Leadership and Job Satisfaction: Addressing Endogeneity With Panel Data From a Field Experiment

Abstract

The interaction between leaders and employees plays a key role in determining organizational outcomes and performance. Although the human resources management literature posits positive effects of leadership behaviors on employee job satisfaction, the causal path between the two is unclear due to potential endogeneity issues inherent in this relationship. To address the issue, we first provide theoretical explanations about why and how transformational and transactional leadership behaviors would enhance employee job satisfaction. Second, we test the relationship between leadership behaviors and employee job satisfaction using panel data from a year-long randomized field experiment that engaged leaders and employees from hundreds of public and private organizations in Denmark. Primary findings suggest that although leadership training does not have direct effects on changes in employee job satisfaction, leadership-training-induced changes in leadership behaviors (transformational leadership and verbal rewards) are positively related to changes in job satisfaction.