Increasing Governance Innovation Capacity of Local Governments Through Knowledge-Seeking: The Moderating Effect of Transformational Leadership

Abstract

This study explores the relationship between governance innovation capacity,
knowledge-seeking, and transformational leadership in local governments. De
spite the importance of innovation in public governance, many local govern
ments face challenges due to limited innovation capacity. Using a multisite case
study approach, this study analyzes two local governments in Indonesia, involv
ing eight agency leaders. The research suggests that transformational leadership
can moderate the impact of knowledge-seeking on innovation, fostering prac
tices that enhance governance innovation. Findings underscore the crucial role
of leadership in promoting knowledge-seeking and fostering innovation within
local governments, particularly highlighting the need for leadership continu
ity and alignment across all levels of management. However, the innovation
capacity observed is limited to individual level, suggesting the need for further
research into organizational and network dimensions to support a more holistic
approach to innovation. The findings also highlight the need for local govern
ments to invest in transformational leadership as a catalyst for innovation. To
achieve this, leadership should be promoted not only at the political level but
also within agencies, especially among mid-level and operational leaders. Local
governments should prioritize leadership development programmes that foster
transformational qualities and create mechanisms for the creation, acquisition,
and application of knowledge across departments and with external partners.
For future research, it is recommended that a framework be developed to explore
the influence of transformational leadership, while also considering the role of
transactional leadership – which remains dominant in some sites – as well as
the organizational structure and inter-agency collaboration in strengthening
governance innovation capacity. A qualitative approach could provide deeper
insights into how differences in leadership styles impact governance innovation
and help capture dynamics not fully addressed by quantitative methods.