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Leader-Member Exchange and EmployeeCreativity: Test of a MultilevelModerated Mediation ModelWen Pan a , Li-Yun Sun a & Irene Hau Siu Chow ba Macau University of Science and Technologyb The Chinese University of Hong KongPublished online: 14 Nov 2012.

To cite this article: Wen Pan , Li-Yun Sun & Irene Hau Siu Chow (2012) Leader-Member Exchange andEmployee Creativity: Test of a Multilevel Moderated Mediation Model, Human Performance, 25:5,432-451, DOI: 10.1080/08959285.2012.721833

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Human Performance, 25:432–451, 2012Copyright © Taylor & Francis Group, LLCISSN: 0895-9285 print/1532-7043 onlineDOI: 10.1080/08959285.2012.721833

Leader-Member Exchange and Employee Creativity:Test of a Multilevel Moderated Mediation Model

Wen Pan and Li-Yun SunMacau University of Science and Technology

Irene Hau Siu ChowThe Chinese University of Hong Kong

Drawing on self-determination and social exchange theories, the study examined the mechanismsthrough which leader–member exchange (LMX) influences employee creativity. Data were obtainedfrom 367 leader–follower dyads at three manufacturing companies in the People’s Republic of China.The results of our study revealed that (a) motivation-oriented psychological empowerment and socialexchange-oriented felt obligation fully mediate the relationship between LMX and employee cre-ativity, and (b) work-unit structure moderates the indirect effect of LMX on creativity throughpsychological empowerment, such that the mediated effect of LMX is stronger in organic than inmechanistic work-unit structure.

Creativity, defined as production of novel and useful ideas (Amabile, 1988; Madjar, Oldham, &Pratt, 2002; Shalley, Gilson, & Blum, 2000), constitutes an important force to sustain organiza-tional success and competitive advantage (Shalley, 1991; Zhou, 2003). Recent scholarly efforthas witnessed the role of high-quality leader–member exchange (LMX) in driving employee cre-ativity (e.g., Tierney, Farmer, & Graen, 1999). The role of LMX is important because it embedsthe role of leaders within the social relations framework linked to the emergence of creativity inthe workplace (Tierney, 2008). Researchers called for more work to investigate the mechanismsunderlying the relationship between LMX and creativity (e.g., Tierney, 2011).

Researchers developed models from the motivational and social exchange perspectives toexamine the mechanisms through which LMX affects its work outcomes. The motivational modelholds that by creating conditions that support employees’ experience of autonomy, competence,and relatedness, a leader fosters the most volitional and high-quality forms of motivation andengagement for activities, including enhanced performance, persistence, and creativity (Conger& Kanungo, 1988; Thomas & Velthouse, 1990). The social exchange model suggests that anemployee who is treated fairly by his supervisor would be willing to provide reciprocal favors tohis or her supervisor (Liden & Graen, 1980; Loi, Mao, & Ngo, 2009). Despite the explanatory

Correspondence should be sent to Li-Yun Sun, Faculty of Management and Administration, Macau University ofScience and Technology, Avenida Wai Long, Taipa, Macau. E-mail: lysun@must.edu.mo

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power of both models, few studies have investigated the two models simultaneously in therelationship between LMX and creativity.

Employees do not work alone with their supervisors. They are also exposed to other environ-mental factors. Because work-unit structure is regarded as a context within which organizationaltasks are accomplished (Aryee, Sun, Chen, & Debra, 2008), the LMX–creativity relationship maybe contingent upon work-unit structure. Work-unit context is important for the following reasons.First, the psychological meaning of environmental events influences creativity at work (Conger& Kanungo, 1988; Spreitzer, 1996). Second, some work-unit factors may enhance, neutralize,or substitute for leaders’ exchange behaviors (Fernandez & Vecchio, 1997; Schriesheim, Castro,Zhou, & Yammarino, 2001). Third, work-unit structure varies in terms of resources available forthe employees, which may influence their perception of supportiveness and creativity. In spiteof its importance, little attention has been given to work-unit structure in the creativity research.To fully understand creativity, it is necessary to consider the contingency of contextual charac-teristics in the workplace (Shalley, Zhou, & Oldham, 2009). The present study examines howwork-unit structure moderates relationship between LMX and creativity.

Taken together, this study aims to investigate the mechanism through which LMX affectsemployee creativity. Specifically, we examine (a) the mediating effect of psychologicalempowerment and felt obligation in the LMX–creativity relationship, (b) the moderating effect ofwork-unit structure on the psychological empowerment–creativity and felt obligation–creativityrelationships, and (c) the moderating effect of work-unit structure on the mediated effects of LMXon creativity.

The study contributes to the literature in two specific ways. First, based on the prior efforttoward inquiring the processes through which LMX affects employee work outcomes, the presentstudy has explicitly investigated two mediating mechanisms of motivation-oriented psychologi-cal empowerment and social exchange-oriented felt obligation in the relationship between LMXand creativity. Simultaneous investigation of these two models lies in the notion that the princi-ples that underlie successful motivation-based interventions are different from those that underliesuccessful exchange-based interventions. Motivation-based interventions focus on core princi-ples of interest, competence, and autonomy, whereas exchange-based interventions focus on coreprinciples of benefits and supportiveness. Combining these two models may offer a new perspec-tive through which managers would maximize the effect of LMX on creativity by integrating theprinciples from these two models or adapt to different stages of LMX by choosing between thetwo models. Second, given that paucity of research has examined the boundary conditions of themediated effects of LMX on employee creativity, this study adds to creativity literature throughexamining work-unit structure as a moderator that may facilitate or restrict the mediated effects ofLMX. Through comparing the relative moderating power of work-unit structure on motivationaland exchange-based processes, supervisors may thus identify the relative benefits and impedi-ments of the environment in advance when either process is concerned. Supervisors may furthermatch their use of interventions with the work-unit structure.

SELF-DETERMINATION AND SOCIAL EXCHANGE THEORIES

Self-determination theory (SDT; Gagné & Deci, 2005) and social exchange theory provide the-oretical underpinning for the motivational model and social-exchange model, respectively. SDT

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suggests that autonomy-supportive leaders promote autonomous motivation. SDT propositionsfocus on how social-contextual factors facilitate or undermine people’s sense of volition andinitiative. It maintains that conditions supporting the individual’s experience of autonomy, com-petence, and relatedness foster the most volitional and high-quality forms of motivation andengagement in activities for creativity. Autonomous motivation in the workplace will involveenabling employees to experience meaningfulness, competence, self-determination, and impactat work (Gagné, Senecal, & Koestner, 1997; Spreitzer, 1995; Thomas & Velthouse, 1990).Psychological empowerment reflects such psychological experience manifested in meaning, com-petence, self-determination, and impact. Psychological empowerment thus constitutes a formof autonomous motivation. SDT suggests that activities such as creativity will be supported ifemployee needs for autonomous motivation are satisfied (Amabile, 1988; Amabile, Conti, Coon,Lazenby, & Herron, 1996). Furthermore, SDT identifies contextual factors that enhance or reduceautonomous motivation, thereby facilitating or inhibiting creativity.

According to social exchange theory, each member in the social exchange relationship is obli-gated to repay any benefits received, and the mutual exchange of goods and services could bebalanced out in the long run. Mutually beneficial social exchange relationships are based on thecondition that individuals will carefully meet the other party’s expectations and consider suchbehaviors an obligation, no matter whether the expectation is formally prescribed within their jobrequirements (Blau, 1964). Social exchange theory has been widely applied to the study of LMX(Keller & Dansereau, 1995; Loi et al., 2009). The support and encouragement provided by thesupervisors often create feelings of obligation on the part of the subordinates. With these feelingsof obligation, the subordinate will exert more effort and dedication to work better in return.

LMX AND CREATIVITY

Prior studies provided support for the direct relationship between LMX and creativity (Elkins &Keller, 2003, Redmond, Mumford, & Teach, 1993; Scott & Bruce, 1994; Tierney et al., 1999).The supportive leader can foster employee creativity in several ways. First, high-LMX membersoften enjoy more challenging assignments, sponsorship, and greater access to information rele-vant to the job (Graen & Scandura, 1987). This provides employees with opportunities for skilldevelopment. Second, Seibert, Kraimer, and Liden (2001) found that establishing a social network(including contacts in different functional areas) with leaders was related to the procurement ofresources and information. Availability of adequate information entails goal clarity, which playsthe critical role of problem definition in the creative process (Getzels & Cskszentmihalyi, 1976).Availability of adequate resources affects people psychologically by leading to beliefs about theintrinsic value of the projects that they have undertaken (Amabile et al., 1996). Third, in highLMX relationships, subordinates are allowed greater autonomy and decision latitude, both ofwhich have been shown to be essential to creative performance (Cotgrove & Box, 1970; Pelz& Andrews, 1966). Finally, high LMX employees experience a strong sense of advocacy andliking from their supervisors (Duchon, Green, & Taber, 1986). This is necessary for creativity(Mumford & Gustafson, 1988) because this sense is conductive to a level of comfort and trust,which is a great support for risk taking involved in creativity. In addition, the sense of likingimplies the individual’s need of relatedness is satisfied, and therefore autonomous motivation ispromoted.

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MEDIATING EFFECT OF PSYCHOLOGICAL EMPOWERMENT

Creativity requires a substantial amount of autonomy. Freedom and autonomy experienced byemployees are generally conducive to employees engaging in creativity (Hackman & Oldham,1980). Spreitzer (1995) defined psychological empowerment as an overall construct as manifestedin four cognitions: meaningfulness (the value or purpose of a work goal), competence (perceivedability to accomplish work-related tasks), self-determination (having choice or being able to initi-ate actions), and impact (the degree to which an individual can influence outcomes at work). High-quality LMX relationship can nurture psychological empowerment through granting these fouraspects. First, leaders in high-quality LMX relationships tend to enhance the meaningfulness ofwork by making information about the organization’s mission and information about performance(Spreitzer, 1995) more available to their subordinates. Conger and Kanungo (1988) regardedinformation about mission as an important antecedent of empowerment because it helps to createa sense of meaning and purpose. Second, in a high LMX relationship, leaders express confidencein an employee’s competence and prospects for high performance. According to Bandura (1986),“People who are persuaded verbally that they possess the capabilities to master given tasks arelikely to mobilize greater sustained effort than if they harbor self-doubts and dwell on personaldeficiencies when difficulties arise” (p. 400). Specifically, with supervisors’ verbal encourage-ment, employees have the feeling of self-worth and are likely to assume an active orientation withregard to their work and work units (Gist & Mitchell, 1992). Third, leaders provide employeeswith autonomy and prospects for self-determination by encouraging the individual to decide howto carry out his or her job (Pearce et al., 2003; Sim & Manz, 1996). Keller and Dansereau (1995)found that when employees received negotiating latitude and support for self-worth from theirsuperiors, their perceptions of control increased. In addition, greater job responsibilities translateinto an increased perception of self-determination. Finally, LMX fosters an employee’s partici-pation in decision making (Manz & Sims, 1987). This process potentially gives an employee afeeling of greater control over the immediate work situation and an enhanced sense that his orher own behaviors can make a difference in work results, thus promoting the sense of impact.LMX research has shown that subordinates reporting a high-quality relationship not only assumegreater job responsibilities but also contribute more to their units (Liden & Graen, 1980). A feel-ing of contribution is considered as one of the important dimensions of empowerment, that is,impact.

LMX promotes psychological empowerment, and psychological empowerment furtherenhances creativity. Psychological empowerment is necessary to creative behavior (Amabile,1988). First, psychological empowerment has been suggested as “a proximal cause of intrin-sic task motivation and satisfaction” (Thomas & Velthouse, 1990). Because psychologicallyempowered workers regard their work as valuable and meaningful, it is most likely that theyhave strong intrinsic motivation toward their work. Gagné et al. (1997) demonstrated a positive,significant relationship between meaningfulness and intrinsic task motivation. Second, creativ-ity involves trials and errors, successes and failures so that workers need to try out new waysin face of failures. However, it is impossible for individuals to try out new ways of doing theirwork without perceived freedom and encouragement from their supervisors. Third, empoweredindividuals, equipped with more information and resources, feel more confident and efficaciousabout their task activities. Thus, they are willing to introduce change (Spreitzer, 1995), and they

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are likely to be innovative in their work and to expect success (Amabile, 1988; Redmond et al.,1993).

We suggest that LMX affects employees’ psychological empowerment to explain variance inemployee creativity. Empirical studies have found that psychological empowerment fully medi-ated the relationship between LMX and work outcomes (Aryee & Chen, 2006; Harris, Wheeler,& Kacmar, 2009). We therefore predict that

H1: Psychological empowerment will mediate the relationship between LMX and employeecreativity.

MEDIATING EFFECT OF FELT OBLIGATION

Felt obligation is defined as a prescriptive belief regarding whether one should care about theorganization’s well-being and should help the organization reach its goals (Eisenberger, Armeli,Rexwinkel, Lynch, & Rhoades, 2001). Drawing on social exchange theory, earlier research (e.g.,Eisenberger et al., 2001) suggested that perceived organizational support (POS) affects employ-ees’ felt obligation, and felt obligation mediates the relationship between POS and positiveemployee work outcomes. Pundt, Martins, and Nerdinger (2010) posited that innovative behavioramong employees arises out of a feeling of being obligated to provide innovative contribution.It is presumed that feeling of obligation is the result of perceived POS, in so far as the organi-zation provides resources relevant to innovation. The rationale underlying the importance of thisrelationship is that developmental opportunities provided by supervisors increase the level of taskspecific knowledge, skills, and competence to employees, thereby enabling them to develop cre-ative and innovative ideas. Employees may appreciate such human capital investment that inducesfeeling of obligation to reciprocate, if necessary by being more innovative. Simply, employeecreativity can be the results of their felt obligation based on reciprocal contributions induced bythe resources provided by the organization (Pundt et al., 2010). Ramamoorthy, Flood, Slattery,and Sardessai, (2005) found that pay and job autonomy had indirect effects on innovative workbehaviors through the mediating variable of perceived obligation to innovate.

As supervisors can be seen as important agents, representing the organization in manag-ing employment relationships with employees (Coyle-Shapiro & Shore, 2007; Wong, Ngo, &Wong, 2003), employees’ evaluation of their employment relationships with the organizationmay be greatly influenced by LMX. As a result, employees may attribute the supportiveness oftheir supervisor to the organization rather than solely to the supervisor’s personal inclinations(Eisenberger, Stinglhamber, Vandenberghe, Sucharski, & Rhoades, 2002). In return for this sup-portiveness, subordinates may induce a felt obligation to act in ways valued by the organization.Hence, LMX is positively related to employees’ felt obligation to care about their organizationalwell-beings.

Based on reciprocity norm, leader support would elicit subordinates’ felt obligation to engagein creativity valued by their leader as well as their organization. Therefore, we may expect thatLMX enhances employee creativity through triggering their felt obligation to care about theorganization’s goals. We thus posit the following hypothesis.

H2: Felt obligation will mediate the relationship between LMX and employee creativity.

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MODERATING EFFECT OF WORK-UNIT STRUCTURE

Creativity cannot be fully understood without consideration of work-unit structure in whichthe persons are embedded. We posit that the effects of motivation-oriented psychologicalempowerment and social exchange–oriented felt obligation on creativity are contingent uponwork-unit structure. Work-unit structure is defined as how jobs tasks are formally divided,grouped, and coordinated (Robins & Judge, 2007). The most prevalent distinction for describingfundamental differences in work-unit structure is that of mechanistic and organic structural forms(Burns & Stalker, 1961; Slevin & Covin, 1997; Stopford & Baden-fuller, 1994). Mechanisticstructure is generally characterized by extensive departmentalization, high formalization, andhigh centralization. In mechanistic settings, power is centralized, communications follow rigidhierarchical channels, managerial styles and job descriptions are uniform, and formal rules andregulations predominate decision making. By contrast, organic structure is characterized by flex-ible, loose, decentralized structures. Using Burns and Stalker (1961) typology of “organic andmechanistic” structure, organic structure correlates strongly with creativity.

The emphasis of organic or mechanistic structure may vary within one organization inresponse to factors such as the stage of its life cycle or the function of a particular subunit (Hunt,1991). For example, an organic structure is more likely used in the birth stage of the organi-zation. At the maturity stage, a mechanistic structure may be more appropriate. In many largeorganizations that have differentiated departments such as R&D and marketing, both organic andmechanistic subunits may coexist (Pallai & Meindl, 1998). Dansky and Brannon (1996) suggestedthat both mechanistic and organic features are possible in today’s home health care environment.An organic structure is favorable for the implementation of decentralized, flexible, and proactiveculture, whereas a mechanistic structure is favorable for preserving the internal stability of theorganization. This discussion suggests that there would be sufficient variation on work-unit struc-tures within one organization. Therefore, research on organizational behaviors should not ignorethe specific effects of the different work-unit structures.

The effect of psychological empowerment on employee creativity will vary with the degree towhich the work-unit structure is organic or mechanistic.

First, the connection between psychological empowerment and creativity is closer in anorganic structure than in a mechanistic structure. An organic structure is often established inresponding to a competitive environment. Creativity is regarded both as a goal and as a strategyby the work unit. Under an organic structure, unique attention is focused on how to make manage-rial practices more empowering, such as participative decision making, autonomy, and designingjobs as complex and challenging. However, a mechanistic structure is established in a relatively senvironment. Creativity is not as saliently needed. Under a mechanistic structure, more attentionis paid to rules and procedures that are used to control employees. This suggests that the effect ofpsychological empowerment on creativity would be greater under an organic structure than undera mechanistic structure, because psychologically empowered employees are more likely to investtheir efforts into creativity under an organic structure than under a mechanistic structure.

Second, the effect of psychological empowerment may depend on supportiveness of organiza-tional rules, procedures, and systems. An organic work structure provides empowered employeeswith more discretion to act so that they feel less constrained by their contextual environment.Consequently, empowered employees may better utilize their capability and authority to makedecision in the organic structure. Further, working under loose and flexible (organic) environment,

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empowered employees may have a better chance to fully utilize their given autonomy andconfidence to carry out their duties and task responsibilities. Thus, the effect of psychologicalempowerment on creativity should depend on the supportiveness provided by the structure.

Third, an organic work unit can facilitate creativity. An organic work structure provides indi-viduals an environment with challenging tasks, meaningful work and freedom from structuralconstraints to capitalize on their creative potential (Amabile, 1988). It gives supportive evaluationof new ideas (Cummings, 1965; Kanter, 1983), which contributes to creativity. Field experimentshave demonstrated that supportive, informative evaluation can enhance the intrinsically motivatedstate that is most conductive to creativity (Deci & Ryan, 1985). In addition, participative manage-ment and decision making enable ideas flow across work units, thus contributing to creative ideageneration. Thus, the effect of psychological empowerment on creativity would be maximizedunder an organic structure.

However, a mechanistic structure would just restrict empowered employees. With high cen-trality, a mechanistic structure may make employees feel that their hands are tied in the formalwork-unit structure even as they are assigned enlarged responsibilities through empowerment.In addition, a mechanistic structure would stifle creativity.First, the rigid and inflexible mecha-nistic structure, characterized by control-oriented value system, would just imply decreased theautonomy of the employees. Second, with limited access to information network (mostly down-ward communication) and limited understanding of the overall process (lack of communicationacross functions), employees are not only unlikely to recognize problems as they occur but alsolack both confidence and competence to produce unusual, useful ideas (Liu, Denis, Kolodny, &Stymne, 1990). Third, this type of structure restricts or constrains an individual’s excitement inhis or her work activities and is thus expected to hinder creativity. As a result, mechanistic workunits would likely reduce the effect of its employees’ psychological empowerment and preventcreative activities.

In sum, the features of organic structures provide a facilitative context for psychologicalempowerment and employee creativity, whereas those of mechanistic structures provide a con-straining context (Brazier, 2005). Organic structures liberate employees and equip them witheasy access to the information, support, and resources necessary to accomplish creative work andwith opportunities for growth and development. This is supported by the finding that the level ofpsychological empowerment within an organization varies according to the extent to which itswork-unit structure promotes and facilitates empowerment (Honold, 1997). It is thus expectedthat the impact of the work-unit structure on the indirect relationship between LMX and creativ-ity may differ depending on whether it is organic or mechanistic in nature. We posit a mediatedmoderation model through which LMX affects creative performance. Thus, it is expected thatthe mediating effect of psychological empowerment in the LMX–creativity relationship will bestronger in organic than in mechanistic structure.

H3: The strength of the mediated relationship between LMX and employee creativity (viapsychological empowerment) will vary depending on the form of work-unit structure; theindirect effect of LMX via psychological empowerment on employee creativity will bestronger in organic than in mechanistic structure.

Felt obligation is elicited by the perceived supportiveness of the supervisor. The extent to whichemployees reciprocate their felt obligation depends on freedom and opportunities available tothem. This is because if subordinates feel obligated to their supervisor and the organization,

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they are more likely to help the supervisor and organization through extrarole acts (Pearce &Gregersen, 1991). However, mechanistic structure is characterized by strong management con-trol, rigid rules, and set procedures, so it is hard for subordinates to perform extrarole acts toreciprocate the perceived supportiveness, even if they have feelings of obligation to their orga-nization. Thus, the association between felt obligation and outcomes should be weakened whensubordinates are not given the necessary freedom to fulfill their obligations, which is often a caseof the mechanistic structure. Because autonomy and freedom are promoted in an organic struc-ture, it is likely that in organic structure subordinates’ felt obligations are easily reciprocated to theorganization, and result in increased benefits for the organization. We thus propose the following:

H4: The strength of the mediated relationship between LMX and employee creativity (via feltobligation) will vary depending on the form of work-unit structure; the indirect effectof LMX via felt obligation on employee creativity will be stronger in organic than inmechanistic structure.

METHODS

Sample and Procedure

The data were collected by means of survey questionnaires. Respondents were employeesand their immediate supervisors who came from three manufacturing companies located inGuangzhou, PR China. Three survey coordinators, who were employees of the relevant firms,were responsible for collecting data in their respective firms. With the support of their HR depart-ments, they explained the objectives of the study and distributed questionnaires to supervisorswho volunteered to participate in the study. Supervisors were asked to provide a name list undertheir supervision. Participants were requested to select from professionals engaged in engineer-ing, R&D, and marketing whose creative performance was one of important criteria of their jobs.To ensure nonselection and following nonresponse bias, coordinators urged supervisors to includetheir subordinates with different demographic characteristics. Using the name lists, the coordina-tors randomly selected four subordinates from each of the lists and then distributed questionnairesto them in coded self-addressed envelopes.

We administered 120 supervisor questionnaires and 480 subordinate questionnaires, repre-senting a supervisor–subordinate ratio of 1:4. Attached to each questionnaire was a cover letterexplaining that the purpose of the survey was to examine the quality of the supervisor–subordinaterelationship and its implication for creativity. The letter further informed respondents of the vol-untary nature of participation in the survey, assured them of the confidentiality of their responses,and explained that the codes were meant to ensure an accurate match of supervisor–subordinatesurveys. The questionnaires for supervisors are different from those for subordinates. Supervisorswere required to rate their subordinates’ creativity, whereas subordinates were asked to reporttheir psychological empowerment, the quality of LMX, felt obligation, and their work-unit struc-ture. Completed surveys were returned to a box designed for that purpose in each participatingorganization’s human resource department.

After eliminating records with unmatched supervisor–subordinate dyads, 367 supervisor–subordinate dyads in 98 work units (367 subordinates and 98 supervisors, an average of

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3.74 employees per unit) from the three participating organizations remained and constitutedthe sample for this study. This represents 76.5% of valid response rate. Of the 367 subordinaterespondents, 54% were women, the average age was 32.18 years (SD = 8.84), and average tenurewith the organization and the supervisor was 9 and 4.2 years (SD = 8.9 and 4.2), respectively.Respondents reported an average of 14 years of education (SD = 2.40).

Measures

The survey instrument was administered in Chinese but originally constructed in English.Following research practices adopted in the Chinese context (e.g., Sun, Aryee, & Law, 2007), weused a standard translation and back-translation procedure to ensure equivalence of the measuresin the English and Chinese versions (Brislin, 1980). Unless otherwise indicated, all the variableswere measured by participant responses to questions on a 5-point Likert-type scale ranging fromstrongly disagree to strongly agree.

Leader–member exchange. A seven-item scale of leader–member exchange relationshipwas measured using the LMX-7 (Scandura & Graen, 1984). A sample item is, “How well do youfeel that your immediate supervisor understands your problems and needs?” The scale’s alphareliability is 0.93.

Psychological Empowerment

We used 12-item scale developed by Spreitzer (1995) to measure employee psychologicalempowerment. Sample items include “My impact on what happens in my department is large”(impact), “I have mastered the skills necessary for my job” (competence), “My job activities arepersonally meaningful to me” (meaning), and “I have significant autonomy in determining how Ido my job” (self-determination). The scale’s alpha reliability is 0.87.

Felt Obligation

We used seven items designed by Eisenberger et al. (2001) for this study to measure employ-ees’ felt obligation to care about the organization and to help it reach its goals. A sample item is“I feel a personal obligation to do whatever I can to help—achieve its goals.” The scale’s alphareliability is 0.88.

Creativity

We use six-item scale to measure creativity. Three items were originally developed by Madjaret al. (2002) on a 5-point Likert scale, ranging 1 (not at all creative/original/adaptive) to 5 (verycreative/original/adaptive). The other three items were from Scott and Bruce (1994). Exampleitems are “This employee searches out new technologies, processes, techniques, and/or productideas,” “This employee generates creative ideas,” and “This employee is creative.” The scale’salpha reliability is 0.78.

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Work-Unit Structure

Following Covin and Slevin (1989) and Slevin and Covin (1997), we used Khandwalla’s(1976/1977) seven-item scale to measure work-unit structure defined in terms of mechanistic ororganic characteristics. Subordinate respondents indicated the extent to which paired statementsdescribe the structure of their work unit (e.g., “A strong insistence on a uniform managerial stylethroughout the business unit” vs. “Managers’ operating styles allowed to range freely from thevery formal to the very informal.”). Items were scored such that higher scores represent a moreorganic structure. To justify the aggregation of individual-level data to unit level, we calculatedintraclass correlation coefficients ICC (1) and ICC (2). ICC (1) = 0.28, ICC (2) = 0.60. Thescale’s alpha reliability is 0.71.

Control Variables

The demographic variables of gender, education, and tenure with supervisor were employedas controls. In addition, we controlled for relative LMX in our analysis, which was obtainedby subtracting the mean individual-level score for each group from individual group mem-ber’s LMX scores (Kozlowski & Klein, 2000). LMX differentiation was obtained by usingthe variance of LMX scores with each group (Liden, Erdogan, Wayne, & Sparrowe, 2006).Relative LMX and LMX differentiation were controlled for because they may influence individ-ual performance (Henderson, Wayne, Bommer, Shore, & Tetrick, 2008; Hu, 2009; Liden et al.,2006).

Analysis Approach

The hierarchical linear model (HLM6.08) was used to test the multilevel moderated mediationprocess among work-unit structure at group level, LMX, psychological empowerment, felt obli-gation, and creativity at individual level. Following Kreft and de Leeuw (1998), we built up ourmodel systematically on the incremental approach. To test the moderated mediation, we followedprocedures suggested by Muller, Judd, and Yzerbyt (2005).

Y = β21 + β22X + β23Mo + β24XMo + ε20 (1)

Me = β10 + β11X + β12Mo + β13XMo + ε10 (2)

Y = β31 + β32X + β33Mo + β34XMo + β35Me + β36MeMo + ε30 (3)

HLM is susceptible to multicollinearity problems (Wilk & Moynihan, 2005). Following Kreftand de Leeuw (1998), we grand-mean centered all the variables in the models. Meanwhile,according to Hofmann (1997), a prerequisite for testing hypotheses in the study is to ensure thesignificance of between-organization/group variance (τ 00) in outcome variable. The chi-squaretest of the null model indicated that employee creativity, psychological empowerment, and feltobligation varied significantly among groups, χ2(97) = 1041.25, τ 00 = .22, p < .001; χ2(97) =465.81, τ 00 = .18, p < .001; χ2(97) = 570.44, τ 00 = .24, p < .001.

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RESULTS

We used LISREL 8.5 (Jöreskog & Sörbom, 2001) to conduct a confirmatory factor analysis ofthe four individual level variables in our study. Table 1 presents the confirmatory factor analysisresults. The results show that the four-factor model had a better fit than the alternative models,demonstrating the distinctiveness of the variables in the study.

The means, standard deviations, and correlations among variables are shown in Table 2.We assigned the means of work-unit structure to members of the same group to calculate theindividual-level correlations.

We employed the causal steps described by Baron and Kenny (1986) to evaluate the simplemediating role of psychological empowerment and felt obligation in the relationship betweenLMX and creativity. Model 1 in Table 3 of HLM results shows that LMX had significant positiveeffect on creativity (γ = .25, p < .01). M2 shows that LMX had positive and significant effecton psychological empowerment (γ = .54, p < .001) and felt obligation (γ = .55, p < .001),

TABLE 1Comparison of Measure Models for Study Variables

Model Description χ2 df �χ2 RMSEA CFI TLI

The baseline model 5-factor model 338.65 88 .084 .95 .93Model 1 4-factor (combine psyemp and felobl) 384.54 92 45.89∗∗ .090 .94 .92Model 2 3-factor (combine lmx, psyemp, and felobl) 386.58 95 47.93∗∗ .088 .94 .92Model 3 2-factor (combine lmx, psyemp, felbol, and stru) 389.85 97 51.20∗∗ .088 .94 .92

Note. RMSEA = root mean square error of approximation; CFI = comparative fit index; TLI = Tucker-Lewis index;lmx = leader–member exchange; psyemp = psychological empowerment; felobl = felt obligation; stru = work-unitstructure.

∗∗p .01, two-tailed.

TABLE 2Descriptive Statistics and Variable Zero-Order Correlations

Variable M SD 1 2 3 4 5 6 7 8 9 10

1. Gendera .54 .50 —2. Education −14 2.40 −.04 —3. Dyadic tenure −4.17 4.16 −.10 .00 —4. RLMX −.00 .39 −.01 .05 .05 —5. LMX differentiation −.20 .30 .06 −.16∗∗ −.04 .00 —6. LMX −3.74 .70 −.07 .12∗ .08 .55∗∗ −.27∗∗ —7. Psychological empowerment −3.62 .58 .01 .20∗∗ .04 .22∗∗ −.11∗ .56∗∗ —8. Felt obligation −3.87 .65 −.08 .09 .08 .07 −.04 .44∗∗ .24∗∗ —9. Work-unit structure 2.78 .44 −.09 .02 −.09 .00 .02 −.21∗∗ −.12∗ −.18∗∗ —10. Creativity 3.70 .55 .03 .18∗∗ −.05 .00 .06 .19∗∗ 29∗∗ .28∗∗ −.02 —

Note. N = 367. Work-unit mean of work-unit structure and leader–member exchange (LMX) differentiation wereassigned to members of the same work-unit to calculate the individual-level correlations. RLMX = relative leader-member exchange.

aGender (0 = male, 1 = female).∗p < .05. ∗∗p < .01.

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TABLE 3Multilevel Moderated Mediation Analysis

M1 M2 M3

Variables Creativity Psychological Empowerment Felt Obligation Creativity

Level 1 predictorsIntercept 3.71∗∗∗ 3.62∗∗∗ 3.88∗∗∗ 3.71∗∗∗Gender .01 .03 −.06 −.01Education .03∗∗∗ .02 .02 .03∗∗∗Dyadic tenure −.01 .01 .00 .00RLMX −.26∗ −.21∗ −.44∗∗∗ −.11LMX .25∗∗ .54∗∗∗ .55∗∗∗ .04∗∗∗

Leve1 2 predictorsWork-unit structure .03 −.02 −.04 −.02LMX differentiation .27 .15 .24 .18

Cross-level interactionsLMX × Work-Unit Structure .04 .11 −.08 −.18

MediatorsPsychological Empowerment .17∗∗∗Felt Obligation .13∗∗Psyemp × Work-Unit Structure .42∗∗∗Felobi × Work-Unit Structure .01

Model deviance 391.82 480.68 581.18 367.09

Note. n = 367 for the individual level, n = 98 for the work-unit level. RLMX = relative leader-member exchange;LMX = leader–member exchange; psyem = psychological empowerment; felobl = felt obligation.

∗p < .05. ∗∗p < .01. ∗∗∗p < .001.

respectively. In M3, LMX, psychological empowerment and felt obligation were included. Theestimation results showed that psychological ownership and felt obligation were significantlyrelated to creativity (γ = .17, p < .001; γ = .13, p < .01), but the effect of LMX becameinsignificant (γ = .04, ns).

Baron and Kenny’s conditions fail to test for the significance of indirect effect (Preacher &Hayes, 2004). We then used bootstrap analysis (Efron & Tibshirani, 1993) to provide an alter-native test of the mediated effects (MacKinnon, Lockwood, Hoffman, West, & Sheets, 2002).Following procedures suggested by Shrout and Bolger (2002), we bootstrapped 10,000 samplesand used the bootstrap estimates to construct bias-corrected confidence intervals for all signifi-cance tests reported in this study (Mooney & Duval, 1993; Shrout & Bolger, 2002). The bootstrapresults are reported in Table 4. The results show that LMX has an indirect effect on creativitythrough psychological empowerment (P = 0.11, p < .01; 99% bias-corrected confidence inter-val [0.04, 0.19]), and through felt obligation (P = 0.08, p < .01; 99% bias-corrected confidenceinterval [0.02, 0.15]).

To test the hypothesized moderated mediation, we followed Muller et al. (2005)’s recommen-dation and assessed the following one option of necessary conditions for moderated mediation:(a) the independent variable must be related to the dependent variable, but there should not beinteractive effect between the independent variable and the moderator on the dependent variable(see Equation 1); (b) the independent variable must be related to the mediator (see Equation 2);

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TABLE 4Bootstrap Analysis on the Mediated Effect of Leader–Member Exchange on Creativity

Mediator PMX PYM Direct Effects (PYX)Indirect Effects

(PYMPMX)Total Effects

(PYX + PYMPMX)

Psychological empowerment .46∗∗ .24∗∗ .04 .11∗∗ .42∗∗Felt obligation .40∗∗ .20∗∗ .06 .08∗∗ .14∗∗

Note. N= 367. PMX = path from leader–member exchange to mediator; PYM= path from mediator to creativity.Controls = gender, age, and education.

∗∗p < .01.

(c) the interactive effect between mediator and moderator must be related to the dependent vari-able (see Equation 3). For the first necessary condition, M1 in Table 3 showed that the effects ofLMX on creativity (γ = .25, p < .01). For the second necessary condition, M2 showed that theeffect of LMX on psychological empowerment (γ = .54, p < .001) and on felt obligation (γ =.55, p < .001). For the third necessary condition, M3 showed the moderating effects of work-unitstructure. The interactive term between psychological empowerment and work-unit structure hada positive effect on creativity (γ = .42, p < .001). The interactive term between felt obligationand work-unit structure, however, did not have a positive effect on creativity (γ = .01, ns). Takentogether, the results suggested support for the moderated mediation model of Hypothesis 3 butnot Hypothesis 4.

Figure 1 shows the plot of the mediated effects of LMX at + 1 SD around the disaggregatedwork-unit structure. The indirect effect of LMX on creativity via psychological empowerment isstronger in organic than in mechanistic structure.

Low High

High

Creativity

Low

LMX

Organic structure

Mechanistic structure

FIGURE 1 The indirect interactive effect of leader–member exchange (LMX) and work-unit structure onemployee creativity via psychological empowerment.

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DISCUSSION

The goal of the study was to find a solution to the problems that managers often face of howto motivate employees to engage in creativity and how to make employees feel obligated to putefforts in creativity. Drawing on self-determination theory and social exchange theory, the studyproposed and tested an integrated model in which a high-quality LMX relationship can exertinfluences over both employee psychological empowerment and felt obligation that lead to cre-ativity. The processes may be enhanced or inhibited by the work-unit structure. The results ofthe data reveal that (a) LMX can enhance employee creativity completely through psychologi-cal empowerment and felt obligation, and (b) the indirect effect of LMX on creativity throughpsychological empowerment is facilitated in the organic work unit but inhibited in the mechanicwork unit. We now discuss the theoretical and practical implications of these findings.

Finding 1: Psychological Empowerment and Felt Obligation as Mediators

This study extends previous LMX literature by employing an integrated theoretical frameworkto explain the unique and independent mechanisms that underpin the relationship betweenLMX and creativity. The findings indicate that a relationship with supervisors can influenceemployee creativity through alternative motivation-oriented psychological empowerment andsocial exchange–oriented felt obligation. The results of the research give support to the view thatleader influences employee creativity in various aspects and through alternative ways (George &Zhou, 2007; Piccolo & Colquitt, 2006). However, most of the prior studies failed to link LMXwith employee creativity simultaneously through different paths. This study contributes to the lit-erature by integrating the motivation-oriented and social exchange–oriented paths in explainingthe LMX–creativity relationship.

Prior research has investigated the mediating effect of psychological empowerment on the rela-tionships between LMX and other work outcomes (Aryee & Chen, 2006; Harris, Wheeler, et al.,2009; Liden, Wayne, & Sparrowe, 2000). The mediating effect of psychological empowermentin the relationship between LMX and creativity has been surprisingly absent from investigation.As noted, the posited mediating effect of psychological empowerment has received both theoret-ical and empirical support in our study. This result is congruent with SDT that situational factorsexert influence on creativity via influencing autonomous motivation (Amabile, 1988).

Results from the present study reveal intervening variables (employee’s felt obligation to per-form creatively) that help account for the complex relationship between LMX and creativity tobetter explain how LMX leads to creativity at work. The result adds to previous results concerningthe relationship between employee’s perception of favorable treatment and their felt obligationto work better (Eisenberger et al., 2001). Benefits provided by the supervisor produce feelings ofobligation on the part of the subordinates, and the feelings of obligation enhance their creativity.The result supports the social exchange theory’s emphasis on the role of felt obligation in theLMX–outcome relationships.

Finding 2: Work Unit Structure as a Moderator

First, the results lend support for the moderating effect of work-unit structure on the relation-ship between psychological empowerment and employee creativity. The finding suggests that the

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features of organic structures provide a facilitative context for psychological empowerment andcreativity, whereas those of mechanistic structures provide a constraining context for the effectof psychological empowerment on creativity (Brazier, 2005). The work-unit structure has beenchosen as the arena of focus because individual work roles tend to be specific to a given contextand work-unit structure is the immediate workplace environment for employees. Psychologicalempowerment is granted by supervisors within the work unit, which may or may not be syn-chronized with the structure of the rest of the organization. When empowered employees workin organic structure, the effect of their psychological empowerment is reinforced by the work-unit structure, leading to stronger employee creativity. The result conforms to the argument thatthe context in which people work has a significant influence on individual-level relationships,because context can vary in its capacity as a resource or a constraint for the individuals withinit (Jones, 2006). Work-unit structure operates as a cross-level effect that moderates the associ-ation between psychological empowerment and creativity at the lower level. The current studyresponds to the call for expanding the range of contextual variables examined that might affectthe incidence of employee creativity at work (Shalley & Gilson, 2004).

Second, the study extends present literature on LMX and creativity literature through exploringthe moderated mediation process in the relationship between LMX and creativity. The strengthof the mediated relationship between LMX and creativity through psychological empowermentvaries depending on work-unit structure, and the indirect effect of LMX is stronger in organicthan in mechanistic structure. The study of the process by applying multilevel approach capturesthe rich and complex social context in which the mediating relationship is developed. The studyoffers new insights on how leaders nurture employee creativity through motivating employeesand designing work-unit structure.

Third, the study anticipates that the mediating effect of felt obligation is stronger in organicthan in mechanic work-unit structure. However, the research results do not support this hypoth-esis. It is found that employee’s felt obligation to reciprocate the benefits offered by theirsupervisor does not vary with work-unit structure. Although there may be other reasons, it ispossible that felt obligation is decided overwhelmingly by the quality of LMX so that work-unitstructure would not have salient moderating effect on felt obligation. In particular, the uniquecause–effect relation between felt obligation and creativity should largely result from the super-visor’s creative supportive behaviors and high value in creativity. Supervisors in the mechanicalstructure often feel that their hands are tied with the strict rules and regulations and cannot providethe much needed support for subordinates’ creativity. In contrast, supervisors in the organic struc-ture express great value in creativity and provide adequate support for creativity. Correspondingly,subordinates develop different levels of obligation to engage in creativity as a return to their super-visor and their organization. Thus, it is unlikely that the link between a high level of felt obligationand creativity would be moderated by a mechanistic structure, because only in an organic struc-ture can a link between a high level of felt obligation and creativity exist. Similarly, it is unlikelyfor a link between a low level of felt obligation and creativity to be moderated by an organicstructure, because only in a mechanistic structure can a link between a low felt obligation andcreativity exist. Thus, the hypothesized moderating effect of work-unit structure does not makemuch sense in either of the cases.

This study advances our understanding of the mediated LMX–creativity link by applying amultilevel model that captures the rich and complex work-unit structure in which the medi-ating relationship is developed. Furthermore, it offers new insights into the way in which

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leaders nurture employee creativity through the process of psychological empowerment and feltobligation, as well as the design of the work-unit structure.

Implications for Practice

LMX plays an important role in stimulating a high level of employee creativity throughemployee psychological empowerment and felt obligation. The effect of these two mecha-nisms suggests that supervisors can influence employee creativity in multiple ways. Supervisorsmay employ different interventions to enhance employee creativity and that the interventionsmay have compounding effects on employee creativity. First, because LMX makes a differ-ence in encouraging employee creativity, supervisors should be aware that their relationshipswith employees impact employee creativity. To increase subordinates’ creativity, supervisorsshould provide them with the necessary support including information, resources, authority,verbal encouragement, and consideration of subordinate’s personal well-being. Leaders shouldknow that employee creativity is boosted if their psychological empowerment is increased.They should help employees understand the importance of their roles in contributing to theoverall effectiveness of the organization, set inspirational and/or meaningful goals for them(Zhang & Bartol, 2010), express confidence in an employee’s competence, provide employ-ees with autonomy, and encourage the individual to decide how to carry out his or her job.Supervisors should also care about subordinates’ personal well-being so as to elicit their feltobligation to put more efforts in their work. In addition to the improvement of relationshipsbetween supervisor and subordinate, work-unit structure needs to be taken account of, as itcan act as an enhancer or an inhibitor of psychological empowerment conductive to creativ-ity. Organizations that have an emphasis on creativity should take a position closer to organicpattern rather than mechanic pattern. Particularly, it seems that teamwork and self-managementshould be encouraged as they can improve quality and reduce time needed to get new products tomarket.

Limitations and Recommendations

Like any study, this one is not without limitations. First, this study had a cross-sectional design.It is possible that creative employees may likely enter a high-quality relationship with their super-visors, rather than high-quality LMX leads to high creativity. The arguments tested were based ontheoretical logic and findings reported in the literature, but it is difficult to rule out such reversecausality. Research using longitudinal data or experimental methods is needed to confirm thedirection of causality assumed in this research.

Second, this study relied on a single, subjective source (from supervisors) to rate employees’creativity. However, creativity research points out that validity of creativity should be provided bymultiple creativity indicators such as supervisory ratings, invention disclosure forms, and researchreports. As creativity has a rather broad construct space, future research should provide a moreobjective measure of creativity. Further, the supervisor completing the creativity assessment isthe same person who the subordinate is rating on the LMX scales, which may cause the problemof halo effect. Future study should consider having someone else (the third party) rate creativityrather than the supervisor being rated by the subordinate.

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Third, the present study points out the significance of LMX quality in employee creativity.However, individuals in especially high-quality LMX relationships might feel pressure or theobligation (Gouldner, 1960) to do numerous extra jobs or work late at night, and such activities orattitudes could ultimately result in feelings of stress and unwanted outcomes. Future researcherscould examine this relationship to determine whether the relationship is curvilinear and provideadditional insight into the relationship.

Fourth, it is likely that other factors were neglected. As an example, Zhang and Bartol(2010) posited that creativity is contingent on a variety of individual differences, such as cre-ative self-efficacy, creative role identity, personality, knowledge, and skills. It is possible thatcreative self-efficacy moderates the link between LMX and psychological empowerment, or thata creativity-oriented personality moderates the connection between psychological empowermentand creativity. Future research might address this proposition.

Finally, though an organic structure is favorable for the encouragement of creativity, the deci-sion about whether to design an organic or a mechanistic structure depends on the particularsituation an organization faces: the environment it confronts, its technology and the nature of thetasks performed, and the type of people employed (Jones, 2006). Future research on creativityshould be able to address the strategies that might enhance the favorable effects of work-unitstructure while reducing the unfavorable effects as many as possible.

In conclusion, our research suggests that LMX can affect employee creativity through psy-chological empowerment and felt obligation. This dual-channeled influence indicates that LMXcan have a double benefit for managers to increase the level of employee creativity. Supervisorsshould attend to both influences when interacting with their subordinates. This study also empha-sizes the role of work-unit structure in the mediated relationship between LMX and creativity.It suggests that organic structure facilitates the mediating effect of psychological empowermenton employee creativity. The study sheds a new light on the LMX–creativity research and pro-vides primary work for future research to further explore why and how LMX influences employeecreativity.

ACKNOWLEDGMENT

The study was partially supported by a grant from the RGC of the Hong Kong SAR, China (No.CU10433/443310).

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