TRANSFORMATIONAL AND TRANSACTIONAL LEADERSHIP: AN

EXAMINATION OF MANAGERIAL COGNITION AMONG SPANISH

UPPER ECHELONS1

IE Working Paper WP06-13 30-03-2006

Juan Carlos Pastor Margarita Mayo

Instituto de Empresa Instituto de Empresa

Calle María de Molina 11 Calle María de Molina 11
28006 Madrid, Spain 28006 Madrid, Spain
juan.pastor@ie.edu margarita.mayo@ie.edu
T: +34 91 568 9600 T: +34 91 568 9600

Abstract
Transformational leadership predicts follower’s satisfaction and
performance beyond traditional forms of leadership. However, little is
known about the beliefs system associated with transformational leaders.
Taking a cognitive perspective, we examined how the managerial beliefs
that executives hold about their followers relate to their perceived
leadership style among a sample of 76 Presidents and CEO´s of Spain
largest firms. The results support the idea that executives with a learning
orientation are more likely to report a transformational leadership style;
whereas executives with a performance goal orientation are more likely to
report a transactional leadership style. We also found that self-rated
transformational leaders hold stronger Theory Y beliefs than self-rated
transactional leaders. Furthermore, we found that these mental associations
are held to a stronger degree for executives with graduate degrees of formal
education. These results are discussed in terms of their significance for
transformational leadership theory and leadership development.
Key words
Transformational Leadership, Managerial Cognition, Goal orientation,
Theory Y.
1
The authors would like to acknowledge financial support provided by MCYT SEC 2002-
02968. An earlier version of this paper was presented to the International Cross-Cultural
Conference of Leadership in Seul, Korea, 2004.
 IE Working Paper WP06/13 30/03/2006

INTRODUCTION

In the last two decades, there has been a great research effort to understand the
dynamics of transformational and charismatic leadership. Work on the extant theories in
this field, -Bass (1985), Burns (1978), Conger and Kanungo (1998) and House (1977) has
focused, for the most part, on the description of the behaviors and leadership styles of
transformational leaders and their effects on followers (see House & Shamir, 1993). The
empirical evidence showing that transformational and charismatic leadership predict
followers’ satisfaction and performance beyond other traditional forms of leadership is
overwhelmly positive, as demonstrated in three meta-analytical reviews (Fuller, Patterson,
Hester, & Stringer, 1996; Judge and Piccolo, 2004; Lowe, Kroeck, & Sivasubramanian,
1996).

Despite the evidence of the positive impact of transformational leadership in

followers and organizations, little is known about the cognitive aspects associated with
transformational leaders that may facilitate the adoption of this leadership style. The
cognitive perspective is conspicuously underrepresented in the transformational and
transactional leadership literature. A few studies have used a cognitive approach to explain
how transformational leaders motivate subordinates by engaging subordinates´ self-concept
in the interest of the leader’s mission (Shamir, House & Arthur, 1993; Bono & Judge,
2003). Similarly, a study by Pastor, Meindl & Mayo (2002) also focused on subordinate’s
attributions regarding the charismatic qualities of a leader. However, there is little research
on the attitudes and beliefs of leaders themselves that are associated with transformational
leadership. Understanding the beliefs system of transformational leaders has important
implications for leadership development. If transformational leaders display behaviors
toward subordinates that are unique and have an extraordinary impact on followers, we
might expect that their attitudes, values and beliefs about people in general and followers in
particular are also different from other types of leaders. For instance, it is reasonable to
expect that transformational leaders stimulate followers intellectually because they belief
that followers are motivated to learn and grow and can be motivated toward ideological
goals. Similarly, transformational leaders may invest time and effort in developing
followers, because they belief that followers are malleable and their competencies can be
developed.

In this study, we seek to understand some aspects of leaders´ cognitive system that
might act as precursors of the use of transactional and transformational styles to lead and
influence subordinates. We argue that the beliefs and values that leaders hold are key
determinants of their motivation to lead and their behavioral displays. Our purpose is to
gain a better understanding of the beliefs system held by executives who view themselves
as transformational leaders. We did this by examining some of the generalized beliefs and
implicit theories that leaders hold about their followers and their abilities. In a field study,
we explored the mental association between leaders´ self-perception of transformational
leadership and generalized beliefs consistent with McGregor’s (1960) Theory Y Philosophy
of Management and Dweck’s (1998) Implicit Theories of Abilities among Presidents and
CEO’s of Spain’s largest firms.
 IE Working Paper WP06/13 30/03/2006

TRANSFORMATIONAL LEADERSHIP

One of the most influential theories of leadership in the last few decades has been
the transactional-transformational theory of leadership (Bass, 1985, 1990, 1997; Burns,
1978). We used this theory to explore the relationship between managers´ beliefs and self-
perceptions of leadership for several reasons. First, Bass´ theory provides a comprehensive
theoretical framework as well as a number of refined tools to measure the various
leadership constructs advanced in the theory (e.g., Multifactor Leadership Questionnaire,
MLQ, Bass & Avolio, 1990). Second, the theory of transformational leadership has been
widely applied to a variety a settings which provides high construct validity to the concepts
and measures. Third, the theory provides a number of leadership dimensions that will allow
us to examine differences in the beliefs of managers who perceive themselves using one
leadership style over others. Finally, the transactional–transformational theory of leadership
has become the dominant paradigm for leadership research in the last few decades. A recent
search of keywords in materials published in PsycINFO conducted by Judge and Bono
(2000) revealed that from 1990 to 2003, there were more articles citing the transformational
theory of leadership than all of the other leadership theories combined (e.g., contingency
models, Vroom-Yetton, vertical-dyad linkage, and so on).

Generally, the transactional and transformational theory of leadership (Bass, 1985,

1990; Burns, 1978) seeks to explain the extraordinary effects that certain leaders have on
their followers. While transactional leaders obtain expected results from followers,
transformational leaders seem to obtain extraordinary effort, motivation, self-sacrificial
behavior and performance from their followers. Underlying these effects is the nature of the
relationship established between leaders and followers. Transactional leadership occurs
when leader-follower relationships are viewed as exchanges, in which leaders and followers
perceive each other as being potentially instrumental to each others’ goals and needs, such
as accomplishment of a task (Bass, 1990). By contrast, transformational leadership occurs
when leader-follower relationships are viewed as transcending their own personal interests
to the benefit of higher-order values and principles (Burns, 1978). Transformational leaders
are visionary, charismatic, sensitive to individuals’ needs and feelings, and inspirational
(e.g., Bass, 1985; Burns, 1978; Conger, 1989; Conger & Kanungo, 1988; House and
Shamir, 1993). Charisma has been found to be the major component of transformational
leadership (Bass, 1985). Charismatic relationships are characterized by followers’ intense
emotional feelings about the leader, unquestioning acceptance of leaders’ beliefs, and an
emotional attachment to the mission. These followers react with devotion, affection,
admiration, and extraordinary esteem for their leaders. The transactional and
transformational theory of leadership has been successfully applied in different
organizational contexts, which adds to its construct validity.

More specifically, transformational leaders have an enormous influence on

followers by paying individualized consideration to each of them, talking about
possibilities in the future, and acting self-sacrificially. Transformational leadership occurs
when there is a personal identification with the goals of the leader, so that followers are
willing to exert high levels of effort and commitment. There are four main dimensions to
transformational leadership. First, idealized influence or charisma refers to the leader’s
ability to exercise intensive and diffuse influence over followers’ beliefs, attitudes and

2
 IE Working Paper WP06/13 30/03/2006

behaviors. Charisma is viewed as a relationship or bond between the leader and the
follower. Charismatic leaders articulate overarching goals, communicate high expectations,
exhibit confidence in their followers, and establish emotional bonds with them. Charismatic
leaders project a sense of power, confidence, and dynamism to other team members.

Second, inspiration refers to the behaviors of leaders that motivate and inspire
followers, such as establishing challenging goals and providing meaning to the job.
Inspirational leaders display enthusiasm and optimism and provide a vision of the future
that is appealing to their followers. These leadership style includes communicating clear
expectations about effectiveness, effort and commitment to the task at hand. Third,
individualized consideration refers to the behaviors of leaders who show concern for their
followers´ welfare and engage in frequent conversations with them. They stress the
satisfaction and well-being of their interlocutors and often act as coaches and mentors for
other team members. They are perceived as friendly and approachable, and show
acceptance of individuals’ differences. They show active listening and delegate or involve
members in challenging tasks to develop them. Finally, intellectual stimulation refers to the
behaviors of leaders who often question the assumptions made by their followers, helping
them to reframe problems, and to approach old situations in new ways. They stimulate
creativity in the team and never criticize individual members’ mistakes.

In contrast, transactional leadership occurs through an exchange between the leader

and the follower in which rewards and incentives are offered in exchange for effort and
compliance. There are two main dimensions in the transactional leadership relationship.
First, contingent reward refers to those aspects of the relationship in which leaders clarify
goals, talk about expected behaviors and accomplishments, and reward subordinates for
expected levels of performance. These leaders see their relationship with followers as an
exchange process in which their role is to assign and get agreements from followers by
clarifying the rewards that will likely be obtained in exchange for satisfactory performance.
Second, management by exception refers to the behaviors of leaders who often engage in
corrective transactions with followers. These leaders arrange to monitor subordinates’
performance and look out for errors in order to correct them. This process of searching for
mistakes can be passive, waiting for errors to occur, or active, when leaders closely
examine work processes so that mistakes can be prevented and corrected.

MANAGERIAL COGNITION

The socio-cognitive approach to psychology suggests that behavior is a function of

the interaction between individuals’ internal dispositions and the situation (Bandura, 1997;
Mischel & Shoda, 1998). Indeed, most socio-cognitive perspectives share the common
view that internal dispositions are activated by situational factors and have an effect on
behavior through a core set of cognitive and affective mediating processes (Mischel &
Shoda, 1998). If individuals’ attitudes and beliefs toward others are important determinants
of their behavior (Fishbein & Ajzen, 1975), then transactional and transformational leaders
may hold different managerial beliefs and assumptions that underlie their preferences for
transactional and transformational leadership styles. That is, transactional and
transformational leaders show unique patterns of behaviors toward subordinates that should
be related to specific beliefs and assumptions about people in general and their subordinates

3
 IE Working Paper WP06/13 30/03/2006

in particular. For instance, delegating responsibilities on subordinates requires a high

degree trust and the belief that at least certain people can be trusted. We explore in this
paper two important sets of beliefs in the organizational behavior literature that could be
related to leaders preferences for certain leadership styles, namely the Implicit Theories of
Ability (Dweck, 1989; Dweck & Ledggett, 1988; Heyman & Dweck, 1992; Licht &
Dweck, 1984) and Theory Y Philosophy of Management (McGregor, 1960). These two sets
of beliefs include basic assumptions about people’s motivations and their ability to learn
that might be related to the leadership styles implemented by managers.

Implicit Theories of Ability. Research on goal orientation has received a great deal
of attention in the last few years (e.g., Seijts, Latham, Tasa, Latham, 2004). Working in the
educational psychology field, Dweck (1989, 1996) originally proposed that the goals
people pursue create a framework for the interpretation of events and outcomes. The work
of Dweck and her colleagues (Dweck, 1989; Dweck & Ledggett, 1988; Heyman & Dweck,
1992; Licht & Dweck, 1984) has identified two classes or types of goals: performance
goals and learning goals. Individuals with a performance goal orientation strive to
demonstrate their competence via task performance to avoid negative judgments of their
competence. In contrast, learning oriented individuals strive to understand something new
or to increase their level of competence in a given task.

Research has shown that the goal orientation is related to different conceptions of
ability (Dweck & Leggett, 1988; VandeWalle, Ganesan, Challagalla and Brown, 2000). In
fact, the two goal orientations can also be considered implicit theories of ability that have
important implications for behavior. Performance oriented individuals tend to consider
abilities difficult if not impossible to change and therefore avoid exploring ways to improve
abilities and skills after failures. In contrast, learning oriented individuals consider skills
and abilities changeable and therefore they strive to improve and master the tasks. The
conception of ability as a fix entity leads to a performance orientation that emphasizes goals
and results. In other words, those with the conception of ability as an unchangeable entity
will try to set goals to outperform others rather than improve their ability (Brett &
VandeWalle, 1999; VandeWalle, 1997; VandeWalle, Cron and Slocum, 2001). Thus, it is
reasonable to expect that leaders with implicit theories of ability as a fixed entity
(performance goal orientation) will see themselves as striving to pursue goals and motivate
subordinates by reinforcing their desired behavior or punishing them when they deviate
from the expected behavior. These behaviors are more consistent with a transactional
leadership style. Stated formally:

Hypothesis 1: Performance goal orientation will show a positive association with

transactional leadership.

In contrast, we expect leaders with a learning orientation to see themselves as

dedicating efforts to improve their subordinate’s abilities. Tabernero and Wood (1999)
found that learning oriented individuals tend to develop stronger self-efficacy, maintain
more positive affect, and set themselves more challenging goals across multiple trials in a
laboratory study. Also, VandeWalle an his colleagues (VandeWalle et al, 2000; Vande

4
 IE Working Paper WP06/13 30/03/2006

Walle and Cummings, 1997) found that learning goal orientation was related to active
feedback-seeking behaviors with respect to overall performance and technical aspects of
the job. These behaviors are consistent with a transformational leadership style.
Transformational leaders act as coaches seeking to improve their subordinates abilities.
Accordingly:

Hypothesis 2: Learning goal orientation will show a positive association with

transformational leadership.

Philosophy of Management. In his 1960 management book, The Human Side of

Enterprise, Douglas McGregor proposed the two motivational theories by which managers
perceive employee motivation. Originally, he referred to these opposing motivational
theories as Theory X and Theory Y. Beliefs consistent with Theory X include the idea that
most people are not ambitious, have little desire for responsibility, have little aptitude for
creativity in solving organizational problems and prefer to be directed. Most people are
self-centered and as a result, they must be closely controlled and often coerced to achieve
organizational objectives. In contrast, managers with Theory Y beliefs assume that work
can be as natural as play if the conditions are favorable. People are self-directed and
creative to meet their work and organizational objectives if they are committed to them.
These managers also believe that people are committed to their quality and productivity
objectives if the rewards in place address higher developmental needs such as self-
fulfilment. Theory Y beliefs also include the idea that the capacity for creativity can spread
throughout organizations and most people can handle increased responsibility because
creativity and ingenuity are common in the population. We expect that transactional and
transformational leaders will differ in their Theory Y beliefs about subordinates. Managers
with strong Theory Y beliefs will emphasize the development and involvement of
subordinates in the decision making process. This approach is consistent with the
dimensions of intellectual stimulation and individualized consideration of transformational
leadership that emphasize helping subordinates reframe problems in new and creative ways
and treating them individually. In contrast, executives with weak Theory Y beliefs will
emphasize incentives and external controls to motivate employees. This approach is
consistent with contingent reward and management-by-exception dimensions of
transactional leadership. Accordingly:

Hypothesis 3: Theory Y beliefs will show a stronger positive association with

transformational leadership than with transactional leadership.

So far, we have argued that there is an association between executives´ values and
their self-perception of leadership styles. In this section, we address the role that formal
education plays in the mental association between values and action. In particular, we
suggest that executives´ understanding of value-action relationships are improved and
facilitated with formal education. Organizational scholars have suggested that top managers
learn about the adequacy between strategic decisions and the characteristics of the

5
 IE Working Paper WP06/13 30/03/2006

environment through their career educational experiences (Hambrick and Mason, 1984).
Similarly, we expect that top managers understanding of the relationships between their
own personal values and congruent leadership styles may also be acquired through their
careers as leaders. As managers learn the values and assumptions underlying certain
leadership styles, they will identify their own leadership preferences. For example, an
important part of the training activities in most executive MBAs programs is directed
towards improving managers´ self-awareness of their own leadership styles (e.g., Boyatzis,
Stubbs and Taylor, 2002). Self-awareness helps individuals to control their cognitive
processes in order to plan and execute a desired course of action. Empirical work in this
area has found a positive relationship between this active control over cognitive processes
and learning (Sternberg, 1986). Thus, top executives who go through formal training in
graduate education might be able to develop action plans and execute leadership styles that
are more congruent with their own values and assumptions.

We argue that the educational level of top managers, particularly having and MBA
or beyond increases the self awareness about their own values and its corresponding
leadership styles to motivate and develop followers. CEOs with broader learning
experiences may be more likely to perceive accurately this value-action relationship, and
therefore report values and leadership styles that are consistent with current prescriptions of
transformational-transactional theory. Thus, the level of CEO education will moderate the
relationship between managers´ values and leadership styles, so that highly educated CEOs
will hold stronger association between beliefs and leadership styles than less educated
CEOs. Stated mode formally:

H4a. The self-reported relationship between Theory Y values and transformational

leadership actions will be stronger for highly-educated CEOs.

H4b. The self-reported relationship between learning goal orientation and

transformational leadership actions will be stronger for highly-educated CEOs.

H4c. The self-reported relationship between performance goal orientation and

transactional leadership actions will be stronger for highly-educated CEOs.

6
 IE Working Paper WP06/13 30/03/2006

METHODOLOGY

Sample and Procedure

The sample for this study includes 76 top executives of the largest companies in
Spain. A total of 800 surveys were sent to the top executive of the largest companies in
Spain and a reminder was sent a week later. We received a total of 76 usable surveys. The
executive who responded to the survey were in firms operating in the service (32%),
manufacturing (29%), industrial (19%), finance (11%), and computer and
telecommunication (9%) industry. Regarding the position of the leaders in these companies,
there were 43% presidents, 30% general directors, 18% board members and 9% other top
position. The average age of the leaders was 45 years. The education level varied between
4% less than BA, 59% BA, 29% MBA; and 13% PhD (percentages add more than 100
because some participants have more than one degree, such as both MBA and PhD). Sixty
six percentage of the leaders had up to 10 direct reports; 19% had between 10-20 and 15%
had more than 20 direct reports.

Measures

Transformational Leadership. We measured transactional and transformational

leadership by using a short version of the transformational leadership scales of the MLQ
with 11 items (Bass & Avolio, 1990). We included 3 items to measure charisma (e.g.,
“When I want to motivate my group, I make reference to my values and ideals), 2 items of
inspiration (e.g., “I always talk optimistically about the future”), 3 items of intellectual
stimulation (e.g., I suggest my subordinates new ways of doing their job”) and 3 items of
individualized consideration (e.g., “I treat each of my subordinates to develop their
strengths”). Responses to the items were measured with a 5-point scale (1-Almost never, 2-
very rarely, 3-Sometimes, 4-Often and 5-Almost always). The reliability of the scale was
.67.

Transactional Leadership. We measured transactional leadership by using a short

version of the transactional leadership scales of the MLQ with 6 items (Bass & Avolio,
1990). We included 3 items from the Contingent Reward (e.g., “I assure that members of
my group get their proper incentives when getting their objectives”) and 3 items of
Management-by-Exception (e.g., “I dedicate I good part of my time to correct errors and
complains”) scales of the MLQ (Bass & Avolio, 1990). Responses to the items were
measured with the same scale. The reliability of the scale was .67.

Theory Y. We measured managers’ philosophy of management by using a short

version with 6 items of the scale developed by Mainiero and Tomley (1986). The scale is
unidimensional and measures beliefs along a continuum going from strong Theory X to
strong Theory Y. An example of item on the Theory X pole is “money is basically what
motivates employees” and an example of item on the Theory Y pole is “people like to
assume responsibilities.” Responses to the items were measured with a 5-point scale
ranging from 1-Totally Disagree to 5-Totally Agree. The responses for Theory X were

7
 IE Working Paper WP06/13 30/03/2006

reversed, so we will refer to this measure as the Theory Y scale to avoid confusion. The
reliability of the scale (Cronbach´s alpha) was .60.

Implicit Theories of Ability. We measured managers’ goal orientation by using an 6-

item scale from Buthon, Mathieu and Zajac (1996). Three items were used to measure
performance goal orientation (e.g., I feel very well when I do things without errors and I
feel competent when I do jobs better than others) and 3 items to measure learning goal
orientation (e.g., I do my best when I try to do difficult and challenging projects”).
Responses to the items were measured with a 5-point scale ranging from 1-totally disagree
to 5-totally agree. The reliability of the scales (Cronbach´s alpha) was .61 for performance
goal orientation and .66 for learning goal orientation.1

Control Variables. We introduced controls for age, sex, number of subordinates,

tenure in the company, education and international experience. Age may affect the
leadership styles of CEO´s because the values and beliefs regarding leadership and
motivation during their training and formative years might be different. Even though there
is only one female CEO in our sample, there is some research supporting the idea that
female leaders use more transformational leadership styles (Eagly, Johannesen-Schmidt,
and Engen, 2003). The number of subordinates may affect the leadership style of CEOs
because they need to divide their time and attention among followers. Company tenure may
also affect the beliefs and leadership styles of their CEO´s. Education may also an effect on
CEOs values and leadership styles. MBA programs usually dedicate a good part of their
training to increase managers´ self awareness and practice new leadership styles. CEO´s
with an MBA degree or beyond may have values consistent with transformational
leadership. Finally, international experience may influence the leadership styles of the
CEOs by exposing them to a wider range of values and styles to motivate subordinates.

RESULTS

Means, standard deviations, and intercorrelations for the variables used in the
analyses are presented in Table 1. The correlation between transactional and
transformational leadership (r=.50, p<.01) is consistent with previous research in this area.
The Theory Y scale shows statistically significant correlations with transformational (r=.49;
p<01) and transactional leadership (r=.34; p<01). Learning goal orientation shows a
statistically significant correlation with transformational (r=.23; p<05) and performance
goal orientation shows a statistically significant correlation with transactional leadership
(r=.37; p<01). Performance goal orientation and learning goal orientation show a
statistically significant correlation (r=.40, p<.01). Table 1 shows the correlation matrix for
all the variables as well as the reliability indexes.

1
The reliability of the cognitive measures, although acceptable, is relatively low. One possible reason is that
we decided to shorten the number of items for each scale to accommodate the time pressures of executives.
For future research is recommended to use full scales.

8
 IE Working Paper WP06/13 30/03/2006

[Insert table 1 about here]

Multiple regression analyses were used to estimate the effects of CEO´s beliefs and
assumptions on leaders’ self-perceived leadership style. We included the control variables
in all the regressions. Since we are interested in the differences between transformational
and transactional leadership, we introduced controls for transactional leadership when
regressing transformational leadership and viceversa. Even though transformational and
transactional leadership are conceptually different, most studies show high correlations
between the two scales. By controlling for each other in the regression equations, we obtain
the portion of unique variance explained by the regressors that make leaders
transformational beyond their transactional leadership style and viceversa.

Hypothesis 1 predicts that performance goal orientation will show a positive

relationship with transactional leadership. The results shown in Table 2 provide support for
this hypothesis. As expected, performance goal orientation shows a positive and
statistically significant beta coefficient with transactional leadership (beta= .41, p<01). Also
as expected, the beta coefficient predicting transformational leadership did not reach
statistical significance (b=-.09, ns).

Hypothesis 2 predicts that learning goal orientation will show a positive relationship
with transformational leadership. The results shown in Table 2 provide support for this
hypothesis. As expected, learning goal orientation shows a statistically significant beta
coefficient predicting transformational leadership (beta=.27, p<01). In addition, we found a
negative and statistically significant coefficient for transactional leadership (b=-.26, p<.05).

Hypothesis 3 predicted that Theory Y beliefs will be a stronger predictor of

transformational leadership than transactional leadership. The results shown in Table 2
support this hypothesis. As expected, Theory Y beliefs show a positive and statistically
significant beta coefficient predicting transformational leadership (beta=.43, p<01). In
contrast, the beta coefficient predicting transactional leadership did not reach statistical
significance (b=.03, ns).

Hypotheses 4a, 4b and 4c stated that the level of educational experience moderates
the relationship between CEO´s values and their self-perception of leadership. To test these
hypotheses, we divided our sample between CEOs without MBA degrees (n=45) and
CEO´s with MBA degrees and beyond (n=31), and we examined the relationship between
CEO´s values and self assessment of leadership styles within each subsample. We run
regression equations within each sub-sample. The control variables were included in a first
step and the two goal orientations and philosophy of management were included in a
second step. Table 3 shows the beta coefficients for CEO´s goal orientation and philosophy
of management predicting transformational and transactional leadership. As compared to
the regression equation for the subsample of CEOs without MBA degree, the regression
equation predicting transformational leadership for the graduate subsample shows higher
beta coefficients for Theory Y (b=.62, p<.01 vs. b=.26, p<.01; difference z=2.09, p<.05)
and learning goal orientation (b=.45, p<.01 vs. b=.18, difference z=1.30, p=.09). Also,
performance goal orientation shows higher beta coefficients predicting transactional

9
 IE Working Paper WP06/13 30/03/2006

leadership in the graduate subsample than the non-MBA subsample (b=.55, p<.01, vs
b=.21, ns; difference z=1,68, p<.05). These results support our hypotheses.

SUMMARY AND DISCUSSION

Despite the relevance of transformational leadership in the leadership literature in

the last two decades, the values, beliefs and assumptions of transformational leaders have
received scant attention from leadership researchers. This study examined the implicit
theories of abilities and Theory Y beliefs of top executives as they relate to their self-
reported leadership styles. As predicted, learning goal orientation and Theory Y beliefs are
good predictors of leaders´ preferences for transformational leadership. In contrast and also
as predicted, performance goal orientation is a good predictor of transactional leadership.

One of the most interesting findings of the study relate to the effects of executives´
level of education on their mental association between managerial beliefs and leadership
styles. Executives with high levels of formal education (MBA or PhD) report stronger
associations between their values and the actions associated with transformational
leadership than executives with lower levels of formal education. In particular, the values
of Theory Y are strongly associated to the actions of transformational leadership in the
minds of highly educated executives. Similarly, a learning goal orientation shows stronger
association with the actions of transformational leadership in the minds of highly educated
executives than non-graduate degree executives. This congruence effect of graduate
education also occurs in the transactional leadership domain. In fact, highly educated
executives hold strongly mental congruence between performance goal orientation and their
self perception of transactional leadership. These results are consistent with the idea that
formal education increases the meta-cognition of executives about value-action
relationships. That is, their ability of knowing about their own implicit theories of action
and act consistently with them. This awareness is a fundamental step to increase managerial
learning. The key assumption here is that people have general beliefs about management
that affect their perceptions of leadership actions. The association between these beliefs and
the corresponding leadership actions becomes more obvious to those executives with
formal training.

The results of our study also support the idea that leaders’ implicit theories of ability
and managerial beliefs are significantly associated with their self perception of leadership
style. In particular, leaders with a learning goal orientation are more likely to report a
transformational leadership style to influence their subordinates; whereas leaders with a
performance goal orientation are more likely to report a transactional leadership style. It
seems that the dominant belief of leaders who view themselves as acting transformational
with their followers is that of learning and development over achievement and
performance. The data show that high scores in transformational leadership are associated
with higher scores on learning orientation. In contrast, it seems that the dominant
orientation of leaders who view themselves as transactional leaders with their followers is
that of performance and achievement over learning. Self-rated transactional leaders report
that performance is an important goal for them. These results contribute to the
transformational leadership literature adding a cognitive characteristic, namely learning

10
 IE Working Paper WP06/13 30/03/2006

goal orientation, to the well-studied behavioral patterns of transformational leaders. This

line of research contributes to advance a more socio-cognitive approach to leader-follower
relations that have received little attention in the transformational leadership literature.

The results of the study also show that leaders with a strong belief system consistent
with McGregor´s Theory Y are more likely to report using a transformational leadership
style than using a transactional leadership style with subordinates. These results suggest
that managers’ general set of beliefs regarding their philosophy of management and their
general expectation of how followers view their working life have an important effect on
their leadership style. These findings present similar theoretical and practical implications
as those for managers’ goal orientation and together, they present a more comprehensive
picture of the cognitive system associated with transformational leadership. Knowledge
about the values and beliefs of transactional and transformational leaders will help
managers and educators to develop transformational leadership abilities to motivate their
subordinates.

Overall, our results contribute to advance the transformational leadership theory

from a cognitive perspective. Most of the literature on transformational leadership has a
behavioral focus (e.g., Bass, 1985, Conger and Kanungo, 1998). Behavioral models of
transformational leadership consider leadership styles as a skill that can be acquired by
practice or observation. In this paradigm, the development of transformational leaders is a
matter of learning the right behaviors and practicing them. Other authors claim the role of
personality traits as important determinants of transformational leadership (e.g., House,
Spangler & Woycke, 1991, Judge, Bono, 2000, Judge et al, 2002). In this account, leaders´
behaviors are based on their personality and the selection of leaders with the right
personality make up is the most effective way to develop transformational leadership
throughout the organization. Our study contributes to this debate by adding the system of
values and beliefs of managers in the transformational and transactional leadership model.
Our study shows that in the mental maps of top executives, their philosophy of
management and implicit theories of ability are strongly associated with their leadership
behavioral styles.

Practical Significance

The results of our study have practical relevance to increase the level of
transformational leadership in organizations. The adoption of a specific leadership style is
the final result of leader’s personal characteristics, situational factors and follower
characteristics. In this equation, the system of beliefs and implicit theories that leaders hold
in their minds might prove to be an important determinant of their behavioral leadership
style. Most training courses tend to emphasize skill development and focus mainly on the
practice of behaviors consistent with transformational leadership. There is little emphasis in
the governing system of generalized beliefs and assumptions that antecede leaders’
behaviors. This type of training is likely to result in “situational learning” (Kim, 1993).
Situational learning occurs when managers face a problem and improvise a solution on the
spot changing a particular behavior, but without making any change in the manager’s
mental map. Training courses that emphasize the development of behavioral styles
consistent with transformational leadership might likely result in situational learning or

11
 IE Working Paper WP06/13 30/03/2006

what Argyris (1976) calls “single-loop” learning in his model. This learning might be
effective in the short term. In the long term, however, “each problem is solved, but no
learning is carried over to the next case” (Kim 1993, p. 46).

Argyris´ (1990, 1991) general model of individual learning states that people are
taught since their early childhood how to act and these lessons are transformed into what he
calls “theories of action” which contain rules and beliefs that guide their actions. His theory
of individual learning suggests that most people change their action, but still hold the same
governing belief system. This is what he calls “single-loop” learning. Yet, the “real”
learning only occurs when people change their governing beliefs and, therefore, their
actions, what he calls “double-loop” learning. Moving beyond single-loop learning toward
double loop-learning requires having the appropriate tools for mapping the system of values
and beliefs of managers and changing these beliefs. Teaching transformational leadership
requires mapping key management beliefs and having a strategy for changing these beliefs.
Transformational leaders differ from their transactional counterparts in their basic beliefs
about managing people. In order to develop transformational leaders, we need to develop
the set of rules, beliefs, and mental models that transformational leaders have in their minds
about the relationship between their actions and the consequences on their subordinates.
For instance, our results suggest that transformational leaders believe that people can be
trusted and their competencies can be improved.

Thus, the development of transformational leaders will require acting not only upon
their behaviors, but also on their value system to help them think differently. As our study
shows, leaders who enjoy new and difficult tasks, who value the opportunity to learn and
who think that abilities can be improved are more likely to report the use of a
transformational leadership style to motivate their subordinates. In contrast, leaders who
think that abilities are fixed and who prefer to work on routine tasks that they already know
are more likely to report the use of transactional leadership styles to motivate subordinates.

Limitations and Future Research

This study uses intra-person correlations as a strategy to examine managerial

cognition. We collected the data from a survey completed by executives on both measures -
beliefs and actions. This could be interpreted as a problem of single-source biases.
However, taking a micro-psychological approach to sense making, we interpret the intra-
person correlations as an indication of mental associations that reveals important
information for mapping and operationalizing belief systems and mental schemas. These
methodological challenges are not new in managerial cognition. For example, Porac,
Meindl, and Stubbart (1996) point out that “one of the greatest challenges facing research
on managerial and organizational sense making is the development of consistent standards
for defining and measuring cognitive phenomena.” (p. xv). We followed the methodology
successfully used by Priem (1996) who studied CEOs´ cognition by examining managerial
responses to a questionnaire. He asked executives to complete a survey that required them
to disclose their beliefs about the relationships between strategy, structure and environment.
Furthermore, supporting our methodological strategy, we found differential effects of
beliefs and assumptions on transactional and transformational leadership. These differential
effects are not affected by single source biases since they are intra-individual comparisons.

12
 IE Working Paper WP06/13 30/03/2006

These comparative results do provide a significant contribution to the leadership literature

and help us to understand better some of the cognitive aspects behind the transformational
leadership style. Future research on managerial cognition of transformational leadership
may use alternative methodologies, such as neural networks, to map more precisely the
links between specific beliefs and transformational behaviors.

In our study we have taken an individual approach to examine executives´

cognition. We focused on intrapsychic cognitive phenomena as a first step to understand
the thinking of transformational leadership. Yet, there is an increasing interest in modern
cognitive research that emphasizes interpsychic cognitive phenomena (e.g., Weick, 1995).
Following this trend, future research could go beyond the individual executive cognition to
the top management team cognition. If we think of a top management team as a cognitive
group, an interesting line for future research would be to study how the top management
team functions as a collective mind. For example, one could study the distributed cognition
regarding transformational leadership beliefs. This line of research is also consistent with
new conceptualizations of leadership as a shared phenomenon within a team (e.g., Mayo,
Pastor & Meindl, 2003).

Future research on the socio cultural factors that influence leaders´ management
beliefs would also be valuable. There is some evidence that the socio-political context
influence managers’ values and beliefs. For example, leadership values following World
War II became less authoritarian and more participative. In the mid 80s, Anzizu and Nueno
(1984) stated that “In Spain, leaders who are adaptable are seen to be of particular
importance” (cf. Bass 1990, p. 771). Today, our results show that top Spanish leaders view
themselves as acting more as transformational leaders than as transactional ones. Because
our data is perceptual we can not draw conclusions as to their actual behavior. However, it
is interesting to note that executives´ espoused theories of action are more consistent with
transformational leadership behaviors and a learning orientation. Future research examining
how the socio cultural context has the power to change the governing belief system of
leaders would be of relevance. This line of research would be of great interest to understand
and manage, for example, expatriation as a process not only to acquire technical knowledge
but also as a socialization tool for personal change and leadership development.

13
 IE Working Paper WP06/13 30/03/2006

REFERENCES

Argyris, C. (1976). Single-loop and double-loop models in research on decision making.

Administrative Science Quarterly, 21(3), 363-375.
Argyris, C. (1990). Overcoming organizational defenses: Facilitating organizational
learning. Needham, MA: Allyn & Bacon.
Argyris, C. (1991). Teaching smart people how to learn. Harvard Business Review, 69(3),
99-109.
Bandura, A. (1997). Self-efficacy: The excercise of control. New York: Freeman
Bass, B. (1997). Does the transactional transformational leadership paradigm transcend
organizational and national boundaries? American Psychologist, 52, 130-139.
Bass, B. M. (1985). Leadership and performance beyond expectations. New York: Free
Press.
Bass, B. M. (1990). Bass & Stogdill’s Handbook of Leadership (3rd ed.), New York: Free
Press.
Bass, B. M., & Avolio, B. J. (1990). Manual: The Multifactor Leadership Questionnaire.
Palo Alto, CA: Consulting Psychologists Press.
Bono, J. E., & Judge, T. A. (2003). Self-Concordance at work: Toward understanding the
motivational effects of transformational leaders. Academy of Management Journal,
46(5), 554-571.
Brett, J. F., & VandeWalle, D. (1999). Goal orientation and goal content as predictors of
performance in a training program. Journal of Applied Psychology, 84, 863-873.
Burns, J. M. (1978). Leadership. New York: Harper & Row.
Button, S. C., Mathiey, J. E., & Zajac, D. M. (1996). An examination of the relative impact
of assigned goals and self-efficacy on personal goals and performance over time.
Journal of Applied Social Psychology, 26, 1084-1103.
Conger, J. A., & Kanungo, R. N. (1988). Charismatic Leadership: The Elusive Factor in
Organizational Effectiveness. San Francisco: Jossey-Bass.
Conger, J. A., & Kanungo, R. N. (1998). Charismatic leadership in Organizations.
Thousands Oaks: Sage.
Dweck, C. S. (1989). Motivation. In A. Lesgold & R. Glaser (Eds.), Foundations for a
psychology of education (pp. 87-136). Hillsdale, NJ: Erlbaum.
Dweck. C. S. & Leggett, E. L. (1988). A social-cognitive approach to motivation and
personality. Psychological Review, 95, 256-273.
Dweck. C. S. (1996). Capturing the dynamic nature of personality. Journal of Research in
Personality, 30, 348-362.

14
 IE Working Paper WP06/13 30/03/2006

Dweck, C.S. (1998). The development of early self-conceptions: Their relevance for
motivational processes. In J. Heckhausen & C.S. Dweck (Eds.), Motivation and
self-regulation across the life span. Cambridge: Cambridge University Press.
Fishbein, M., & Ajzen, I. (1975). Belief, Attitude, Intention, and Behavior: An Introduction
to Theory and Research. Reading, MA: Addison-Wesley.
Fuller, J. B., Patterson, C. E. P., Hester, K. & Stringer, D. Y. (1996). A quantitative review
of research on charismatic leadership, Psychological Reports, 78, 271-287.
Heyman, G. D., & Dweck, C. S. (1992). Achievements goals and intrinsic motivation:
Their relation and their role in adaptive motivation. Motivation and Emotion, 16,
231-247.
House, R. J., & Shamir, B. (1993). Toward the integration of transformational, charismatic,
and visionary theories. In M. Chemers & R. Ayman (Eds.), Leadership theory and
research: Perspectives and directions, (pp. 81-107). San Diego, CA: Academic
Press.
House, R. J. (1977). A 1976 theory of charismatic leadership. In J. Hunt & L. Larson
(Eds.), Leadership: The cutting edge (pp. 189-207). Carbondale, IL: Southern
Illinois University Press.
House, R. J., & Shamir, B. (1993). Toward the integration of transformational, charismatic,
and visionary theories. In M. M. Chemers & R. Ayman (Eds.), Leadership theory
and research: Perspectives and directions (pp. 81-107). Academic Press.
House, R. J., Spangler, W. D., & Woycke, J. (1991). Personality and charisma in the U. S.
presidency: A psychological theory of leader effectiveness. Administrative Science
Quarterly, 36, 364-395.
Judge, T. and Bono, J. (2000). Five-factor model of personality and transformational
leadership. Journal of Applied Psychology, 85, 751-765.
Judge, T.A., Bono, J.E., Illies, R., and Gerhardt, M.G. (2002). Personality and leadership:
A qualitative and quantitative review. Journal of Applied Psychology, 87, 765-780.
Kim, D. (1993). The link between individual and organizational learning. Sloan
Management Review, Fall, 37-50.
Licht, B. G., & Dweck, C. S. (1984). Determinants of academic achievement: The
interaction of children achievement orientation with skill area. Developmental
Psychology, 20, 628-636
Lowe, K.B., Kroeck, K. G., & Sivasubramanian, N. (1996). Effectiveness correlates of
transformational and transactional leadership: A meta-analytic review of the MLQ
literature. Leadership Quarterly, 7, 385-425.
Mainiero, L.A., & Tomley C.L. (1986). Developing Managerial Skills in Organizational
Behaviour. Englewoods Cliffs, NJ: Prentice Hall.
Maslow, A. (1970). Motivation and Personality, 2nd ed. New York: Harper & Row.
McGregor, D. (1960). The Human Side of the Enterprise. NY: McGraw Hill.

15
 IE Working Paper WP06/13 30/03/2006

Mischel, W., & Shoda, Y. (1998). Reconciling processing dynamics and personality
dispositions. Annual Review of Psychology, 49, 229-258.
Shamir, B., House, R. J., & Arthur, M. B. (1993). The motivational effects of charismatic
leadership: A self-concept based theory. Organization Science, 4, 577-594.
Tabernero, C., & Wood, R.E. (1999). Implicit theories versus the social construal of ability
in self-regulation and performance on a complex task. Organizational Behavior and
Human Decision Processes, 78, 104-127.
VandeWalle, D., and Cummings, L.L. (1997). A test of the influence of goal orientation on
the feedback seeking process. Journal of Applied Psychology, 8, 390-400.
VandeWalle, D. (1997). Development and validation of a work domain goal orientation
instrument. Educational and Psychological Measurement, 8, 995-1015.
VandeWalle, D., Ganesan, S., Challagalla, G.N., and Brown, S.P. (2000). An integrated
model of feedback-seeking behavior: Disposition, context, and cognition. Journal of
Applied Psychology, 85, 996-1003.
VandeWalle, D., Cron, W.L., and Slocum, J.W. (2001). Te role of goal orientation
following performance feedback. Journal of Applied Psychology, 8, 629-640.

16
 IE Working Paper WP06/13 30/03/2006

Table 1. Descriptive statistics, reliability and correlations among all variables

1 2 3 4 5 6 7 8 9 10 11
1. Age1

2. Sex (1-M, 2-F) -.24*

3. Subordinates -.22 -.03
4. Tenure Co. .38** -.11 .00
5. MBA (1-No, 2-Yes) .02 .14 .06 .05
6. International (0-No, 1-Yes) .04 .14 -.11 -.14 .02
7. Transformational lead. .01 .07 -.12 -.05 -.02 .10 (.71)
8. Transactional leadership .03 .04 -.18 -.07 .04 .05 .50** (.67)
9. Performance Orientation -.06 -.05 -.03 -.12 -.01 -.16† .17 .36** (.61)
10. Learning Orientation .14 .04 .06 -.20 .02 -.04 .23* .04 .40** (.66)
11. Theory Y .09 -.14 -.05 -.19 .03 -.10 .49** .30** .09 0,07 (.59)
Mean 4.29 1.01 10 16.21 .42 1.41 4.02 3.78 3.97 4.11 4.16
SD 1.13 .11 6.96 10.85 .50 .50 .39 .57 .66 .60 .54
N=76. † p<.10; * p< .05; ** p<.01. Reliabilities in parenthesis.
1
Age was measure in categories according to the following: (1)-25, (2)26-34, (3) 35-44, (4)45-54,
(5)55-60, (6)+60

17
 IE Working Paper WP06/13 30/03/2006

Table 2. Results of the hierarchical regression analyses of Transformational and

Transactional leadership on CEO´s goal orientation and philosophy of management.

TRANSFORMATIONAL TRANSACTIONAL
LEADERSHIP LEADERSHIP
Controls
Age -.01 -.13 .11 .18
Sex .03 .07 .04 .09
Number of Subordinates .06 .05 .01 .04
Tenure Co. -.02 .14 -.07 -.09
International Experience .04 .01 .08 .10
MBA (1-No, 2-Si) .07 .11 .00 .01
Transformational lead. - - .45** .41**
Transactional leadership .45** .36** - -
Goal Orientation
Learning Goal orientation .27** -.26*
Performance Goal Orientation -.07 .40**
Philosophy of Management
Theory Y .43** .03

Adjusted R2 .15** .36** .15** .26**

Change in R2 .21** .11**
N=76. † p<.10; * p< .05; ** p<.01.

18
 IE Working Paper WP06/13 30/03/2006

Table 3. Differential Effects for MBA and Non-MBA CEO´s of congruence between
beliefs and action. Betas are from regression analysis on subsample of CEO´s with MBA
and without MBA

TRANSFORMATIONAL TRANSACTIONAL
LEADERSHIP LEADERSHIP

Beta N Beta N

Theory Y
MBA subsample .62** 31 .01 31
Non-MBA subsample .26* 45 .00 45

Pooled sample .43** 76 .03 76

Learning goal orientation

MBA subsample .45* 31 -.31** 31
Non-MBA subsample .18 45 -.22 45

Pooled sample .27** 76 -.26* 76

Performance goal orientation

MBA subsample .02 31 .55** 31
Non-MBA subsample -.01 45 .21 45

Pooled sample -.07 76 .40** 76

F*
† p<.10; * p< .05; ** p<.01.
Control variables include age, number of subordinates, international experience, company tenure
and transformational leadership when predicting transactional leadership and viceversa.

19
 IE Working Paper WP06/13 30/03/2006

Figure 1. Degree of association between values and leadership for CEO´s with and without
graduate education.

0,7

0,6

0,5
Beta Coefficients

0,4 Graduate
Non-graduate
0,3

0,2

0,1

0
Theory Y beliefs - Learning orientation - Performance orientation-
Transformational Transformational Transactional

20
NOTAS
 NOTAS

Depósito Legal: M-20073 I.S.S.N.: 1579-4873