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Many researches have been conducted on leadership styles and business performance in Malaysia. However none of these researches specifically studied transformational leadership and business performance from the perspectives of technology-based SMEs. This paper serves two purposes. First, the authors aim to identify the critical dimensions of transformational leadership and business performance. Second, this paper intends to determine the relationship between transformational leadership and business performance. This study used a quantitative method approach using survey questionnaire. 86 respondents who are the owners or top managers of technology-based SMEs in Malaysia took part in the study. The analyses conducted involved factor, reliability and correlation analysis. The results of factor analysis proposed three dimensions representing transformational leadership, i.e. enthusiastic optimism, idealized influence and individual consideration which is contrary to the four dimensions theorized by Bass and Avolio (2004). In addition, business performance generated a one-factordimension. The correlation analysis indicates there is a significant and positive correlation between transformational leadership and business performance. The originality of this paper lies on being the first to examine the transformational leadership and business performance in technology-based SMEs in Malaysia.

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The aim of this article is to propose second order hierarchical component models to analyze the two leadership styles (transformational leadership and transactional leadership) for technology-based SMEs. We adopted the two-stage approaches in partial least square-structural equation modelling to examine the appropriateness of hierarchical modelling for both leadership styles. The findings indicate that the conceptual properties of transformational leadership and transactional leadership are matched with reflective-formative type of second order hierarchical component models. In addition, the study offers an alternative avenue to those researchers who are intending to introduce hierarchical component models in modelling leadership styles.