The Impact of Leadership Style on Employees’ Turnover Intention

Abstract

Employee turnover is particularly costly for micro, small, and medium enterprises (MSMEs), which often depend on a limited number of experienced employees and operate with constrained human-resource systems. This study examines the effects of transformational and transactional leadership on employees’ turnover intention in Vietnamese MSMEs. Survey data from 361 employees were analysed using partial least squares structural equation modelling. The measurement model demonstrated satisfactory reliability and validity. Transformational leadership had a significant negative effect on turnover intention (β = −0.264, t = 7.107, p < 0.001), while transactional leadership also reduced turnover intention (β = −0.232, t = 6.373, p < 0.001). Transformational leadership produced the stronger effect, but both leadership styles made meaningful contributions. The findings extend leadership research in an emerging-economy MSME context by showing that relational support, vision, development, role clarity, consistent feedback, and fair performance-linked rewards can jointly strengthen employee retention. MSME managers should therefore combine inspirational and individualised leadership with clear expectations, dependable feedback, and transparent reward practices.