Does Inclusive Leadership Strengthen the Relationship between Organizational Agility and Psychological Capital? Evidence from Textile Firms in Pakistan

Abstract

In increasingly dynamic and uncertain business environments, organizations must develop adaptive capabilities that enable them to respond effectively to rapid market and technological changes. Among such capabilities, organizational agility has emerged as a critical factor that supports organizational responsiveness and adaptability. However, while prior research has primarily focused on the strategic and performance-related outcomes of agility, relatively little attention has been paid to its psychological implications for employees. Addressing this gap, the present study examines the relationship between organizational agility and employees’ psychological capital, while also investigating the moderating role of inclusive leadership in this relationship. Grounded in Self-Determination Theory, the study proposes that agile organizational environments enhance employees’ psychological resources by fostering autonomy, competence, and supportive work conditions. Data were collected from employees working in textile firms in Pakistan using a structured questionnaire. A total of 302 valid responses were obtained and analyzed using structural equation modeling and hierarchical regression techniques. The findings reveal that organizational agility has a significant positive effect on employees’ psychological capital, indicating that agile work environments contribute to the development of hope, resilience, optimism, and self-efficacy among employees. Furthermore, the results demonstrate that inclusive leadership significantly moderates this relationship, such that the positive effect of organizational agility on psychological capital becomes stronger when inclusive leadership is high. This study contributes to the literature in several ways. First, it extends organizational agility research by highlighting its influence on employee psychological resources rather than focusing solely on organizational performance outcomes. Second, it identifies inclusive leadership as an important boundary condition that strengthens the psychological benefits of agile organizational practices. Finally, the study offers practical insights for textile firms seeking to build resilient and psychologically empowered workforces capable of adapting to rapidly changing industrial environments.

Keywords: Organizational agility, psychological capital, inclusive leadership, textile industry, employee resilience, positive organizational behavior.