The effect of levers of control, firm’s capability, and transformational leadership on competitive advantage: A study on manufacturing firms in Indonesia

Abstract

This research uses the Input-Process-Output model to investigate the impact of levers of control (LoC) on organizational aspects in Indonesia. The study views LoC as both internal and external input to an organization. It examines how transformational leadership (TL) and firm capability (FC) act as processes to integrate these elements, leading to competitive advantage (CA) as the output. Using data from 260 questionnaires, the study conducted a series of analyses, including reliability and validity checks, confirmatory factor analysis (CFA), and structural equation modelling (SEM). The results indicate that LoC significantly influences TL, FC, and CA. TL and FC have notable effects on a company’s CA, with both factors mediating the relationship between LoC and CA. TL and FC have a sequential mediation effect on the link between LoC and CA. The study also touches on its implications, boundaries, and potential areas for future exploration.