Inclusive Leadership and Employee Innovation: Driving Change in Pakistan’s Textile Sector

Abstract

This paper examines the impact of inclusive leadership on employee innovative behavior (EIB) in the textile industry in Pakistan, a very important industry confronting global competition, technological advances, and the constant need for innovation. Based on the Social Exchange Theory and Leader-Member Exchange Theory, the study examines the mediating effects of psychological safety and creative self-efficacy (CSE) and the moderating effects of innovation rewards. A cross-sectional, quantitative survey was used, yielding 323 valid responses from 35 major textile companies. Data analysis was performed in SPSS and SmartPLS, including descriptive statistics, ANOVA, reliability analyses, and structural equation modelling. A sample size of 323 employees was sampled out of 35 textile companies in Pakistan in this study, and the numbers were equally distributed across companies of varying sizes. The results indicate that the direct path coefficient (IL -> EIB) is considerable and the relation is positive (IL -> EIB: b = 0.365, p = 0.010), which means that inclusive leadership directly corresponds to employee innovative behavior. The model explains the innovative behavior of the employees up to 73.9 (R 2 = 0.739). Additionally, the models fit reasonably well, with SRMR = 0.121. The results indicate that inclusive leadership has a big positive impact on FSE indirectly and directly via CSE, with the innovative energies of employees being identified as one of its driving forces. Conversely, the outcomes of psychological safety could not be used to predict significantly innovative behavior, meaning that the extent of safety is not sufficient in a labor-intensive setting unless supported by other motivational forces. The effect of the inclusive leadership was reinforced by innovation rewards, but surprisingly, CSE came out weaker, which corroborates the fact that intrinsic motivation can be crowded out by extrinsic incentives. The research provides insights into the leadership and innovation literature by situating these dynamics in the context of a developing economy and provides practical recommendations for managers and policymakers on how to promote sustainable innovation in Pakistan's textile industry.

           Keywords: Inclusive Leadership, Employee Innovative Behaviour, Psychological Safety, Creative Self-Efficacy, Innovation Rewards, Textile Industry, Pakistan