Human Systems Management 39 (2020) 37–50 37

DOI 10.3233/HSM-190596
IOS Press

How leaders can initiate knowledge

management in organizations:
Role of leadership style in building
knowledge infrastructure
Andrej Novaka , Kristijan Breznika,b,∗ and Srečko Nateka
a International School for Social and Business Studies, Celje, Slovenia
b Environmetal Protection College, Velenje, Slovenija

Abstract.
BACKGROUND: Initiating knowledge management activities has proved challenging in many organizations as focus on
wrong activities and not providing adequate leadership cause many failures. Leadership style significantly determines success
of knowledge management activities, specifically activities related to knowledge infrastructure that consist of organizational
culture, organizational structure and information technology.
OBJECTIVE: The purpose of this study is to analyse how transformational and transactional leadership styles influence
knowledge infrastructure which provides organizations a platform on which knowledge management can be developed.
METHODS: PLS-SEM was used to analyse data obtained from 135 valid questionnaires.
RESULTS: Transformational and transactional leadership styles both positively influence all three factors of knowledge
infrastructure (organizational culture, organizational structure and information technology). The influence of transformational
leadership style is, however, statistically significantly stronger.
CONCLUSIONS: Based on research findings managers should use more transformational leadership elements when pro-
moting knowledge management initiatives in organizations. Nevertheless transactional leadership style should be also used
especially contingency reward as its dominant factor.

Keywords: Transformational leadership, transactional leadership, knowledge management, knowledge infrastructure

capacity, organizational culture, organizational structure, information technology, structural equation modelling

Andrej Novak is a PhD candidate at Kristijan Breznik is Associate Pro-

International School for Social and
Business Studies in Celje, Slovenia.
He holds a Master degree in Finance
from University of Maribor, Slovenia
and Master of Business Administra-
tion degree from IEDC – Bled School
of Management. His main research
areas include knowledge manage-
ment, leadership, organizational cul-
ture, organizational performance and
corporate finance.
fessor in Mathematics and Research
Methodology at the International
School for Social and Business Stu-
dies in Celje. His main research
interests, beside social network anal-
ysis, are data analysis, graph theory,
database development, entrepreneu-
rial networks as well as sport statis-
tics. Currently, he is Editor-in-chief of
International Journal of Management,
Knowledge and Learning and mem-
ber of the Editorial Boards of some
prominent journals.

∗ Corresponding author: Kristijan Breznik. Tel.: +386 663 722;

E-mail: kristijan.breznik@mfdps.si.

0167-2533/20/$35.00 © 2020 – IOS Press and the authors. All rights reserved
38 A. Novak et al. / How leaders can initiate knowledge management
Srečko Natek is a lecturer of
information systems and knowledge
management systems at the Interna-
tional School for Social and Business
Studies in Celje, Slovenia. His main
research areas include information
system development methodology,
healthcare, production and higher
education information systems, busi-
ness intelligence, data mining and
knowledge management systems. Dr.
Srečko Natek was General Chair
of the International Conference for
Make Learn 2011 – 2019 and Editorial
Board Member for Actual Problems of Computer Science (APCS)
Journal.
1. Introduction
Many organizations are facing challenges of imple-
menting knowledge management practices into their
business model. Despite their efforts, failure is often
the outcome of knowledge management implemen-
tation. Variety of reasons may contribute to this, such
as lack of understanding knowledge management,
universal instead of custom approach, unrealistic
expectations, overemphasis on technology or lack of
strategic alignment [1].
As knowledge management is paving its way
into strategic focus of organizations as well as
daily operations, managers are exploring variety
of implementation initiatives. When thinking about
knowledge management, we often think of knowl-
edge management processes (acquisition, creation,
transfer, storage or application). However, many
leaders in modern organizations realized that those
processes cannot be efficient without basic founda-
tion and environment which are usually presented
in the form of organizational culture, organizational
structure, information technology, strategy or reward-
ing system [1–3].
Gold [4] studied the topic of knowledge man-
agement through capability of organization to
recognize, create, transform and distribute knowl-
edge. Knowledge management capabilities are
therefore consisting of two type of capabilities:
knowledge infrastructure capability and knowledge
process capability. In this study we are interested
in knowledge infrastructure capability that includes
organizational culture, organizational structure and
information technology. This present the basic infras-
tructure needed to efficiently organize knowledge
management activities, hence knowledge manage-
ment enablers are often used term to describe factors
of knowledge infrastructure [5].
However, knowledge infrastructure cannot be built
by itself. It takes strategic commitment, organi-
zational resources and individual competency to
achieve this goal. Responsibility for achieving these
goals is always on the leader. But what kind of leader
or leadership style is best suited to achieve complex
goals like this? Leadership style represents behaviour
of a leader when managing organization and peo-
ple. We defined leadership style with the definition
of the full range leadership model that basically con-
sist of transformational and transactional leadership
styles. Transformational and transactional leadership
are two basic leadership styles that are covering
majority of leaders’ behaviour spectre with former
being more focused on motivation, inspiration and
empowerment and latter being more focused on trans-
action between leader and followers [6].
The purpose of this study was to analyse influ-
ence of transformational and transactional leadership
style on knowledge infrastructure represented by
organizational culture, organizational structure and
information technology. Research model was pro-
posed based on literature review and partial least
squares structural equation modelling (PLS-SEM)
was used for conducting analysis.
The duration of this paper is structured as follows:
theoretical framework and hypothesized model, an
overview of the methodology, results of a study, a
discussion of the results and the conclusion.
2. Theoretical framework and hypothesized
model
2.1. Leadership style and knowledge
management
There is no unified definition of leadership style.
Hence Belinskaja and Pauliene [7] concluded that
definition of leadership depends on author and his
subjective view on the topic. Furthermore, there is
no recipe for using certain leadership style in given
situation. Nevertheless, long term existence of com-
panies is largely depended of efficient leadership and
because of that organization must develop leader-
ship as strategic priority. Allio [8] suggested that
leadership is one of the most important ingredi-
ents of management as leader must possess personal
competency and integrity as well as understanding
of organizational culture, business environment and
above all its employees.
Burke [9] described two basic leadership
behaviours: task-focused and person–focused with
 A. Novak et al. / How leaders can initiate knowledge management
latter having greater positive impact on organization
performance. The most often used leadership theory
in different studies is the full range leadership
model that describes leadership as transformational
leadership, transactional leadership and laissez-
faire leadership. Often laissez-faire leadership is not
included in research as it is essentially non-leadership
[10, 11].
Transformational leader leads by inspiration, moti-
vation and empowerment of his followers. He uses
his charisma, inspiration and clear communication
to present his vision and organizational goals to
employees who consequently take greater responsi-
bility at their work place and identified themselves
with common values. Transformational leadership
is represented by factors of idealized influence,
inspirational motivation, intellectual stimulation and
individual consideration. Idealized influence encour-
ages follower emotions and identification with the
leader. Inspirational motivation is about motivation
and inspiration of followers. Individual considera-
tion consists of mentoring and coaching followers
while intellectual stimulation stimulates employees’
creativity and innovativeness [12]. Transformational
leadership is especially appropriate for environment
of constant changes, turbulent and fast changing mar-
kets which are present in modern economy [10].
Transactional leadership is focused in relations
between leaders and followers. Transactional leader
stimulates followers, gives them clear directions
and presents organizational goals. Main factors of
transactional leadership are contingent reward, man-
agement by exception active and management by
exception passive. Contingency reward is using
rewards system to stimulate employees for con-
ducting their responsibilities and to increase their
performance. Active management by exception is
based on corrective actions that prevent making mis-
takes by employees while passive management by
exception is about letting followers’ actions by them-
selves and correcting mistakes only after already
happened. Transactional leadership is best utilized in
stable market and organizations that are not required
to constantly adapt to unstable environment [10].
Knowledge management as a concept inside of
general management is being recognized in recent
years as a source of competitive advantage [13, 14].
Knowledge management uses organization knowl-
edge resources to increase productivity and creates
new value as well as promotes exchange and applica-
tion of knowledge in organization [15–17]. Chawla
and Joshi [18] defined knowledge management as
39
acquisition and application of internal and external
knowledge with purpose of achieving organizational
goals. However, as knowledge management is only
one part of management activities in organization, it
must be aligned with organization strategic goals to
have positive effect [19]. Because of that managers
and organization’s leaders must also take in account
organizational structure, organizational culture and
information technology to efficiently manage knowl-
edge [2, 3].
Leadership style’s influence on knowledge man-
agement is being addressed as a topic in various
studies. Study of Singh [20] reported that lead-
ership styles focus on people positively influence
knowledge management activities in organization.
Hayat [21] analysed relationship between trans-
formational/transactional leadership and knowledge
management. It was reported that both leadership
style influence knowledge management significantly,
however transformational leadership is influencing
knowledge management more positively. Transfor-
mational leadership in particular was reported in
many studies to have positive impact on knowledge
management [22–24]. This does not come as sur-
prise as transformational leader primary task is to
motivate, empower and encourage employees to find
ways to success while transactional leader focuses on
improving hierarchical structure and reducing errors.
Besides this transformational leader will promote
knowledge as one of the main cornerstones of his
function [25, 26].
Transformational leadership style proved to be
very appropriate for managing knowledge as it is
primarily focus on people. Role of transformational
leader is to build teams and networks in company
that are capable of managing information and knowl-
edge in organization [27]. Beside that leadership style
heavily influence culture of an organization which is
perhaps most important aspect of effective manage-
ment [28].
2.2. Knowledge infrastructure capacity
Gold [4] define knowledge management as capac-
ity of organization to manage knowledge through
infrastructure capabilities (technical, organizational,
cultural) and knowledge process capabilities (acqui-
sition, conversion, application, protection). Gold’s
definition of knowledge management has been used
in various others studies [29, 30]. Knowledge
infrastructure capacity can be described as knowl-
edge enabler that is necessary foundation which
40 A. Novak et al. / How leaders can initiate knowledge management
makes knowledge management processes effective.
It consists of three key enablers: information tech-
nology, organizational structure and organizational
culture. The idea behind combining both concepts
is that it is essential to build knowledge infrastruc-
ture first to establish platform that enables efficient
managing of knowledge [31].
Schein [32] defines organizational culture with
two key elements: structural stability and integration.
Structural stability refers to set of commonly held val-
ues and beliefs within an organization which is not
easily seen from outside perspective and integration
refers to behaviour patterns, rituals and climate that
combined mould organization’s identity. There can
be many different types of organizational cultures,
among them results-oriented, tightly controlled, job-
oriented, closed system or professional-oriented [33].
According to Gold [4] shaping organizational cul-
ture is central in company’s ability to manage its
knowledge more effectively Interaction and dialogue
between individuals and groups is often basis for
new ideas and creation of knowledge. Employee
interaction must be encouraged, formally and infor-
mally, so that relationship, contacts and perspectives
are shared by those not working side by side [4].
Pyöriä [34] even claim that informal organizational
culture is more important for effective knowledge
management. Organizational culture as very impor-
tant factor of knowledge management was recognized
in various studies [3, 33, 35–37]. Study of Oliver
and Kandali [38] identified 10 factors that influence
knowledge culture in organizations with leadership
style being one of the most important ones. Accord-
ing to Bass [39], transactional leaders work within
their organizational cultures and maintain consistent
rules, procedures, and norms. Opposite of that, Bass
[39] reported that transformational leaders frequently
change their organizational culture with a new vision
and revision of its shared assumptions, values and
norms. Nam Nguyen and Mohamed [40] stated that
it is possible that transformational leaders are shaping
organizational culture to heavily support knowledge
management and on the other hand organizational
culture is a mediator between transactional leadership
and knowledge management practices.
Structural infrastructure refers to the presence of
norms and trust mechanisms, cultural dimension
reflects shared values and technological dimen-
sion addresses the technology-enables ties that exist
within the organization [4]. One of priorities in orga-
nization’s knowledge management activities is to
develop organizational structure that enables maxi-
mizing efficiency of knowledge management [2, 41].
Furthermore, it must be flexible enough to support
business processes, less hierarchical but with some
elements of bureaucracy to maintain control over
processes [2, 42]. Despite main goal of organiza-
tional structure is to rationalize individuals’ functions
or units within organization, organizational structure
often impact level of collaboration and knowledge
sharing across organization, intentionally or even
unintentionally [4]. Because of that optimization
of organizational structure can increase knowledge
management practices in organization.
Information technology supports the categoriza-
tion and collaboration of explicit forms of knowledge
[43]. Previously fragmented flows of information and
knowledge can be integrated with a use of information
technology and organizations must invest in a com-
prehensive infrastructure that supports various types
of knowledge and communication [4]. After laying
foundation of knowledge infrastructure in organiza-
tion structure and organization culture, supporting
information flow with information technology is
crucial to maximize efficiency of knowledge man-
agement [44, 45]. Information technology provides
codification, protection and sharing knowledge in
organization and represents vital element of knowl-
edge management system [46].
2.3. Research hypotheses
Presumed relations between transformation/
transactional leadership and knowledge manage-
ment were based on literature review. We defined
knowledge management as capacity of organiza-
tion to manage knowledge through infrastructure
capabilities (and knowledge process capabilities).
According to that definition, knowledge infrastruc-
ture is a part of knowledge management as well
as three key elements of it: organization culture,
organization structure and information technology.
Leadership style influence on knowledge manage-
ment has been topic of many studies which revealed
strong influence of transformational leadership on
knowledge management although transactional
leadership also correlates positively with knowledge
management [25, 27, 47, 48]. According to that we
presume that transformational leadership is having
stronger effect on knowledge management than
transactional leadership. As we have analyzed only
infrastructural elements of knowledge management
we developed our next hypotheses:
 A. Novak et al. / How leaders can initiate knowledge management
LEADERSHIP STYLE
H1
Transformational
leadership
H2
H3
H1
Transactional H2
leadership
H3
Fig. 1. Proposed research model.
H1: Transformational leadership is having more
positive influence on organizational culture than
transactional leadership.
H2: Transformational leadership is having more
positive influence on organizational structure than
transactional leadership.
H3: Transformational leadership is having more
positive influence on information technology than
transactional leadership.
3. Research methodoly
3.1. Data collection procedure and sample profile
Research was done on population of medium and
big sized companies in Slovenia with two additional
criterium of number of employees (ten or more) and
years of operating (three or more). Criterion of more
than ten employees and more than three years oper-
ating was applied strictly for focusing on population
of companies that have potential to actively con-
duct knowledge management practices as smaller and
younger companies usually do not have resources or
awareness for managing knowledge. To be ranked as
a medium sized company in Slovenia, company must
exceed two of the following criterion: 50 employ-
ees, yearly turnover of 8 mio Euros and total assets
of 4 mio Euros. Big sized companies must exceed
criterion of 250 employees, 40 mio Euros of yearly
turnover and 20 mio Euros of total assets.
Publicly available databases were used to collect
contact information on companies from which data
41
KNOWLEDGE INFRASTRUCTURE
Organizational
culture
Organizational
structure
Information
technology
for 395 companies that fitted in selected criteria could
not be obtained due to data not being published or it
proved invalid after sending them request for partici-
pate in the study via email. The final population thus
consisted of 883 companies.
Questionnaire was designed to collect research
data for the study. Questions that represented man-
ifest variables of each latent variable were selected
based on literature review, and had been validated in
previous studies. Email sending of survey was used
with some follow up phone calls in case of respon-
dent asked for additional information or clarification.
We received 135 valid responds (15, 3%) which is in
line with expected percent of 10–20% as reported in
other studies with similar samples.
3.2. Measures
Five constructs form the research model: trans-
formational leadership and transactional leadership
represent leadership style and organizational culture,
organization structure and information technology
represent knowledge infrastructure. Survey consisted
of 8 questions for transformational leadership, 6 ques-
tions for transactional leadership, 8 questions for
organizational culture, 8 questions for organizational
structure and 8 questions for information technology.
Questionnaire used seven-point Likert scale to mea-
sure responses with 1 being ‘strongly disagree’ and
7 being ‘strongly agree’.
In line with study of Arshad [49], we conceptu-
alized transformational and transactional construct
42 A. Novak et al. / How leaders can initiate knowledge management
as second order hierarchical component construct
(reflective – formative type) in which the first order
constructs (Idealized influence - II, Inspirational
motivation - IM, Intellectual stimulation - IS, Indi-
vidual consideration - IC, Contingent reward - COR,
Management by exception active - MA and Manage-
ment by exception passive - MP) were measured by
reflective factors – selected items from MLQ. Second
order constructs of transformational and transactional
leadership were measured with formative factors
represented by first order factors (II, IM, IS and
IC for Transformational leadership and COR, MA
and MP for Transactional leadership. The instru-
ment that has been developed to measure leadership
style is the MLQ (Multifactor Leadership Question-
naire). Respondents describe the frequency of the
behaviour described by the item on a designed scale.
Different version of MLQ are consisting different
number of items (36 to 90), each relating to a spe-
cific factor, we selected two items for each construct
[50].
As defined by Gold [4] knowledge infrastruc-
ture consist of three key elements: Organizational
culture - OC, Organizational structure - OS and
Information technology – IT. All three elements
were conceptualized as individual constructs mea-
sured with reflective factors – selected items from
Gold’s validated questionnaire. Respondents were
asked to express consent or disagreement with state-
ments about knowledge management elements of
organizational culture, organizational structure and
information technology relating to their organization.
We selected 8 items for measuring each construct of
knowledge infrastructure.
Table 1
Measurement scales
Construct
Transformational leadership (2nd order construct)
Idealized influence - II (1st order construct)
Inspirational motivation - IM (1st order construct)
Intellectual stimulation - IS (1st order construct)
Individual consideration - IC (1st order construct)
Transactional leadership (2nd order construct)
Contingency reward - COR (1st order construct)
Management by exception active - MA (1st order construct)
Management by exception passive - MP (1st order construct)
Information technology - IT (1st order construct)
Organizational structure - OS (1st order construct)
Organizational culture - OC (1st order construct)
3.3. Analytical methods
Partial least squares – structural equation mod-
elling (PLS-SEM) using SmartPLS 3.2.8 software
was used to analyse the research model. PLS - SEM
is a statistical approach for modelling complex mul-
tivariable relationships among observed and latent
variables. Structural Equation Models include a
number of statistical methodologies allowing the
estimation of a causal theoretical network of rela-
tionships linking latent complex concepts, each
measured by means of a number of observable
indicators. From the standpoint of structural equa-
tion modelling, PLS-SEM is a component-based
approach where the concept of causality is for-
mulated in terms of linear conditional expectation.
As an alternative to the classical covariance-based
approach, PLS-SEM is claimed to seek for optimal
linear predictive relationships rather than for causal
mechanisms thus privileging a prediction-relevance
oriented discovery process to the statistical testing
of causal hypotheses. Using PLS-SEM approach to
modelling exhibit greater flexibility in handling var-
ious modelling problems in situations where it is
difficult or impossible to meet the hard assumptions
of more traditional multivariate statistics. Within
this context, PLS-SEM is only attributed to dis-
tributional assumptions and not to the concepts,
the models or the estimation techniques. PLS-SEM
approach was used in recent years by researchers
on fields of management, marketing and accounting
[51].
Two-step approach in conducting analysis is used
in PLS-SEM where first step is the assessment of the
Item Measure Source
II 1-2 Likert scale 1–7 Antonakis (2001), Avolio et al. (1999),
IM 1-2 Likert scale 1–7 Carless et al. (2000), Kirkbride (2006),
IS 1-2 Likert scale 1–7 Franco and Matos (2015)
IC 1-2 Likert scale 1–7
COR 1-2 Likert scale 1–7 Antonakis (2001), Avolio et al. (1999),
MA 1-2 Likert scale 1–7 Carless et al. (2000), Kirkbride (2006),
MP 1-2 Likert scale 1–7 Franco and Matos (2015)
IT 1–8 Likert scale 1–7 Gold et al. (2001), Bakar and
OS 1–8 Likert scale 1–7 Yusof (2016), Mills and Smith (2011),
OC 1-8 Likert scale 1–7 Cho and Korte (2014), Pandey (2018)
 A. Novak et al. / How leaders can initiate knowledge management
measurement model (outer model) which specifies
the relationship between manifest variables and latent
variable. Second step is evaluating structural model
(inner model) to test the extent to which the relation-
ship specified by the proposed model are consistent
with the acquired data [52].
Regarding to our research PLS-SEM is suit-
able for following reason [53]: relatively small
sample (n = 135), focus on prediction of the depend-
able variables, reflective and formative constructs,
conceptualization of constructs as higher order
constructs, latent variable scores are applied in subse-
quent analyses, research model involves considerable
complexity with regard to the type of relationships in
the hypotheses.
4. Results
4.1. Measurement model
Two second order formative constructs (Type 2
Reflective – Formative) and three first order reflec-
tive constructs represent measurement model in this
study. Two-stage approach was applied to evaluate
hierarchical second order constructs. In first stage
repeated indicator approach was used to extract latent
variables scores for all the first order constructs.
Latent variable scores were subsequently used as
indicators in a separate higher order structural model
analysis to measure second order constructs through
a formative design approximation [54, 55].
Measurement model of first order reflective con-
structs was assessed in terms of individual item
reliability, construct reliability, convergent reliability
and discriminant reliability. Individual item reliabil-
ity was analysed by examining their factor loadings
and consequently one item of organizational struc-
ture and one item of information technology were
removed from the model for not reaching recom-
mended minimum value of 0.7. All other items in
measurement model meet the minimum requirements
as presented in Table 2. Hence, individual items were
reliable.
Construct reliability determines whether the items
measuring a construct are similar in their scores
which means that correlations between items are
large [55]. Values of Composite reliability (CR) and
Cronbach’s alpha (CA) are measures of construct reli-
ability and their values are suggested to be above
value of 0.7. As seen in Table 2 are values of CR
and CA are above minimum value and we can con-
43
firm construct reliability. Convergent validity was
assessed by Average variance extracted (AVE). For-
nell and Larcker [56] suggest that values of AVE
should be above value of 0.5. Value of AVE over
0.5 means that at least 50 per cent of the indica-
tor variance should be accounted for Table 2 shows
that values of all first order reflective constructs
were above 0.5 which means that constructs have an
acceptable level of convergent validity.
Discriminant validity analyse whether a construct
is truly different from other constructs in the model
by how much it correlates with other constructs and
how much items represent only a certain construct
[55]. In this study, the confirmation of discriminant
validity comes from three approaches:
1. Cross – loading test
2. Fornell – Larcker criterion
3. The heterotrait-monotrait ratio of correlations
(HTMT).
Cross loading refers to an item’s correlation with
other constructs in the measurement model. All indi-
viduals’ items should be loaded higher on their
respective constructs than on the other constructs to
meet criteria [55]. Table 3 shows that loading of items
in our research model meet this criterion.
Fornell and Larcker [56] criterium of discrimi-
nant validity is comparing the AVE value of each
construct with the shared variance between the con-
structs and suggest that he square root of AVE of
each construct should be greater than its correla-
tions with other constructs. Table 4 shows values
on the main diagonal being greater than values
below diagonal and by this discriminant validity is
supported.
Heterotrait-monotrait ratio (HTMT) is a mean of
all correlations of items across constructs measuring
different constructs relative to the mean of the average
correlations of items measuring the same construct
[55]. Table 4 shows value of HTMT above diago-
nal. All values are above the recommended threshold
of 0.9 except for value between constructs of IC
and IS. However, as they both represent lower order
constructs of the same higher order constructs of
transformational leadership, we can accept the value
and confirm discriminant validity.
4.2. Structural model
Multicollinearity testing among items and analysis
of weights was used for assessing the structural model
[53]. Table 2 shows that VIF values for all formative
44 A. Novak et al. / How leaders can initiate knowledge management

Table 2
Measurement model

Construct/Item VIF Weight Loading p-value CA CR AVE

Transfor. leadership (2nd order formative)
Idealized influence (reflective) 2.441 0.135 0.246 0.762 0.894 0.808
II1 0.900 0.000
II2 0.898 0.000
Inspirational motivation (reflective) 1.744 0.260 0.011 0.817 0.916 0.845
IM1 0.918 0.000
IM2 0.920 0.000
Intellectual stimulation (reflective) 2.909 0.455 0.000 0.802 0.910 0.834
IS1 0.906 0.000
IS2 0.921 0.000
Individual consideration (reflective) 2.981 0.308 0.009 0.884 0.945 0.896
IC1 0.942 0.000
IC2 0.951 0.000
Transac. leadership (2nd order formative)
Contingency reward (reflective) 1.365 0.749 0.000 0.732 0.882 0.788
COR1 0.875 0.000
COR2 0.901 0.000
Man. by exception active (reflective) 1.286 0.103 0.247 0.775 0.895 0.810
MA1 0.943 0.000
MA2 0.854 0.004
Man. by exception passive (reflective) 1.212 0.441 0.000 0.713 0.875 0.777
MP1 0.885 0.000
MP2 0.878 0.000
Information technology (reflective) 0.883 0.909 0.588
IT2 0.757 0.000
IT3 0.723 0.000
IT4 0.835 0.000
IT5 0.757 0.000
IT6 0.768 0.000
IT7 0.728 0.000
IT8 0.795 0.000
Organizational structure (reflective) 0.930 0.944 0.706
OS1 0.819 0.000
OS2 0.864 0.000
OS3 0.858 0.000
OS4 0.867 0.000
OS5 0.806 0.000
OS6 0.868 0.000
OS8 0.795 0.000
Organizational culture (reflective) 0.937 0.948 0.696
OC1 0.761 0.000
OC2 0.881 0.000
OC3 0.856 0.000
OC4 0.833 0.000
OC5 0.872 0.000
OC6 0.873 0.000
OC7 0.811 0.000
OC8 0.780 0.000
 A. Novak et al. / How leaders can initiate knowledge management 45

Table 3
Discriminant validity: Cross - loadings test

IC II IM IS COR MA MP IT OC OS
IC1 0.942 0.567 0.432 0.752 0.435 0.064 0.383 0.451 0.562 0.497
IC2 0.951 0.717 0.536 0.738 0.520 0.089 0.418 0.554 0.712 0.628
II1 0.652 0.900 0.516 0.615 0.521 0.150 0.305 0.359 0.523 0.506
II2 0.572 0.898 0.624 0.577 0.400 0.081 0.336 0.439 0.589 0.527
IM1 0.454 0.595 0.918 0.483 0.428 0.064 0.350 0.435 0.565 0.457
IM2 0.489 0.571 0.920 0.503 0.386 0.062 0.355 0.386 0.520 0.421
IS1 0.659 0.573 0.475 0.906 0.576 0.239 0.425 0.427 0.521 0.589
IS2 0.773 0.636 0.504 0.921 0.533 0.140 0.415 0.545 0.688 0.644
COR1 0.455 0.435 0.357 0.575 0.875 0.304 0.195 0.429 0.433 0.456
COR2 0.445 0.473 0.426 0.505 0.901 0.352 0.317 0.391 0.553 0.633
MA1 0.118 0.153 0.094 0.240 0.387 0.943 –0.088 0.240 0.107 0.260
MA2 0.006 0.060 0.012 0.102 0.258 0.854 –0.259 0.176 0.023 0.158
MP1 0.445 0.411 0.392 0.449 0.287 –0.207 0.885 0.271 0.460 0.393
MP2 0.300 0.214 0.282 0.360 0.227 –0.092 0.878 0.255 0.338 0.299
IT2 0.351 0.362 0.338 0.345 0.392 0.203 0.180 0.757 0.371 0.459
IT3 0.416 0.291 0.310 0.338 0.397 0.178 0.166 0.723 0.384 0.364
IT4 0.441 0.366 0.268 0.393 0.248 0.217 0.210 0.835 0.427 0.481
IT5 0.528 0.438 0.391 0.515 0.297 0.133 0.328 0.757 0.463 0.533
IT6 0.413 0.347 0.406 0.494 0.372 0.072 0.372 0.768 0.427 0.519
IT7 0.260 0.154 0.264 0.244 0.342 0.171 0.153 0.728 0.400 0.452
IT8 0.399 0.363 0.375 0.466 0.417 0.304 0.148 0.795 0.440 0.515
OC1 0.631 0.502 0.423 0.555 0.349 –0.053 0.463 0.517 0.761 0.596
OC2 0.522 0.467 0.442 0.518 0.448 0.028 0.402 0.493 0.881 0.710
OC3 0.556 0.534 0.535 0.582 0.477 0.094 0.356 0.477 0.856 0.634
OC4 0.553 0.508 0.470 0.564 0.388 0.038 0.330 0.465 0.833 0.674
OC5 0.510 0.488 0.483 0.558 0.526 0.134 0.378 0.440 0.872 0.711
OC6 0.560 0.545 0.533 0.600 0.569 0.121 0.385 0.434 0.873 0.767
OC7 0.572 0.608 0.541 0.544 0.422 0.016 0.431 0.385 0.811 0.666
OC8 0.611 0.468 0.494 0.516 0.522 0.149 0.285 0.439 0.780 0.632
OS1 0.522 0.517 0.443 0.563 0.464 0.134 0.391 0.528 0.671 0.819
OS2 0.580 0.517 0.481 0.572 0.492 0.135 0.394 0.561 0.732 0.864
OS3 0.590 0.543 0.416 0.593 0.423 0.113 0.372 0.585 0.752 0.858
OS4 0.571 0.542 0.338 0.588 0.418 0.131 0.369 0.550 0.749 0.867
OS5 0.402 0.407 0.409 0.503 0.646 0.345 0.279 0.399 0.629 0.806
OS6 0.454 0.428 0.343 0.587 0.583 0.292 0.303 0.557 0.632 0.868
OS8 0.392 0.426 0.369 0.569 0.602 0.269 0.202 0.487 0.593 0.795

indicators were below the recommended threshold
of 3.3, which means that there is no presence of
high collinearity among indicators which would pro-
duce unstable estimated that would make difficult to
separate effects of individual variable on the con-
struct. Assessment of weights provide information
about how individual formative indicator contributes
to its composite construct. Bootstrapping procedure
showed the presence of non-significant weight of
formative indicator Idealized influence (construct
of Transformational leadership) and Management
Active (construct of Transactional leadership). Nev-
ertheless, we decided to keep both indicators in the
model as their loading (absolute correlation with the
construct) is significant [55].
Bootstrap procedure with a number of 5.000 sub-
samples was used to estimate path coefficient and
tested statistical significance.
As shown in Table 5 influence of transforma-
tional leadership on organizational culture is greater
46 A. Novak et al. / How leaders can initiate knowledge management

Table 4
Discriminant validity: Fornell – Larcker and HTMT criterion

Construct 1 2 3 4 5 6 7 8 9 10
Organizational culture 0.834 0.740 0.732 0.672 0.763 0.599 0.114 0.555 0.666 0.866
Individual consideration 0.676 0.947 0.826 0.601 0.932 0.589 0.082 0.531 0.627 0.656
Idealized influence 0.619 0.681 0.899 0.804 0.847 0.527 0.154 0.481 0.684 0.683
Inspirational motivation 0.590 0.513 0.634 0.919 0.662 0.516 0.074 0.501 0.570 0.547
Intellectual stimulation 0.666 0.787 0.663 0.536 0.913 0.616 0.243 0.607 0.795 0.782
Information technology 0.545 0.533 0.444 0.446 0.535 0.767 0.281 0.365 0.573 0.683
Man. by exception - active 0.082 0.081 0.129 0.068 0.205 0.237 0.900 0.256 0.473 0.271
Man. by exception - passive 0.454 0.424 0.356 0.383 0.459 0.298 –0.170 0.882 0.398 0.482
Contingency reward 0.558 0.506 0.512 0.443 0.606 0.460 0.371 0.292 0.888 0.742
Organizational structure 0.809 0.597 0.575 0.477 0.676 0.624 0.242 0.393 0.618 0.840
Notes: Values on diagonal represent the square root of AVE and values below diagonal represents shared
variance between constructs.Values above the diagonal represent HTMT values.

Table 5
Structural model results

Structural path Path coeff. p-value Sig. level Conclusion

Transformational leadership - Organizational culture 0.604 0.000 ∗∗∗ H1 supported
Transactional leadership - Organizational culture 0.209 0.011 ∗∗

Transformational leadership - Organizational structure 0.452 0.000 ∗∗∗ H2 supported

Transactional leadership - Organizational structure 0.349 0.000 ∗∗∗

Transformational leadership - Information technology 0.455 0.000 ∗∗∗ H3 supported

Transactional leadership - Information technology 0.186 0.049 ∗∗

Notes: n.s. - not significant; ∗∗∗ - significant at p < 0.001 level; ∗∗ - significant at p < 0.05 level; ∗ - - significant
at p < 0.1 level.

than influence of transactional leadership on orga- Table 6

nizational culture. As we predicted both styles Model’s goodness of fit and predictive relevance
of leadership to positively influence organizational Endogenous construct R2 Q2
culture with greater influence of transformational
Organizational culture 0.583 0.525
leadership we can accept hypotheses H1. Organiza-
Organizational structure 0.544 0.499
tional structure is also heavily influenced by both
Information technology 0.359 0.313
leadership styles. Path coefficient of transformational
SRMR = 0.034∗∗
and transactional leadership towards organizational
structure are relatively similar however transforma- Notes: ∗∗ - p < 0.05 two-tailed bias-corrected confidence
tional leadership positive influence is greater and we interval
can accept hypotheses H2. Both leadership styles are
also positively influencing information technology
although path coefficient of transactional leadership relevance. Q2 values greater than zero implies that
is relatively low. H3 can also be accepted. the model has predictive relevance [51]. Table 6
As seen in Table 6 values of R2 for Organiza- shows that all endogenous constructs are above these
tional culture is 0.583, for Organizational structure requirements.
0.544 and for information technology 0.359. Fol- Model’s goodness of fit was analysed through
lowing the rule of thumb all R2 values exceed the value of Standardized root mean square resid-
minimum value of 0.1 recommended by Falk and ual (SRMR). The value of SRMR was 0.034 is well
Miller [57] which shows satisfactory level of pre- below than the maximum threshold of 0.08 [58]. We
dictability. Cross-validated redundancy index (Q2 ) concluded that our model reached satisfactory level
was measured for further assessment of predictive of goodness of fit.
 A. Novak et al. / How leaders can initiate knowledge management
5. Discussion and conclusion
Main goal of this study was to empirically test a
conceptual model of leadership style’s influence on
knowledge infrastructure capacity which is consid-
ered as a part of knowledge management concept.
Knowledge infrastructure can also be interpreted
as a knowledge management enabler that pro-
vides necessary foundation for efficient knowledge
management. Organizational culture, organizational
structure and information technology as three fac-
tors of knowledge infrastructure play important role
in knowledge management [31]. Conceptual model
predicts that leadership style adopted by managers
in organizations is influencing knowledge infras-
tructure. Leadership style is represented by two
basic styles of leadership styles: transformational
leadership and transactional leadership. Both leader-
ship styles are influencing knowledge management,
however transformational leadership style which is
more people-focused approach toward leadership is
believed to have stronger positive influence on knowl-
edge infrastructure elements.
Results of empirical analysis showed that both
leadership styles are influencing all three fac-
tors of knowledge infrastructure in a positive way
and thereby supporting various reports [25, 27,
47, 48] that both leadership styles are positively
correlated with knowledge management. Transfor-
mational leadership was, however, found to have
stronger positive effect on all three factors of knowl-
edge infrastructure although level of influence on
organizational structure was relatively very close.
That can be attributed to the fact that organiza-
tional structure demands also transactional approach
of leadership with some bureaucratic elements to be
effective which is supporting studies of Acharya and
Mishra [42] and Claver-Cortes et al. [2].
Strong positive influence of transformational lead-
ership on knowledge management was expected as it
was reported already in many other studies [20–24].
Results were also in line with studies of Birasnav [25]
and Birasnav et al. [26] which claimed that transfor-
mational leader will promote knowledge as one of the
main cornerstones of his function while also build-
ing teams and networks that are providing efficient
information flow in organization [27].
As transformational leader primary task is to moti-
vate, inspire and empower employees, knowledge
is considered as one of the basic tools that modern
leaders use to generate success in their organiza-
tions. Transformational leadership is therefore more
47
appropriate for managing knowledge, however trans-
actional leadership elements also need to be used
in order to increase efficiency of knowledge man-
agement in organization. Transactional leadership
provides clear direction and project goals while
establishing organizational framework in which orga-
nization operate. System of corrective actions and
stimulation by rewarding can be very effective, espec-
cialy in stable market or organizational environment.
Transactional leadership therefore adds complemen-
tary dimension of leadership to be combined with
transformational leadership in order to maximize pos-
itive influence on knowledge management.
5.1. Implication for practice and theory
Study provided additional insights for managers on
how to approach knowledge management initiatives
in organizations. Results showed that leadership style
can be a crucial element of efficient knowledge man-
agement. On one hand, transformational leadership
that is based on motivation, individual consideration
and intellectual stimulation provides better results.
On the other hand, transactional leadership also con-
tributes with positive effects. Hence it is necessary
that mixture of both styles is adopted, however greater
emphasis should be on transformational leadership
style.
Knowledge management is often analysed only
from the perspective of knowledge management
processes which may not reveal us with the whole pic-
ture. Knowledge management infrastructure can also
be described as knowledge management enablers and
provides necessary foundation for efficient knowl-
edge management. Because of that it is essential for
managers to focus first on elements of organizational
culture, organization structure and information tech-
nology to establish platform on which knowledge
management processes can be build. As seen by the
results of this study, influence of leadership style on
all three factors of knowledge infrastructure is sig-
nificant. This fact further establishes the need for
managers to focus their activities in that perspective.
From a theoretical point of view study provides
insight in different relationship between leadership
style and knowledge management. Leadership style
is defined as transformational leadership and trans-
actional leadership that are different in aspects they
are focus on. Both leadership styles are consisting
of several additional components that all together
define each construct. Transformational leadership
consists of four components with similar weights
48 A. Novak et al. / How leaders can initiate knowledge management
towards transformational leadership construct. Trans-
actional leadership on the other hand is consisting of
three components with one being dominant in aspect
of weight towards transactional leadership construct
(Contingency reward). Knowledge infrastructure rep-
resents only one part of knowledge management
concept, however very important one. With break-
ing knowledge management concept into two parts,
we can more precisely analyse which specific fac-
tors are contributing to the whole concept. When
analysing relationship between leadership style and
those specific factors, namely organizational culture,
organizational structure and information technology,
we can see deeper relation between analysed factors.
5.2. Limitations and future research directions
First limitation of study represents geographical
context of research as it was conducted of popu-
lation of companies in Slovenia. The final number
of valid responses was relatively small which may
have consequence of limited overall generalizability.
Quantitative research only also represent limitation as
some respondents may prefer other research methods
like interviews when participating in study. Sur-
vey for obtaining research data was conducted with
respondents in companies using self-reported ques-
tionnaires which can present various opportunities for
bias in the data. We assured anonymity of respon-
dents and provided additional detail explanation of
questions to minimize bias in the data. Unusable or
unstable data were removed from the final sample to
furthermore minimize bias.
Future studies should define leadership style with
different yet similar concepts to analyse if basic dis-
tinction between person-focused and task-focused
leadership style is influencing knowledge manage-
ment similar to our study. Also, other leadership
styles should be used to analyse basic relationship
between them and knowledge management. There
are many different definitions of leadership style
which can be used and provide additional insight
into its influence on knowledge management. Knowl-
edge management should also be analysed from
strategy perspective (codification vs. personalization)
regarding to its relationship with leadership style.
As with leadership style there are various definitions
of knowledge management which may contribute to
knowledge when analysed in relationship with other
factors that are influencing it. Furthermore, other
concepts of measuring construct of knowledge man-
agement should be used or developed as they also
may provide new information about how respondents
in surveys sees this relatively new concept. As our
study is focused on one country only it would be use-
ful if future studies would focus on other countries,
or even more of them, to compare the results between
them and also between different industries. Long term
observation of researched object should be conducted
in future studies, especially from the standpoint of
influence of different leadership styles through time
perspective on knowledge management infrastruc-
ture, as it would provide more in depth insight on how
is leadership style influencing knowledge manage-
ment as we can assume that influence of leadership
can be (partially) delayed and can be fully effective
over longer period of time.
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