This study aims to empirically examine the relationship of ethical leadership and psychological capital with knowledge creation. It also investigates the effect of psychological capital as a mediator in the relationship between ethical leadership and knowledge creation.

This study is based on quantitative research methodology. The data was gathered using a survey questionnaire from 286 members of public-sector research organizations (PSROs) in India. Structural equation modelling (SEM) was used for hypotheses testing.

The findings of this study show that ethical leadership and psychological capital have a positive influence on knowledge creation. Further, psychological capital mediated the relationship between ethical leadership and knowledge creation.

This study is a quantitative cross-sectional study. However, future researchers may use qualitative research methodology and longitudinal data collection to supplement this study.

This study provides new understanding into the creation of knowledge by emphasizing on the critical role played by ethical leadership and psychological capital and, thus, makes significant theoretical contribution. It emphasizes that managers should not only be ethical but also use interventions to strengthen psychological capital of employees to strengthen knowledge creation.

To the best of authors’ knowledge, this is the first study to examine the underlying mechanism of psychological capital in explaining the links of ethical leadership with knowledge creation.