THE MODERATING ROLE OF LEADER-MEMBER EXCHANGE ON THE RELATIONSHIP BETWEEN EXPLOITATIVE LEADERSHIP AND KNOWLEDGE HIDING IN THE SRI LANKAN BANKING SECTOR

Abstract

The Sri Lankan banking sector, a crucial economic pillar, grapples with knowledge hiding (KH), where employees intentionally conceal vital work information, hindering innovation, efficiency, risk management, and overall organizational success. This research examines the relationship between exploitative leadership (EL) and KH within this context, drawing on Social Exchange Theory (SET). It also examines whether the quality of the Leader-Member Exchange (LMX) can mitigate this negative effect. Despite existing research, the moderating role of LMX in this specific industry remains underexplored. This study aims to determine whether the quality of LMX can buffer the tendency of employees to hide knowledge when led exploitatively in Sri Lankan banks, ultimately providing insights for fostering knowledge sharing and enhancing organizational effectiveness in this critical sector. Data for this study were gathered from 253 banking sector employees in Sri Lanka via questionnaires and analyzed using SPSS. Pearson’s correlation analysis revealed a moderate positive relationship between EL and KH (r = 0.52, p < 0.01), indicating that higher perceptions of EL are significantly associated with increased KH. Additionally, EL showed a moderate negative correlation with LMX (r = -0.41, p < 0.01), suggesting that perceptions of EL coincide with poorer leader-member relationships. Hierarchical regression analysis confirmed these findings: EL positively predicted KH (β = 0.52, p < 0.001), while LMX negatively predicted KH (β = -0.33, p < 0.001), demonstrating that strong leader-member relationships reduce KH behaviors. Importantly, the interaction effect between LMX and EL was significant (β = -0.28, p = 0.001), indicating that high-quality LMX moderates and weakens the positive relationship between EL and KH, especially when employees perceive a strong leader-member relationship. Conversely, low-quality LMX strengthens the link between exploitative leadership and knowledge hiding. These findings underscore the importance of fostering positive leader-member relationships in mitigating KH behaviors in exploitative environments within Sri Lankan banks. This study’s cross-sectional design limits causal inference, and self reported data may involve response bias. Future research should consider longitudinal methods and explore other moderators like organizational culture or psychological safety. Broader sectoral or cultural comparisons could improve generalizability.