Equalize or differentiate? How leaders' relational choices steer employees toward proactive or expedient innovation

This study addresses a core managerial dilemma: should leaders equalize relationships to preserve harmony, or differentiate them to stimulate initiative? We examine how employees' comparative evaluations of their own leader-member exchange (LMX) relative to coworkers' LMX function as identity signals that channel them into distinct innovation forms. We conducted a three-wave, multi-source field study of 432 employees nested in 42 high-tech SMEs in Taiwan. At Time 1, employees reported self-referenced and other-referenced LMX; at Time 2, they reported constructive felt responsibility and perceived insider status; at Time 3, supervisors rated employees' expedient and proactive innovation. We define expedient innovation as short horizon, non accumulative innovation for immediate stabilization, rather than compliance, reactive problem fixing, or incremental or exploitative improvement. Using multilevel polynomial response surface analysis and Bayesian mediation, we show that LMX congruence is associated with expedient innovation through constructive felt responsibility, whereas directional incongruence in which self-referenced LMX exceeds other-referenced LMX is associated with proactive innovation through perceived insider status. By distinguishing congruence effects from directional incongruence, including self-high other low and self-low other high configurations, we help reconcile mixed findings in the LMX differentiation literature. Theoretically, these findings reframe LMX differentiation as an identity signaling process that explains variation in innovation form, and managerially, they suggest that calibrating relationship equalization versus differentiation can help leaders balance short-term operational stabilization with longer-term change initiation.