Proceedings of 7th Asia-Pacific Business Research Conference 25 - 26 August 2014, Bayview Hotel, Singapore ISBN: 978-1-922069-58-0 Organizational Performance through Transformational Leadership and Organizational Learning of Exporting Gems and Jewelry Business in Thailand Pasiri Khetpiyarat This research aimed to investigate the factors affecting organizational performance of exporting gems and jewelry business in Thailand and to develop a causal model which affected the organizational performance. The target population was entrepreneurs exporting gems and jewelry business in Thailand. The questionnaire was used as a research instrument. This study was mixed method research, which include of quantitative research and qualitative research. Model was verified by using empirical data from a total of 121 completed questionnaires. Data was analyzed by SEM. The results of this study showed 2 that the measurement model was valid and well fitted to empirical data ( = 45.11, df = 37, p = 0.210, GFI = 0.94, AGFI = 0.89). This model exhibited acceptable levels of fit. Finding from the research suggested that highest level of the factors influencing on organizational performance was transformational leadership. It had direct and positive influence on organizational learning and organizational performance. Moreover, organizational performance was indirectly influenced by transformational leadership with the mediator being organizational learning. 1. Introduction It is a challenge for organizations to survive and prosper with the world changing rapidly. Moreover, in the step up to the knowledge-based economy, this rapid change affects the operation of the business cluster as well. These consequences make organizational leadership become aware of the direction of the enterprise development and creation of competitive advantage. Thus, the organizational leaders’ abilities are of core significance to administration. The transformational leader especially would focus on a vision and impact of internal organization changing (Bass and Avolio, 1994). If the leaders manage this, the effect would be operational development plan and organizational learning continuing. An organization that prepares would have high ability for an operation and adaptability in the competitive and constantly changing environment. This is according to the Eleventh National Economic and Social Development Plan that talked about creating economic opportunities, knowledge base, innovation technology and creativity. It must be based on the foundation of production and green consumption. This policy to develop Thailand is a guide for transformational Leadership in order to properly prepare the internal resources. Thus, an organization would have a strategy plan to sustainable organization. (The Office of the National Economic and Social development Broad, 2013) This research studied an organizational capability to focus on internal resources used that can be supplied to build up organizational potential and value. (Barney, 1991) Also, it can use an organizational learning factor for an intermediary organization in making high performance, competitive advantage and plan for the use of resources in organizations effectively. Organizational Learning means balancing dynamic characteristic between external learning and internal learning. After synthesis between them, an organization can get a design activity from the knowledge that it has learned and take it to develop an organization. (Senge, 1990) Moreover, organizational learning will help to create a balance between a resource and operation of an administration within its organization. This happens because an organization is highly competitive, and it operates to survive. *Miss Pasiri Khetpiyarat, Department of Management, Uttaradit Rajabhat University, Thailand, Email uttcom01@gmail.com Proceedings of 7th Asia-Pacific Business Research Conference 25 - 26 August 2014, Bayview Hotel, Singapore ISBN: 978-1-922069-58-0 In addition, an organization should create a culture in order to build up trust between people inside an organization (Hung, et al., 2011) If an organization needs to develop internal processes, it is most necessary to receive support from an organizational leader; especially a leader who practices transformational leadership would be active and draw tacit knowledge of an employee's potential use to the organization. Furthermore, the leader would be a supporter and developer to enhance an employee’s ability by seeking opportunities and reducing threats in the workplace. Also, the leader would be the structural organization designer and find the direction to build up a sustainable organization. This data is confirmed in the study of Bass and Avolio (1994). They concluded that the organizational leader's behaviour is very important to direct for success or failure of an organization. This is because a leader’s behaviour and motivation affects an employee’s operation. The same conclusion is in the study of Garcia-Morales, et al. (2011). They have found that an organizational leader of administrative form will help the employee to understand the significant issue of strategy that an organization uses by studying organizational learning which helps to add value to an organization. The transformational leadership is an important factor to support organizational learning and set an operating plan because a leader has the authority and drive to direct followers inside an organization in order to achieve the organizational goal. Thailand exporting gems and jewelry business have reported an increase in revenue for the country. This is because the businesses have the competitive ability domain, particular skills and production skills. Although these businesses have shown high performance, problems still arise because of a shortage of design expertise and high labor costs when compared with China, India and Vietnam. Because of these issues, the researcher was interested on studying organizational performance of exporting gems and jewelry business in Thailand. The researcher wanted to find out what are causes of the businesses needs to accelerate their potential from developing inside organizations to survive and overcome any threat even facing the competitive and changing environment. Factors involved in this research including the factors on organizational performance, transformational Leadership and organizational learning. This study would help the export of gems and jewelry businesses to have competitive potential and performance management as a great model for the future business development. 2. Literature Review Organizational Performance After finishing the fiscal year for operating a business, an organization needs to know the results of operations in the past in order to determine the operational efficiency. Dalaney and Huselid (1996) have developed a tool to measure organizational performance. It was using for measuring on the dimension of the market performance and human resource performance. According to Lin and Kuo (2007) they have also used to measure the performance in three dimensions including the financial performance, business performance and organization effectiveness. As pointed out by Kaplan and Norton (1992) has studied four dimensions including financial perspective, customer perspective, internal process perspective and learning and growth perspective. In this case, the instruments only use for measuring the performance; on the other hand, the organizational success’s measurement has varieties. Likewise, they use to measure return on revenue such as return on asset (ROA), return on sales (ROS) and return on equity (ROE) (Menguc, 2007; Bobillo, 2010). Nath, et al. (2010) also has studied to use marketing measurements for testing sales’ growth, market share growth and profitability. According to the reviewing and analyzing elements of organizational key performance, measuring tools have various tools as well, and each tool measures an organizational success by testing organizational Proceedings of 7th Asia-Pacific Business Research Conference 25 - 26 August 2014, Bayview Hotel, Singapore ISBN: 978-1-922069-58-0 performance in several ways such as the performance of financial, marketing, human resource or learning outcome. It depends on the purpose for using the measurement in each organization. In this research, the researcher used the measurement for testing organizational performance in two dimensions. They were financial performance including ROS, ROA and ROE and non-financial performance including sales growth and learning performance. Transformational Leadership In the study of leader’s behaviour of Bass (1990); Bass and Avolio (1994) has presented two behaviour ideas including transactional leadership and transformational leadership. They focused on the leader’s styles of transactional Leadership means the nature of the leader role with maintaining the followers to perform at their best reward for performing. However, for this research was interested and directly presented on the theory of transformational leadership only, and this style of transformational leadership informs that a leader who practices for transformational leadership focuses on teamwork, motivation and creation to change for achieving the goal. Because transformational leadership contains idealized Influence, inspiration motivation, intellectual stimulation and individualized consideration. According to Chaiyached B. (2012), he mentioned about the new leadership styles that is the leader’s characteristic who brings technologies and changes for improving and developing to the sustainable organization. The way that the leader would make it inside the organization by taking into account follows people’s needs and well-being. In addition, the leader must create significant changes to affect the employee and the organization as well as changes in the duty structure, strategy and corporate culture. Also, Kriangkraiyot P. (2012) defined that the leader who has charisma can stimulate people’s sense to feel attracted and excited to imitate the leader’s behaviour. The way that the leader does will provide the followers’ performance by helping them to apply their intelligence to solve the problems in order to achieve an organizational goal. The literature review drew to interest on transformational leadership in 4 dimension. The dimensions contained inspiration motivation, intellectual stimulation, individualized consideration and idealized Influence. Organizational Learning The concept of organizational learning was developed by Argyris and Chon (1996). They showed the learning concept that learning takes place when the action is intended to happen and cause in positive results. If problems or defects occur after inspection, the learning will be updated for solving and developing those problems. These are important aspects of learning. The aspects of learning are divided into two types, Single-Loop Learning and Double-Loop Learning. According to Morgan, et al. (1998), conclude that organizational learning that learning supports the organizational working system and producing processes for keeping up-to-learn and up-to-date to changing environment. Huber (1991) claim that organizational Learning is divided into four steps. The first step is knowledge acquisition. This step tells about how people gain the knowledge, and it is the nature of knowledge that derives from an observation, experience or learning from others. The second step is information distribution processes on publishing, distributing and sharing knowledge. The third step is information interpretation that information is focused on giving a meaning, and people have information to become knowledge by gaining from their operations’ experiences. The last step is the organizational memory that the knowledge is kept by the storage process, and all datum and inventions are remained for using inside the organization. This finding is similar to the study of Nemeth (1997), found that the steps of knowledge acquisition, knowledge sharing, meaning construction, Proceedings of 7th Asia-Pacific Business Research Conference 25 - 26 August 2014, Bayview Hotel, Singapore ISBN: 978-1-922069-58-0 organizational memory and information retrieval. Because of these literature reviews, it has made the researcher interested in studying of organizational learning which was containing the knowledge acquisition, information Interpretation, knowledge transfer and integration organizational memory and retrieval of information. 3. The Methodology and Model Measures The measured of the organizational performance through transformational leadership and organizational learning of gems and jewelry business in Thailand with the variables used including: Transformational leadership measured by the four indicators including inspiration motivation, intellectual stimulation, individualized consideration and idealized influence. Organizational learning measured by the four indicators including knowledge acquisition, information interpretation, knowledge transfer and integrating, organizational memory and retrieval of information. Organizational performance measured by the two indicators including financial performance and non-financial performance. Sample and Data The study is carried on Thailand exporting gem and jewelry business that scope was the CEO or executives of the companies. All companies registered as a member of the Department of International Trade Promotion (Department of International Trade Promotion, 2013) in a total of 387 companies. They are companies to work on exporting of gems and jewelry. The businesses’ names are in the database of the Department of International Trade Promotion and establishment on the form of producing and manufacturing in Thailand. Questionnaires and the structured interview were used as the primary means for data collection using in-depth interviews and mailed questionnaires. During the study period focused on a measurement model that influence on organizational performance of exporting gems and jewelry business in Thailand, and studying was to review theories and related researches. The research had qualitative research technique that was in-depth interviews with entrepreneurs in exporting companies of gems and jewelry in Thailand. In addition, Quantitative research technique analyzed with SEM (Structural Equation Modeling). The data collection used the questionnaires to distribute to the sampling group and analyzed The review of the literatures, it was concluded that organizational performance was caused by the administration of the leader who practice transformational Leadership; whereas, the organizational learning arose from the direct and indirect experiences of the followers. If the leader who practices transformational leadership orders organizational learning, the organizational performance would be high level of efficiency and effectiveness. Proceedings of 7th Asia-Pacific Business Research Conference 25 - 26 August 2014, Bayview Hotel, Singapore ISBN: 978-1-922069-58-0 The Conceptual Framework and the Hypotheses Organizational Learning H2 Transformational Leadership -Inspiration Motivation -Intellectual Stimulation -Individualized Consideration -Idealized Influence -Knowledge Acquisition -Information Interpretation -Knowledge Transfer and Integration -Organizational Memory -Retrieval of information H3 H1 Organizational Performance -Financial Performance: ROS, ROA, ROE -Non-Financial Performance Market Performance Sales Growth, Learning Performance Figure 1 Research Framework 4. The Findings The findings were the causal factors that influenced on organizational performance of exporting gems and jewelry in Thailand. The details were as following: The result of factors influenced the direct and indirect effects on the organizational performance of exporting gems and jewelry in Thailand. Table 1 showing the cause factors influenced the organizational performance of exporting gems and jewelry in Thailand Latent Variable Transformational Leadership Observed Variable -Inspiration Motivation -Intellectual Stimulation -Individualized Consideration -Idealized Influence Direct Effect / Organizational Learning -Knowledge Acquisition -Information Interpretation -Knowledge Transfer and Integration -Organizational Memory -Retrieval of information / Indirect Effect trough Organizational Learning The result of factors influenced organizational performance of exporting of gems and jewelry business in Thailand. In order to enable the construction of transformational leadership and organizational learning were direct effect of organizational performance; moreover, transformational leadership also has indirect effect of organizational performance through organizational learning. Proceedings of 7th Asia-Pacific Business Research Conference 25 - 26 August 2014, Bayview Hotel, Singapore ISBN: 978-1-922069-58-0 The result of factors influenced organizational performance by testing the consistency of the measurement model, and the model also influenced organizational performance of exporting gems and jewelry in Thailand. The result showed that the model was verified by using the empirical data. Considering this study showed that the measurement model was valid and well fitted to the empirical data with the chi-square (2) was 45.11, degree of freedom (df) was 37, p-value (p) was 0.210, Goodness-of-Fit Index (GFI) was 0.94, Adjusted Goodness-of-Fit Index (AGFI) was 0.89, Root Mean Square Residuals (RMR) were 0.017 and Root Mean Square Error of Approximation (RMSEA) was 0.039. The chi-square relative (2/df) was 1.22 which was less than 2. Finding from the research suggested that highest level of the factors influencing on organizational performance (E2) was transformational leadership (K1). It had direct and positive influence on organizational learning (E1) and organizational performance. (E2) Moreover, organizational performance (E2) was indirectly influenced by transformational leadership (K1) with the mediator being organizational learning (E1). Whereas, transformational leadership (K1) had total effect and direct effect equal to 0.71 and 0.68 respectively, it had indirect effect on organizational performance (E2) through organizational learning (E1), with the size of indirect effect equal to 0.18. Thus, all of these were the value of influence in the statistical significance on 0.01 and 0.05. The analysed result can show on the table 2 as following: Proceedings of 7th Asia-Pacific Business Research Conference 25 - 26 August 2014, Bayview Hotel, Singapore ISBN: 978-1-922069-58-0 Table 2 showing the analyzing results were the factors influenced the organizational performance of exporting gems and jewelry in Thailand. Effect factors Transformationa l Leadership Organizational Learning R2 Cause Factors Organizational Learning .51 DE .71** IE - TE .71** .77 - - - Organizational Performance DE IE TE .68** .18** .86** .24** - .24** *The Chi Square = 45.11, df = 37, p = 0.210, GFI = 0.94, AGFI = 0.89, RESEA = 0.039 5. Summary and Conclusions H1: The transformational leadership that had direct and positive influence on organizational performance. This was confirmed in the concept of Bass and Avolio (1994). They found that the behaviour of the leader who practices transformational leadership is more affective to followers in an attempt for having high performance than the leader who practices transactional leadership. Moreover, the leader acts to provide opportunities to followers to debate or ask questions, these makes good and high level of organizational performance. The research result was consistent with the study of Robbins and Coulter (2007). They presented that the leader who practices transformational leadership can create and generate more productive and higher operation of the organizational performance than the leader who practices transactional leadership. This is because the leader supports to make organizational productivity, generate new ideas and effort employees’ on the job satisfaction. As a result, the organization can achieve the organizational objectives and goal setting. These literatures were verified the research results that the leaders of exporting of gems and jewelry business in Thailand who practiced transformational leadership must set their administrative guidelines to be suitable on their employees’ need. In addition, leaders must encourage employees to practice for their perception and learning from the organizational leaders’ information. Leaders must inspire with challenging assignments to employees, develop their learning and allow them to express their creativities. Leaders must be as a good role model as well as paying more attention and caring in all staffs closely. If the guidelines were accepted by everyone in the organization, it would have the result of the collaborative working on high performance. Besides, this research was also consistent with the study of Garcia-Morales, et al. (2011). The study showed that transformational leadership directly affects the results of organizational operations. The leader who practices transformational leadership would encourage employees to perceive and learn to have responsibilities on their jobs. Thus, Thailand exporting companies of gems and jewelry must design their administrations to be an appropriate depending on the context of the organizational and personnel needs. H2 : Transformational leadership was direct and positive influence organizational learning. Transformational leadership was factors that had direct and positive influence on organizational learning. This result is confirmed in the study of Gemusluogo and Ilsev (2009). They found that to achieve a better relationship among people inside the organization is the duty of the leader. The leader gives an opportunity and motivation to their followers that they will be creators to find creative ways working, and the leader also helps them to fulfill the employees' knowledge continuously. Moreover, the leader who Proceedings of 7th Asia-Pacific Business Research Conference 25 - 26 August 2014, Bayview Hotel, Singapore ISBN: 978-1-922069-58-0 interests in information and learns from what is around the organization enables to help the organization having knowledge and apply it for getting a high advantage in order to contain the organization's ability to survive. This study was consistent with the study of Menquc, et al., (2007); Garcia-Morales, et al., (2011). They showed that transformational leadership supports learning and take an advantage from the marketing strategy which is marketing differentiation. These are result to make an affect organizational growth and competitive advantage. Furthermore, the leader who practices transformation leadership should use the knowledge sharing by giving the opportunity to employees for sharing their ideas and brainstorming to analyze information from external organization frequently. The information should get from external organization and customers. Furthermore, the leader should support organizational learning and present an importance of continuing learning in among of employees. If employees were curious of leaning, it would help them to have a persuasion in order to develop their skills and abilities. This would provide to develop an individual fist before distributing to the group working and the whole organization in the last. Thus, organizational learning would be benefit to organizational performance as a good direction to achieve the goal. H3 : Organizational learning was factors that had direct and positive influence on organizational performance. The finding showed that learning process comprised knowledge acquisition, information interpretation, knowledge transfer and Integration, organizational memory and retrieval of information (Huber, 1991; Jimenez and Valle, 2011). In each organization has a unique way to manage organizational learning differently. Starting from an acquisition of knowledge is knowledge finding in the different sources of knowledge to enhance operational capabilities (Rhodes, et al., 2008). The reason for organizational learning is beneficial for increasing organizational performance with the leader who understand the workplace environment and cope in the right way of organizational management (Jones, 2000). This study was consistent with the concept of Liao and Wu (2008). They found that creating the recognition system among employees can help them to create their learning path with their experiences. Also receiving the knowledge from the organization will help them apply their knowledge to make more benefit to the organization. Moreover, learning process in an organization starts by creating learning, and it occur from integrating knowledge inside an organization to use the knowledge in the top to the maximum benefit for the organization, and the knowledge is published or distributed through the entire organization and retrieval of information Migdadi (2009) in order to use it for value adding of the organizational output and outcome. Implication for Operating The results found that the behaviour of the leader who practiced transformational leadership was significant to increase the organizational performance. This is because the leader is a key factor in an organizational success with behaviour aspects on vision, foresight and change to an organization. Also, the leader influences the concept and practice among employees. Unlike, the leader who practiced transactional leadership was only focusing on using incentives workforces in many ways. Thus, an organizational leader should practice a new leadership model in the form of transformational leadership to manage in the organization because this type of leadership would have a vision that could bring the development and change to organization. To give high organizational performance, the leaders should encourage everyone for practicing on organizational learning. This is because the survival and prosperity of an organization base on the lives of their learning. Organizational learning has dimensions of leaning including information, critical corporate data or practice techniques. These confirm Proceedings of 7th Asia-Pacific Business Research Conference 25 - 26 August 2014, Bayview Hotel, Singapore ISBN: 978-1-922069-58-0 that an organization should prepare for organizational learning, and could be done by the leader who encourages people and adopt the information technology system in the organization. An organization will get the benefit from working on these in various fields such as the telecommunication, data storage, specific production of the organization, and finally it becomes the source of organizational knowledge. The leader needs to focus on learning process and support the use of the information technology to help for enhancing operational performance and maintain the knowledge continuing with the organization. Future Research This research focused on a specific target group of the top executives in exporting gems and jewelry business in Thailand. This research was studying only in the perspective of administrators. 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