The relationship between transformational and transactional leadership styles and intention to stay in Malaysia manufacturing SMEs / Siti Nur Athirah Mohd Fauzi

Small and Medium Enterprise (SMEs) in Malaysia specifically in the manufacturing sector has faced a high turnover rate and this has led to difficulty to sustain its competitiveness in the industry. When employees keep on leaving the organization, the organization needs to face with direct and indirect costs and organizational growth will be delayed. At the end, development and contribution of SMEs in Malaysia economy will be affected. In addition, the implementation of good leadership styles is still low in SMEs. Thus, studies regarding leadership styles and employee intention to stay among employee in Malaysian SMEs are indeed needed. The aim of the study is to investigate the relationship between transformational leadership style and transactional leadership style towards employee intention to stay in the manufacturing SMEs in Malaysia. This study was conducted based on perceptions from employees towards their leaders. 384 employees have been selected from 10-15 manufacturing companies to be the respondents of this study. To analyse the data SPSS technique is used in this study. This study has found, both transformational and transactional leader show positive and significant relationship towards intention to stay with transactional leadership showed a much stronger effect than transformational leadership. At the factor level for transformational leadership, only intellectual stimulation gives a positive and significant relationship towards intention to stay. Meanwhile, at the factor level of transactional leadership, contingent reward and management-by-exception active have a positive and significant relationship towards intention to stay.