Paradoxical leadership on firm performance: What role can guanxi HRD practices play?

Research shows that paradoxical leadership has a strong positive but inconsistent relationship with firm performance. Drawing on leadership contingency theory, we provide a theoretical model explaining how business unit level (BU‐level) paradoxical leadership positively impacts BU‐level performance mediated by BU‐level corporate entrepreneurship (CE). However, we also show that this relationship can turn negative when the degree of firm‐level Guanxi on human resource development (Guanxi HRD) practices is high. By relying on the responses from 276 BUs and performance archival data from the Taiwan Economic Journal database, we found that BU‐level CE mediates the relationship between BU‐level paradoxical leadership and BU‐level performance. Firm‐level Guanxi HRD practices diminish this effect and turn the positive relationship between BU‐level paradoxical leadership and BU‐level performance through BU‐level CE negative. Our study reveals the dark side of firm‐level Guanxi HRD practices and provides new theoretical and empirical insights that reconcile the relationship between paradoxical leadership and firm performance. Practitioner Points There is a positive relationship between BU‐level paradoxical leadership and BU‐level performance. BU‐level CE positively mediates the relationship between BU‐level paradoxical leadership and BU‐level performance. BU‐level CE positively mediates the relationship between BU‐level paradoxical leadership and BU‐level performance. Guanxi HRD practices negatively moderate the positive relationship between BU‐level paradoxical leadership and BU‐level performance. Guanxi HRD practices negatively moderate the positive relationship between BU‐level paradoxical leadership and BU‐level performance through BU‐level CE.