Abstract
In the digital economy, Micro and Small Enterprises (MSEs) are important drivers of innovation, yet their innovative capacity is often constrained by limited resources, operational uncertainty, and weak formal support systems. Drawing on Path-Goal Theory, Social Cognitive Theory, Social Exchange Theory, and Social Capital Theory, this study develops an integrated framework to examine how Empowering Leadership is associated with employees’ Innovative Job Performance in Chinese MSEs. Data were collected from 403 knowledge workers across eastern, central, and western China and analyzed using Structural Equation Modeling (SEM). The findings show that Empowering Leadership is significantly positively associated with Innovative Job Performance. This relationship is partially mediated through a sequential psychology-to-behavior process in which Empowering Leadership is associated with higher levels of Self-Efficacy, which in turn is associated with greater Knowledge Sharing and ultimately with higher Innovative Job Performance. The results also indicate that Social Capital serves as an important boundary condition, such that the positive association between Knowledge Sharing and Innovative Job Performance is stronger in high-trust relational contexts. By linking leadership, psychological resources, collaborative knowledge processes, and relational conditions in a resource-constrained setting, this study contributes to research on innovation, entrepreneurship, and organizational complexity. It also offers practical implications for MSE owners seeking to strengthen employee innovation through empowering leadership, knowledge exchange, and relational support.