The current research developed a model to explain team effectiveness in Korean firms and theorized how a leader's vertical transformational leadership and members' shared transformational leadership affect team performance and creativity differentially through the mediating process of dynamic capability (i.e., exploitation and exploration). The hypotheses were: (a) the two forms of leadership affect dynamic capability, but the effect of members' shared transformational leadership is greater than that of the leader's vertical transformational leadership; (b) dynamic capability in the team enhances both team performance and creativity; and (c) dynamic capability mediates the effects of the two forms of leadership on team performance and creativity. Testing the hypotheses with 71 teams and 324 members sampled from Korean firms, the current study provided overall support for the hypotheses. Partially supporting the hypothesis, leaders' transformational leadership positively affected the exploitation, but not the exploration. In contrast, members' shared transformational leadership positively affected both dimensions of dynamic capability. Supporting the second hypothesis, the two dimensions of team dynamic capability positively affected both team performance and creativity. Finally, the results supported all mediating effects of leadership on team performance and creativity, except the mediation effect of leaders' transformational leadership on exploration.
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