This paper examines the effect of transformational, transactional and passive leadership on the performance of multicultural teams in the People’s Republic (PR) of China. 42 multicultural teams with a total of 158 team members employed at German companies in the PR China completed a questionnaire which has been analyzed to show the extent to which these three leadership styles moderate the relationship between cultural diversity and social integration, satisfaction, communication effectiveness and conflict. To evince an explanation for discrepancies it has also been examined whether all three leadership styles justified mediating effects. The relationship between cultural diversity and several team variables has been explained through the resource-oriented theory, the information processing theory, the similarity-attraction theory and the social identity and social categorization theory. The effect of transformational, transactional and passive leadership is based on the theory of charismatic leadership from Bass and its related “Full Range of Leadership”. Results suggest transformational, transactional and passive leadership moderate the relationship between cultural diversity and conflict. In addition, it has been shown that transactional leadership mediates all four group variables. This study identifies practical implications and proposes an agenda for future research.
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