Globalisation has significantly added to diversity in the workplace, requiring leaders to acquire new skills to negotiate and operate in international environments; this is especially true in the case of multinational corporations where relationships can be complex and mono-cultural management styles can fuel conflict. The proximity of individuals from different cultures raises consciousness of difference; therefore, leaders must be able to deal with the reactions of those with different backgrounds to themselves. Awareness of cultural diversity informs the way leaders define their roles and responsibilities and requires them to carefully apply themselves to team management. This study proposes a theoretical model to address team-level concerns and examines how social identity strengthens the relationship between leadership behaviour and effective leadership. Accordingly, this study evaluates two styles of leadership: charismatic (Conger and Kanungo, 1998) and ethical leadership (Masuda, 2005); it relates them to two aspects of social identity (team identity and leader prototypicality). Propositions are developed concerning how these styles of leadership would be expected to influence leader effectiveness. It is also hypothesised that team identification and leader prototypicality moderate these relationships. This means that social identity and leadership behaviour can interact to create a more effective leader, which may reduce conflict, increasing group cohesion and affective commitment to the organisation. This research utilises a quantitative approach to achieve its objectives. The research participants were selected purposively from the study population, Saudi Arabia Basic Industries Corporation (SABIC) due to its successful implementation of cultural diversity. Paper questionnaires were distributed to 500 employees and 100 team leaders; 351 employee questionnaires were collected and these employees were taken from different groups covering 90 separate leaders. A multilevel modelling analysis was used to test the study‟s hypotheses regarding the relationships and interactions between specific variables. This study contributes to the existing literature on leadership and social identity by providing empirical data regarding the significance of two leadership styles (charismatic and ethical) for increasing leader effectiveness; this effectiveness is strengthened when team identity and leader prototypicality moderate these relationships in private organisations in a culturally diverse context. The study findings have meaningful implications for leadership training and development.
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