Leadership’s impact on SME performance: A systematic review of its role in enterprise

In small and medium-sized enterprises (SMEs), leadership is crucial for business success. This review analyses how democratic, autocratic, laissez-faire, and transformational leadership styles impact SME performance, examining 32 studies from Scopus and Web of Science (2020–2023). Findings reveal that leadership significantly influences profitability, employee productivity, growth, and sustainability. Democratic leadership encourages innovation and inclusivity but can slow decision making. Autocratic leadership facilitates swift action under pressure but may hinder employee engagement. Laissez-faire leadership promotes autonomy, ideal for creative industries, although it risks lack of direction if poorly managed. Transformational leadership drives high performance and innovation, although excessive use can lead to burnout. This study synthesizes recent literature, offering practical recommendations for SME leaders, consultants, and policy makers, emphasizing the importance of flexible leadership styles tailored to specific organizational needs and market conditions.