Effects of leadership on organizational performance in Russian companies Detelin S. Elenkov * School of Management, New York Institute of Technology, 1855 Broadway, New York, NY 10023, USA Received 1 February 2000; accepted 1 July 2000 Abstract This study investigated concurrently the main effects of the transformational- and transactional-leadership behaviors on organizational performance of Russian companies, the moderating effects of support for innovation on the relationship between the transformational- leadership behaviors and organizational performance, and the impact of group cohesiveness on transformational-leadership behaviors in a Russian context. The results demonstrated that transformational leadership directly and positively predicted organizational performance of Russian companies over and beyond the impact of transactional leadership; Russian managers who displayed more transactional-leadership behaviors also made a positive contribution to the achievement of organizational goals; support for innovation significantly moderated the relationship between transformational leadership and organizational performance; and group cohesiveness was positively related to the ratings of transformational leadership. These research findings were, then, used to draw conclusions concerning finding new effective ways to promote organization development (OD) and to achieve better organizational performance results in Russia. The potential benefits for Russian companies of Full Range of Leadership Development Modules, process consultation (PC), sensitivity training, and other OD techniques were discussed. D 2002 Elsevier Science Inc. All rights reserved. Keywords: Leadership; Organizational performance; Russia For almost 10 years now, Russia has been undergoing a transformation from a centrally planned economy to a mar- ket-oriented one. Accordingly, the Russian government has introduced a series of sweeping economic reforms, including the use of freely fluctuating market prices, the initiation of a process that will ultimately break down economic monopo- lies, the creation of conditions for the establishment of a private sector in many areas of economic activity, the elimination of most food subsidies, and the reduction of subsidies for fuel and most other basic commodities. However, there is a wide range of statistical evidence that indicates that the state of the Russian economy has been deteriorating sharply since the end of the cold war. Russian gross domestic product fell about 45% from 1989 to 1997. Real capital investment plunged by 92% over the same period. Moreover, net productive investment has turned negative as aging equipment has become unusable. The output of the oil industry — one of Russia’s main sources of export revenue — has dropped by about 50% (Koretz, 1998). Many business scholars, political economists, business executives, and politicians agree that economic problems in Russia have a lot to do with the style of management at various levels in that country. Statistical evidence has demonstrated that economic inefficiency in Russia has been a long-lasting problem. Paradoxically, Russia would earn twice as much as its present total GDP, if all the raw materials that the country produce were sold abroad. In other words, Russian companies have appeared to subtract, not add, value to the raw materials they consume. By this measure, ‘‘Russia would be better off if every industrial worker stopped working.’’ (The Economist, Dec. 5, 1992: p. S10). Although business experts may find some faults with the above-mentioned measure of economic (in)effi- ciency, macro-economic policies, as well as company man- agement in Russia, are clearly in a desperate need for radical improvements in order to reverse the negative trends of the recent past and to achieve positive economic results in a not- very-distant future. One possible way of achieving the hoped-for improve- ments is to make appropriate changes in Russian companies by creatively taking advantage of the best modern theories of * Tel.: +1-261-1602; fax: +1-261-1593. E-mail address: delenkov@nyit.edu (D.S. Elenkov). Journal of Business Research 55 (2002) 467 – 480 0148-2963/02/$ – see front matter D 2002 Elsevier Science Inc. All rights reserved. PII:S0148-2963(00)00174-0