Transformational leadership and human capital benefits: the role of knowledge management

In order to achieve sustained competitive advantage through developing human capital, organizations, apart from human resource management practices, concentrate on developing transformational leaders and implementing knowledge management (KM). To take part in their efforts, this paper intends to explore leadership and KM literatures to examine the interrelationship between transformational leadership, KM, and employee‐perceived human capital creation or benefits.

A systematic literature review is carried out of traditional and contemporary theoretical and empirical research studies to support the nexus of interrelationship between transformational leadership, KM, and human capital. This review is mainly integrated using a model and propositions that relate transformational leadership and KM with human capital benefits.

Transformational leaders have potential to affect their employees' perceptions of human capital benefits. They also have the greatest potential to augment these benefits through involving them in the KM process, establishing organizational culture, and encouraging communication among employees.

This model suggests that human resource managers should provide training to managers with regard to developing transformational leadership behavior, since this behavior contributes to human capital creation by which an organization achieves competitive advantage. Furthermore, this study mainly focuses on leaders as transformational leaders, since these leaders are highly capable of stimulating their followers' creativity. Therefore, this study only considered the components described by Bass and Avolio.

This paper contributes to leadership literature by adding the notion of transformational leadership as an antecedent of human capital creation.