Innovative work behavior as a driver of performance: roles of transformational leadership, innovative atmosphere and competitive intensity

Purpose This study aims to examine multilevel drivers of individual performance in Indonesia’s rural banks (Bank Perkreditan Rakyat [BPR]), focusing on how transformational leadership and organizational innovative atmosphere promote innovative work behavior (IWB), how IWB enhances individual performance and how competitive intensity (CI) moderates the relationship between innovative atmosphere and IWB. Grounded in the Job Demands–Resources (JD-R) theory, this study integrates organizational- and individual-level factors to address the need for innovation and improved performance in a highly regulated and competitive environment. Design/methodology/approach A multilevel quantitative design was applied using 446 valid responses from nonmanagerial employees across 32 BPR branches in East Java. Multilevel structural equation modeling with MPlus was used to analyze individual-level variables (transformational leadership, IWB and individual performance) and organizational-level variables (innovative atmosphere and CI), allowing for the assessment of within- and between-level effects. Findings All hypothesized paths were statistically significant. Transformational leadership positively influenced IWB, which in turn enhanced individual performance. At the organizational level, an innovative atmosphere significantly increased IWB. CI strengthened the relationship between innovative atmosphere and IWB, indicating that greater market pressure enhances the innovation-promoting role of the organizational context. Originality/value This study advances JD-R theory by validating a multilevel framework linking organizational atmosphere and leadership to individual innovation and performance. It offers novel insights into how BPRs, operating in a developing country context, can leverage leadership and organizational culture to foster innovation and remain competitive.