Background. Innovation plays the main role in organization in order to survive in the era of technology and information as an effect of globalization. Innovation can only be achieved when employees are able to show innovative work behavior. Previous studies have stated that leadership styles can influence innovative work behavior, especially authentic leadership style by forming positive work behaviors (e.g., work team, resilience, optimism) that associated with individual psychological capital. This study aims to study whether psychological capital takes a role as a mediator in the relationship between authentic leadership and innovative work behavior.

Methods. This study is cross-sectional with non-probability accidental sampling. The participants (N=115) consisted of male (51%) and female (49%), with the range of age 19-37 years (M = 26.15, SD = 25.68), work tenure ranging from 1-137 months (M = 24.5, SD = 24.56), and the participants are working for the government (21.7%), private sector (71.3%), non-profit (3.5%). Authentic Leadership Inventory (ALI) was used to measure the employees’ perception of authentic leadership (α = .90), Psychological Capital Questionnaire (PCQ) to indicate psychological capital (α = .87), and Innovative Work Behavior Questionnaire (IWBQ) to signify employee’s innovative work behavior (α = .91). All the instruments have been adapted and translated from English to Bahasa. This study used mediation analysis using Hayes PROCESS Macro on IBM SPSS.

Results. The authentic leadership has significant positive relationship with innovative work behavior (B = .145, R² = .044, F (1,113) = 5.15, p <.05). Second, authentic leadership is found to have a significant positive relationship with psychological capital (B = .242, R² =.200, F (1,113) = 28.169, p < .01). Third, psychological capital has a significant effect on innovative work behavior (B = .355, R² = .077, F (1,113) = 9.449, p <.05). Finally, psychological capital is fully mediate the effect of authentic leadership on innovative work behavior (B =.071, SE =.036, 95% CI [.009,.150]).

Conclusions. Based on the data analysis that has been done, the results confirm the hypothesis. There is a positive relationship between authentic leadership and innovation, authentic leadership has positive relationship with psychological capital, and psychological capital has positive relationship with innovative work behavior.  Answering further research questions, psychological capital has the mediator effect in the relationship of authentic leadership and innovative work behavior.

Added Values. This study may contribute to the understanding of the antecedents of employees' innovative work behavior. HR practitioners may provide authentic leadership training for leaders in the organizations to facilitate employees’ psychological capital, which in turn will support innovative work behavior of the employees. The limitations of the study were cross-sectional, and the sample was not representative of the population. Therefore, we can not conclude the causal direction of the effects of the study variables, and we can not generalize the result of the study to other organizations. Future studies may conduct longitudinal research and should use a larger representative sample, and may explore other variables that influence innovative work behavior (i.e., employee characteristics: creativity and personality traits, and organizational characteristics: organizational climate and culture).

Keywords: authentic leadership, psychological capital, innovative work behavior, Indonesia, public and private organizations.

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