Ethical leadership and physical work environment as drivers of employee creativity and innovative behaviour

Abstract

Purpose This study examines the impact of ethical leadership and the physical work environment on the creativity and innovative behaviour of employees in the same organizational context, with a particular emphasis on implications for international business settings. Design/methodology/approach A quantitative method (survey) was used for this study, with 396 questionnaires completed online. Data analysis was conducted using Partial Least Squares Structural Equation Modelling (PLS-SEM) in SmartPLS 4, following the two-stage approach. The research sample was generated using a simple, non-probability, convenience sampling technique. Findings This study challenges prevailing theoretical frameworks by examining the interrelations between ethical leadership (EL), physical work environment (PWE), employee creativity (EC) and innovative behaviours (IB) within a unified framework. EC emerges as a key mediator linking EL and PWE to IB. The PWE, modelled as a second-order construct, exerts both direct and indirect effects on IB, indicating partial mediation through EC. Supportive and aesthetically pleasing environments stimulate EC and directly promote IB. These findings are particularly relevant for multinational organizations managing culturally diverse teams. Research limitations/implications The present study is subject to a number of limitations that may inform the design of future research. One such limitation is that the study included a relatively younger cohort of respondents, with an average age range of 29–30. This may have influenced the overall findings of the study. In subsequent research, the age range of respondents should be broader to gain a more representative sample and to ensure a greater distribution of the questionnaire to respondents in older age categories. Another potential limitation of the study that could be addressed in future research is the voluntary participation of many study participants, which may have introduced demographic biases into the sample. Subsequent studies could consider including a more diverse set of organizations or activities in the scope of investigation. Practical implications This study offers several managerial implications. First, it highlights ethical leadership's role in fostering employee innovation. As leadership shapes behaviour, organizations should prioritize creativity and support its development. Ethical leaders inspire creative employees to act innovatively, enhancing innovation outcomes. Second, the physical work environment significantly affects behaviour and performance. Visually engaging spaces can boost satisfaction, productivity and creativity. For multinational enterprises, aligning leadership and workplace design with local cultural norms is essential. Perceptions of supportive or aesthetic environments, and interpretations of ethical leadership, vary across regions. Thus, culturally sensitive leadership and design strategies are vital for local effectiveness and a cohesive global innovation strategy. Originality/value Among physical work environment (PWE) dimensions, Focus and Sense of Beauty influence innovative behaviours (IB) entirely through employee creativity (EC), indicating full mediation. Connectedness does not significantly affect EC but has a modest direct effect on IB, suggesting social connection may independently foster innovation. These results affirm that leadership and environmental factors shape innovation primarily via EC, while Connectedness may play a distinct role. The findings guide global leaders in aligning leadership and workplace design across cultures.