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For this assignment:

1. Read the article From Listening to Leading: Towards an Understanding of Supervisor Listening Within a Framework of Leader-Member Exchange Theory by Lloyd, Boer and Voelpel and the article Exploring Competitiveness of Thailand’s Cosmetic Industry Using Porter’s Diamond Model by Jinachai, Anantachoti, and Winit-Watjana.
2. Draft a three-page paper wherein you identify the following with respect to each article:

   the problem under investigation in each study as articulated by the researchers,
   the purpose of each study as articulated by the researchers,
   the framework (theoretical or conceptual) used by the researchers,
   how the researchers explain the alignment of the framework to the problem, and
   how the researchers explain the alignment of the problem to the research purpose.

Submit your paper in Microsoft Word format by the deadline identified above. The composition should follow conventions of standard American English appropriate for a professional and scholarly audience using APA format (6th Ed.). Submissions that exceed the page limit (title and reference pages excluded) will be rejected.

172 TJPS 2016, 40 (4): 172-178http://www.tjps.pharm.chula.ac.th

Exploring competitiveness of
Thailand’s cosmetic industry using
Porter’s diamond model

Neeranard Jinachai1, Puree Anantachoti2, Win Winit-Watjana2
1Ph.D. Graduate Program in Social and Administrative (International Program),
Faculty of Pharmaceutical Sciences, Chulalongkorn University, Bangkok, Thailand,
2Department of Social and Administrative Pharmacy, Faculty of Pharmaceutical
Sciences, Chulalongkorn University, Bangkok, Thailand

ABSTRACT

Background: The Thai cosmetic industry has continuously grown, but relevant factors impacting
on the industry remained un-assessed. Objectives: This study was intended to explore the key
factors affecting the country competitiveness. Methodology: The diamond model was adapted
as the conceptual framework. An in-depth interview was conducted in five key informants who
were cosmetic executives. Results: It was found that three factors currently enhancing Thai
cosmetic industry competitiveness were government factor, demand condition, and supporting
industries. Gaps in factor conditions, firm strategy, structure and rivalry were detected. The result
showed that many government agencies provided several positive supports for the industry. There
were high demands in made in Thailand cosmetic products. The multinational company (MNC)
products were well-liked by the global markets, whereas the products of small and medium-sized
enterprises (SMEs) were trusted by and preferred among Cambodia, Laos, Myanmar. Herbal and
natural cosmetics were identified as a niche market. Supporting industries, especially service
business (such as tourism, massage, and spa), enhance cosmetic industry growth. Government
created cosmetic cluster helped bringing related businesses to meet and enhancing marketplaces.
Conditions that found to be barriers for the cosmetic industry were high labor cost and 100% of
imported raw materials and packaging. A strategy that should be improved included focusing
on research and development, and blending niche consumer needs to produce the good quality
and high ended cosmetic products. Although many government agencies try to help the industry,
communications between the government and the industry, and co-operations among government
parties should be improved. Conclusion: To foster the cosmetic industry competitiveness,
the government should support the cosmetic industry, particularly SMEs on herbal and natural
products as well as promoting “Made in Thailand Product.” The government and industry should
focus on building network with supported business and related stakeholders. The professional
trainings to SMEs on branding and marketing skills should also be continuously provided by
government. For MNC, the government should work closely with industry sector, and help reduce
unnecessary technical barriers to trades. This will keep Thailand the most attractive cosmetic
production-based country for further investment in the region.

INTRODUCTION

Thailand is the main cosmetic production-base country in the Association of Southeast Asian Nations (ASEAN). The cosmetic business in Thailand has continuously
grown in an opposite direction of downturn economy caused
by political uncertainties such as political crisis during 2013-
2014, or uncontrolled natural disasters such as big flooding in
2011 [1]. Thailand’s cosmetic industry can be classified into

three groups: Small and medium-sized enterprises (SMEs),
multinational company (MNCs), and original equipment
manufacturers (OEMs). Thai cosmetic industry includes
762 companies with approximately 220,000 employees [2].
The number excluded non-registered business. Large-sized
manufacturers usually produce well known international
cosmetic brands, or well accepted local cosmetic brands.
SMEs, on the other hands, manufacturer local cosmetic brands

Original Article

Corresponding Author:
Puree Anantachoti,
Department of Social and
Administrative Pharmacy,
Faculty of Pharmaceutical
Sciences, Chulalongkorn
University,
Bangkok, Thailand.
Tel.: +66894418456,
E-mail: puree.a@pharm.
chula.ac.th

Received: May 10, 2016
Accepted: Aug 20, 2016
Published: Oct 01, 2016

Keywords:
Cosmetic industry,
competitiveness,
diamond model,
Thailand

Thai Journal of Pharmaceutical Sciences

Jinachai, et al.: Competitiveness of Thai cosmetic industry

173 TJPS 2016, 40 (4): 172-178http://www.tjps.pharm.chula.ac.th

for domestic use. Sometimes SMEs produced special cosmetic
products to serve the niche markets.

Regarding ASEAN agreement on trade facilitation among
member states, ASEAN economies gained positive trade
balance after the full implementation of ASEAN harmonization
on the cosmetic sector in 2008 [3]. As for Thailand, the country
has now been recognized as a prominent player in the world’s
beauty industry [4]. Among ASEAN, Thailand and Singapore
are the key exporting countries. Singapore is considered a top
trader, while Thailand is considered a leading producer in the
region [5]. The size of Thai cosmetic market is 250 billion baht;
150 billion baht is for domestic consumption and the other
100 billion baht for the exportation [5]. Thailand has shared
the high export values of the ASEAN region, in particular,
hair products (>50% of the market share) and skincare
product (20% of market share) [3]. For skincare products,
Thailand had less competitiveness to export to all markets
when compared to Philippines. Since Thailand still has high
market share in the region, it is worth to put effort to improve
the competitiveness in this category. It needs to find out for
which key elements needed to be focused and supported. For
hair products, Thailand had absolute competitiveness in all
markets. However, it seems the market share of the haircare
products tended to be decreased in the last few years [3].
Thailand must put a huge effort to maintain the market share
of the haircare products. Because this category is big in term of
market size and it makes Thailand as a leader of the cosmetic
sector in the region.

As there was no previous study related to competitiveness
of Thailand cosmetic industry found in extensive literature
search since 2008, this study aimed to explore the country
competitiveness of two major cosmetic categories; haircare
and skincare products using Porter’s diamond model as a study
framework.

METHODOLOGY

A qualitative study with an in-depth interview to explore
Thailand cosmetic industry competitiveness by an application of
diamond model was carried out from September to November
2014. The study was approved by the Ethics Committee of
Chulalongkorn University Faculty of Pharmaceutical Sciences
(Ref. No. 13-33-011). Details of methodology; sample
selection, study instrument, data collection, and data analysis
are demonstrated below.

Sample Selection

Key persons in the cosmetic industry were purposively
selected for the in-depth interview. Regarding eligibility
criteria, the informants in this study should be executives who
fully understood the cosmetic business very well both local
and international. In addition, they should also be able to
forecast the industry trend and future competitiveness. Most
importantly, they should reflect or assess the competitiveness
at the company and national levels. Based on Anthony’s
recommendation on qualitative research data collection, five
informants were selected [6]. This study started with a specific
group of five key informants who were purposively asked to
join the study as they were considered experiential exporters

with thorough understanding about the cosmetic industry.
If the information provided by the five key informants was
not saturated, additional key informants would be further
approached for an in-depth interview until the data were
saturated. With the identification codes shown in the brackets,
the informants included a representative from the Thai
Cosmetics Association (R1), two small and medium enterprise
executives, i.e., one from a small enterprise (R2) and the other
from a medium enterprise (R3), one executive from a large
local company (R4), and one manager from a multinational
manufacture (R5).

Study Instrument

The conceptual framework of the study as shown in Figure 1
was adapted from the Porter’s diamond model [7]. This
model was selected as it has been widely utilized as a tool to
assess a country competitiveness in various industries [4,8,9].
Porter’s model was aimed to explain the competitiveness
of the nations. The model has been widely used to explain
competitiveness of various industries in many economies
such as USA, Germany, Denmark, South Korea, Britain, Italy,
Sweden, Switzerland, Japan, and Singapore [8,9]. The model
was selected as a theoretical framework for this study to
deeply understand factors that influence the competitiveness
of Thailand’s cosmetic industry at the macroeconomic level.
The five interrelated components of the diamond model were
focused and applied in the study [7].

A total of 23 open-ended questions for the in-depth interview
were constructed based on five aforementioned factors
of the diamond model, i.e., government factor (3 items);
demand conditions (5 items); firm strategy, structure, and
rivalry (7 items); factor conditions (4 items); related and
supporting industries (3 items); one additional question
regarding problems and barriers to competitiveness was also
added. The questions were checked for the face validity and
imprecise wording by two experts who had more than 5 years
of experiences in the cosmetic industry. The questions were

Figure 1: Conceptual framework of the study based on the Porter’s
diamond model [7]

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174 TJPS 2016, 40 (4): 172-178http://www.tjps.pharm.chula.ac.th

adjusted for clarity. The operational definitions and examples
of open-ended questions were summarized below.

In this study, government factor referred to the rules,
laws, and policies established by governmental agencies at
national and international levels that have a major influence
on the country competitiveness. Example questions reflecting
government factor were as follows:
• What are government agencies’ rules, laws, policies, and

activities that support the cosmetic business? (Please also
provide detailed examples)

• Are there any problems or barriers caused by the
government policies? If so, what are they? (Please also
provide detailed examples).

Demand conditions was defined as the consumers’
preference for cosmetic products. Demand conditions were
observed at both macro and micro level. Examples of questions
used to elicit this factor were:
• Is there a demand for Thai skincare and haircare products?
• What the demand look like?
• Who and where is the demand?

Firm strategy, structure and rivalry embraced relevant
strategies for increasing the market share and country
competitiveness. Questions for this factor were:
• What are strategies that the industry implement to

enhance competitiveness and wider the market?
• How the strategies work?
• Please provide 2-3 examples.

Factor conditions referred to both positive and negative factors
that have an impact on the country competitiveness. The
following was the question examples:
• What are factors affecting cosmetic production costs?
• How such factor affects country competitiveness?
• Please provide examples.
• If you are an investor, what are the factors that impact

your investment decision?

Related and supporting industries were associated
business which when matching or collaboration with cosmetic
business would enhance cosmetic business. Example questions
for this factor included:
• What are other types of businesses that might enhance

your cosmetic business?
• How do such businesses help?
• Please provide an example.

Data Collection and Analysis

An in-depth interview with the five informants was conducted
in their own offices by the researcher (Neeranard Jinachai).
This interview was to elicit their perceptions and assessments
of the cosmetic industry and competitiveness. Although
the probing questions were prepared for the interview, all
interviewees could freely respond without any concern
about the question sequence or specific patterns. Overall,
the understanding of the informants’ points of view was
gained [10]. The saturated information obtained from the
informants, namely with the same answers, was the signal
of information adequacy. Each interview session lasted
approximately 2 h. After the interview, the informants’
answers were carefully transcribed and entered into the

database. The data were then thematically coded based on
the diamond factors.

RESULTS

In this study, the informants composed of three male and two
female executives with the age range between 35 and 55.
From the in-depth interview, they provided a reflection of the
bird-eye view of Thailand cosmetic industry and expressed
their opinion on five key factors that affect Thailand’s
competitiveness, especially for skincare and haircare products
(Table 1).

Factor 1: Government Factor

From the study, all informants confirmed that the government
perceived that cosmetic industry was a growing sector despite
the political uncertainties, unpredictable environments
disaster, and country and the world economic downturn.
The government provided various positive supports for the
business, for instance, the Department of Industrial Promotion,
Ministry of Industry, provided training sessions for SMEs in all
cosmetic business lifecycle including business startup, market
expansion, and exportation. The FDA provided a lot of training
sessions for SMEs; good manufacturing practice (GMP), product
notification, and product information files preparation. The
Department of Community Development, Ministry of Interior
also provided special supports and promoted the efficient use
of Thai herbal and natural ingredients in cosmetic products
for SMEs and One Tambon One Product groups. Moreover,
the Ministry of Agriculture and Cooperatives provided grants
that support SMEs’ investments for relevant technology and
equipment, whereas the Department of Intellectual Property,
Ministry of Commerce has promoted the industry research
and development (R and D) through the National Innovation
competition awards to inspire SMEs. Aside from that, the
Department of International Trade Promotion, Ministry of
Commerce also encouraged manufacturers, or SMEs to export
their products by arranging overseas trips for exhibition,
market visits, and business matching.

It was mentioned by all informants that the government has
endeavored to strengthen the competitiveness of the cosmetic
industry. Despite the considerable supports in place, it seemed
that the activities were not effectively communicated to all
members in the whole industry. Many companies were not
aware of the supports provided. The activities were only made
known to companies that were members of the Thai Cosmetic
Associations. In addition, some unnecessary technical barriers
to trades created by government agencies negatively impacted
export only products. This was opposed to the national policy
aiming to support and improve the country competitiveness
including the expansion of the export business. For example,
an approved trade name in other countries was not authorized
by the Thai authority due to the country-specific control [11].
Nevertheless, this example of barriers has been discussed
between the exporters and the authority. Some problematic
regulations, especially for processing time, should be carefully
considered for the future improvement as an informant
described below:

“To encourage the investment in Thailand, the Department of
Industrial Works, Ministry of Industry, should support the

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175 TJPS 2016, 40 (4): 172-178http://www.tjps.pharm.chula.ac.th

industry for the plant starting up and approval. The process
should not be too complicated or take too long for SMEs.” (R3)

Overall, the government factor had a positive impact on the
country competitiveness. However, the area for improvement
would be the coverage of supporting activities throughout the
country. The technical barriers to trade should be minimized
particularly for export-only products.

Factor 2: Demand Conditions

The findings from all informants could be grouped in three
major themes: (1) Existing markets for Thai cosmetics,
(2) consumer preference, and (3) potential unique demand.

It was found that the top three markets for Thai skincare
products were Singapore, Malaysia, and Indonesia. For
the haircare, the top three markets for Thai products were
Indonesia, followed by Malaysia and Singapore. All informants
conceded that the products required in those specified markets
were MNC brands. This is because the MNC products have
long established reputation and customers trust products’
quality. Moreover, MNC products did cover all cosmetic types
in the market, i.e., the mass, premium, and cosmeceutics. In
regard to the local Thai brands, all respondents unanimously
agreed that the ASEAN consumers, i.e., Cambodia, Lao PDR,
and Myanmar (CLM) in particular, trusted and liked made-
in-Thailand cosmetics. This group of consumers believed that
the products manufactured in Thailand were high in quality
compared with the same products or brand names made in
their own countries.

All informants revealed that consumers had different
preferences for skincare and haircare products. Skincare
composed of a very wide range of products. Three informants
stated that the medium- and high-income consumers tended
to use the imported premium products owing to their brand
loyalty. The haircare, however, had a lot lesser product choices.
The main consumer’s consumption was mostly mass MNC
products for daily use. One informant from SMEs articulated
this demand as follow:

“…Middle-to-high-income people tend to use imported products
in particular skin care products. For haircare stuff which is the
routinely used products, the perception and trust of consumers
on the MNC brands are still high; 80-90% of sales volumes are
from the MNCs, but 10% from SMEs. Consumers consider hair
products as general goods for daily life, while skin care products
are for beauty. Fewer consumers want to switch a hair product,
but most are always ready to try a new skin care one. The brand
switching happens with skin products more frequent than the
hair products.” (R3)

All informants had simultaneously mentioned that the Thai
cosmetic could be created with more unique characteristics.
Having herbal ingredients and being natural were two
identified characters that could add significant value to the
cosmetic product. The concept idea of herbal ingredient and
being natural could create high ended product that serves niche
market. Moreover, four informants mentioned that as Thailand
is very famous for providing service, cosmetics could be offer
together with high demand services such as Thai massage
or spa. All informants confirmed that most Thai herbal and
spa products were perceived as premium and were greatly

Table 1: Themes related to five factors that affect the country
competitiveness

Factor Theme (number of informants)

Government • Positive impacts: Training, financial
support, R and D competition awards,
overseas business matching and exhibition
trips (5/5)

• Negative impacts: Unnecessary
technical trade barriers, regulations for
exported products (5/5)

Demand conditions • Made in Thailand products demand
in neighbor countries, especially for
CLM (5/5)

• Medium- and high-income consumers
preference on imported premium
skincare (3/5)

• Mass MNC haircare demand in
general (3/5)

• Thai herbal and natural cosmetic
products accepted by extra-ASEAN
countries, e.g., Japan, EU (5/5)

• Thai herbal products expanded together
with related industries, e.g., spa and
massage (4/5)

Factor conditions • Higher labor cost of Thailand
when comparing with other cosmetic
production base countries in ASEAN,
especially Indonesia and Vietnam (5/5)

• Almost 100% imported, and only
1-2% locally produced raw materials for
production in Thailand (5/5)

• 70-80% locally supplied materials for
primary and secondary packaging and
20% imported (5/5)

Firm strategies,
structure, and rivalry

• More investment on R and D (5/5)

• Strategy for innovation-driven economy
combing the cosmetic science and
technology to meet “green,” “organic,”
“natural,” and other health-related
services (4/5)

• GMP, COA, halal certification for
exportation (4/5)

• Tax incentive and incentive package,
and investment strategy from BOI to
attract MNC’s investment (4/5)

• Strategy for the weakness on English
communication, marketing skills, and
branding skills (5/5)

• Crucial strategies for “Thai band
loyalty” and “sustainable business” (5/5)

• Brand loyalty and trust building
strategies via product quality,
effectiveness, safety, authority’s rewards
and endorsement (4/5)

Related and
supporting industries

• Contribution of Thai service
business relating to cosmetic industry
competitiveness (5/5)

• Supporting of wholesalers and retailers
to cosmetic business (5/5)

• Two major clusters for cosmetics
made up of related and supporting
industries (5/5)

CLM: Cambodia laos and myanmar, MNC: Multinational company,
GMP: Good manufacturing practice, COA: Certificate of analysis, SME: Small
and medium-sized enterprise, BOI: Board of Investment

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accepted by extra-ASEAN markets, e.g., the US, EU, Japan,
Taiwan, and Korea. One informant from SME articulated that:

“…For the niche products, if the brand is built strongly, the
potential markets would be worldwide. Customers will walk
into the country for the products, and it is no need to do a
door-knocking business. In Asia, Japan, Korea, and Taiwan are
potential markets for niche items like THANN products. Price is
not a key concern for this category. The unique aromatherapy
and Thai spa are demanded worldwide.” (R4)

On the whole, the demand conditions remained satisfactory for
the Thai cosmetic industry. The markets for made-in-Thailand
products, MNC brands, and the niche products had the growth
potential. The positive trend of global demand for cosmetics
containing Thai herbal and natural products, along with the
combination of Thai services, in particular spa and massage,
were clearly observed.

Factor 3: Firm Strategy, Structure, and
Rivalry

All informants agreed that the crucial strategies should be
focused on SME business, as the MNC business strategies were
globally managed by the head offices. Regarding the SMEs,
the main strategies cited by the informants were (1) more
investment in R and D (2) combined cosmetic science
and technology for Thai herbal and natural products, and
(3) increased brand awareness and loyalty. To run a sustainable
business, it was important to improve R and D as asserted by
all informants. SMEs, at present, needed to fiercely compete
in the market where the Korean and Japanese products had
dominated over the past 2-3 years. The SMEs, unfortunately,
did not focus on the long-term basis, but rather on the short-
term success with little innovation for cosmetic products. They
slightly invested in R and D, but mostly outsource R and D tasks
to OEMs. A total of 20-30 new items per year were created by
the medium-size enterprises and <3 for the small size, whereas the MNCs produced on the average of 10,000 new unique product items. In fact, the technology and machines were not the SMEs constraint as they could be locally produced by Thai suppliers with reasonable prices. Four informants mentioned that the reward for R and D and innovation in the cosmetic area should be continuously provided and promoted to motivate the researchers and increase innovation in the country. Aside from that, the reward and endorsement by authorities could also be encouraged to help build the consumers’ trust.

In regard to the demand markets, it was confirmed by
all informants that the cosmetic tendency in the next few
years would be products containing Thai herbal or natural
ingredients and their combination with service packages.
With the booming tourism and related industries, unique
Thai herbal and natural cosmetic products would be highly
demanded by the world markets. As a result, Thailand should
have the innovation-driven cosmetic economy with the
strategy for incorporating cosmetic science and technology
into the herbal and natural products. This kind of economy
would support the world’s needs for green, organic, natural,
halal, nano-technology, and/or other related health businesses,
i.e., massage, spa, tourism, and fashion. Nevertheless, the
huge investment in innovation needed to be partly supported
by the government. One SME informant stated,

“…Thailand should focus on natural and/or herbal cosmetics.
This will help promote the “Made in Thailand” products. The
country could be the leader in cosmetics “NOT” just for the
finished products but also as a hub of cosmetic business in the
region. To become a regional hub, the country should convince the
international investors to use Thailand as the headquarters….”
(R5)

Brand awareness and loyalty were another strategy that
Thai SMEs put as a priority. Most SMEs’ products were
fashion driven and very fast-moving, but the business owners
were not aware of the necessity for building up the brand
loyalty. To increase the loyalty and gain consumers’ trust,
improving products’ quality, effectiveness, and safety should
be set as top priority. Four informants specified that the GMP,
certificate of analysis (COA), and halal certification should
also be emphasized to increase the exportation growth.
A few informants pointed out that only 132 of 700-1000
manufacturers had obtained the GMP certificate, which was
required by certain countries. In some business partners, such
as Indonesia and Vietnam, the GMP and COA were required
for all imported products. In addition, the halal certification
was planned to be mandated by Indonesia and Malaysia
authorities for products placed in their markets. Thai cosmetic
companies should thus improve their strategies to comply
with some specific countries’ requirements so as to expand
the business abroad. However, the export strategy should
focus more on intra-ASEAN markets than the extra-ASEAN
during this period. The main potential markets for SMEs
should be Indonesia and CLM countries. The reason was that
there are many potential users in Indonesia with the highest
population in ASEAN and the consumers in CLM countries
trusted in Thai quality products. Although Thailand had the
high export values, it should be kept in mind that the values
did not portray the absolute competitiveness.

Four informants said that to keep the operation of MNCs
which were the key player in the country, tax incentives
should be provided by the Board of Investment, i.e., reducing
the imported equipment and raw material taxes by 20-30%,
waiving the tax for the legal entities of foreign investors, and
treating them equally as local investors. An incentive package
should also be offered. This policy would help prevent the
relocation of manufacturing sites to other countries.

In general, the firm strategy, structure, and rivalry at the
company and national levels were slightly negative for
SMEs. The area of improvement for SMEs’ strategies should
be more investments in R and D, innovative herbal and
natural products as well as products combined with services
packages. All SMEs should have brand loyalty and awareness
strategies in place. At the country level, the government
should focus more on promoting R and D and technology
for Thai herbal and natural products and their combined
services.

Factor 4: Factor Conditions

It was confirmed by all informants that two major factor
conditions elaborated by the informants were labor cost
and imported raw materials and packaging. Among the
countries regarded as cosmetic production bases, Malaysia
and Thailand had the highest labor cost. The minimal labor

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cost in Thailand had increased to 300 baht (US$ 8.4) per
day according to the government policy since 2012. This
high labor cost affected all business types and sizes. It was
likely to cause some MNCs to move their investment to
other countries. Compared with other ASEAN members such
as Indonesia and Vietnam which were potential cosmetic
production based countries, Thailand’s monthly labor
cost was the highest of all. Although Thailand had good
infrastructure, Vietnam was considered another attractive
country due to the lower labor cost.

Considering the raw materials for cosmetics, the majority of
them (98%) were imported. Raw material such as essential
oil, rice oil, and palm oil derivatives which could be supplied
locally accounted for 2%. These numbers indicated that raw
material supply was not self-sustainable for the local cosmetic
industry. For the primary and secondary packaging, nearly
70-80% of materials were locally supplied, and the rest were
imported. A response to this factor was as follows:

“Thailand could not produce the cosmetic raw materials locally.
Most of the materials are imported and require stock planning.
The logistics could be an issue of concern if not well planned. This
may be a risk regarding the shortage and unpredictable price
from suppliers. Thailand has the best infrastructure to be the
cosmetics production base…” (R2)

The factor conditions were overall construed as negative to
the Thai cosmetic industry and required urgent improvement
and supports from the government. The labor cost should be
contemplated along with increased skills and multi-function
labor. The high cost of imported raw materials and packaging
would be resolved with the government policies on tax
reduction and production based promotion.

Factor 5: Related and Supporting
Industries

All informants identified two key industries; service industry
and distribution industry, which highly related and supported
the cosmetic industry. Examples of service industry were spa,
massage, hotel, and tourist businesses. These businesses need
cosmetic products to complement with their main services. To
expand the market of cosmetic products, the businesses should
target both end and intermediate customers.

Expansion of cosmetic product depends largely on product
distribution channel. Modern trades such as Tesco Lotus and
7-Eleven were highly influenced cosmetic product sales. As
these modern trades were located in urban and rural area, they
create consumer awareness and provide convenient access for
customers. Although modern trades were considered highly
influential distribution channel, extremely expensive entry
fee was identified as a major barrier for the cosmetic industry,
especially the SMEs.

Cosmetic industry cluster, created by the Department of
Industrial Promotion, Ministry of Commerce in 2014, aimed
at gathering related cosmetic industries to know each other.
The cluster enhanced its members to access their business
partners; upstream and downstream business.

The related and supporting industries could overall be perceived
as crucial for the Thai cosmetic industry competitiveness.

Relevant services were the star business of the country that
was well known worldwide, and the rising trend of service
business resulted in the growth of the Thai cosmetic industry.

DISCUSSION

The cosmetic business in Thailand has continually increased
despite the political uncertainties and unpredictable
environments [1]. All informants reflected on the SMEs and
MNCs that were currently two major business sectors. Both
sectors required different strategies for driving their own
businesses. MNCs are the key contributors of Thai cosmetic
business. Examples of large MNCs established in Thailand
are Unilever, P and G, Biersdorf, and Johnson and Johnson.
These business groups had strong R and D and apply new
technology with powerful marketing strategies. However,
the main technical barrier to MNC business is the country-
specific requirements for export-only products. These
unnecessary technical barriers could prolong 6-8 months of
logistic flow and supply chain timeline for exportation. Those
cosmetic products would be notified or registered again at the
destination countries before placing in markets. This would
impact Thailand cosmetic exportation value which is currently
more than 80,000 mil baht (2286 mil US$), and tended to
be increased in the future. Since MNC business is the main
exportation driver of the country, it is always convinced by the
government to maintain their production bases in the country.
Thailand puts a lot of efforts to attract new investors. The
big challenge of the country has so far been the high labor
cost compared with other ASEAN countries, i.e., Indonesia,
the Philippines, and Vietnam. Given the higher cost, Thailand
is still considered attractive to new entrepreneurs because
of its geographic location, infrastructure, and transportation
system. Aside from the country’s strategy for being the best
cosmetic production-base in the region, the co-operation
of the government and industry, including in-between
industries, on the technology and knowledge transfer should
also be more concentrated. The technology transfer could be
an impetus for the country competitiveness in a positive and
sustainable way.

The SMEs might not be a major contributor to the country’s
cosmetic industry in terms of export values compared with
MNCs. However, it is the most important business sector that
the government put tremendous efforts and supports into
it so as to propel its competitiveness for both domestic and
international markets. Some examples of successful SMEs
are Mistine and Giffarine that currently become large local
companies and are able to compete in the world markets.
The success of such companies lies with R and D and product
quality. Therefore, all SMEs should consider increasing
investment in R and D with innovation. The emphasis on the
short-term business without the awareness of sustainability
based on appropriate R and D could put the whole SMEs at risk.
The utilization of qualified R and D personnel in the country
should be maximized to achieve more innovative, high-quality
products and confidence in Thai cosmetic brands. The reward
and endorsement for R and D by authorities could also help
increase the trust from consumers. To improve the product
quality for the world markets, the SMEs should meet the
requirements of GMP or equivalent international standards.
The Thai SME brands should be strategically promoted to the

Jinachai, et al.: Competitiveness of Thai cosmetic industry

178 TJPS 2016, 40 (4): 172-178http://www.tjps.pharm.chula.ac.th

international markets. Training sessions on brand building
and marketing skills should be provided and supported by
the government. To expand the SMEs’ markets, a co-operative
cosmetic cluster is the major support business. The tourism,
hotels, massage, and spa are also the key supporting businesses
for the Thai cosmetic industry, as they share the same group
of target consumers. Moreover, SMEs should also expand their
businesses to the certain markets of niche products, i.e., Thai
herbal and natural cosmetic products for target extra-ASEAN
countries. Thailand has a good reputation of unique Thai
herbal and natural cosmetic products that are required by the
world markets, particularly in EU and Japan.

Compared with other sectors using the diamond model to
explore competitiveness of food and car industries [2,6,7],
the government factor was all reported as the most important
factor affecting business competitiveness. Impact from the
government has a tremendous effect in promoting and
supporting the industry. Same as findings from this study, the
related and supported business has also been recognized as an
important factor for the industry competitiveness.

To improve the country competitiveness, the policy
recommendation should focus on; (i) provide continuously
support the herbal and natural products; (ii) promote
“Made in Thailand Trusted Products” by performing strong
and professional training to local industry on Business
Communication, Branding, and Marketing skills; (iii) arrange
a business matching between cosmetic industry and other
related and supported business, i.e., spa, massage, tourism
business, hotels, airways, beauty medicinal, and treatment
clinics; and utilize the qualified R and D by matching the
academic resources with the real business; and help provide
the special event for the industry to meet the trade partners,
i.e., roadshow, business matching, and exhibition. The business
barriers and issues could be possibility solved when there is a
face to face meeting between the two partners with the same
purposes.

There are some limitations of the study. Although the saturated
answers were obtained from the five qualified informants, to
generalize the result for specific business group, i.e., SMEs,
and to get more precise policy recommendation, further study
should be specific and involve more participants from such
particular type of business.

CONCLUSION

It can be summarized that the government factor, demand
condition, and related and supporting industries are positive
factors related to Thailand cosmetic industry competitiveness.
The negative factors from this study are factor conditions and
firm strategy, structure, and rivalry. An immediate action is
required to improve regulatory process efficiency, especially
export only products. Other important strategies that could

enhance Thailand cosmetic industry competitiveness are
promotion of R and D, emphasis on product quality, sale
cosmetic couple with famous services, and looking for niche
and high-ended markets.

ACKNOWLEDGMENTS

The authors would like to thank the Cosmetic Controlled
Division, Thai Food and Drug Administration and the Thai
industry groups that include (1) Thai Cosmetic Manufacturing
Association, (2) Thai Cosmetic Industry Association, (3) Thai
Soap, Detergents, Household’s and Personal care Association,
(4) Cosmetic and Beauty Cluster under the Thai Federal
Industrial Association, (5) Cosmetic Cluster under the Ministry
of Industry, and (6) Regulatory Affairs Professional Association
of Thailand for both direct and indirect inputs used in this
research.

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in-thailand/report. [Last cited on 2015 Oct 17].

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2017, Vol. 54(4) 431 –451

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DOI: 10.1177/2329488415572778

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Article

From Listening to Leading:
Toward an Understanding of
Supervisor Listening Within
the Framework of Leader-
Member Exchange Theory

Karina J. Lloyd1, Diana Boer2, and Sven C. Voelpel1

Abstract
This study explores the value of supervisor listening as a seeming key competence
in effectively leading employees. We conceptualize listening within the theoretical
framework of leader-member exchange (LMX). Specifically, we argue that supervisor
listening contributes to satisfaction with the supervisor, interactional justice, and
job satisfaction, and that listening unfurls its effect through fostering strong LMX.
Data from 250 German employees from various professional backgrounds was used
to assess validity criteria as prerequisites for the examination of listening vis-à-vis
LMX for the three outcome variables. Good performance in all validity criteria and
path-modeling results indicated that perceived supervisor listening provides value for
future research on supervisor-employee interactions in the work setting.

Keywords
leader listening, construct validation, leader-member exchange theory, empathy

Introduction

Since Rogers and Roethlisberger’s (1952/1991) thought-provoking essay in the
Harvard Business Review, “Barriers and Gateways to Communication,” scholars and
practitioners have embraced the concept of empathic listening in management litera-
ture or handbooks on effective leadership (e.g., Drucker, 2004; Frey, 1993; Reave,
2005; Steil & Bommelje, 2004). Although this concept is elusive, there appears to be

1Jacobs University, Bremen, Germany
2University of Koblenz-Landau, Germany

Corresponding Author:
Karina J. Lloyd, Jacobs University, Bremen, Campus Ring 1, D-28759 Bremen, Germany.
Email: k.lloyd@jacobs-university.de

572778 JOBXXX10.1177/2329488415572778International Journal of Business CommunicationLloyd et al.
research-article2015

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432 International Journal of Business Communication 54(4)

a practical and intuitive appeal of the positive effects of listening, which has led to
increased attention of this concept in psychological literature (e.g., Bavelas, Coates, &
Johnson, 2000; Beukeboom, 2009; Pasupathi & Hoyt, 2009). However, in the fields of
organizational psychology and management research, the term listening still appears
both vague and conjectural due to a lack in theory and specification (e.g., Bodie, Cyr,
Pence, Rold, & Honeycutt, 2012; Brownell, 1994). Bodie (2012) summarizes
approaches to listening research in a variety of academic fields and argues that research
is in need of incorporating “listening” into theoretical frameworks that are “capable of
explaining how listening works and functions to the betterment of people’s lives” (p.
121). The current article aims at contributing to this call by investigating perceived
supervisor listening and its links to related constructs and work outcomes within the
theoretical framework of leader-member exchange (LMX) theory.

LMX theory in its core suggests that “effective leadership processes occur when
leaders and followers are able to develop mature leadership relationships (partner-
ships) and thus gain access to the many benefits these relationships bring” (Graen &
Uhl-Bien, 1995, p. 225). Such quality leader-member interaction has been linked to
more positive organizational outcomes such as increased performance, job satisfac-
tion, or commitment (Gerstner & Day, 1997). However, LMX is a rather broad term
(see below) and does not detail what specific leader behavior may establish strong
leader-member relationships. Listening to employees has the positive potential to cre-
ate and maintain strong leader-follower partnerships (Bodie, 2012; Steil & Bommelje,
2004) and may thus be one specific component that fosters LMX. Work by Comer and
Drollinger (1999) for instance proposed that sales persons’ active-empathic listening
(AEL) behaviors can establish and maintain more positive relationships with clients
(see also Drollinger & Comer, 2013

).

Originally based on Carl Rogers’s (1951) observations in client-centered therapy,
empathic listening or “active listening” has been described as an accepting and non-
judgmental approach of attending to an individual (Rogers, 1959). Emphatic listening
creates a mutual bond between interaction partners, which over time evolves into a
relationship of trust and reciprocal understanding (Rogers, 1957, 1975). When applied
to organizational settings, listening may have similar effects in the supervisor-
employee interaction (e.g., Brownell, 1990; Reave, 2005). Rogers’s work on empathic
listening can help provide specificity to the meaning of listening in the business con-
text. Empirical research in the organizational context suggests that listening may be a
crucial factor in the supervisor-employee relationship that may affect other work-
related attitudinal (e.g., Ellinger, Ellinger, & Keller, 2003) and behavioral outcomes
(Lloyd, Boer, Keller, & Voelpel, 2014; Stine, Thompson, & Cusella, 1995). For
instance, Lobdell, Sonoda, and Arnold (1993) showed that perceived supervisor listen-
ing competence is positively associated with employee perceptions of leader respon-
siveness and support. Similarly, empirical evidence suggested a link between
supervisor listening and perceived relationship quality with employees (Stine et al.,
1995), which might, in the long term, also affect more distal variables such as employee
perception of the climate of organizational openness and supportiveness (Husband,

Lloyd et al. 433

Cooper, & Monsour, 1988), overall job satisfaction (Brownell, 1990; Ellinger et al.,
2003), and organizational citizenship performance (Lloyd, Boer, Keller et al., 2014).

Listening research suggests positive links of listening with work outcomes such as
perceived leadership effectiveness (Johnson & Bechler, 1998), employee commitment
(Lobdell et al., 1993), organizational trust and performance (Stine et al., 1995). Two
studies by Lloyd, Boer, Keller et al. (2014) recently demonstrated that perceived
supervisor listening contributes to three important work outcomes—one proximal
(emotional exhaustion) and two more distal (organizational citizenship behavior and
turnover intentions). Together, these findings indicate that assessing listening in the
workplace may promise similar value as in clinical or psychological research and
hence needs specification in terms of its relationship to related constructs and out-
comes. We propose that supervisor listening contributes to positive organizational out-
comes via its related construct LMX (see Graen & Uhl-Bien, 1995 for a detailed
review).

This article’s overall purpose is to foster the scholarly dialogue and advance the
understanding of listening in organizational research by providing a more precise clar-
ification of listening in the workplace. Specifically, our main focus is to integrate lis-
tening and LMX in a holistic model based on theoretical considerations that listening
fosters strong relationships between leaders and followers. To establish a sound basis,
we seek first to evaluate validity criteria of perceived listening quality in the context
of supervisor-employee relationships and its links to work-related variables. Empirical
examination of internal reliability as well as convergent, discriminant, and predictive
validity intends to foster the refinement of listening within the supervisor-employee
relationship.

The Concept of Listening

Listening is a multifaceted process (Bodie, Cyr et al., 2012) and as such, conceptual-
izations have ranged from studying listening attitudes and skills (e.g., Mishima,
Kubota, & Nagata, 2000) to behaviors (e.g., Bodie, Cyr et al., 2012; Ramsey & Sohi,
1997), and differ in terms of underlying theory and measurement. To provide a con-
ceptual framework for listening in the supervisor-employee relationship, it is helpful
to review Rogers’s initial work on empathic listening. In this article, we build on
Rogers’s (1951, 1975) definition of empathic listening as an appreciating and non-
judgmental way of perceiving and responding to an individual. When the individual
feels accepted and cared for, Rogers argued, mutual understanding and trusting bonds
are possible. Hence, in this article, we focus on how the person being listened to per-
ceives the listener (see also Barnlund, 1962; Stone, Patton, & Heen, 1999; Tyler, 2011)
and conceptualize listening as a subjective perception of listening quality. Listening
quality captures the individual’s perception of being attended to, accepted, and appre-
ciated (Rogers, 1975). This is in line with the leadership literature that describes super-
visor listening as demonstration of active acceptance of employee opinions and ideas
(Spears, 1995) or the willingness to do so (Bass & Avolio, 1994).

434 International Journal of Business Communication 54(4)

Leadership handbooks (e.g., Covey, 1989; Gordon, 1977; Steil & Bommelje, 2004),
business journals, and management scholars have long argued in favor of listening as
a “key management skill” (e.g., Drucker, 2004; Ewing & Banks, 1980; Frey, 1993)
that enables both understanding of feelings and the demonstration of concern (Gabarro,
1991). Some empirical evidence has been put forward in support of this, demonstrat-
ing, for example, a link between supervisor listening and perceived relationship qual-
ity with employees (Stine et al., 1995). Overall, however, it is noteworthy that leader
listening and leadership styles have only rarely been considered simultaneously (for
exceptions, see Bechler & Johnson, 1995; Johnson & Bechler, 1998; Kluger & Zaidel,
2013). Yet listening most commonly takes place in dyadic interactions, develops in a
unique way during the process of interacting (Pasupathi & Hoyt, 2009), and may con-
secutively develop each interaction in a unique way. Hence, to enhance our under-
standing of listening in the supervisor-employee relationship, it is necessary to embed
it in leadership theories. The leadership approach arguably most closely related to our
conceptualization of listening is LMX theory.

The Listening Leader and Leader-Member Exchange

LMX theory, which originated from vertical dyad linkage theories (Dansereau, Graen,
& Haga, 1975), is unique among leadership theories in that it focuses on the dyadic
and specific leader-follower relationship (Graen & Uhl-Bien, 1995; Liden, Sparrowe,
& Wayne, 1997). According to LMX theory, this relationship may have a unique qual-
ity for each dyad, which in turn predicts organizational outcomes at the individual
level of analysis (Gerstner & Day, 1997). Meta-analytical results also suggest that
strong leader-member relationships significantly influence outcomes such as job per-
formance, satisfaction with supervision, overall satisfaction, commitment, role con-
flict, role clarity, member competence, and turnover intentions (Gerstner & Day,
1997).

LMX contains certain aspects that relate to listening. Strong LMX requires that
employees feel appreciated, cared for, and supported by a supervisor (e.g., Graen &
Uhl-Bien, 1995; Liden & Graen, 1980). These are essential features of the listening
construct (Rogers, 1951, 1975). The strongest similarity is that both concepts predict
tight bonds and strong relationships between the interaction partners.

The range of components inherent in the LMX construct appears fairly broad and
touches various components such as support, responsiveness, and consideration, leav-
ing room for the actual behavior and interpersonal perceptions that elicits the creation
of strong relationships. The theory does not specify which specific behavior fosters
such strong leader-follower bonds. Listening—as a mean to actively demonstrate
acceptance of follower opinions and suggestions (Bass & Avolio, 1994; Spears,
1995)—may be a viable component in developing sustainable leader-follower rela-
tionships. Since listening facilitates the development of mutual understanding and
trust (Lloyd, Boer, Kluger, & Voelpel, 2014; Stine et al., 1995) it might lay the basis
for fruitful partnerships and strong relationships. In the long run, this fosters further
positive interactions, mutual cooperation, and support. Inevitably, this will also

Lloyd et al. 435

enhance further communication. In other words, listening and leader-member interac-
tion are mutually interwoven; yet, especially in an early stage of a relationship, listen-
ing may have the beneficial effect of creating strong leader-member interaction which
both, in turn, will be positively related to organizational outcomes. In this article, we
examine the possibility that listening quality may precede the development of LMX—
that is, suggesting a sequence of listening quality affecting positively on LMX, which
then contributes positively to outcomes.

From numerous potential outcome variables of organizational behavior, we will
focus on a choice of three that reflect different interaction levels: (a) employee satis-
faction with the supervisor, (b) interactional justice, and (c) overall job satisfaction.
Listening quality should have the strongest effect on the more proximal outcomes that
are affected by direct interaction with the supervisor.

Perceived supervisor listening affects employee perceptions of interaction pro-
cesses. As outlined earlier, listening quality can influence speaker attitudes and feel-
ings toward the listener (Bavelas et al., 2000; Beukeboom, 2009). Hence, not being
listened to and not feeling understood by a supervisor may elicit negative affective
reactions such as the feeling of disrespect and injustice (Bass & Riggio, 2006; Blader
& Tyler, 2003). Thus, we chose satisfaction with the supervisor and interactional jus-
tice (Kim & Leung, 2007) as proximal outcome of supervisor listening. Interactional
justice captures the degree to which individuals feel treated with respect and dignity
by authorities or third parties (e.g., the leader) involved in executing or implementing
procedures (Colquitt, 2001; Greenberg, 1987). Although we expect that listening qual-
ity will affect outcomes closely related to the interaction, listening quality might also
have effects on more distal variables related to the job and affect overall job satisfac-
tion (Allen, Bryant, & Vardaman, 2010). Hence, to get a more inclusive view on listen-
ing quality’s predictive validity, we will examine its relationship to three outcomes
related to the supervisor, the supervisor-employee interaction, and the job.

Overview of the Present Study

To extend our understanding of listening within the supervisor-employee relationship,
we investigate listening quality based on Rogers’s conceptualization of empathic lis-
tening within the framework of LMX theory. We obtain validity evidence for the lis-
tening quality scale by assessing its relation with measures closely related to listening
such as feeling understood (Lun et al., 2008) and AEL (Bodie, 2011; Drollinger,
Comer, & Warrington, 2006), as well as LMX (Janssen & Van Yperen, 2004), which
all already have a validity portfolio. We expect that employee perceptions of supervi-
sor listening quality will be positively related to both, employee ratings of their super-
visor’s AEL and ratings of feeling understood by the supervisor. We then examine in
detail how listening quality is related to LMX and the unique predictive contribution
of the two constructs to three outcome measures. We then simultaneously examine
listening vis-à-vis LMX in predicting satisfaction with the supervisor, interactional
justice, and job satisfaction. We then integrate listening quality and LMX in a path
model that tests a sequence between listening quality, LMX, and work outcomes.

436 International Journal of Business Communication 54(4)

Building on theoretical considerations, we examine the possibility that listening pre-
cedes LMX, which in turn is related to the three outcomes. In sum, we propose and test
four hypotheses:

Hypothesis 1 (convergent validity): Listening quality will be positively related to
AEL and feeling understood as well as LMX.
Hypothesis 2 (divergent validity): Listening quality will be conceptually distinct
from LMX.
Hypothesis 3a (predictive validity): Listening quality will predict satisfaction with
the supervisor.
Hypothesis 3b (predictive validity): Listening quality will predict interactional
justice.
Hypothesis 3c (predictive validity): Listening quality will predict job satisfaction.
Hypothesis 4 (sequential model): Listening quality is associated with LMX, which
in turn relates to outcomes (satisfaction with the supervisor, interactional justice,
and job satisfaction).

Method

Participants

Two hundred and fifty-one German employees from different companies participated
in this survey study voluntarily and without monetary reward (57% women; mean age
= 34.1, SD = 8.7; 60% with university degree or equivalent). Participants were
recruited by convenience sampling methods as described below. A wide range of job
functions were represented in the sample—including administration, engineering,
finance, marketing, and teaching. The average tenure at the company was 4.8 years
(SD = 5.4), and the average time participants had been working for their current super-
visor was 3.2 years (SD = 2.6).

Procedure

Convenience sampling measures were taken to recruit a heterogeneous sample of
employees to increase generalizability. We administrated an online survey through
various online discussion forums to reach a maximum variety in age, job level, and
industry. Examples included general work related forums in which employees discuss
or exchange work related information as well as job specific forums for occupational
groups (e.g., police officers, mechanics, engineers, etc.). Permission to post an invita-
tion to participate in our study was obtained from the web administrators. Only ques-
tionnaires that were fully completed were included in the analysis.

Measures

All measures were adapted to German by translation and back-translation techniques
(Brislin, 1970) by a team of bilingual psychologists and professional translators. Unless

Lloyd et al. 437

otherwise noted, we measured items using 7-point Likert-type scaling (1 = strongly
disagree, 7 = strongly agree). All items (i.e., the set of items belonging to each mea-
sure) as well as the measures were presented in random order to control for order
effects (Bishop, 2008). Since all measures referred to internal psychological states and
perceptions (e.g., job satisfaction), employees were best positioned to provide ratings
on these.

Perceived Listening Quality. To assess the extent to which employees felt listened to by
their supervisor, we adapted a seven-item listening quality scale (Lloyd, Boer, Keller
et al., 2014; Lloyd, Boer, Kluger et al., 2014) to the context of supervisor-employee
interactions (appendix). Participants were asked to refer to a typical interaction with
their supervisor when answering the questionnaire. The items were prefaced with the
statement “Generally, when my supervisor listens to me, I feel my supervisor . . . ”;
sample items included “is interested in what I have to say,” “makes me comfortable so
I can speak openly,” and “understands my feelings.”

A pretest (n = 51; 53% women; mean age = 32.26, SD = 9.97) was conducted to test
the items concerning internal consistency and applicability to the supervisor-employee
interaction. The items revealed acceptable internal reliability (α = .92). Principal com-
ponent analysis yielded one principal component that explained 71% of the item
variance.

In the current study, listening quality was well represented by the one-factor model
(χ2 [df = 13] = 74.78, p < .01, Standardized root mean square residual [SRMR] = .03, comparative fit index [CFI] = .96, Tucker-Lewis index [TLI] = .94).1 The residuals of two items (“cares about me” and “is interested in me personally”) reveal covariance, most likely owing to high semantic similarity. We added this covariance to all tested models including listening quality. The internal reliability of the seven items was acceptable (α = .95).

Active-Empathic Listening. Employee perceptions of their supervisor’s AEL was mea-
sured by 11 items of the Active Empathetic Listening Scale (AEL Scale, Drollinger et
al., 2006), which contains three subscales (sensing, processing, responding). All items
were adapted to refer to the supervisor. Participants were instructed to think of a typi-
cal interaction with their immediate supervisor when answering the questions. The
items were prefaced with “Generally, when my supervisor listens to me”; sample items
included were “my supervisor is sensitive to what I am not saying,” “my supervisor
listens for more than just the spoken words,” and “my supervisor shows me he or she
is listening by his or her body language (e.g., head nods).” The scale was well repre-
sented by a second-order model distinguishing between the three subfacets, which
load on the second-order factor (χ2 [df = 41] = 129.56; p < .001; root mean square error of approximation [RMSEA] = .09, SRMR = .04, CFI = .96, TLI = .95). The overall scale revealed acceptable internal reliability (α = .95).

Feeling Understood by Supervisor. The degree to which employees felt overall under-
stood by their supervisor was measured using two items from Lun et al. (2008):

438 International Journal of Business Communication 54(4)

“During your interaction with your supervisor, to what extent do you feel understood
by your supervisor?” and “To what extent do you feel misunderstood by your supervi-
sor?” (reverse-coded). Response categories ranged from 1 (not at all) to 7 (totally).
Cronbach’s alpha for this scale was. 91.

Leader-Member Exchange (LMX). LMX was assessed using seven items from Janssen
and Van Yperen (2004). Sample items were “My supervisor would be personally
inclined to help me solve problems in my work,” “My supervisor understands my
problems and needs,” and “My working relationship with my supervisor is effective.”
Cronbach’s alpha for this scale was .95.

Interactional Justice. Respondents were asked to assess how they felt treated in interac-
tions with their supervisor at work. Sample items of the three-item scale (Kim &
Leung, 2007) were “In interpersonal encounters, my supervisor gives me fair treat-
ment” and “The way my supervisor treats me is fair.” Cronbach’s alpha for this scale
was .95.

Satisfaction With Supervisor. We adapted three items from the Job Dissatisfaction Scale
(Zhou & George, 2001) to capture the extent to which employees were satisfied with
their supervisor. Sample items were “In general, I like working for my supervisor” and
“In general, I don’t like my supervisor” (reverse-coded). Cronbach’s alpha for this
scale was .94.

Job Satisfaction. Job satisfaction was measured using the three-item Job Dissatisfaction
Scale (Zhou & George, 2001). Sample items were “All in all, I am satisfied with my
job” and “In general, I don’t like my job” (reverse-coded). The three-item scale
revealed acceptable reliability, with a Cronbach’s alpha of .85.

Control Variables. We controlled for individual’s tenure of working for the specific
supervisor, since the time period might relate to both work outcomes such as job sat-
isfaction and quality of LMX. We also controlled for the influence of major demo-
graphic variables including sex, age, and educational level in the analysis.

We computed an overall model including all study variables to test the distinctive-
ness of all measured variables. The seven-factor model2 revealed a moderate overall
fit, χ2 (df = 557) = 1265.04, p < .001; RMSEA = .072; SRMR = .043; TLI = .92; CFI = .93. In comparison, the baseline model in which all items loaded on one factor, did not reveal satisfactory fit, χ2 (df = 594) = 2684.88, p < .001; RMSEA = .119; SRMR = .055; TLI = .78; CFI = .79, and differed significantly from the seven-factor model (Δχ2 = 1419.84, Δdf = 37, p < .001).

Analytical Strategy

First, we test Hypotheses 1 and 2 using the confirmatory factor analyses approach.
Convergent validity of the listening quality scale was assessed based on the

Lloyd et al. 439

intercorrelations of the latent listening quality construct with AEL, LMX, and feeling
understood by the supervisor. For empirical support of convergent validity, at large
effects are expected (Cohen, 1992). Discriminant validity of listening quality vis-à-vis
LMX was assessed based on distinct latent factors (comparing one-factor model with
the two-factor model).

Hypotheses 3a to 3c are tested in multivariate hierarchical regression analysis assess-
ing the predictive validity of listening quality on each of the three dependent variables:
satisfaction with supervisor, job satisfaction, and interactional justice (see Model 1).
We entered control variables in the first block, then individually tested listening quality
(Model 1) as well as LMX (Model 2) and both as predictors (Model 3). The latter two
regression analyses aim to gain clarity on the interdependency of listening quality and
LMX. Model 3 evaluates the contribution of listening quality over and beyond LMX,
which qualifies as initial gauging of the sequential model (Hypothesis 4).

To test Hypothesis 4 explicitly, we employed latent variable modeling (structural
equation modeling [SEM] in Mplus6). This analysis additionally accounts for two
potential limitations inherent in the present data: (a) to account for the relatedness of
the three outcome variables and (b) to control for common method variance that might
arise from the cross-sectional study design and monomethod approach (Podsakoff,
MacKenzie, Lee, & Podsakoff, 2003). Following previous studies, we control for the
effects of a single unmeasured latent method factor by including it in the SEM analysis
(Conger, Kanungo, & Menon, 2000; Elangovan & Xie, 1999; MacKenzie, Podsakoff,
& Paine, 1999; Moorman, Blakely, & Niehoff, 1998). All item loadings were con-
strained to be equal in their loadings on the method factor (Conger et al., 2000;
Elangovan & Xie, 1999; MacKenzie et al., 1999).

Results

Table 1 presents means, standard deviations, and zero-order correlations of all study
variables.

The latent construct listening quality was correlated to the three comparative latent
measures of AEL (see Figure 1a), feeling understood by the supervisor (see Figure 1b),
and LMX (see Figure 1c; see also Table 1). These intercorrelations of large effects size
support adequate convergent validity of listening quality (Hypothesis 1).

We analyzed the distinctiveness of perceived listening quality vis-à-vis AEL (again
differentiating its three subscales loading on a second-order factor). The model sepa-
rating listening quality and AEL revealed a moderate overall fit, χ2 (df = 130) = 468.04,
p < .001; RMSEA = .102; SRMR = .049; TLI = .92; CFI = .93 (see Figure 1a). The baseline model in comparison did not reveal satisfactory fit, χ2 (df = 135) = 859.01, p < .001; RMSEA = .15; SRMR = .06; TLI = .83; CFI = .85, and differed significantly from the separate model (Δχ2 = 390.97, Δdf = 5, p < .001). Taken together, the results indicate discriminant validity of two listening scales. Furthermore, the model separat- ing listening quality and LMX revealed a good overall fit of the measurement model, χ2 (df = 75) = 242.85, p < .01; SRMR =.028; RMSEA = .095; TLI = .95; CFI = .96 (see Figure 1c). In comparison, the one-factor model did not reveal satisfactory fit (χ2 [df = 77]

440 International Journal of Business Communication 54(4)

Figure 1a-1c. Results of confirmatory factor analysis assessing convergent and divergent
validity of the latent listening quality construct with AEL (1a), LMX (1c), and feeling
understood by the supervisor (1b).

= 503.08, p < .001; SRMR = .04; TLI = .87; CFI = .89) and differed significantly from the two-factor model (Δχ2 = 260.23, Δdf = 2, p < .001). These results in sum support adequate discriminant validity of the listening construct vis-à-vis LMX and AEL (Hypothesis 2).

The predictive validity of perceived listening quality on three outcome variables
(i.e., satisfaction with supervisor, interactional justice, and job satisfaction) was deter-
mined by three regression analyses for each outcome entering (a) listening quality as

Table 1. Descriptive Statistics and Zero-Order Correlations of All Study Variablesa.

M SD 1 2 3 4 5 6 7

1. Listening quality 4.56 1.69 (.95)
2. Active-empathic listening 4.32 1.54 .89*** (.95)
3. Feeling understood 4.24 1.67 .78*** .79*** (.91)
4. Leader-member exchange 4.75 1.94 .87*** .86*** .82*** (.95)
5. Satisfaction with supervisor 5.12 1.39 .82*** .79*** .79*** .89*** (.94)
6. Interactional justice 5.25 1.71 .76*** .71*** .75*** .80*** .83*** (.82)
7. Job satisfaction 5.51 1.51 .54*** .56*** .55*** .65*** .64*** .57*** (.85)

Note. The diagonal displays Cronbach’s alphas of the study variable.
a. N = 251.
***p < .001.

Lloyd et al. 441

sole predictor, (b) LMX as sole predictor, and (c) listening quality and LMX both as
predictors. The last regression model determined if perceived listening quality still
accounted for the prediction of organizational outcomes beyond what is afforded by
differences in LMX. Table 2 displays the standardized regression coefficients (β),
changes in R2 (ΔR) as well as changes in F (ΔF) values for each model.

As shown in Table 2, for satisfaction with the supervisor, entering the main effect
of listening quality (Model 1) results in a significant increment in R2. Regression
results were similar for LMX (Model 2) as sole predictor. Adding listening quality to
the equation after LMX (Model 3), the effect of listening quality on supervisor satis-
faction was reduced to a β of .20 which failed to reach significance. The results sug-
gest that over two thirds of variability in satisfaction with the supervisor is predicted
by perceived listening quality. However, listening quality did not significantly contrib-
ute to this prediction when the effect of LMX is accounted for.

A similar pattern was found for the prediction of interactional justice. Listening
quality, as sole predictor (Model 1), explained 53% of the variance in interactional
justice. LMX as sole predictor (Model 2) revealed similar results. Entering listening
quality to the equation with LMX (Model 3) reduced the effect of listening quality to
β of .20.

Last, the results for the prediction of job satisfaction showed that listening quality’s
main effect (Model 1) explained 28% of variability in overall job satisfaction and
LMX (Model 2) accounted for 31% of variability. After adding listening quality to the
equation, however, listening quality’s main effect, was again reduced to insignifi-
cance. The results’ pattern indicate that the effect of listening quality is absorbed by
the broader construct of LMX.

Next, we employed latent variable modeling (SEM in Mplus6) to test for the pos-
sibility that listening may precede LMX, which then in turn relates to the outcome
variables. The results of the SEM analysis are presented in Figure 1.

As indicated by the standardized coefficients, perceived supervisor listening was
positively associated with LMX which in turn was positively associated with the three
outcome variables. Overall, the SEM model displayed in Figure 1 fitted the data well
(χ2 [df = 220] = 545.17; RMSEA = .077; CFI = .949; TLI = .941; SRMR = .035). To
control for common method variance, we estimated the model with and without com-
mon method factor. Table 3 displays the standardized parameter estimates before and
after controlling for this common method factor.

All relationships were significant and of similar—if not the same—magnitude,
which indicated that the data were not influenced by common method variance. Taken
together, the analysis supports the robustness of the findings (Hypothesis 4) in account
of the weaknesses of the study design.

Discussion

The purpose of this study was to examine the role of perceived listening quality in the
supervisor-employee relationship within the theoretical framework of LMX theory.
Therefore, we examined their relationships to three work outcomes and tested a path

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Lloyd et al. 443

model that aimed at integrating listening and LMX. Initial validity assessments were
conducted as prerequisites to the usability of listening quality as measurement tool
within the work context. Convergent, divergent, and predictive validity were assessed
vis-à-vis validated measures. Positive correlations between perceived supervisor lis-
tening quality and two related constructs—supervisor’s AEL and employees’ feelings
of being understood—demonstrated acceptable convergence. Confirmatory factor
analysis indicated that although listening quality and LMX may share considerable
variance, these two concepts are distinguishable and demonstrate acceptable discrimi-
nant validity. Listening quality demonstrated acceptable predictive validity concern-
ing three organizational outcomes—employees’ job satisfaction, satisfaction with their
supervisor, and interactional justice. However, when LMX was statistically accounted
for, listening quality did not significantly explain variance over and beyond LMX, as
indicated by the results of the hierarchical regression analysis. We followed the

Table 3. Standardized Parameter Estimates With and Without Controlling for Common
Method Variance.

Not controlling for CMF Controlling for CMF

Description
Listening quality → LMX .92*** .93***
LMX → Satisfaction with supervisor .94*** .95***
LMX → Interactional justice .84*** .86***
LMX → Job satisfaction .69*** .73***

Note. N = 250. Standardized coefficients reported; CMF = common method factor; LMX = leader-
member exchange.
***p < .001.

Figure 2. Latent path model of listening effects and LMX.
Note. N = 250. SEM analysis accounted for covariation among outcome variables. Standardized
coefficients reported, controlling for a common method factor.
***p < .001.

444 International Journal of Business Communication 54(4)

commonly used procedure to examine the additional contribution of two constructs.
LMX is a relatively broader construct that encompasses various components of inter-
action toward employees. Listening could be a more specific component of those and
thus in its associations with work outcomes statistically swallowed by LMX. These
results are based on a cross-sectional analysis and clearly cannot infer causality includ-
ing the path-modeling results. However, they may initially indicate that supervisors
who listen well might establish strong relationships to their employees more easily and
foster good quality LMX. This in turn may benefit work outcomes such as satisfaction
with the supervisor, their interaction, and the job.

Contribution

This study contributes to the listening literature, but also to the leadership literature, in
several ways. First, our results underline previous research that suggested the positive
impact of supervisor listening on followers’ job satisfaction ratings (Brownell, 1990;
Ellinger et al., 2003; Kluger, 2013) and extend these results to two other work out-
comes: interactional justice and satisfaction with the supervisor. Taken together, these
results highlight that listening is a leadership skill that deserves more attention, both in
research and in everyday work life.

Most important, we incorporated listening and LMX theory, which provides a theo-
retical framework and more clarity for studying listening in the organizational context
as was suggested by Bodie (2012). Within this theoretical framework, the term “listen-
ing” is conceptualized as a contributing part to leader-follower interaction that fosters
strong relationships. Our results reflected the close relationship between listening and
LMX, while showing their unique contribution.

With this, we also add to the scarce body of research that empirically examines
listening in relation to leadership theories. Since listening has been proclaimed a “key
management skill,” it is critical to include and investigate listening in a broader frame-
work of leadership theory. The results indicated that listening—as a specific compo-
nent of leadership behavior—can help us better understand how leaders influence their
followers’ attitudes and behaviors—through growing strong relationships with
employees.

In this study, we attempted to incorporate both listening and LMX and their links to
organizational outcomes more holistically. Although conceptually distinctive, the
results reflected a close link between the two. The path-modeling analysis indicated
that the effect of listening on work outcomes might be unfolded by LMX. However,
these results have to be interpreted with caution. They are based on cross-sectional
data and do not allow for causality statements. Clearly, in any established leader-fol-
lower relationship, listening quality and quality of LMX are inseparably interwoven.
LMX is a broad construct that combines for instance perceptions of leader support and
relationship effectiveness. Hence, this construct always refers to and is based on an
established relationship. In contrast, listening has to be treated within this theoretical
framework as a specific receptive behavior, which is important at any stage of a

Lloyd et al. 445

relationship. It is similarly valuable in first encounters between strangers (Lloyd, Boer,
Kluger et al., 2014) and contributes to establishing of strong relationships.

Clearly, in the current sample, the relationship between listening and LMX presents
a chicken-and-egg problem, which cannot be solved without further studies. On the
whole, the results advance our understanding how supervisor listening, as a specific
part of leader-follower interaction, interacts with LMX and hence may offer particu-
larly important implications for organizational practice.

Practical Implications

Our research suggests that feeling listened to by leaders may foster satisfaction with
the supervisor, the perceptions of fair treatment, and overall perceptions of job satis-
faction. It also suggests that listening may be a valuable lever for building and sustain-
ing strong leader-subordinate relationships. When leaders exert high motivation to
listen, an organizational culture of mutual understanding is possible—as has been sug-
gested before (Rogers & Roethlisberger, 1952/1991). Early resolutions of interper-
sonal and task-related issues may be an example of such a work culture, which may
translate into additional positive work indicators.

Organizations that want to implement such a work culture should select managers
who are truly interested in listening and understand their followers. Listening may
afford far more patience than speaking or advising, and followers may quickly notice
when leaders’ listening is an attempt at mutual understanding or employed as a “tech-
nique to manipulate” (Tyler, 2011). In the case of the latter, all attempts and future
ones, however honest, may be detrimental to the supervisor-employee relationship.

For unfolding and developing the full value of leader listening, additional manage-
ment training will be a necessary supplement to selection criteria. Research has dem-
onstrated that people can successfully be trained to listen (e.g., Ikegami et al., 2010;
McNaughton, Hamlin, McCarthy, Head-Reeves, & Schreiner, 2008). Taken together,
our results draw the attention to listening as “powerful management skill” (e.g.,
Drucker, 2004; Ewing & Banks, 1980) that may, however, require correct usage and
extensive training.

Limitations and Future Research

Our study is limited by its cross-sectional design and the data available reflect only
a specific point in time. Hence, this does not allow for making any causal inferences
of the effects. As discussed earlier, listening and LMX are inseparably interwoven in
any leader-follower relationship. At an early stage of the relationship, effective lis-
tening could be a viable engine for creating strong relationships. In the long run, a
mutual interaction should be expected: listening affects strong relationships, and
strong bonds will affect the quality of future listening. In the extreme, it seems
unlikely that employees who perceive their supervisor as bad listener would per-
ceive their supervisor as understanding and their relationship as effective. One

446 International Journal of Business Communication 54(4)

intriguing approach to the chicken-and-egg problem would be a longitudinal study
design that observes the effects of listening and LMX over time. It would be particu-
larly interesting to incorporate a sample of new employees who started freshly at a
company.

Inherent in the cross-sectional design, this study is limited in that respondents
answered all questions, and all at the same time. For the purpose of our research ques-
tion, however, it was inevitable to have participants answer all variables: All items
referred to followers’ perceptions and hence employees were best positioned to answer
them. A “second source” could not have answered this adequately. Thus, common
method variance might have inflated the results. To overcome this shortcoming, we
applied SEM methods and controlled for a common method factor as well as the relat-
edness of all outcome variables. However, depending on the nature of the study vari-
ables, future research should nonetheless include complementary ratings by the
supervisor to get a more holistic picture, especially for observable measures such as
performance.

Third, to be able to reach and examine a wide range of different industries and job
functions, we employed convenience sampling. Although checking thoroughly if sam-
pling bias lead to skewed results, the current data may differ from a representative
randomly chosen sample of employees. Hence, further studies are needed to strengthen
the external validity of the results.

Similarly, our sample consisted of German employees, limiting generalizability to
other cultures. Additional studies are needed to examine listening effects in different
cultures and specific industries. For instance, leadership styles and leader-follower
interactions vary between Western and East Asian cultures (e.g., Chen, 1995; Cheng,
Chou, Wu, Huang, & Farh, 2004; Dorfman et al., 1997; Kim & Leung, 2007).
Evaluating how listening effects differ in a cultural comparison would be a particularly
fruitful avenue.

Finally, future research may incorporate additional outcome variables. For instance,
it would be important to investigate supervisor listening effects on work-related out-
comes such as, for example, turnover intentions. Prior research demonstrated that job
satisfaction and strong work relationships are the strongest attitudinal drivers for turn-
over. Thus, if listening affects job satisfaction and high-quality interactions, a link
between listening and turnover may be likely.

Conclusion

The current research revealed evidence for listening as an important management skill
within the theoretical framework of LMX. Strong relationships between leaders and
followers are clearly an indispensable factor for fruitful and productive interactions,
and hence organizational success. Follower perceptions of being listened to by their
leader are linked to their perceptions of fair treatment and satisfaction with the super-
visor as well as their job in general. These results show promise for using listening as
a valuable variable in the investigation of leader-follower interactions.

Lloyd et al. 447

Notes

1. We refrained from considering the commonly reported RMSEA owing to the low complex-
ity of the model and low degrees of freedom (df). For small df and low N models, especially
for the former, there is greater sampling error, which can result in artificially large values of
the RMSEA (Kenny & McCoach, 2003). For this reason, Kenny, Kaniskan, and McCoach
(2011) recommend that one may not even compute the RMSEA for low df models.

2. AEL consists of three subfacets (sensing, processing, and responding; Drollinger et al.,
2006), which are modeled via a second-order factor (see Method section).

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Appendix

Measure of Perceived Supervisor Listening

The response format ranged from 1 (strongly disagree) to 7 (strongly agree).
Think of a typical interaction with your supervisor. Generally, when my supervisor

listens to me, I feel my supervisor . . .

1. is interested in what I have to say.
2. makes me comfortable so I can speak openly.
3. makes it easy for me to open up.
4. understands my feelings.
5. is interested in me personally.
6. accepts me for what I am.
7. cares about me.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship,
and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of
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Author Biographies

Karina J. Lloyd (PhD) is an organiaztional psychologist who received her PhD in Business
Administration from Jacobs University Bremen, Germany. Her professional work in consulting
and research focusses on leadership and strategic human recourses development.

Diana Boer (PhD) is professor for social and organizational psychology at University of
Koblenz-Landau in Koblenz, Germany. Her research investigates how culture, the environment
and situations impact on attitudes, behaviors and motivations, in particular those that facilitate
cooperation, well-being and prosocial values.

Sven C. Voelpel (PhD) is professor for business administration at Jacobs University Bremen in
Bremen, Germany and director of the WISE Demographic Network.

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