The Leadership Quarterly 26 (2015) 156171

Contents lists available at ScienceDirect

The Leadership Quarterly

journal homepage: www.elsevier.com/locate/leaqua

The missing link? Investigating organizational identity strength

and transformational leadership climate as mechanisms that
connect CEO charisma with rm performance
Stephan A. Boehm a,, David J.G. Dwertmann a,1, Heike Bruch b,2, Boas Shamir c,3
a
Center for Disability and Integration, University of St. Gallen, Rosenbergstrasse 51, CH-9000 St. Gallen, Switzerland
b
Institute for Leadership and Human Resource Management, University of St. Gallen, Dufourstrasse 40a, CH-9000 St. Gallen, Switzerland
c
Department of Sociology and Anthropology, The Hebrew University, Jerusalem 91905, Israel

a r t i c l e i n f o a b s t r a c t

Article history: In this paper, we suggest that CEO charisma is related to rm performance via its effect on two im-
Received 15 October 2013 portant mediators. First, charismatic CEOs are expected to raise the transformational leadership
Received in revised form 22 July 2014 climate within an organization. Second, both CEO charisma and transformational leadership
Accepted 31 July 2014
climate are proposed to increase a rms organizational identity strength (OIDS), which in turn,
Available online 12 September 2014
relates positively to rm performance. We tested these propositions on a sample of 150 German
companies (20,639 employees) with a three-path mediation model at the organizational level
Handling Editor: William Gardner
of analysis, utilizing four independent data sources. Our study helps open the black box of organi-
zational leadership and organizational performance by demonstrating top-level leaderships (CEO
Keywords: charisma) cascading effect on the TFL climate throughout the organization and by showing that
Organizational identity strength
OIDS mediates both leadership levels relationships with rm performance. Further, our study is
CEO charisma
Transformational leadership climate
the rst to investigate the relationship between OIDS and performance at the organizational
Firm performance level of analysis.
2014 Elsevier Inc. All rights reserved.

Introduction

In this paper, we seek to integrate two central bodies of knowledge the literature on organizational leadership and the literature
on organizational identity in order to contribute to the understanding of a controversial issue in organizational studies the
relationship between strategic or top-level leadership and organizational performance (Finkelstein & Hambrick, 1996). Earlier studies
on this relationship focused on the effects of leadership succession on organizational performance and their conclusions ranged from
reporting no effects (Lieberson & O'Connor, 1972) to executive leadership can explain as much as 45% of organizational performance
(Day & Lord, 1988, p. 453). More recent studies have mainly focused on the relationship between charismatic or transformational
leadership at different organizational levels and performance. Studies of transformational leadership generally support the existence
of a relationship between TFL and individual and unit-level performance (for meta-analyses see Judge & Piccolo, 2004; Lowe, Kroeck,
& Sivasubramaniam, 1996). However, very few studies examined this relationship at the organizational level.

We would like to thank Associate Editor William Gardner as well as three anonymous reviewers for their thoughtful and constructive feedback during the review process.
Corresponding author. Tel.: +41 71 224 3181; fax: +41 71 220 3290.
E-mail addresses: stephan.boehm@unisg.ch (S.A. Boehm), david.dwertmann@unisg.ch (D.J.G. Dwertmann), heike.bruch@unisg.ch (H. Bruch), boas.shamir@huji.ac.il
(B. Shamir).
1
Tel.: +41 71 224 3194; fax: +41 71 220 3290.
2
Tel.: +41 71 224 2371; fax: +41 71 224 2374.
3
Tel.: +972 54 2242258; fax: +972 3 5479499.

http://dx.doi.org/10.1016/j.leaqua.2014.07.012
1048-9843/ 2014 Elsevier Inc. All rights reserved.
 S.A. Boehm et al. / The Leadership Quarterly 26 (2015) 156171 157

Studies on the relationship between CEO charisma and organizational performance have produced mixed results. Some studies
report that CEO charisma has a positive effect on rm performance (Agle, 1993; Agle & Sonnenfeld, 1994; Waldman, Javidan, &
Varella, 2004), while others report no effects (Agle, Nagarajan, Sonnenfeld, & Srinivasan, 2006; Tosi, Misangyi, Fanelli, Waldman, &
Yammarino, 2004). One study reports a positive effect, but only under conditions of high environmental uncertainty (Waldman,
Ramirez, House, & Puranam, 2001). A conclusion emerging from these ndings (Agle et al., 2006; Waldman & Yammarino, 1999) is
the need to better explain the inconclusive evidence of the relationship between CEO charisma and rm performance by studying
the underlying processes that translate top-level leadership behavior into performance.
In this study, we develop and test a model that includes two potential mediators. The aim is to examine the possibility that even
though CEO charisma may not have a direct relationship with rm performance, it may affect other variables, which in turn affect rm
performance. First, we draw on the leadership literature and the organizational identity literature to suggest that CEO charisma affects
the strength of the organizational identity, which in turn enhances rm performance. Voss, Cable, and Voss (2006) were among the
rst to empirically show that strategic or top-level leaders impact rm performance through organizational identity-related process-
es. If organizations and their management cannot project a solid and unied identity for employees to follow, their performance
seems to suffer due to the lack of a common point of reference (Brown & Starkey, 2000; Scott & Lane, 2000). As entrepreneurs of
identity, leaders play an important role in this regard (Reicher, Haslam, & Hopkins, 2005; Reicher & Hopkins, 2001, 2003). By
engaging in rhetorical and symbolic behaviors, leaders create a strong sense of identity in their organizations. They use this identity
to persuade people to understand themselves, their interests, and their predicaments in a certain way, to persuade certain people
that they are (for certain purposes) identical with one another and at the same time different from others, and to organize and justify
collective action along certain lines (Brubaker & Cooper, 2000, p. 5). Based on the self-concept theory of charismatic leadership (Kark,
Shamir, & Chen, 2003; Shamir, House, & Arthur, 1993), we suggest that charismatic CEOs are particularly likely to engage in behaviors
that facilitate the development of a strong and shared sense of identity in their organizations. Hence, the stronger the CEO charisma,
the more pronounced should be the organizational identity strength.
In addition, we propose a second path through which CEO charisma is associated with rm performance. As organizations increase
in size, CEO charisma becomes a more distant form of leadership (Shamir, 1995), which has to be mediated by leadership at lower
levels of the organization. The lower-level leaders have to transmit the charismatic leader's vision to the organization's lower echelons
and demonstrate their commitment to the vision in their daily interactions with other organizational members. In other words, both
the organization's top-level and lower-level leaders may inuence OIDS. We build on arguments and ndings on the cascading
effects of charismatic and transformational leadership (Bass, Waldman, Avolio, & Bebb, 1987; Waldman & Yammarino, 1999;
Yammarino, 1994) to propose that the stronger the leader charisma, the more likely s/he is to foster a TFL climate in the organization.
We further build on the literature on TFL across levels of analysis (Hill, Seo, Kang, & Taylor, 2012), as well as on recent studies on TFL
climate's effects on positive organizational outcomes (Menges, Walter, Vogel, & Bruch, 2011; Walter & Bruch, 2010), to propose that
such a climate would further enhance OIDS and, ultimately, rm performance.
The model we more fully develop in the next sections is presented in Fig. 1.
Our study contributes to several streams of research. First, we enrich and rene the literature on the relationship between CEO
charisma and rm performance by demonstrating two mechanisms that mediate this relationship. Second, we nd support for
arguments (to date only supported by a single study: Bass et al., 1987) regarding the relationship between an organization's top-
level and lower-level leadership. Third, we contribute to the emerging literature that views leadership as an organizational-level
phenomenon and captures this view in the construct of leadership climate. Fourth, by positioning OIDS as a central and potentially
useful mediator, and by showing its relationships with leadership aspects and rm performance for the rst time, we make an original
contribution to the organizational identity literature.

CEO charisma

Organizational
Firm performance
identity strength

TFL climate

Fig. 1. Conceptual organizational-level model of the mediating role of identity strength in the leadershipperformance link.
Note. CEO = chief executive ofcer; TFL = transformational leadership.
158 S.A. Boehm et al. / The Leadership Quarterly 26 (2015) 156171

Theory and hypotheses development

CEO charisma and rm performance

Leadership scholars have proposed various mechanisms through which charismatic CEOs might inuence rm performance:
(1) By presenting a compelling vision, they inspire and enthuse the organizational members and other relevant stakeholders
(Agle, 1993; Shamir et al., 1993), thus increasing their motivation, commitment, and efforts on behalf of the organization.
(2) By demonstrating strong convictions and expressing condence in their employees' abilities (House, 1977), charismatic leaders
empower them and increase their sense of collective efcacy, which increases their persistence and ability to overcome difculties
and obstacles. (3) Through their vision, strong values, role-modeling behavior, and use of other symbolic means, charismatic leaders
provide a focal point that increases intra-organizational integration. These behaviors increase the cohesion level between the organi-
zational members and the organizational units, as well as inuence the development of a strong organizational culture. Both of these
effects are likely to result in agreement about the values and the goals, a high level of cooperation, and in overall better integrated
internal processes (Waldman & Yammarino, 1999). (4) These behaviors are also likely to increase the salience of the collective iden-
tity, which in turn increases the organizational members' identication with the organization and their willingness to make sacrices
for it (Shamir et al., 1993). (5) By providing intellectual stimulation and a sense of collective efcacy, and by generating a high level of
trust and condence in their leader's abilities among employees, charismatic leaders help the organization overcome various forms of
cognitive, motivational, and obligation inertia (Agle et al., 2006), deviate from the status quo, and make the necessary changes to bet-
ter adapt to environmental changes. This argument is consistent with Weber's (1947) positing of charismatic authority as the main
vehicle for social change, and Oreg and Berson's (2011) nding that TFL is negatively related to resistance to change.
From an empirical point of view, there is mixed evidence on the relationship between CEO charisma and rm performance.
Agle (1993) and Agle and Sonnenfeld (1994) report positive associations between CEO charisma and organizational
performance. Waldman and colleagues (2004) nd a similar relationship, while Waldman et al. (2001) nd this relationship
only in organizations facing a high level of environmental uncertainty. In contrast, Tosi and colleagues (2004), like Agle et al.
(2006), nd no such relationship. In fact, Agle and colleagues (2006) even nd a relationship in the opposite causal order, i.e.
a positive link between rm performance and subsequent attributions of charisma to the CEO.
Meta-analytic studies on the effects of TFL (which includes charisma) have also established positive relationships between TFL and
various indicators of group and organizational performance (Judge & Piccolo, 2004; Lowe et al., 1996). While these studies are not
limited to CEO leadership, and do not separate the effect of charisma from the overall TFL effect, their results are consistent with
the theoretical arguments of this section. Therefore, in view of these results, the strength of the theoretical arguments, and since at
least some of the studies on the CEO charismaorganizational performance link have found positive relationships, we propose the
following hypothesis.

H1. CEO charisma is positively related to rm performance.

Waldman and Yammarino (1999) and Agle et al. (2006) have called for scholars to examine the mediating variables in order to
understand the black box of CEO charisma and organizational performance. On the basis of both the leadership literature and the
organizational identity literature, we suggest that OIDS may be a mediator of particular interest. However, we need to clarify the
meaning of the OIDS construct rst.

Organizational identity strength dened

The organizational identity construct, dened as that which members believe to be central, enduring, and distinctive about their
organization (Albert & Whetten, 1985, p. 265), has received considerable scholarly attention over the past decades (Ashforth,
Rogers, & Corley, 2011; Oliver & Roos, 2007; Whetten, 2006). In spite of organizational identity's importance for many organizational
phenomena, including competitive advantage (Fiol, 1991), organizational change (Reger, Gustafson, DeMarie, & Mullane, 1994), and
conict (Golden-Biddle & Rao, 1997), Whetten and colleagues (Foreman & Whetten, 2002; Whetten, 2006) have criticized the eld's
development. They believe that scholars have concentrated too much on theory building, while neglecting quantitative model testing.
This criticism applies specically to scholarly work on identity content (see Oliver & Roos, 2007 for an overview). Organizations
differ greatly when qualitatively analyzing and describing their identity content, i.e. their mission, core values, culture, modes of
performance, and key products (Elsbach & Kramer, 1996). Consequently, it is difcult to compare identity content across organiza-
tions and almost impossible to build and test quantitative models on these grounds. A potential remedy might be to focus on identity
strength (OIDS), rather than on identity content. As Cole and Bruch (2006, p. 588) point out, it may not be identity per se, but rather
the strength with which identity beliefs are entrenched within organizational members that might be of real importance to organiza-
tions. Milliken (1990) and Gioia and Thomas (1996, p. 387) dene OIDS as the extent to which members held the values and identity
of the institution. Similarly, Kreiner and Ashforth (2004, p. 8) dene a strong organizational identity as one that is widely shared and
deeply held by organizational members. It is reected by a common sense of purpose, a clear and unique vision and mission, as well
as feelings of unity within the organization. Following this prior work, we dene OIDS as the extent to which there is a shared and
strongly held belief among the organizational members that the organization has a common and unique identity.
We conclude this section by briey examining the relationship between OIDS and organizational culture, a construct which seems
to partly overlap with organizational identity. In drawing the conceptual boundaries between the two concepts, we agree with
 S.A. Boehm et al. / The Leadership Quarterly 26 (2015) 156171 159

Whetten (2006; see also Fiol, Hatch, & Golden-Biddle, 1998; Hatch & Schultz, 1997, 2002), who regards culture as an element, or an
antecedent, of an organization's identity if the stakeholders perceive cultural elements as distinguishing features and central and
enduring organizational attributes (p. 228). Consequently, culture can also be interpreted as an antecedent or constituent of OIDS.
Further, one literature stream studies the culture concept by means of quantitative methods and investigates its relationship with
rm performance (e.g. Calori & Sarnin, 1991; Cooke & Rousseau, 1988; Denison & Mishra, 1995; Gordon & DiTomaso, 1992). While
a detailed review of this literature would be beyond the scope of this paper, we want to emphasize that the mechanisms proposed
to explain the positive relationship between culture and rm performance are largely congruent with our rationales, for example, in-
creased levels of cooperation, coordination, and initiative taking in rms with a high culture intensity (Cooke & Szumal, 2000;
Murphy, Cooke, & Lopez, 2013).

CEO charisma and organizational identity strength

Even though the relationship between organizational leadership and OIDS has not yet been studied, there are reasons to assume that
leadership in general and charismatic leadership in particular play an important role in fostering a strong sense of organizational iden-
tity. First, as mentioned above, OIDS and organizational culture are closely related (Elsbach & Kramer, 1996; Martin, Feldman, Hatch, &
Sitkin, 1983; Whetten, 2006) and leaders are, at least to some extent, the givers and deners of organizational culture (Schein, 1990;
Trice & Beyer, 1991). More broadly, leadership is the management of meanings (Smircich & Morgan, 1982) and the organizational iden-
tity is one meaning that leaders try to inuence. In developing a rationale for charismatic leadership effects on OIDS, we largely follow
and extend Shamir and colleagues' argumentation (Kark et al., 2003; Shamir, Zakay, Breinin, & Popper, 1998; Shamir et al., 1993). In
addition, we draw from work on charismatic leadership (e.g. Conger, Kanungo, & Menon, 2000) and the social identity theory of lead-
ership (Haslam, 2004; Hogg & Terry, 2000; Van Knippenberg & Hogg, 2003).
Shamir and colleagues theoretically developed and empirically tested a self-concept-based theory of charismatic leadership. Central
to their work is the proposition that the outcomes of charismatic leadership (such as personal commitment, or organizational citizenship
behavior) can largely be explained by the effects of leader behavior on followers' self-concepts, including social identication. Originally,
Shamir et al.'s (1993) theory focused on charismatic leaders' impact on individual followers, but some of their arguments can be extended
to the organizational level. In particular, Shamir and colleagues (1993) argue that charismatic leaders increase the salience of the collec-
tive identity in their followers' self-concepts in various ways. Thereby they increase these followers' identication with the collectivity,
their commitment to the collectivity, and their efforts to achieve the collective mission. Studies by Shamir et al. (1998), Conger et al.
(2000), and Kark et al. (2003) extend this line of reasoning to the unit level by showing that charismatic leaders can also increase the
collective identication of employees with their specic unit. Similarly, Van Knippenberg and Hogg (2003) describe how leaders can em-
phasize the collective identity, make it more salient for the organizational members, and thus mobilize them to act collectively.
We argue that the behaviors explaining the effects of charismatic leaders on organizational members' identication with their
organization or unit are also relevant for explaining charismatic leaders' impact on OIDS. Specically, we propose that charismatic
CEOs increase OIDS by: (1) dening the collectivity's boundaries and managing the entry and exit of the members in such a way that
it symbolizes the organizational identity's values; (2) highlighting the collectivity's history and telling stories about its history; (3) empha-
sizing the collective identity in their visions and justifying proposed changes in terms of their consistency with the collective identity and
its central values; (4) emphasizing the collectivity's distinctiveness, prestige, superiority, and competition compared to that of other
groups; (5) using ceremonies, rituals, slogans, internal language, dress, logos, and other symbolic means to represent and reinforce the
collective identity; and (6) role modeling the collective identity, as well as its central characteristics and values, in their behavior and pre-
senting themselves as prototypical group members (Shamir et al., 1993; Van Knippenberg & Hogg, 2003), thus becoming a symbol of the
organizational identity.
In sum, charismatic CEOs are in a favorable position to act as identity entrepreneurs (Reicher et al., 2005) due to their visibility, and
their ability to draw the attention of their constituents, and because they are often perceived as representative characters that embody
the organization's identity and values. They can positively distinguish their company from their competitors by referring to the
organizational visions, success stories, specic competencies, successful innovations, and products. By emphasizing their organizations'
uniqueness, boundaries, and strengths, charismatic CEOs may not only address their employees' wish to belong to a distinct, unique,
and prestigious organization (Haslam, 2004; Tajfel & Turner, 1979, 1986), but may also increase their organizations' sense of collective
identity. We believe that these potential effects of CEO charisma on OIDS may not only be found in publicly celebrated, large-scale enter-
prises, but also be found in smaller rms in which the owners and CEOs interact with their employees daily, set a personal example, show
their employees what the organization stands for, and demonstrate their commitment to the organizational mission (Koene, Vogelaar, &
Soeters, 2002).
Based on the above arguments, we formulate the following hypothesis.

H2. CEO charisma is positively related to organizational identity strength.

Organizational identity strength and rm performance

We propose that OIDS has a positive impact on rm performance through three main channels, which include the top manage-
ment team (TMT) behavior, the behavior of the company's workforce, as well as the behavior and the reactions of external stake-
holders, such as customers.
160 S.A. Boehm et al. / The Leadership Quarterly 26 (2015) 156171

First, Milliken (1990) suggested that OIDS tends to be associated with a TMT belief in the organization's relative invulnerability to
environmental changes. Top managers perceiving a strong identity seem more likely to believe in the rm's collective capabilities to
master an external change effectively and to perceive this as an opportunity rather than a threat. Such a collective sense of efcacy
should contribute to rm performance through its effects on managers' motivation, persistence, and resilience. Gioia and Thomas
(1996) proposed similar arguments by suggesting that a high OIDS might provide management with the condence to be proactive
and adopt a more offensive strategy to deal with the challenges it faces. Interestingly, they also found OIDS to be negatively related to
organizational issues interpreted as being political, suggesting that stronger institutional identity perceptions minimize the need for
political speculation regarding the key issues facing the organization and increase managers' commitment to proactively deal with
these issues. This is also in line with Voss and colleagues (2006), who showed that the TMT identity perceptions relate signicantly
to nancial performance. Top-level leaders perceiving a single identity are more likely to avoid unproductive TMT conicts, to send
clear messages to their workforce, and to create momentum for important projects, all of which have positive implications for rm
performance.
Second, OIDS may unfold its impact on rm performance by affecting the organization's employees. Scholars taking a social iden-
tity perspective have argued that a strong organizational identity is one of the key antecedents of organizational identication
(Ashforth, Harrison, & Corley, 2008; Kreiner & Ashforth, 2004), which, in turn, is likely to affect members' motivation and actions
on behalf of the organization, its goals, and its mission (Shamir et al., 1993). Consequently, employees who perceive a pronounced
OIDS and identify with their organization are likely to transcend narrow self-interests and rationality (Ashforth & Humphrey,
1995, p. 116) and engage in self-sacricial, collective-oriented behavior (Shamir et al., 1993, p. 582) on behalf of their company.
Kark and Shamir (2002) and Van Knippenberg (2000) have advanced similar arguments. Positive links between identity perceptions,
value-based commitment, and related motivation and behavior are also proposed in Meyer, Becker, and van Dick's (2006) integrative
model of social identities and commitments at work. Organizational members' increased commitment is likely to be positively related
to increased levels of rm performance, as highly committed members are expected to perform well above the minimum required for
retention (Kunze, Boehm, & Bruch, 2011; Ostroff, 1992). Finally, OIDS perceptions should also promote a we-feeling within organi-
zations, which offsets negative outgrouping processes and reduces unproductive inter-unit competition and conicts (Voss et al.,
2006). Such decrease in relationship-based conicts (Jehn, Northcraft, & Neale, 1999) should shift employees' focus to more produc-
tive tasks, with positive implications for rm effectiveness. This is also in line with research on culture intensity's effects on rm per-
formance, which found increased levels of coordination and cooperation within rms with a strong culture perception (Murphy et al.,
2013).
Third, OIDS may further contribute to rm performance by affecting external stakeholders. More specically, a strong organiza-
tional identity that many organizational members share, will also be projected to external constituents such as suppliers, customers,
or partners who perceive it as the rm's organizational image (Gioia, Schultz, & Corley, 2000; Hatch & Schultz, 1997, 2002). Hatch
and Schultz (1997) explain in detail how identity shapes the external image, for example, by top management speeches and media
appearances, and also by everyday interactions with employees, who convey their sense of who we are in conversations with
their customers. The stronger the organizational identity, the more likely its external projection is to be authentic, persuasive, and
powerful. This argumentation is in line with the marketing literature, which proposes that organizational members need to share
core values and priorities in order to project a consistent picture of their organization when communicating with external customers
(Gronstedt, 2000; Gronstedt & Thorson, 1996). A high OIDS makes it easier not only for employees to identify the organization and to
identify with the organization, but also for external constituents, thus positively affecting their behavior toward the rm (e.
g. purchasing their products). Conversely, a weakly projected identity is likely to confuse external stakeholders, with negative effects
on trust and resource inows (Ackerman, 2000; Voss et al., 2006).
On the basis of these arguments, we offer the following hypothesis.

H3. Organizational identity strength is positively related to rm performance.

In H1, we predict CEO charisma's positive inuence on rm performance. According to H2, CEO charisma is positively associated
with OIDS. Finally, in H3, we propose that OIDS has a positive inuence on rm performance. Combined, these three hypotheses in-
dicate that CEO charisma has a direct and an indirect effect on rm performance. Based on this rationale, we suggest the following.

H4. Organizational identity strength mediates the relationship between CEO charisma and rm performance.

CEO charisma and transformational leadership climate

In addition to the path from CEO charisma to organizational performance via OIDS, we propose a second channel via TFL climate.
We focus on TFL climate because TFL and charismatic leadership are related constructs (House & Shamir, 1993); additionally, the orig-
inal TFL conceptualization (Bass, 1985) included charisma as its main component. Furthermore, TFL has already been investigated at
the organizational level of analysis, whereas the term charisma is more strongly associated with a single individual and, to the best of
our knowledge, there has been no theoretical or empirical work on the charismatic climate of leadership in organizations.
Leadership climate has been conceptualized as the degree to which different leaders in an organization exhibit similar behaviors
toward their subordinates (e.g. Chen & Bliese, 2002; Chen, Kirkman, Kanfer, Allen, & Rosen, 2007; Gavin & Hofmann, 2002). More re-
cently, Walter and Bruch (2010) and Menges and colleagues (2011) have extended this concept to TFL, suggesting that a TFL climate is
an organization-level construct reecting the extent to which leaders throughout an organization exhibit TFL behaviors toward their
 S.A. Boehm et al. / The Leadership Quarterly 26 (2015) 156171 161

immediate followers. A TFL climate emerges at the organizational level through various mechanisms that contribute to the similarity
of individuals' leadership behaviors, to followers' perceptions of these behaviors, and to the variability of such behaviors and percep-
tions between organizations (Klein, Dansereau, & Hall, 1994). These mechanisms include processes of attractionselectionattrition
and newcomer socialization (Schneider, 1987; Schneider & Reichers, 1983), as well as common experiences and mutual interactions
between the organization's managers and between managers and employees (Kozlowski & Hattrup, 1992; Morgeson & Hofmann,
1999).
Another mechanism that may contribute to the emergence of a leadership climate is the inuence of the organization's top-level
leader; in our case, the CEO. This seems particularly true of charismatic leaders. Such leaders can have a direct impact on organization-
al members as various charismatic leadership theories suggest (e.g. Conger & Kanungo, 1998; House, 1977; Shamir et al., 1993). How-
ever, such leaders may also affect organizational members indirectly through their effects on lower-level leaders' behavior. Bass et al.
(1987) empirically demonstrated this mechanism, which has been called the falling dominoes effect, or the cascading effect
(Yammarino, 1994).
There are several ways in which charismatic CEOs are likely to affect lower-level managers' behavior and thus contribute to the
creation of a TFL climate. First, by role-modeling leadership behaviors or leadership style: Because charismatic CEOs are highly
esteemed, they act as role models for line managers (Bass, 1981). If charismatic CEOs succeed in instilling a sense of pride, condence,
and identication with the leader in their direct followers, the latter are likely to emulate the CEO's leadership behavior (Bass et al.,
1987). Second, by developing and sharing compelling visions, charismatic CEOs inspire other managers in the organization to similarly
share their vision with their own followers (Bass et al., 1987; Tichy & Ulrich, 1984), for instance, by delivering similar speeches, telling
similar stories, and engaging in other symbolic behaviors. Third, CEO charisma might have an impact on lower-level charismatic or
transformational leadership by affecting certain organizational practices, such as the selection of leadership personnel, or the leader-
ship development and training programs in the organization. Charismatic CEOs are likely to inuence such practices by encouraging
the selection and development of new generations of leaders with similar characteristics, values, and modes of behavior, thus contrib-
uting to the overall TFL climate within the rm.
Based on the arguments developed above, we propose the following hypothesis.

H5. CEO charisma is positively related to the rm's TFL climate.

TFL climate and rm performance

Considerable evidence that supports the existence of a relationship between TFL and unit level performance has accumulated over
the past 30 years (for meta-analyses see Dumdum, Lowe, & Avolio, 2002; Judge & Piccolo, 2004; Lowe et al., 1996). These ndings
have been attributed to many factors, including the effects of TFL on employees' empowerment, efcacy perceptions, motivation,
commitment, increased efforts, intellectual stimulation, identication with the unit and its values, and increased cooperation (Bass,
1985; Bass & Avolio, 1994; Hill et al., 2012; Kark et al., 2003; Walumba, Avolio, & Zhu, 2008). It is logical to extend these results to
the organizational level of analysis and suggest that the extent to which leaders at various levels of the organization exhibit TFL
(i.e. the extent to which there is a TFL climate in the organization) is also associated with performance at the organizational level.
As previously mentioned, TFL includes a component of charisma; the reasons for expecting a relationship between charisma and
rm performance may therefore also apply in respect to an expected relationship between TFL climate and rm performance.
Further reasons may be offered to support this expectation. The studies of Walter and Bruch (2010) and Menges et al. (2011) have
linked TFL climate with positive outcomes at the organizational level. For instance, Menges et al. have linked TFL climate with em-
ployees' aggregated task performance and organizational citizenship behaviors. According to the authors, these effects are mediated
by an organization-wide, positive affective climate the shared experience of positive affect within an organization (cf. Dasborough,
Ashkanasy, Tee, & Tse, 2009; Gamero, Gonzlez-Rom, & Peir, 2008). Further, the authors argue and empirically demonstrate that a
TFL climate is experienced as a positive work-event that increases the positive affective climate, which, in turn, contributes to perfor-
mance due to positive emotions' effects on motivation and creativity (Fredrickson, 1998, 2003). In addition, TFL climate may facilitate
performance in other ways. For instance, TFL was found to increase employee trust (Podsakoff, MacKenzie, & Bommer, 1996;
Podsakoff, MacKenzie, Moorman, & Fetter, 1990). A high TFL climate may similarly increase organizational members' collective
trust in the rm's leadership personnel, and a high level of organization-wide trust may increase cooperation and, ultimately, organi-
zational performance. Consequently, we offer the following hypothesis.

H6. Firm TFL climate is positively related to rm performance.

TFL climate and organizational identity strength

In addition to a direct link between TFL climate and rm performance, we also expect an indirect relationship via OIDS. This expec-
tation builds on the rationale for our previous hypotheses. TFL includes leader behaviors that are expected to clarify the organizational
identity and increase its salience, thus contributing to the formation of a shared sense that the organization has a strong and unique
identity. For instance, transformational leaders (Bass, 1985; Bass & Avolio, 1994) craft and present captivating visions of the collective
organizational future, or, if they are lower-level leaders, convey the vision to the organization's employees. This vision often empha-
sizes the organization's core values and links the picture of the future with these values, its history and other core elements of its
162 S.A. Boehm et al. / The Leadership Quarterly 26 (2015) 156171

identity. Furthermore, transformational leaders at all levels of the organization behave in ways that provide a role model which
represents the collective identity and its core values, and demonstrate their commitment to the organizational mission, which is
often considered a statement of the organization's identity (who we are and why we exist).
Managers at all levels throughout the organization are likely to be seen by their subordinates as representing the organization.
Therefore, the more managers engage in TFL behaviors (i.e. the higher the TFL climate in the rm) and the more they follow the
charismatic CEO's statements, emulate his or her behaviors, and convey his or her messages in their daily interactions with their
co-workers (through the cascading effect described above), the more likely the organizational members are to develop a high
OIDS. In other words, if leaders at all organizational levels engage in similar, homogenous TFL behaviors, they are likely to create an
ambient stimulus (Hackman, 1992) that will foster the development of a strong and shared identity perception among their followers.
Therefore, we propose the following hypothesis.

H7. Firm TFL climate is positively related to organizational identity strength.

H6 argues for a positive relationship between a rm's TFL climate and its performance. H7 proposes a positive relationship
between TFL climate and OIDS. Finally, H3 predicts a positive relation between OIDS and rm performance. Together, these
hypotheses theoretically specify a model in which TFL climate relates both directly and indirectly to rm performance by contributing
to increased levels of OIDS. Consequently, we propose the following mediation hypothesis.

H8. Organizational identity strength mediates the relationship between rm TFL climate and rm performance.

Methods

Sample

Data for this study was collected in collaboration with a German benchmarking agency. Companies in this study had to be located
in Germany and had to have at least 10 employees, but not more than 5000. 189 companies were contacted, of which 150 provided
complete data, which equals an organizational-level response rate of approximately 79%. The companies were from various industry
backgrounds, including services (53%), manufacturing (28%), trade (13%), and nance and insurance (6%). On average, each company
had about 282 employees (SD = 548; median = 122). Within the companies, the average response rate was 47%, which results in a
total of 20,639 employees. The mean age of the respondents was 37 years and more of them were males (58%) than females. The
respondents had been employed by their current company for an average of nine years (Table 1).

Procedure

We used a standardized procedure with the same temporal sequence to collect data in all the companies. First, a questionnaire,
which either the HR executive of the rm, or the chief executive ofcer (CEO) lled out, was used to assess all the information included
as control variables in this study. Second, to assess TFL climate, CEO charisma, and OIDS, we collected data from the company
employees. This was done by sending the participating organizations' employees a standardized email inviting them to participate
in a survey from the HR department's address, or from a top management team member's address. The invitation assured full
anonymity and included a link to a web-based survey on an independent third company page. It is important to note that we
programmed an algorithm into the survey website to randomly assign the participants to one of four versions of the survey. We
followed prior research on the rm level of analysis (e.g. Boehm, Kunze, & Bruch, 2014) and applied this split-sample design
(Rousseau, 1985) to cope with the common source bias found in attitude surveys (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003).
In this study, we used constructs from three of the four survey versions. Our study participants either answered the CEO charisma
questions, the TFL items, or the OIDS questions. Finally, after completing the described data collection, we sent out a second survey
to the HR executive, or the company CEO, to assess the rm's performance.

Table 1
Overview of the company demographics.

Number of Age Gender Tenure

employees (years) (years)

Mean 282 36.82 58.31% male 9

SD 548 3.76 4.36
Min 10 28.69 0% male 1.94
Max 4503 48.04 91% male 21.73

Note. N = 150 companies.

 S.A. Boehm et al. / The Leadership Quarterly 26 (2015) 156171 163

Measures

If not otherwise mentioned, we used a seven-point Likert scale for the measures (1 = strongly disagree; 7 = strongly agree). Where
no German translations were available, we worked with professional translators and used a classical double-blind back translation
procedure to ensure the correct meaning of the items (Schaffer & Riordan, 2003).
CEO charisma was assessed by the seven items that Agle and colleagues (2006) developed on the basis of Podsakoff and colleagues'
(1990) work. A sample item was, Our chief executive ofcer has a clear understanding of where we are going. The Cronbach's alpha
of the scale was .96.4
TFL climate was measured by asking the employees to rate the TFL behaviors of their direct superiors and by aggregating these
ratings to the organizational level. We used 22 items that Podsakoff and colleagues (1990, 1996) originally developed to assess the
transformational behaviors of the leaders. My supervisor is able to get others committed to his/her dream of the future was a sample
item of this scale. A Cronbach's alpha of .97 indicated the scale's sufcient internal consistency.
Organizational identity strength was measured by six items that Milliken (1990) developed for a university context and which
Gioia and Thomas (1996) also employed. Cole and Bruch (2006) reformulated the items to capture the collective identity of cor-
porations, and conducted a conrmatory factor analysis of a sample of 10,948 employees of a steel manufacturer. We followed
these authors' reformulation strategy and used the same six items for our data collection. A sample item was, In this company
we feel that the company has carved out a signicant place in the industry. We also ran a conrmatory factor analysis of this
measure. When assessing the appropriateness of the model t, we refer to the comparative t index (CFI), the Tucker Lewis
Index (TLI), and the standardized root mean square residual (SRMR) as descriptive t indices. We chose the CFI and TLI, due
to Sharma, Mukherjee, Kumar, and Dillon's (2005) simulation study results. Following the propositions of Meyers, Gamst, and
Guarino (2006) and of Marsh, Hau, and Wen (2004), we set the cut-off value for the CFI and the TLI at .90. We followed Hu
and Bentler (1999) for the SRMR and chose a cut-off value of b .08. Based on these criteria, the CFA showed a non-sufcient t
(2 = 107.04, df = 9, p b .001; CFI = .912; TLI = .854; SRMR = .047) according to the TLI. Therefore, we followed Cheng's
(2001) procedure and deleted one item (People in this company are knowledgeable about the company's history and
traditions) due to its high error correlations with the other items and modication indices of the model. A second conrmatory
factor analysis indicated a very good model t ( 2 = 23.92, df = 5, p b .001; CFI = .977; TLI = .955; SRMR = .028). The
Cronbach's alpha for the scale was .95.
Performance was assessed as one construct consisting of three indicators: company growth, nancial performance, and return on
assets. Since our sample consisted of mainly privately owned companies, we were not able to assess objective performance data for all
rms. Therefore, following a widely used practice (e.g. Delaney & Huselid, 1996; Dess & Robinson, 1984; Wall et al., 2004), we asked
the HR department executives, or the CEO, to provide evaluations of their company's performance relative to that of its competitors in
the same industry. Empirical evidence suggests that subjective performance measures are valid and can therefore indicate company
performance (Wall et al., 2004). A sample item was, Compared to your company's competitors from the same industry, how would
you rate your company's growth? The rating scale ranged from 1 = far below average to 7 = far above average. The Cronbach's alpha
for the three-item scale was .76.
Controls were included in the analyses to capture their inuence on the study variables. We included company size and
four broad industry classes (i.e. services, manufacturing, trade, and nance and insurance) in our analyses. Prior studies
have shown that organization size inuences employees' attitudes and behaviors (e.g. Markham & McKee, 1991; Ragins,
Cotton, & Miller, 2000). We measured the company size by asking for the number of employees, converted to full-time equiv-
alents (e.g. Schminke, Cropanzano, & Rupp, 2002), in the rst questionnaire that the rm's HR executive, or the CEO, lled
out. After testing for the normality distribution assumption, we followed a common procedure (e.g. Menges et al., 2011)
and decided to log-transform the measure. Following prior research by Sine, Mitsuhashi, and Kirsch (2006), we also con-
trolled for industry afliation. Based on the questionnaire answers, we created three dummy variables (i.e. manufacturing,
trade, and nance and insurance), which contained the participating organizations' industry afliation, and included them
in our analyses (Cohen, Cohen, West, & Aiken, 2003). As the largest group, the category service served as our reference
industry.

Company level data aggregation

The predictions were tested at the company level. To do so, we aggregated the individual responses to the company level where
necessary. We used commonly employed aggregation statistics (rwg, ICC(1), ICC(2)) to test this procedure's suitability (Bliese, 2000).

4
One of the reviewers for this paper questioned the accuracy of the organizational members' CEO charisma ratings given the social distance between them and their
CEO (Shamir, 1995; Yagil, 1998). To test empirically whether social distance has an inuence on the CEO charisma ratings, we investigated the potential impact of hi-
erarchy as a proxy for social distance by comparing the mean CEO charisma ratings of three groups of employees across all organizations, i.e. the top management team,
middle managers, as well as employees without direct reports. Despite the fact that the average CEO charisma rating by members of the top management team (4.27)
was higher than the rating by middle managers (3.97) and non-managerial employees (3.82) this does not contradict Shamir (1995) and Yagil (1998) who do not argue
that the perceptions of followers who are socially close to the leader are more accurate than those of followers who are more distant from the leader, only that the per-
ceptions of close and distant followers may be different because they are based on exposure to different sources of information. Furthermore, the results are in line with
our arguments regarding the cascading effect of leadership.
164 S.A. Boehm et al. / The Leadership Quarterly 26 (2015) 156171

In the literature, ICC(1) values based on signicant one way ANOVA F statistics, ICC(2) values above .50, and median rwg values higher
than .70 are considered acceptable (Bliese, 2000; Kenny & La Voie, 1985; Klein & Kozlowski, 2000).
In this study, the values of CEO charisma (ICC(1) = .26; F = 11.06, p b 0.001; ICC(2) = .91; median rwg = .88), TFL climate (ICC
(1) = .10; F = 4.27, p b 0.001; ICC(2) = .77; median rwg = .90), and OIDS (ICC(1) = .22; F = 9.87, p b 0.001; ICC(2) = .90; median
rwg = .76) met the given criteria, justifying the aggregation of individual responses to the company level.

Data analysis

As James, Mulaik, and Brett (2006) recommend, we used structural equation modeling (SEM) with a maximum likelihood estima-
tion to test the hypothesized mediation model. According to Mathieu and Taylor (2006, p. 1045), SEM techniques have long been
advocated as preferable to regression techniques for testing meditational relationships because they permit one to model both
measurement and structural relationships and yield overall t indices. In addition, SEM models can account for measurement errors,
thus avoiding biased results due to unreliability (Busemeyer & Jones, 1983). Finally, by enabling researchers to test for the overall
model t, SEM empowers them to do model comparisons to investigate the assumed relationships (Bagozzi & Yi, 1988). Following
Anderson and Gerbing's (1988) proposed two-step approach, we tested our measurement model prior to examining our hypothe-
sized structural model.

Results

Descriptive statistics

Table 2 shows the descriptive statistics and intercorrelations between the study variables. The Cronbach's alpha reliability values of
the measures are provided between parentheses in the diagonal entries.
In line with our hypotheses, CEO charisma is signicantly related to TFL climate (r = .47, p b .01). In addition, both leadership
constructs are related to identity strength (CEO charisma, r = .69, p b .01; TFL climate, r = .62, p b .01). However, neither CEO
charisma (r = .07, p N .05) nor TFL climate (r = .09, p N .05) are signicantly related to performance, which is contrary to our predic-
tion. As expected, OIDS is associated with performance (r = .19, p b .01). Finally, company size is signicantly and negatively
correlated with TFL climate (r = .30, p b .01) and OIDS (r = .22, p b .01), while manufacturing is signicantly and negatively
correlated with TFL climate (r = .22, p b .01). Neither service, trade, nor nance and insurance is related to the study variables.
Therefore, we decided to delete these control variables from further analyses. We did so to reduce the number of parameters to be
estimated and, therefore, maximize the power for the following tests (Bedeian, 2007). Furthermore, unnecessary control variables
could cause biased estimates of our parameters (Becker, 2005).

Measurement model

We rst tested the measurement model's appropriateness. This model consisted of the main latent variables, namely CEO
charisma, TFL climate, OIDS, and performance, as well as their respective indicators. We used a partial disaggregation method for
the TFL climate measure (Coffman & MacCallum, 2005) and parceled the items according to the predened measure structure (i.
e. intellectual stimulation, articulating a vision, high performance expectations, fostering the acceptance of group goals, providing a
role model, and individualized support) as Podsakoff and colleagues (1996) proposed. This was done because the parcels were
grounded in the original measure and to limit the number of parameters that we needed to estimate (for details and additional
advantages, see Little, Cunningham, Shahar, & Widaman, 2002; Williams & O'Boyle, 2008). According to the predened cut-off values,

Table 2
Descriptive statistics and correlations between the variables used in this study.

Mean SD 1 2 3 4 5

1. CEO charisma 3.89 0.52 (.97)

2. TFL climate 3.60 0.37 .47 (.96)
3. Identity strength 5.32 0.67 .67 .62 (.95)
4. Performance 5.74 0.95 .07 .09 .19 (.76)
5. Company size (log) 4.89 1.15 .06 .30 .22 .15
6. Service 0.56 0.50 .06 .12 .00 .01 .07
7. Manufacturing 0.28 0.45 .01 .16 .04 .09 .09
8. Trade 0.12 0.33 .02 .04 .01 .01 .02
9. Finance & insurance 0.06 0.23 .05 .04 .04 .11 .02

Note. N = 150 companies. All correlations were tested one-tailed. The diagonal entries between parentheses reect the Cronbach's alpha internal consistency reliability
estimates.
p b .01.
p b .05.
 S.A. Boehm et al. / The Leadership Quarterly 26 (2015) 156171 165

our measurement model achieved sufcient model t5 (2 = 418.99, df = 183, p b .001; CFI = .932; TLI = .921; SRMR = .059). All of
the factor loadings were signicant (p b .01).
To test the distinctiveness of the measures, we estimated two alternative models. In the rst model, all the CEO charisma and TFL
climate items were forced to load on one common factor. The rest of the model stayed the same. However, this alternative model
yielded a non-acceptable model t (2 = 758.80, df = 3, p b .001; CFI = .712; TLI = .675; SRMR = .156). In the second model
we forced all CEO charisma, TFL climate, and OIDS items to load on one common factor. The rest of the model stayed the same.
Again, this alternative model yielded a non-acceptable model t (2 = 1216.35, df = 5, p b .001; CFI = .580; TLI = .531;
SRMR = .152). Therefore, we decided to retain the originally proposed model.

Structural model

After testing for the appropriateness of the measurement model, we examined the structural part of the specied model
(Anderson & Gerbing, 1988). The analysis results are depicted in Fig. 2. We excluded the control variables from the gure for simplicity
reasons. However, following Richardson and Vandenberg's (2005) suggestions, we regressed each dependent construct, namely CEO
charisma, TFL climate, OIDS, and performance, on the control variables.
The structural model included the direct and indirect effects, as Taylor, MacKinnon, and Tein (2008) propose for three-path mediation
models. This three-path mediation model indicated a sufcient model t (2 = 482.45, df = 217, p b .001; CFI = .924; TLI = .912;
SRMR = .054). In the model, the direct path from CEO charisma to performance is not signicant, which is in contrast to H1. CEO cha-
risma is signicantly and positively linked to OIDS ( = .48, p b .01), as proposed in H2. According to H3, OIDS should be positively related
to rm performance. The data support this hypothesis ( = .46, p b .01). It is often argued that a direct link between a predictor and an
outcome variable is not necessary for postulating a mediation effect (e.g. MacKinnon, Fairchild, & Fritz, 2007). Therefore, we further tested
the proposed OIDS mediation of the relationship between CEO charisma and rm performance by using bootstrap procedures (Cheung &
Lau, 2008; Shrout & Bolger, 2002). The result indicated a signicant indirect effect from CEO charisma to performance via OIDS ( = .294,
SE = .098; CI: .134.481; p b .01). This is in line with H4.
As predicted in H5, we found CEO charisma to be signicantly and positively linked to TFL climate ( = .48, p b .01). In the struc-
tural model, the association between TFL climate and performance is not signicant ( = .03, p N .05). This is contradictory to H6. In
line with our prediction in H7, TFL climate is positively associated with OIDS ( = .40, p b .01). Finally, we examined the proposed
OIDS mediation effect on the relationship between TFL climate and rm performance. To investigate H8, we performed bootstrapping
procedures to directly test for the indirect effect (Cheung & Lau, 2008; Shrout & Bolger, 2002). The result indicated a signicant indi-
rect effect of TFL climate on performance via OIDS ( = .184, SE = .069; CI: .071.300; p b .01). Thus, H8 is supported.
To test our model's robustness, we compared the hypothesized three-path mediation model to three alternative models as illus-
trated in Table 3. First, we specied a mediation-only model (alternative model 1) which only differed from the original model with
regard to TFL climate's and CEO charisma's direct links with performance, which were set to zero. This model showed a comparably
good t (2 = 1.91, df = 2, p N .05). The descriptive t indices were also almost the same, the TLI (TLI = 0.001) was marginally
better, and the SRMR (SRMR = 0.013) slightly worse.
Second, we specied a direct-effects-only model (alternative model 2). Here, only the direct effects that TFL climate and CEO
charisma have on performance were allowed, while all other relationships were xed at zero. The model indicated a signicantly
worse t than the original model (2 = 179.29, df = 4, p b .001).
Finally, we tested a no-controls model (alternative model 3). Here we set all the control variables' links to other constructs to zero.
The model showed a signicantly worse t than the original model (2 = 33.79, df = 8, p b .001). These results support the ro-
bustness of our model. However, as outlined, the mediation-only model resulted in a comparably good t. In addition, this model
is more parsimonious than the originally proposed model. The only difference regarding the path coefcients is the beta for the
link between OIDS and performance ( = .31, p b .01). Thus, the mediation-only model appears to be the best model when consid-
ering t and parsimony.

Discussion

The question of what makes leadership in organizations effective (Van Knippenberg & Hogg, 2003) is potentially one of the oldest
and most central questions in leadership research. Over the past 30 years, charismatic or transformational leadership behaviors have
been regarded as especially promising (Dumdum et al., 2002; Judge & Piccolo, 2004). Consequently, if leaders within an organization
and especially those of the upper echelon like the CEO engage in charismatic behaviors, rms' performance should be positively af-
fected. Unfortunately, empirical evidence for this assumption is scarce and contradictory (e.g. Agle et al., 2006; Waldman et al., 2004).
Moreover, most existing studies on the CEO charismaperformance link are relatively silent about the underlying processes that trans-
late CEO behavior into rm performance.
With our study, we took up this important line of research by employing a slightly different approach. Instead of using top
management team members as informants, we sampled all organizational members of 150 companies in order to shed light on potential

5
Following the recommendation by the Editor of this paper, we acknowledge that the chi-square test yields a signicant result and that we rely on descriptive t
statistics to judge the model t. Thus, even though the proposed measurement model provides the best t to our data, future research may benet from developing
sound measures for the constructs (which is in line with our nding that one of the OIDS items did exhibit signicant error variances with other items; see the Measures
section for more detailed information).
166 S.A. Boehm et al. / The Leadership Quarterly 26 (2015) 156171

Item 1 Item 2 Item 3 Item 4 Item 5 Item 6 Item 7 Employee survey 3 CEO survey

.96** .90** .95** .77** .80** .86** .95**

-.17
CEO charisma
Item 1 Item 2 Item 3 Item 4 Item 5

.84** .98** .94** .88** .74**

Employee survey 1
.48**
Organizational
Employee survey 2 identity strength Firm Performance
.48** .46**
.40** .77** .79** .64**

Item 1 Item 2 Item 3

TFL climate
-.03

.81** .95** .94** .54** .94** .85**

IS PM FG HE AV IST

Fig. 2. Organizational-level model of the mediating role of identity strength in the leadershipperformance link, including the data sources.
Note. N = 150 companies. Coefcients are standardized regression weights. Controls were deleted from the gure for simplicity reasons. CEO = chief executive ofcer;
TFL = transformational leadership. IST = intellectual stimulation; AV = articulating a vision; HE = high performance expectations; FG = fostering the acceptance of
group goals; PM = providing a role model; IS = individualized support. **p b .01.

mediators of the CEO charismarm performance link. More specically, we investigated OIDS and rms' TFL climate to better under-
stand if and how charismatic CEOs affect rm performance. We selected these mediators based on Shamir and colleagues' (1993) prop-
osition that charismatic leaders can spur performance by increasing the salience of collective identities in their followers' self-concepts,
which should in turn trigger self-sacricial, collective-oriented behaviors (p. 582). Yet, it might not be enough if only the CEO engages in
such charismatic behaviors. Instead, leaders from all hierarchical levels might need to produce such identity-triggered, performance-
relevant behaviors throughout the organization (Hill et al., 2012). Therefore, it seems important to investigate a transformational or char-
ismatic leadership climate within rms.
Contradicting our rst hypothesis, CEO charisma was not directly related to rm performance. In this regard, our results are
in line with prior ndings by Tosi et al. (2004) and Agle et al. (2006). However, the data supported our two proposed indirect
mediation channels. We found that both OIDS and TFL climate fully mediate the potential impact of CEO charisma on rm per-
formance. In other words, our data indicate that CEOs might indeed have an effect on their companies' performance, although
the underlying relationship seems to be more complex than originally expected. Instead of directly affecting rm results, it ap-
pears that CEOs impact lower-level organizational leaders and members' OIDS perceptions, which, in turn, positively contribute
to rm success.

Table 3
Model comparison.

Structural model 2 df 2 CFI TLI SRMR

Hypothesized model: three-path mediation model 482.45 217 .924 .912 .054
Alternative model 1: mediation-only model 484.37 219 1.92 .924 .913 .055
Alternative model 2: direct-effects only model 661.74 221 179.29 .874 .856 .306
Alternative model 3: no-controls model 516.24 225 33.79 .917 .907 .082

Note. CFI = Comparative t index; TLI = Tucker Lewis index; SRMR = Standardized root mean squared residual. All models are compared to the hypothesized model.
p b .01.
 S.A. Boehm et al. / The Leadership Quarterly 26 (2015) 156171 167

These results allow us to contribute to the literature in three additional, signicant ways: First, our analyses reveal that CEO
charisma is relatively strongly linked to TFL climate. Together with the ndings mentioned above, this nding supports a cascading
model of leadership (e.g. Bass et al., 1987; Waldman & Yammarino, 1999). It seems as if the CEO can inuence leadership behavior
at the lower organizational echelons via contagion effects on the rm's leadership personnel, for example, by acting as a role model
or by engaging in symbolic behaviors which illustrate the desired leadership style within the rm.
Second, our study contributes to the literature on organizational identity by addressing Whetten and colleagues' calls
(Foreman & Whetten, 2002; Whetten, 2006) to include the construct in testable, quantitative models that also account for
other organizational constructs. In order to do so, we focused on OIDS as a generalizable and transferable representation of
members' identity beliefs compared to the rather rm-specic construct of identity content. To our knowledge, our study is
the rst to operationalize and measure identity strength as an organizational-level property, which is rather remarkable, as
the construct is usually associated with the organization as a referent (e.g. Cole & Bruch, 2006; Dutton & Dukerich, 1991) and
should therefore also be tested at the rm-level of analysis. Further, our multi-rm data set also allowed us to transfer and
test Shamir et al.'s (1993) model of charismatic leadership at the organizational level of analysis. In the past 20 years, plenty
of scholarly work has proposed that a rm's leadership effectiveness can at least be partly explained by leaders' ability to project
a salient social identity (Hogg, 2001; Van Knippenberg & Hogg, 2003). Our ndings empirically support this assumption and
demonstrate the important connections between the leadership and identity literature.
Finally, our results also sharpen our understanding of the processes through which charismatic and transformational lead-
ership may affect important outcomes (Van Knippenberg & Sitkin, 2013; Yukl, 1999). Kark and Shamir (2002) rst described
the dual effect of transformational leadership, indicating that some TFL behaviors activate personal identication with the
leader, while others activate social identication with the group. Recent empirical support for the notion of the differential ef-
fects of collective and individual-focused TFL behaviors stems from Wang and Howell (2010, 2012), as well as Wu, Tsui, and
Kinicki (2010). As one of the reviewers of this paper pointed out, in our model, individually and collectively focused TFL behav-
iors could have differing effects on OIDS as well. Based on this suggestion, we tested two additional models. In the rst model,
we only retained the collective TFL dimensions i.e. articulating a vision and fostering acceptance of group goals. In the second
model, we only used the individually focused TFL dimensions i.e. individualized support and intellectual stimulation as TFL
indicators. The model t was almost the same for both alternatives (2 = 2.03, df = 0, p N .05). In the collective model, the
path coefcient between CEO charisma and TFL was = .49, p b .01. In the individual model, it was = .46, p b .01. The path
between TFL and OIDS was = .44, p b .01 in the collective model, and = .38, p b .01 in the individual model. The indirect effect
between TFL and performance via OIDS was = .18, p b .01 in both models. In sum, the path coefcients were slightly larger in
the collective model. As expected, the largest difference was in the path between TFL and OIDS. This is in line with our model's
theoretical rationale and with recent ndings in the leadership literature (e.g. Wang & Howell, 2010, 2012; Wu et al., 2010). Col-
lective behaviors should foster a shared and seemingly strong identity, therefore leading to enhanced OIDS perceptions and sub-
sequent performance. We believe that such a differentiation between the different TFL dimensions can inform our knowledge of
the mechanisms through which TFL inuences outcomes.

Limitations and future research directions

This paper has various methodological strengths, like the use of four independent data sources (i.e. three employee surveys and
one CEO/HR director questionnaire), a large multi-rm sample, and the use of SEM to demonstrate our theoretical model's better
t compared to other plausible models; nevertheless, important limitations need to be considered when interpreting its ndings.
The model that we propose is a rather leader-centric approach with CEO charisma as the main predictor of rm performance.
Consequently, the argumentation for the hypotheses matches this leader-centric approach. However, our nal results seem to support
a more follower-centric approach, as CEOs only have a positive effect by inuencing their followers. They can shape a certain
leadership climate (i.e. TFL climate) among line managers and can also inuence OIDS as perceived by all employees. Thus, it
seems that followers are as important for positive performance effects. In addition, as we were unable to collect longitudinal data,
we cannot rule out the possibility that it is not the CEO's charisma that shapes the rm's leadership climate and OIDS, but that
rms, which established a certain leadership style throughout and shaped a strong identity, tend to select more charismatic leaders
for their CEO positions. Similarly, a strong organizational performance might contribute to a strong identity perception. Thus, it
seems important for future research to replicate our ndings, using longitudinal data to establish the causal direction of the presented
relationships and to avoid a potential leader-centric bias (i.e. a romanticized conception of leadership; Meindl, 1995).
Further, we were unable to assess objective performance data for all companies in our sample. Instead we used a measure of sub-
jective rm performance as assessed by the top management executives. We could, however, collect objective performance data from
published annual reports for a subset of our sample. In this smaller subset of companies, our performance measure exhibited a positive
correlation with objectively measured growth in revenues (r = .38, p b .05; based on data from 35 rms), the operating prot per em-
ployee (r = .34, p b .01; based on data from 55 rms), as well as the net income per employee (r = .56, p b .01; based on data from 21
rms) during the year of the survey. These results are in line with prior research using similar samples (Baer & Frese, 2003) and further
empirical evidence which suggests that subjective performance measures are a valid source of information to assess rm performance
(Wall et al., 2004). Nevertheless, future research should try to verify the tested relationships, using objective performance measures.
In addition, we deliberately focused on OIDS as a construct that is comparable across organizations and that allows for hypothesis
testing in quantitative models (Cole & Bruch, 2006; Whetten, 2006). In spite of these advantages, future research could also
investigate how charisma and transformational leadership behaviors can impact identity content, i.e. the perception of what is central,
168 S.A. Boehm et al. / The Leadership Quarterly 26 (2015) 156171

enduring, and distinctive about an organization. In order to do so, scholars would have to nd ways to measure and model identity
content in a standardized way by potentially developing a taxonomy for identity content similar to Cooke and Lafferty's (1983,
1986) and Denison and Mishra's (1995) work on the dimensions of organizational culture, and Hofstede's (2001) work on the dimen-
sions of national cultures.
In this study, we investigated the role of charisma and transformational leadership for identity perceptions within companies.
However, other forms of leadership, such as servant leadership (Greenleaf, 1970; Liden, Wayne, Zhao, & Henderson, 2008), might
be equally strong predictors of OIDS. We surmise that leadership style and identity content have to t, i.e. charismatic leadership
might foster bolder and more competition-driven identities, while servant leadership might t particularly well with identities
built on responsibility, ethics, etc. In contrast, the OIDS concept should allow for different anteceding leadership behaviors it is
just important that members jointly believe that their organization stands for something special and has a strong identity, no matter
if it is a humble or bold type of identity. Therefore, future work on the leadershipOIDS link should test different leadership styles in
more detail.
Moreover, in this study, we assumed that charismatic and transformational leadership behaviors which foster high OIDS percep-
tions are positively related to performance. Future research might want to explore if these assumptions always hold. Max Weber
(1947) proposed that leaders' charisma could be transformed into organizational routines that live on beyond them. A strong identity
perception might be an especially inuential institutionalization of leaders' charisma. Yet, as Conger (1993, 1999) pointed out, charis-
ma institutionalizations that develop into rigid rites and routines might be counterproductive for performance. The same might be
true of a pronounced OIDS, which might develop into a bureaucratic norm, fostering conformity and backward orientation. In
times of rapid and constant change, and ongoing demand to challenge current beliefs, mindsets, and strategies, this might seriously
threaten the rm's viability. Therefore, boundary conditions may decide whether CEO charisma and a strong OIDS lead to positive
or negative effects (Pawar & Eastman, 1997; Shamir & Howell, 1999). Future research should more closely investigate how top-
level leaders can overcome such a potential dark side of the charismaOIDS link by instilling a strong, yet future-oriented, identity
perception that nurtures environmental adaptability.

Managerial implications

In this paper, we identied three important contributors to organizational performance: CEO charisma, TFL climate, and OIDS.
CEOs play a signicant role in inuencing lower-level leaders, the company OIDS, and organizational performance. They act as role
models for the rm's management and determine which leadership behaviors will be rewarded or punished, thus having an
important inuence on the company's TFL climate. In addition, CEOs are an important source of OIDS. CEOs communicate the
company's values internally and externally. Consequently, they have the opportunity to shape the perception of the company. Our
study indicates that CEOs should take advantage of this unique opportunity. They should have strong moral standards and act
accordingly, be clear regarding how they want the company to develop (i.e. create a vision), and should transmit the feeling that
they are part of the company and that all company members are part of the same team. Importantly, these are behaviors that
every leader can exhibit. Thus, even though certain individuals might seem more charismatic than others, all top managers can
adopt important behaviors to inuence both the TFL climate and OIDS. Moreover, as Antonakis, Fenley, and Liechti (2011) have
shown, charisma can be trained.
Despite CEOs' importance, our results do not indicate that a company's top manager is omnipotent. Line managers are also impor-
tant for shaping the OIDS and subsequently performance, which they can do by adopting a TFL style. Many of line managers' expected
behaviors match charismatic CEO behaviors, for example, creating a vision for their team that is in line with the company vision and
values, creating a joint team spirit, and leading by example. All these behaviors enhance the organization's OIDS. In addition, drawing
on Schneider's (1987) attractionselectionattrition model, HR processes can be adapted to foster a TFL climate as well. For example,
the selection of new managers and criteria for promoting existing leadership personnel should include behavioral aspects which are in
line with the company values. The same is true for rm-wide leadership trainings which should target the demonstration of TFL be-
haviors including charisma (Antonakis et al., 2011; Barling, Weber, & Kelloway, 1996).
Finally, organizations can try to inuence the company OIDS directly. In order to develop pride in the organizational goals and
values, employees need to be aware of them. Therefore, internal marketing activities via the intranet, company newsletters, and
rm events should deliver appropriate messages. This communication should focus on what the company stands for and how it differs
from relevant competitors. For instance, is the business model focused on price (we always have the lowest prices) or customer
service (we are always available to our customers and support them)? By answering and communicating such information
thoroughly, companies can create a pronounced OIDS. In sum, the CEO, leaders throughout the organization, as well as central
departments like HR or marketing, should highlight joint achievements (who we have been), recent activities and current strengths
(who we are), as well as forward-looking visions (who we want to become) to foster a strong identity perception and related rm
performance.

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