The Impact of Talent Management on Organizational Performance: The Mediating Role of Innovation and the Moderating Role of Transformational Leadership

Abstract

This study investigates the effect of talent management on organizational performance, examining innovation as a mediator and transformational leadership as a moderator. Drawing on the Resource-Based View, Dynamic Capabilities Theory, and Transformational Leadership Theory, the study proposes that systematic talent practices strengthen innovation capabilities and, consequently, organizational outcomes. Data were collected from 398 middle- and senior-level managers in Pakistani manufacturing firms through a structured questionnaire and analysed using partial least squares structural equation modelling. The measurement model demonstrated satisfactory reliability, convergent validity, and discriminant validity. The structural results show that talent management positively influences innovation, while innovation has a strong positive effect on organizational performance. Innovation partially mediates the relationship between talent management and organizational performance. Transformational leadership also positively moderates the talent management–innovation relationship, indicating that supportive and inspiring leaders enhance the conversion of talent practices into innovative outcomes. The model explains substantial variance in innovation and organizational performance and demonstrates predictive relevance. These findings position talent management as a strategic organizational capability rather than solely an administrative human resource function. The study recommends integrating talent development, innovation systems, and transformational leadership practices to strengthen competitiveness and sustainable performance, particularly in manufacturing firms operating in emerging markets.

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