership facilitates in- novation and competitiveness, and is regarded as an important driver of sustainable business growth in emerging markets (Chen, Lin, Lin, & McDonough, 2012). In Chinese firms, leaders play a critical role in the success of their organizations because they are more autocratic and powerful than business leaders in developed countries (Casimir & Waldman, 2007). Therefore, it is important to examine how leadership influences business innovation in China. Existing studies have examined the antecedents of innovation primarily through three theoretical lenses: leadership quality by the upper echelon theory; managerial factors by the dynamic capa- bility theory; and the business process by process theory (Crossan & Apaydin, 2010). A close examination reveals several limitations in this literature on innovation. First, existing studies are mainly focused on identifying the determi- nants of product or service innovation (Atuahene-Gima, 1995; Zhou & Wu, 2010). Despite the fact that a firm's competitive advantage over time depends on both product and process innovations, less attention has been given to the dynamics of process innovation (Damanpour & Gopalakrishnan, 2001). Product innovation refers to the new products or services introduced into the market for the purpose of satisfying customers' wants and needs (Barras, 1986), while process innovation refers to new elements (e.g. new management approaches, production methods and new technologies) introduced into organizations' produc- tion and management operations (Ettlie & Reza, 1992; Gopalakrishnan, Bierly, & Kessler, 1999). As the outcome of process innovation is less tangible and less visible to customers, firms tend to overlook the critical role of process innovation (Gopalakrishnan et al., 1999). However, pro- cess innovation is just as important to an organization's success as prod- uct innovation. On the one hand, process innovation enhances a firm's ability to exploit, maximize, and reconfigure resources and capabilities (Gopalakrishnan et al., 1999), which makes it a critical source of competitive advantage. On the other hand, both product and process innovations have significant implications on a firm's marketing strategy (Gopalakrishnan et al., 1999). While product innovation supports market differentiation strategies, process innovation reduces costs and enhances production efficiency. Given the importance of both types of innovation, we employ a comprehensive perspective by simultaneously examining product innovation and a relatively under-researched form of innovation, process innovation. Industrial Marketing Management xxx (2015) xxx–xxx ⁎ Corresponding author. Tel./fax: +86 28 87092768. E-mail addresses: jeaininechang@gmail.com (J. Chang), baixuan@swufe.edu.cn (X. Bai), julieli@cityu.edu.hk (J.J. Li). 1 Tel.: +852 34425261. 2 Tel.: +852 34427865. IMM-07186; No of Pages 12 http://dx.doi.org/10.1016/j.indmarman.2015.04.014 0019-8501/© 2015 Elsevier Inc. All rights reserved. Contents lists available at ScienceDirect Industrial Marketing Management Please cite this article as: Chang, J., et al., The influence of leadership on product and process innovations in China: The contingent role of knowledge acquisition capability, Industrial Marketing Management (2015), http://dx.doi.org/10.1016/j.indmarman.2015.04.014