From bureaucracy to innovation: How authentic leadership and empowerment drive change in Indonesian State-Owned Enterprises

This study investigates how authentic leadership facilitates innovation within the bureaucratic structure of Indonesian State-Owned Enterprises (SOEs), focusing on psychological empowerment as a mediating mechanism and leader personal power as a moderating factor. A cross-sectional survey was conducted with 141 employees from various SOEs in Indonesia. Data were analyzed using Partial Least Squares Structural Equation Modelling (PLS-SEM) to evaluate measurement and structural models. Findings indicate that authentic leadership significantly promotes innovative work behaviour, both directly and through the mediating role of psychological empowerment. Among the two forms of leader personal power, referent power—grounded in relational trust—strengthens this effect, while expert power has limited influence. These results highlight the importance of relational leadership in catalyzing innovation, particularly in rigid and hierarchical systems. This study contributes to leadership and innovation research by proposing an integrated model rooted in the Global South's socio-cultural realities of public-sector institutions. It offers a novel perspective on how bottom-up change processes can thrive when leaders foster trust, psychological safety, and empowerment. The findings suggest that SOEs aiming for sustainability and agility should incorporate empowerment-based leadership into reform strategies. Leadership development should focus on technical competence and relational credibility. Future research is encouraged to employ longitudinal or mixed method approaches to capture the evolving dynamics of leadership and innovation over time and across diverse organizational contexts.