The Determinants of Employees’ Innovative Behavior in China SMEs: Leader-Member Exchange (LMX) Theory Perspective

Abstract

Today's Chinese SMEs are dynamic and subject to constant challenges. Demonstrating employees' innovative behavior (EIB) to help Chinese SMEs to create a competitive advantage, attract customers, and build a loyal client base. Based on the literature review, the study utilizes theoretical, and hypothesis constructed, and employs Leader-member Exchange Theory to identify the key elements influencing employee innovative behavior (EIB) in the Chinese context. We propose that transformational leadership (TL) and organizational justice (OJ) would be the positive factors that significantly impact EIB. Transformational
leadership (TL) is essential in fostering an innovative environment. Studying TL's influence on EIB could provide insights into how leaders can encourage and support innovation in SMEs. In addition, organizational justice will influence employees' motivation, engagement, and commitment to innovation. Therefore, studying the role of transformational leadership (TL) and organizational justice (OJ) in promoting EIB in Chinese SMEs could help identify strategies organizations can utilize to promote innovation. Based on the literature review, we further argue that high levels of knowledge sharing (KS) among employees can strengthen this
mechanism.