Nepotism and Employee Innovation: The Mediating Role of Perceived Fairness and the Moderating Role of Organizational Transparency

Abstract

Nepotism in the tourism and hospitality industry, educational institutions, and government affect fairness while stifling employee innovation —critical to maintaining competitive advantage and organizational growth. This study examines the impact of nepotism on employee innovation, particularly examining the mediating role of perceived fairness and the moderating influence of organizational transparency. The analysis reveals that the indirect effect of nepotism on innovation, mediated by perceived fairness, is statistically insignificant (β = 0.00, p = .422). Furthermore, the direct effect of nepotism on innovation is significant and negative (β = -0.06, p = .018), indicating that nepotism directly hinders innovation within organizations. While perceived fairness decreases under nepotism, this effect is insignificant (β = -0.02, p = .116). Additionally, perceived fairness does not significantly impact employee innovation (β = -0.20, p = .351), suggesting that variations in fairness perceptions do not substantially affect innovation. Organizational transparency significantly moderates the relationship between nepotism and perceived fairness (β = 0.29, p = .006), indicating that higher transparency can mitigate the adverse effects of nepotism on fairness perceptions. However, transparency does not significantly influence the relationship between perceived fairness and innovation or the indirect effect of nepotism on innovation (p > .05). These results indicate that transparency may improve the perception of fairness in nepotistic environments; however, it does not generate sufficient innovation. Consequently, to encourage innovation in environments where nepotism is prevalent, organizations should explore alternative mechanisms beyond transparency, such as implementing leadership development programs and cultivating a meritocratic culture. Additional research is required to identify mediators connecting nepotism to employee innovation.