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Foundation UniversityJournal of Business &Economics
FUJBEISSN: 2414-4770
Vol. 2, No. 2August 2017
Foundation University Journal of Business & [email protected], http://fujbe.edu.pk, Phone: +92-51-5152266
Foundation University Journal of Business and EconomicsVOL. 2, No.2, August 2017ISSN: 2414-4770
FUJBE
PATRON IN CHIEFLieutenant General Khalid Nawaz Khan, HI (M), Retd.
President, Foundation University Rawalpindi Campus (FURC), Pakistan
PATRONMajor General Khadim Hussain, HI (M), Retd.
Rector, Foundation University Rawalpindi Campus (FURC), Pakistan
EDITORIAL ADVISORY BOARD
Professor, Dr. Brig (R) Akhtar Nawaz MalikDirector, Foundation University Rawalpindi Campus (FURC), Pakistan
Dr. Raja Nasim AkhtarDEAN, Arts & Social Sciences, Foundation University Rawalpindi Campus (FURC), Pakistan
Dr. Ali AhsanDEAN, Business & Technology, Foundation University Rawalpindi Campus (FURC), Pakistan
Dr. M. Iqbal SaifChairman Graduate Research Center, Foundation University Rawalpindi Campus (FURC), Pakistan
Dr. Shagufta AkhtarDirector ORIC, Foundation University Rawalpindi Campus (FURC), Pakistan
Dr. Amir GulzarHOD, Business and Administration Foundation University
Rawalpindi Campus (FURC), Pakistan
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
[email protected] ISSN: 2414-4770 | Vol. 2, No. 2 | Aug 2017
Dr. Zafar Moeen Nasir ([email protected])Vice Chancellor, Punjab University, Lahore, Pakistan
Dr. James Estes ([email protected])Professor Department of Accounting & Finance, California State University, San Bernardino, USA
Dr. Syed Zulfiqar Ali Shah ([email protected])Chairman Research, International Islamic University Islamabad (IIUI), Pakistan
Dr. Tayyeb S habbir ([email protected])Professor of Finance and Director, Institute of EntrepreneurshipCollege of Business Administration and Public Policy, California State University, USA
Dr. Omar Khalid Bhatti ([email protected]) Director Research, Iqra University Islamabad Campus (IU IC), Pakistan
Dr. Stacy R Barnes ([email protected]) Professor, Averett University, USA
Dr. Kashif-Ur-Rehman ([email protected])Professor, Iqra University Islamabad Campus (IUIC), Pakistan
Dr. Mohammad Mafiz-Ur-Rahman ([email protected])School of Accounting, Economics and Finance, University of Southern Queensland, Australia
Dr. Farida Faisal (farida.faisal@ uaar.edu.pk)Director, UIMS-PMAS Arid Agriculture University, Rawalpindi, Pakistan
Dr. Maizaitulaidawati Md Husin ([email protected])Senior Lecturer & IT Manager, UTM International Business School, \Universiti Teknologi Kuala Lumpur, Malaysia
Dr. Sajid Bashir ([email protected])HOD Management Sciences,Capital University of Science & Technology (CUST), Islamabad, Pakistan
Dr. V. Reddy Dondeti ([email protected])Department Chair, School of Business, Norfolk State University, USA
Dr. Attiya Yasmin ([email protected]) Associate Professor,Pakistan Institute of Development Economics (PIDE), Islamabad, Pakistan
Dr. Imran Riaz Malik ([email protected])Assistant Professor, Iqra University Islamabad Campus (IUIC), Pakistan
Dr. Arshad Hassan ([email protected])Dean Management Sciences, Capital University of Science & Technology (CUST), Islamabad, Pakistan
Dr. Nadeem Safwan ([email protected])Professor, Management Sciences, University of Gujrat (UOG), Pakistan
Dr. Qaisar Ali Malik ([email protected]) Associate Professor,Business and Administration, Foundation University Rawalpindi Campus (FURC), Pakistan
Dr. Khurram Shahzad ([email protected])Associate Dean, Riphah International University, Islamabad, Pakistan
ADVISORY BOARD
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
SECRETARY OF THE JOURNAL
Mr. Muhammad AwaisLecturer, Foundation University Islamabad, Rawalpindi Campus (FURC), Pakistan
EDITORIAL BOARD
Chief Editor
Dr. Amir GulzarHOD, Business and Administration,
Foundation University Rawalpindi Campus (FURC), Pakistan
Editor
Dr. Qaisar Ali Malik
Associate Professor,Foundation University Rawalpindi Campus (FURC), Pakistan
Dr. Nazima Ellahi
Assistant Professor, Foundation University Rawalpindi Campus (FURC), Pakistan
Assistant Editors
Mr. Aziz Ur Rehman Rana
Assistant Professor, Foundation University Rawalpindi Campus (FURC), Pakistan
Mr. Naeem Ullah
Assistant Professor, Foundation University Rawalpindi Campus (FURC), Pakistan
Mr. Muhammad Awais
Lecturer, Foundation University Rawalpindi Campus (FURC), Pakistan
Ms. Asiya Sohail
Lecturer, Foundation University Rawalpindi Campus (FURC), Pakistan
Editorial Team
Ms. Nida Abbas
Lecturer, Foundation University Rawalpindi Campus (FURC), Pakistan
Ms. Azka Nawaz
Lecturer, Foundation University Rawalpindi Campus (FURC), Pakistan
Online Submission available at:http://fujbe.fui.edu.pk/[email protected]
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
Table of Contents
Employees Empowerment, Organizational Commitment & Mediatory Role of Perceived Organizational Support: An Empirical Evidence from Banking Sector of Pakistan
Khalid Mehmood, Zaib Maroof, Sarah Qaim, & Hina Affandi
Engaging Customers by Fostering Learning Process and Strategic Flexibility Together in Cellular Sector of Pakistan
Maryam Zeb, Ahmad Sher, Muhammad Awais & Hussaun A. Syed
Moderating Effect of Employee's Emotional Intelligence on the Relation of Emotionally Intelligent Project Manager and Employee Engagement
Shahbaz Khan, Muhammad Awais, Muhammad Naeem Khan, & Owais Ahmed Khan
Analyzing the Capital market movements and saving patterns of South Asian Countries: Evidence from Pakistan, Bangladesh and Sri Lanka
Mah-a-Mobeen Ahmed, Muhammad Awais, Kashif Ur Rehman
Where we are going? Empirical Analysis of Pakistan's Economy
Adiqa Kausar Kiani, Sana Ullah & Zaib Maroof
01
17
41
68
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FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
Employees Empowerment, Orgaanizational Commitment & Mediatory Role of Perceived Organizational Support: Empirical
Evidence from Banking Sector of Pakistan
Khalid MahmoodPhD Scholar Foundation University Rawalpindi Campus, Pakistan
Zaib MaroofLecturer, Faculty of B&T, Foundation University Rawalpindi Campus, Pakistan
Sarah QaimLecturer, Faculty of B&T, Foundation University Rawalpindi Campus, Pakistan
Hina AffandiLecturer, Faculty of B & T, Foundation University Islamabad, Pakistan
Abstract
The study investigated the impact of employee empowerment on affective commitment (AC),
normative commitment (NC) and continuance commitment (CC). Further it also analyzed the
mediating role of perceived organizational support between study variables. The data was collected
from commercial banks of Pakistan (n=300) by using convenience sampling technique. All variables
were measured by using scales developed by different scholars. Organizational commitment was
measured with the help of scale developed by Meyer and Allen (1991). Employee empowerment was
measured by a scale developed by Ashford, Lee and Bobko, (1989). Lastly, perceived organizational
support was measured by a scale developed by Rhoades and Eisenberger, (2002). The data gathered
was analyzed with the help of SPSS. Pearson correlation and multiple regression analysis performed
that indicated, employee empowerment has a significant positive influence on organizational
commitment of employees and perceived organizational support significantly mediated the
relationship. The study included recommendations and directions for future research.
Key Words: Organizational Commitment, Employee Empowerment, Perceived Organizational
Support.
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FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
Introduction
Social exchange theory plays an important role in developing the cordial employee – employer's
relationship. A suitably designed and carefully crafted reward and compensation system constitutes
the foundations for hiring the requisite workforce for the organization, but retaining such a
workforce with the organization needs some other type of recipe (Vig & Dumicic, 2016). The
business today is undergoing a difficult phase where retaining the skilled and experienced workforce
by organizations has become a tricky affair. The organization's HR policies and reward management
systems play a major role in keeping the employees on board for a longer tenure (Vig & Dumicic,
2016). Researchers have established that empowered employees demonstrate a higher degree of
loyalty and commitment to the organization as compared to low empowered employees (Haas,
2010). The empowerment increases the feeling of ownership of the employees and enhances the
dedication to stay loyal and dedicated to work for the organization (Raza, Ashi, Agusta, Jalal, &
Hasan, 2016).
Organizational support contributes a lot in retaining the workforce as the employees feel morally
indebted to the organizations which stood by them under difficult circumstances (Chiang & Hsieh,
2012). The perceived organizational support, therefore, acts as a positive tool in keeping the
employees on board. The perceived organizational support is the expectation of the employees that
their organization cares, acknowledges and values their contributions. This belief has a positive
impact on the employee's level of commitment and he would like to exhibit positive role to influence
other employees to stay loyal as well (Ashraf & Ajmal, 2015; Iqbal & Hashmi , 2015).
Employee empowerment is the organization's decision of providing a certain level of autonomy and
responsibility for decision making to the employees. These decisions are at lower level where
employees have a unique view of the problems facing the organization. Empowering the employees
leads to increased organizational responsiveness to the problems and increased productivity. It also
leads to a greater degree of organizational commitment of the employees (Maina, Gachunga, &
Karanja, 2016). Perceived organizational support has been in the lime light and focus of research
since 1980. It is the degree of sensitivity and opinion of employees regarding extent to which their
involvement is appreciated by the organization (Chiang & Hsieh, 2012). Extent research in Pakistan
conducted in management sciences indicates that very less number of studies had been conducted on
measuring the relationship between organizational employee empowerment and organizational
support (Hassan, Hassan, & Shoaib, 2014).
Results of various studies conducted for measuring the variables have indicated diverse, mixed and
assorted findings (Hassan, Hassan, & Shoaib, 2014; Iqbal & Hashmi, 2015; Ashraf & Ajmal, 2015;
Mehmood, Maroof, Qaim, & Affandi
2
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
Raza, et al., 2016). Moreover, no empirical evidence has been found that has explored perceived
organizational support as mediatory variable in predicting impact of employee empowerment on
dimensions of organizational commitment. The gap of knowledge was found more pronounced in
context of Pakistan where the researchers had conducted a number of studies focusing on
organizational commitment, turn over intentions, engagement and perceived organizational support
and reported various degrees of relationships between these variable (Iqbal & Hashmi, 2015; Ashraf
& Ajmal, 2015; Raza, et al., 2016) . None of these studies included POS as a mediatory variable.
Perceived organizational support has been studied as a mediator variable in a number of studies like
Moorman, Blakely, and Niehoff (1998), Allen, Shore, and Griffeth (2003), Loi, Hang -yue, and Foley
(2006), Behram and Özdemirci, (2014), but there is a lack of empirical evidence of studying POS as
mediator between\employee empowerment and organizational commitment in context of Pakistan.
This study, therefore, will be a small addition in the extent knowledge on the subject and addition of
empirical evidence in context of Pakistan. Basing on the past studies and identified gap, the current
study will answer the following questions:
Ÿ Does employee empowerment have a significant positive impact on organizational commitment
of employees in the Banking sector of Pakistan?
Ÿ Do POS have a significant positive impact on AC, NC and CC dimensions of organizational
commitment of employees in the Banking sector of Pakistan?
Ÿ Do POS mediate the relationship between employee empowerment and dimensions of
organizational commitment of employees in the Banking sector of Pakistan?
Literature Review
Organizational Commitment (OC)
The study of commitment is the most researched yet a challenging subject in the fields of
management, organizational behaviors and human resource since 1970. OC describes a positive
inclination of an individual which he or she shows to the establishment (Porter, William, & Smith,
1976) and that results into development of an attitude or orientation towards the organization.
Having strong ties with the establishment develops a state of mind where the goals of the individual
or worker is increasingly integrated with that of the organization (Becker, 1980). OC is
multidimensional construct having three distinct component i.e. affective commitment, normative
commitment and continuance commitment (Allen & Meyer, 1990; Meyer & Allen, 1991). Affective
Commitment (AC) is that component of OC which indicates that the relation of the employee with
the organization revolves around an emotional attachment; employee feels deeply involved in the
Employees Empowerment, Orgaanizational Commitment & Mediatory Role of Perceived Organizational Support: Empirical Evidence from Banking Sector of Pakistan
3
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
organization and likes to be identified with the organization's name and reputation (Samad, 2007). In
case of affective commitment (AC) the association of employees with the organization is most
willing and they energetically involve in the productive activities. Continuance commitment (CC) is
that component of OC which is associated with the benefits related to the job, monetary and other
settlement which the employee is getting from a particular job and fear of losing them or lack of
available alternatives which keep them tied with the organization or the costs that employees
associate with leaving the organization tasks (Chew & Chan, 2008). The Normative Commitment
(NC) or moral commitment is the type of commitment which originates from a willing attitude of an
employee to stay loyal with the organization and perform in a positive manner for his organization.
The employee feels obliged to be loyal and stay associated with the organization's goals and
objectives.
Employee Empowerment (EE)
Employee empowerment is opposite to the autocracy, tyranny and dictatorship where the employees
are forced to do as directed. Employee empowerment is a state where the employers delegate a
number of authorities and powers to the employee so that he can take some decisions to control
difficult situations and can use his discretion to perform a set of task related activities at the
workplace (Bowen & Lawler, 1992; Spreitzer, 1995). Empowerment has four components i.e.
meaning, importance and value of the work, competence, knowledge, skills and abilities of the
employee to accomplish the task, self-determination, self-sufficiency, liberty and freedom to
accomplish the task and impact, level of influence to end or complete the task (Zhang & Bartol,
2010).
Employee empowerment has been identified as positive contributor for the commitment of
employee towards the organizations (Bhatnagar, 2012). The empowerment will induce a feeling of
being important and the employees will feel more autonomous at their job (Spreitzer, 1 9 9 5 )
Relationship between OC and Employee Empowerment (EE)
The feeling of being empowered induces a strong sense of ownership and belonging in the minds of
employees (Saad, Hassan, & Shoaib, 2014). They take it as their prime responsibility to work for the
organizational benefit, take care of organizational resources and align their personal goals with goals
of their organization (Ashraf & Ajmal, 2015; Iqbal & Hashmi, 2015; Maina, 2016). In the light of
expectancy and social exchange theories, the organizations reciprocate in terms of tangible and
intangible rewards and the employees' commitment to the organization strengthens. Researchers
have studied employee empowerment in relation to organizational commitment along with its three
dimensions and found a significant positive relationship (Powpaka, 2008; Haas, 2010; Saad, Hassan,
Mehmood, Maroof, Qaim, & Affandi
4
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
& Shoaib, 2014; Ashraf & Ajmal, 2015; Iqbal & Hashmi, 2015; Maina, 2016). With this empirical
evidence from the literature, our hypotheses are:
H : There is a significant positive relationship between employee empowerment and affective 1
organizational commitment.
H : There is a significant positive relationship between employee empowerment and normative 2
organizational commitment.
H : There is a significant positive relationship between employee empowerment and 3
continuance organizational commitment.
Perceived Organizational Support (POS)
Perceived organizational support (POS) is the degree of belief which employees have regarding
acknowledgement of their services and expectation that organization will value those services and
render support for them (Krishnan & Mary, 2012). Employees put more efforts and become more
loyal when they see indications that they are owned and rewarded by the organization. It has been
established by the researchers that the employee attitude and behavior toward job is highly affected
by various policies and programs introduced by organization for welfare, training and development
of the employees (WannYih & Hatik, 2011). Better support of the organization leads to better
response from the employee on the workplace and thus they tend to stay loyal and committed
(Eisenberger et al., 1986; Loi, Hang-yue, & Foley, 2006).
Perceived Organizational Support and Employee Empowerment
Organizational support develops a stronger feeling of empowerment in the employees such that they
feel accountable and perform their task with ease and independence (Ahmad, et al., 2010). The
expected organizational support makes the employee more confident and sure that he will have all
required resources to accomplish the task proficiently and will receive recognition from his
organization. The perceived organizational support and employee empowerment are positively
related with each other (Maina, 2016).
H : Employee empowerment has a significant positive relationship with the perceived 4
organizational support.
Relationship between OC and POS
The POS develops feelings of being obliged in the employees who in turn reciprocate in showing
positive work behaviors. The organizations also work in this direction and keep on investing on the
employees to satisfy their professional, social and financial needs in terms of providing chances for
Employees Empowerment, Orgaanizational Commitment & Mediatory Role of Perceived Organizational Support: Empirical Evidence from Banking Sector of Pakistan
5
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
training and development and by announcing various employee oriented financial benefits. An
increased degree of POS leads towards the creation feelings in the employees where they feel pride in
being part of the organization.
H : POS has a significant positive relationship with affective organizational commitment 5
H : POS has a significant positive relationship with normative organizational commitment.6
H : POS has a significant Positive relationship with continuance organizational commitment.7
POS as a Mediator
Detailed probe of literature suggests that POS contributes positively in building positive
image of the organization in the eyes of employees and the labor market which result in
building a good reputation of the organization as a caring setup and good paymaster who looks after
its employees and their needs (Moideenkutty et al., 2001; Rhoades & Eisenberger, 2002; Loi, Hang-
yue, & Foley, 2006). Relationship between perceived organizational support and organizational
commitment has been studied in past to establish that perceived organizational support is an
important factor in predicting organizational commitment (Tansky & Cohen, 2001; Yoon & Thye,
2002).
Perceived organizational support has shown a positive relationship with affective, normative and
continuance commitment (McDonald & Makin, 2000; Rhoades & Eisenberger, 2002; Colakoglu,
Culha, & Atay, 2010). Thus, in the light of the empirical studies, the hypotheses are:
H : POS mediates the relationship between employee empowerment and affective organization 8
commitment.
H : POS mediates the relationship between employee empowerment and normative 9
organizational commitment.
H : POS mediates the relationship between employee empowerment and continuance 10
organizational commitment
Theoretical Framework
Keeping in view the literature the following theoretical framework can be formed:
Mehmood, Maroof, Qaim, & Affandi
6
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
Research Methodology
Research design
The purpose of the study is mainly hypotheses testing and is correlational in nature. The time horizon
of the current study is cross-sectional and study setting non contrived environment with researcher's
interference minimum. The data was collected with the help of self-administered questionnaire rated
on Likert scale and the unit of analysis was individual.
Population /Sample
According to an estimate, total numbers of banks in Pakistan are 38 including 5 public sector banks,
22 domestic banks, 7 foreign banks and 4 specialized banks. There are total 10984 branches
operating in the country. The population of the present study comprises public and private sector
commercial banks of Pakistan. Convenience sampling technique was used to collect data from the
respondents through a self-administered questionnaire. A sample of 300 employees (managers and
non-managers) from banking sector of Pakistan was selected.
The study was conducted in two different phases. During phase – I, pilot study was conducted with
the view to ascertain the psychometric properties of the scales. However, during the phase II, the
hypotheses were tested on sample of 300 managers and non- managers from public and private sector
commercial banks of Pakistan. Following measuring scales were opted:
Ÿ Organizational Commitment (OC) was measured by an instrument developed by Meyer and
Allen (1991). The scale consisted of 25 items out of which 8 items were meant to measure
affective, 9 items to measure continuance and 8 items to measure normative commitment. Each
item was anchored at 5- point Likert scale ranging from (1) strongly disagree to (5) strongly agree.
H1+
H2+
H3+
H4+ H5+
H6+
H7+
H8+
H9+
H10+
Perceived OrganizationalSupport
EmployeeEmpowerment
Affective OrganizationalCommitment
NormativeOrganizationalCommitment
ContinuanceOrganizationalCommitment
Employees Empowerment, Orgaanizational Commitment & Mediatory Role of Perceived Organizational Support: Empirical Evidence from Banking Sector of Pakistan
7
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
Mehmood, Maroof, Qaim, & Affandi
Ÿ Perceived Organization Support (POS) was measured by a short form of survey of perceived
organizational support (SPOS) developed by Eisenberger et al., (1986). Short form of scale
consisted of 8 items which were anchored at 5- point Likert type scale ranging from (1) strongly
disagree to (5) strongly agree.
Ÿ Employee Empowerment (EE) was measured by the scales developed by Ashford, Lee and
Bobko, (1989). The scale consisted of 15 items and were anchored at 5- point Likert type scale
ranging from (1) strongly disagree to (5) strongly agree.
Results & Discussion
Pilot study, with a sample of 100 employees was conducted to establish the reliability and validity of
the scales adopted to measure the variables (Mathieu & Zajac, 1990). The result indicated that 25%
respondents were managers and 75% non-managers out of which 66 % were male and 34% were
female. Large numbers of respondents (57%) were from the age group of 21 – 30 years. Item total
correlation (Churchill, 1979), Univariate Normality (Muthan & Kaplan, 1985) and reliability
(Bakeman & Gottman, 1986) tests were performed to establish consistency.
Main study was conducted after having established the reliability and consistency of the scales.
There were 300 respondents out of which 63 % male and 37 % female and 29 % were managers and
71 % were non mangers. The spread of age indicated that 32 % respondents were having age 30 years
and below while 68 % aged above 31 years. There are 63% of correspondents having experience 5-10
years while 37% were having experience 11 years and above.
Table 1:
Mean,
Standard
Deviation
and
Correlation
Matrix
of
all
Variables
(N
=
300)
Variable Mean Standard Deviation Correlations AC CC NC EE POS
AC
3.13
.616
1
.396**
.449**
.319**
.432**
CC
3.12
.716
1
.444**
.304**
.316**
NC
3.22
.623
1
.339**
.478**
EE
3.61
.709
1
.344**
POS
3.20
.586
1
**. Correlation is significant at the 0.01 level (2 -tailed).
8
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
Table 1 above indicates correlation of affective commitment, continuance commitment and
normative commitments with the independent study variables. The correlation of affective
commitment with study variables was POS (r=0.43**, p<.001) and employee empowerment
(r=0.32**, p<.001). Continuance commitment also indicated a very significant positive correlation
with the independent variables i.e. POS (r=0.31**, p<.001) and employee empowerment (r=0.30**,
p<.001). Normative commitment showed a very significant positive correlation with all the
independent variables POS (r=0.47**, p<.001) and employee empowerment (r=0.33**, p<.001).
POS has indicated a very significant positive correlation with employee empowerment (r=0.34**,
p<.001).
Multiple regressions were performed, by using SPSS, to measure effect of independent variables on
the dependent variable.
Table 2: Regression analysis for Affective Organizational Commitment on Perceived
Organizational Support and Employee Empowerment (N= 300)
Model Variable Regression Coefficients F T Sig R 2
1 (Constant) 41.7 5.19 .000 .214
POS .365 6.69 .000
EE
.193
3.54
.000
Table 2 above contains the result of multiple regressions performed for affective commitment. The
results indicate that perceived organizational support (β = .365, p <0.001) has a significantly positive
effect on organizational commitment and employee empowerment (β = .193, p <0.001) the affective 2 organizational commitment. The values of adjusted R = 0.214 indicates that 21% variations in the
affective commitment are caused due to selected independent variables.
Table 3: Regression analysis for Continuance Organizational Commitment on Perceived
Organizational Support and Employee Empowerment (N= 300)
Model Variable Regression Coefficients F t Sig R2
1 (Constant) 24.780 4.27 .000 .137
POS .240 4.19 .000
EE
.221
3.86
.000
Employees Empowerment, Orgaanizational Commitment & Mediatory Role of Perceived Organizational Support: Empirical Evidence from Banking Sector of Pakistan
9
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
Table-3 above shows the results of multiple regressions performed for the continuance commitment.
The result indicates that perceived organizational support (β = .240, p <0.001) and employee
empowerment (β = .221, p <0.001) has significant positive impact on continuance commitment. The
values of adjusted R2 = 0.137 for the model indicates that 13% variations in the continuance
commitment are caused due to selected independent variables.
Table 4: Regression analysis for Normative Organizational Commitment on Perceived
Organizational Support and Empowerment (N= 300)
Model Variable Regression Coefficients F t Sig R 2
1 (Constant) 53.008 4.21 .000 .258
POS .410 5.90 .000
EE
.198
3.73
.000
Table – 4 above shows the results of multiple regressions performed for Normative Commitment.
The result indicates that perceived organizational support (β = 0.4410, p <0.001) and employee
empowerment (β = .198, p <0.001) has significant positive impact on normative commitment. The 2 value of adjusted R = 0.258 indicates that 25% variations in the normative commitment are caused
due to selected independent variables.
Table 5: Regression analysis for Mediatory Impact POS between Affective Organizational
Commitment and Employee Empowerment (N= 300)
Model Variable Regression Coefficients F t Sig R2
1
(Constant)
33.760 12.1
.000
.099
EE
.319
5.81 .000
(Constant) 41.748
6.27
.000
2
EE
.193
3.54 .000
POS
.365
6.69
.000
.214
Table – 5 above shows the results of multiple regressions performed to check mediation of POS
between employee empowerment and for affective commitment.
Mehmood, Maroof, Qaim, & Affandi
10
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
The result indicates that (a) there is a significant relationship between employee empowerment, POS
and affective commitment (b) the relationship between employee empowerment and affective
commitment remained significant (β = .319, p <0.001) (c) beta value of employee empowerment 2 reduced after inclusion of mediatory variable (β = .193, p <0.001) (d) R has improved from 0.099 to
0214 (Baron & Kenny, 1986).
Result indicated that POS has partial mediation effect between affective commitment and employee
empowerment.
Table 6: Regression analysis for Mediatory Impact POS between Continuance
Organizational Commitment and Employee Empowerment (N= 300)
Model Variable Regression Coefficients F t Sig R2
1 (Constant) 30.2 9.82 .000 .089
EE .304 5.503 .000
(Constant) 24.7 5.49 .000
2 E .221 3.86 .000 POS .240 4.19 .000 .137
Table – 6 above shows the results of multiple regressions performed to check mediation of POS
between employee empowerment and for continuance commitment.
The result indicates that (a) there is a significant relationship between employee empowerment, POS
and continuance commitment (b) the relationship between employee empowerment and continuance
commitment remained significant (β = .304, p <0.001) (c) beta value of employee empowerment 2 reduced after inclusion of mediatory variable (β = .221, p <0.001) (d) R has improved from 0.089 to
0.137 (Baron & Kenny, 1986). Result indicated that POS has partial mediation between continuance
commitment and employee empowerment.
Table 7:Regression analysis for Mediatory Impact POS between Normative Organizational
Commitment and Employee Empowerment (N=300)
Model
Variable
Regression Coefficients F
t
Sig
R2
1 (Constant) 38.5 12.15 .000 .112
EE .339 6.21 .000 (Constant)
53.0
5.90
.000
2
EE
.198
3.72
.000
POS
.410
7.73
.000 .258
Employees Empowerment, Orgaanizational Commitment & Mediatory Role of Perceived Organizational Support: Empirical Evidence from Banking Sector of Pakistan
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FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
Table – 7 above shows the results of multiple regressions performed to check mediation of POS
between employee empowerment and for normative commitment.
The result indicates that (a) there is a significant relationship between employee empowerment, POS
and normative commitment (b) the relationship between employee empowerment and normative
commitment remained significant (β = .339, p <0.001) (c) beta value of employee empowerment 2
reduced after inclusion of mediatory variable (β = .198, p <0.001) (d) R has improved from 0.112 to
0.258 (Baron & Kenny, 1986). Result indicated that POS has partial mediation between normative
commitment and employee empowerment.
Conclusion
The current study was conducted with the aim to measure impact of employee empowerment on
affective commitment (AC), normative commitment (NC) and continuance commitment (CC) along
with investigating the impact of perceived organizational support as mediating variable between the
variables. The study was conducted on the employees of banking sector of Pakistan. The results
indicated that employee empowerment has a significant positive impact on AC, NC and CC which
provided evidence for accepting the hypotheses 1, 2 and 3. This result is in line with the previous
studies conducted by the researchers (Singh & Singh, 2010; Beheshtifar, Nezhad, & Moghadam,
2012; Chiang & Hsieh, 2012; Hassan, Kibriya, & Nawaz, 2013). A significant positive relationship
was found between POS and EE providing evidence for accepting the hypothesis 4 which is in
conformity with the work of previous researchers (Hassan, Kibriya, & Nawaz, 2013).The results also
indicated a significant positive impact of POS on AC, NC and CC which substantiates the evidence
for accepting the hypothesis 5, 6 and 7 of the study. The results are in line with the previous studies
conducted by the researchers (Hashmi & Nqvi, 2012; Hassan, Kibriya, & Nawaz, 2013). The results
indicated existence of a partial mediation between the Employee empowerment and all the
dimensions of organizational commitment i.e. AC, NC and CC.
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Engaging Customers by Fostering Learning Process and Strategic Flexibility Together in Cellular Sector of Pakistan
Maryam ZebPhD Scholar, International Islamic University Islamabad, Pakistan
Ahmad SherPhD Scholar, Iqra University Islamabad Campus, Pakistan
Muhammad AwaisPhD Scholar, Iqra University Islamabad Campus, Pakistan
Hussaun A. SyedMasters of Business Economics, Wilfrid Laurier University, Toronto, Canada
Abstract
Globalization has caused immense changes in the business environment and has made difficult for
the organizations to respond quickly and effectively to the changing customer preferences.
Therefore, organizations that are flexible and are involved in the learning process are able to
compete in the modern markets. This research study seeks to achieve the understanding of the
contribution of organizational learning along with strategic flexibility to enhance the customer
performance in sustaining competitive advantage in a rapidly changing business environment. This
allows the organizations to react quickly towards the changing market requirement. Questionnaire
was used to collect data. Findings suggested that both the constructs of organizational learning and
strategic flexibility help firms to adapt to the changing business conditions in order to satisfy the
needs of their customers. The cellular companies in Pakistan call for new approaches to engage
customers therefore, managers are required to focus on learning process along with strategic
flexibility to respond to the changing market conditions in a timely manner.
Keywords: Organizational learning, Strategic flexibility, Enhanced customer performance,
competitive advantage
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Introduction
The significant change in the shape of communication has changed the world into a global village.
The Telecom sector is the fastest growing sector everywhere in the world which has changed the
nature of communication and has made it easier for the people to connect with others. Similarly, it is
the fastest growing industry in Pakistan as well, where subscribers have reached to more than 120
million after biometric verification system. Globalization has caused immense changes in the
cellular markets of developing countries like Bangladesh and Pakistan. Pakistan has been rated high
in the context of growing cellular markets as compared to its competitors which play an important
role in various social and economic activities. Today, the cellular industry of Pakistan is facing their
intense competition ever. Currently, there are five major cellular companies operating in the country
named Mobilink, Ufone, Warid, Zong and Teleport (PTA, 2015).
This transfer of philosophy from product-and-sale to the market orientation helps in understanding
the customers completely so that the right services are always provided to customers at a right time to
attain competitive advantage (Imtiaz, Khan, & Shakir, 2014). The competition affects the marketing
strategies of the organizations, and only those firms that strive to learn and provide customer value
are able to create competitive advantage in today's dynamic and volatile environment (Abdullah,
Rashid, & Umair, 2013). According to the resource-based view (RBV), the organizations that have
rare, unique, non-substitutable and valuable resources and capabilities are more able to create
competitive advantage because it becomes difficult for the others to duplicate the strategies that
create value for them. However, it is not possible for the firm to have a particular set of resources and
capabilities to create value in a long term due to fast changing business environment. Therefore,
firms are required to continuously review their valuable resources and capabilities in order to sustain
competitive advantage (Helfat & Peteraf, 2003; Newbert, 2008).
Resource-based theory was considered as a base for sustaining and maintaining competitive
advantage during 1990s but later on along with this theory, dynamic capability and other
competence-oriented theories based on rare, imitable, valuable and non- alternative resources were
added to strengthen the approach of resource-based theory which illustrates the importance of
constant improvement and adaptation in the turbulent environment to maintain competitive
advantage (Zollo & Winter, 2002; Dess, Eisner, Lumpkin, & McNamara, 2011). The above
discussed approaches together were used to study marketing resources related to customer
orientation in the year 2000, which emphasize on the importance of learning to lead in the market.
However, in the recent years, the organizations' ability to learn has been considered the main secret
for their survival in a changing environment. Therefore, organizations require to learn in order to get
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ahead of their competitors in the turbulent business environment (Srivastava, Fahey, & Christensen,
2001; Weerawardena, 2003).
Organizations are facing rapid business environment changes and the main cause of these changes
are the changing technology, changing needs of the customers, suppliers and competitors which has
caused immense pressure on the organization to create added value for their customers and be
flexible in order to learn faster than their competitors and to look for the best management practices
as well as to refresh their skills and resources (Grewal & Tansuhaj, 2000; Wu & Shanley, 2009).
Organizational learning as a strategic capability is the ability of the organizations to create long term
customer value because it allows to learn continuously, look for new market opportunities and
respond to the threats by achieving alignment with its environment and helps them in adapting to
volatile market conditions (Bee, Voelpel, Leibold, & Tekie, 2005; Kandemir & Hult, 2005).
Therefore, organizations are required to have strategic flexibility to deal with the rapid changes as it
determines the future success of the organization and also underline the importance of flexible use
and coordination of an organization's resources and reorganization of the processes that enable them
to attain competitive advantage.
Matthyssens, Pauwels, & Vandenbempt (2005) argued that in today's dynamic market, strategic
flexibility is a success factor in creating customer value and sustaining competitive advantage.
Organizations can better understand the external market by focusing on the organizational learning
and can flexibly reorganize their resources in advance to better react with the rapidly changing
market environment (Santos-Vijande, Lopez-Sanchez, & Trespalacios, 2012). However, being
strategically flexible, and implementing effective competitive strategies to grab the huge market
share is the major challenge for the cellular sector to survive in current dynamic environment. A little
research has been carried out on organizational learning culture and customer orientation in Pakistan
(Abdullah, Rashid, & Umair, 2013). However, no previous research has been carried out on the
importance of organizational learning in context of strategic flexibility to enhance customer
performance in the cellular sector of Pakistan.
The number of recent studies has been carried out on the importance and benefits of organizational
learning and its relationship with business performance (Lopez, Peon, & Ordas, 2005), product
performance (Alegre & Chiva, 2008), innovation (Weerawardena, O'Cass, & Julian, 2006;
Weerawardena, 2003), supplier performance (Carter, 2005), entrepreneurship (Garcia‐Morales,
Lorens‐Montes, & Verdu‐Jover, 2006), market orientation (Grewal & Tansuhaj, 2000), joint-
ventures (Kandemir & Hult, 2005), organizational commitment and human resource performance
(Bhatnagar, 2007; Chiva & Alegre, 2009). However, little consideration has been given to study the
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relationship of organizational learning and the strategic flexibility to enhance customer performance
in different competitive industries (Santos-Vijande, Lopez-Sanchez, & Trespalacios, 2012).
Previous studies have been carried out on the significance of knowledge in the area of
implementation of firm strategies (Paisittanand, Digman, & Lee, 2007).
The current study considers the organizational learning as a strategic capability of the organization
and examines its role to respond towards the rapid environmental changes in order to pursue the
opportunities and to avoid threats. However, there exists a debate on the role of organizational
learning towards firms capability in response to the changing business environment and achieving
competitive advantage because organizations are facing continuous changes, whether driven by
technology, suppliers, customers or competitors which in turn create pressure for the organizations
to sustain their customers by improving products and services (Sanchez , Vijande, & Gutierrez,
2010; Santos-Vijande, Lopez-Sanchez, & Trespalacios, 2012). In Pakistan, being a developing
nation, organizations are striving hard to develop a sustainable competitive advantage (Akhtar,
Khan, & Mujtaba, 2013). Therefore, the current research will provide empirical evidence of the
importance of organizational learning and firm's strategic capability to create long term customer
value thus having a competitive edge for the organizations.
The purpose of the current study is to find the contribution of organizational learning process
towards its capability to be responsive in a dynamic environment which creates the long-term
customer value and sustainable competitive advantage for the organization. Number of studies have
been carried out on organizational learning and its relationship with organizational commitment
(Malik, Nawab, Naeem, & Danish, 2010; Kalyar, Rafi, & Ahmad, 2012), organizational
performance (Akhtar, Arif, Naveed, & Rubi, 2011; Abdullah, Rashid, & Umair, 2013), employee
performance (Hassan, Shaukat, Shakeel, & Imran, 2011) and innovation in Pakistan. However, little
research has been conducted to explain the competitive advantage (Akhtar, Khan, & Mujtaba, 2013).
The current research considers the constructs of organizational learning contribution towards firm's
rapid response to a highly dynamic and competitive environment.
This research signifies the importance of how the organizational learning process plays an important
role and contributes to strategic flexibility in order to create customer value and thus sustaining
competitive advantage for the organization. However, previous studies in Pakistan have been
conducted on its relationship with organization's performance, commitment, innovation and
satisfaction, therefore, this research focuses on its relationship with strategic flexibility and
enhanced customer performance. The scope of the study covers the importance of the organizational
learning process along with strategic flexibility to enhance customer performance with special
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reference to the cellular sector of Pakistan. This helps the cellular sector in having a quick approach
to satisfy changing customer preferences in order to maintain and sustain competitive advantage in
the business market.
Research objectives
The objective of the study is to find out the nature of the relationship between the constructs of
organizational learning, strategic flexibility and enhanced customer performance. First of all, the
contribution of organizational learning towards strategic flexibility has been discussed which helps
organizations in sustaining competitive advantage. Secondly, importance of organizational learning
and strategic flexibility has been explained to enhance customer performance in the cellular industry.
Finally, the hypotheses were proposed about the relationship between variables and to analyze the
mediating role of strategic flexibility between the constructs of organizational learning and
enhanced customer performance by using data collected from the managers of the cellular
companies.
Literature Review
Organizational learning process
Organizational learning has been defined in various ways, but the basic definition describes it as a
process through which knowledge is acquired, processed and shared in the firms (Slater & Narver,
1995). Organizational learning has also been discussed in various domains previously and research
has been going on over the last 40 years, since Cangelosi & Dill (1965) discussed organizational
learning to examine the process during an exercise of complex management decision making.
Organizational learning is a process which creates knowledge that enhances organizational
capabilities and acts as a basis for having a sustainable competitive advantage as organizations that
learn are more flexible and able to respond to changing business environments (Fiol & Lyles, 1985;
Geus, 1988; Tsang, 1997). Stata (1989) argued that learning better than the competitors is important
for the organizations. However, this requires new management tools and techniques to speed up
organizational learning and adapt to dynamic business environment. Organizational learning has ita
application in strategic context as it is not merely about learning of individuals or developing new
products, therefore, organizations need to focus on organizational learning if they want to achieve
strategic renewal (Crossan, Lane, & White, 1999). The concept has been explained previously by
March (1991) who identified strategic renewal as a tension between exploration and exploitation.
Furthermore, the ability of the organization to learn is dependent on the features of the organization,
including; leadership, organization's intention to learn, system of planning and decision making,
strategies supporting behavior, processes and tools used to acquire, create or transfer knowledge
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between the employees in the organization which in turn affects employee satisfaction and
commitment to work, flexibility and efficiency of the organization (Nonaka, 1994; Dimovski &
Skerlavaj, 2005). A complete understanding of organizational learning was provided by defining its
four constructs or processes named as knowledge acquisition, information distribution, information
interpretation and finally an organizational memory (Huber, 1991; Sinkula, 1994). Recent
researches on organizational learning provide an explanation of its four processes in a detailed
manner (Kandemir & Hult, 2005). In the first stage of organizational learning, knowledge is both
created from internal and external sources. Organizations continuously engage themselves in
gaining external knowledge in order to enhance their capabilities by comparing themselves with
their competitors and by creating joint ventures (Santos-Vijande, Lopez-Sancgez, & Trespalacious,
2012; Wang & Huzzard, 2005). In second stage of organizational learning, distribution of
knowledge takes place among the individuals through formal and informal interactions. The better
the process and system, the better will be the flow of information in the organization, and the better
will be its position to cope with the changing customer preferences (Kandemir & Hult, 2005;
Ramirez, Morales, & Moralez, 2012)
However, there are a number of factors including individual, cultural, interpersonal, context of the
organization and motivation that influence the knowledge sharing process in the organization (Wang
& Noe, 2010; Zollo & Reuer, 2010). The information gathered should be provided to the right people
and at the right time in the organization. In the third stage, organizations intend to interpret the
information from global perspective which urges them to gain consensus on its meaning and
implication through communication models. The main purpose of doing interpretation is to reduce
uncertainty about the information created or acquired and this process is critical to the organizations
(Huber, 1991). The meaning is given to the information at this stage and shared among those who
needed it to finally act on the information. Recent literature on organizational learning has raised the
awareness of its importance in creating and maintaining organizational sustainability, which helps
the firms in removing barriers for achieving goals and act as a medium for its progress on the journey
of sustainability (Smith, 2012). Organizational memory, another construct of organizational
learning, signify the storage of all the knowledge gathered by the organization (Cross & Baird,
2000).
Strategic Flexibility
The notion of strategic flexibility has been studied in previous researches of management, marketing
and economics, and has a diverse range of definitions. The early research on the concept was in the
late 1970's that (Eppink, 1978) argued that flexibility makes the organizations less susceptible to the
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uncertain external changes and places it in an enhanced position to successfully respond to these
rapid changes. In (Porter, 1980) work on competitive strategy based on the study of external
environment provides us with a deterministic approach to strategy which refers to strategic choice in
which organizations have a range of strategies to opt from to cope with the changes in external
environment. Therefore, strategic flexibility is about both internal restructuring of the organization
and its relationship with external environment where competition exists within and even outside the
industry (Anderson, 1985). According to Evans, (1991) strategic flexibility is a set of skills and
abilities that allow the organizations to effectively respond to changing environment, highly
dependent on the availability of the flexible resources and their application to various courses of
actions (Sanchez, 1995). The current business environment is highly dynamic because of the
changing preferences of the customers and volatile environment which has put emphasis on the
capability of strategic flexibility. Recent studies provide evidence that strategic flexibility has
become a source of competitive advantage by generating strategies to maintain the competitive
position of the organization and improve its performance (Dreyer & Gronhaug, 2004; Shimizu &
Hitt, 2004). This also shows that organizational flexibility and dynamic capabilities are similar to the
concept of strategic flexibility and defined as the capability of the organization (Teece, Pisano, &
Shuen, 1997) but recently, the concept of strategic flexibility has been discussed within the
perspective of product competition in strategic management (Schilling & Steensma, 2001).
According to the resource-based view (RBV) the assets and capabilities provide a competitive edge
to the organizations, therefore, earlier research on strategic flexibility provides an evidence that it
depends on both resources and its application to various actions for sustainable competitive
advantage (Pauwels & Matthyssens, 2004). The degree to which the organizations have the
capability to shift from one strategy to another and the range of strategies they have are the two ways
on which strategic flexibility has been conceptualized in the previous studies (Nadkarni & Narayan,
2004). Literature provides an empirical evidence of the role of strategic flexibility in better
performance of the organizations in responding to the uncertain shocks of the dynamic environm ent
(O'Regan & Ghobadian, 2005; Nadkarni & Narayanan, 2007; Tam ayo-Torresa, Moreno, & Verdu,
2010). Strategic flexibility allows organizations to be more proactive and provides the means
through which the organizations can make the strategic choices to deal with the turbulent business
environment (Hitt, Ireland, & Lee, 2000; Roberts & Stockport, 2014). According to
Ussahawanitchakit, Sriboonlue and Pankom (2011) firms with strategic flexibility are able to
manage the economic and political risks successfully and effectively by responding to the market
threats and opportunities in a proactive manner. However, further research on the area reveals not all
organizations are able to recognize, create and exploit market opportunities (Saini & Johnson,
Engaging Customers by Fostering Learning Process and Strategic Flexibility Together in Cellular Sector of Pakistan
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FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
2005). Organizations are basically adapting themselves in order to face different technological
evolutions, intense competition and expectations of the customer (Harrigan, 2006) but its
contribution varies depending on the intensity of competition in the market (Dreyer & Gronhaug,
2004; Tamayo-Torres, Ruiz-Moreno, & Verdu, 2010). Further, research shows that there are a
number of aspects of flexibility, including tactical and operational, but a long-term perspective of
flexibility is strategic flexibility which emphasizes managerial capability of the organization to
identify, generate and sustain real options and position itself according these options and respond to
the unpredictable changes in the business environment (Johnson, Lee, Saini, & Grohmann, 2003;
Cannon & Jhon, 2004).
Enhanced Customer Performance
In order to achieve sustainable competitive advantage, organizations have shifted their emphasis on
creating value for their customers instead of focusing on structural characteristics of the firm.
Today's businesses are market oriented and customer orientation is one of the components of the
market orientation. Such type of businesses spend considerable time with their customers in order to
satisfy their changing needs and also involve them in their different activities which makes their
customers more loyal and if the customers are not satisfied, then there will be greater turnover and it
will become difficult for the organizations to retain their customers (Jhonson & Fornell, 1991;
Anderson, Fornell, & Lehmann, 1994; Slater & Narver, 1994). However, very few studies show that
there is no direct or weak relationship between customer satisfaction and customer retention
(Hennig-Thurau & Klee, 1998). Meta- analysis of customer satisfaction reveals that there are
consequences of the dissatisfaction which includes negative word of mouth, complaining behavior
of the customers and their repurchase intentions (Szymanski & Henard, 2001). The perceived image
of the company significantly enhances the customer loyalty. However, few studies also reveal that
brand or image of the firm does not directly influence the customer loyalty rather the relationship is
mediated by the presence of relationship quality (Chena & Myagmarsuren, 2011). Effective
communication with the customers and customer satisfaction both have a significant positive
relationship with the customer loyalty and have a negative relationship with customer intention to
switch to other products or services (Filip, 2013). However, alternative products or services
positively influence the intentions of the customer in switching to the product or service while it has a
negative effect on the customer satisfaction (Yen & Horng, 2010).
Customer retention is valuable to the organizations in today's turbulent environments. Previous
studies reveal that customer satisfaction, customer perceived value, customer trust and relationship
have an impact on customer retention. However, if the customer is satisfied, he will ignore the small
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disturbance and will not switch to other products.
Switching cost and relationship quality both have a significant relationship with the customer
retention, but relationship quality and customer's perceived value has a direct impact on the
customer satisfaction and customer retention (Chakraborty & Sengupta, 2014; Rasheed & Abadi,
2014; Tamuliene & Gabryte, 2014). Customer loyalty has a significant relationship with the
corporate image and service and price of the product or service. Further research highlighted that the
main drivers of customer loyalty include price and quality of the product or service, and the
perceived image of the organization (Peng, Quan, & Zhang, 2013). Similarly, brand sustainability of
any organization, service quality and length of the customer association has a direct relationship with
customer satisfaction especially in technology related services. Previous studies reveal that product
and service quality has significant relationship with customer retention (Seo, Ranganathan, &
Babad, 2008). Recently, the importance of retention of customers has been emphasized in the
telecommunication sector because of intense competition in the marketplace. The sector provides
continuous services and also additional services to its customers for a certain tenure to make profit. It
is less expensive to retain the current customer in the mature market than attracting the new
customers (Seo, Ranganathan, & Babad, 2008).
Figure 1: Proposed Model and Hypothesis Development
Globalization has brought considerable pressure on the organizations to adopt effective ways of
responding to customer preferences. This has caused them to know their customers better and faster
and move ahead of the competition in the market. Customer value creation has always been a goal of
business marketers because it serves as a basis for customer loyalty and has a positive relationship
with organizational learning (Sanchez, Vijande, & Gutierrez, 2010; Battor & Battour, 2013).
According to Day (1994), organizations that are better in learning are able to gain accurate
Engaging Customers by Fostering Learning Process and Strategic Flexibility Together in Cellular Sector of Pakistan
25
Strategic Flexibility
H2H4 H3
H1
Organizational Learning
l Information Acquisitionl Knowledge Disseminationl Shared Interpretationl Organizational Memory
Enhanced CustomerPerformance
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
information their customers and competitors. Also, these organizations are capable of making
strategies to deal with customers and competitors which in returns lead to better business
performance. But, in the current economic condition, keeping the customers satisfied and delivering
them a high quality product or service is critical for the survival of the organization. Therefore,
organizational learning makes the organization to learn better about the customers and offer those
products which can better satisfy their needs ultimately leading towards customer retention.
Organizational learning improves the customer satisfaction and sales, which add to better
performance of the organization (Slater & Narver, 1995; Bontis, Hulland, & Crossan, 2002; Hung,
Lien, Yang, Wu, & Kuo, 2011). Organizations are required to continually learn to gather information
outside the market to have a better understanding of their customers. Previous studies showed that
organizations can adopt market- based learning approach towards customers in order to know their
needs and to create long term customer value, thus, leading to attaining competitive edge. Therefore,
in today's turbulent environment, organizations are required to continually learn from their external
environment to generate knowledge essential for their survival in the market (Hoe, 2008). Further,
the development of strategic flexibility is dependent on building the dynamic core competencies of
the organization which can help them to better serve the needs of their customers and gain
competitive edge over their competitors in the dynamic market (Hitt, Keats, & DeMarie, 1998).
Strategic flexibility also helps the organization to deal with the changes in the customer demand and
the moves of the competitors. If organizations want to satisfy the needs of their customers, then they
must think about strategic flexibility (Shimizu & Hitt, 2004). Organizations are required to
constantly pay attention to market trends in order to meet the needs of their customers. Market
orientation involves both customer and competitor orientation and if organizations are capable of
understanding their customer needs, then they are able to offer products and services which can
satisfy customers in the turbulent business environment (Khin, Ahmad, & Ramayah, 2012).
Organizations are facing uncertainty whether its global competition, technological trends or changes
in the demand of the customers, but in order to compete effectively organizations need to have
strategic flexibility to prepare for uncertainty (Cingoz & Akdogan, 2013). Hence, following
hypothesis can be formed:
H : There exists a relationship between the constructs of organizational learning and 1
enhanced customer performance.
H : There exists a relationship between the constructs of organizational learning and 2
strategic flexibility.
H : There exists a relationship between strategic flexibility and enhanced customer 3
Zeb, Sher, Awais, & Syed
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performance. H4: Strategic flexibility mediates the relationship between the constructs of
organizational learning and enhanced customer performance.
Methodology
Sample and data collection
The unit of analysis of the present study was employees working in telecom industry of Pakistan. The
five major cellular service providers of this sector are Mobilink, Telenor, Ufone, Warid, and Zong.
The sampling frame of the study consisted of the main offices of five companies. The sample of
managers of any gender was used that seems sufficient for the current study. Functional Managers
were selected because of their knowledge of the organization's strategies, operations and business
performance. Questionnaire was distributed among the managers of the offices of five cellular
companies. Brief discussion on the purpose of the research study was included in order to reduce the
biases in filling the questionnaire. The collected responses were then coded for analysis purpose and
maintained through Statistical Package for Social Sciences (SPSS). The sample consisted of 11.8%
females and 88.2% males, 23% respondents with age between 27-37, 72% between age 38-47 and
5.5% by age between 48-57. Majority of the sample i-e 80.4% consisted of respondents with a
Master's Degree, while there were 19.6% respondents with a Bachelor's degree. Majority of the
respondents i-e 27.3% belonged to Ufone, 22.3% belonged to Mobilink, 18% belonged to Zong,
17.3% belonged to Telenor, and 15.1% belonged to Warid.
Measures
The main variables were Organizational Learning (α=.952) 29 contents derived from the research by
(López-Sánchez et al., 2011), Strategic Flexibility (α=.788) 5 contents derived from the research by
(Vorhies and Morgan, 2005) and Enhanced Customer Performance (α=.873) 5 contents derived from
the research by (Lings, 2004). The total reliability of the questionnaire with 39 contents was (α= .70).
Analysis and Results Std.
Variables
Mean Deviation IA
KD
KI
OM
SF ECP
IA
3.64
.438
1
KD
3.77
.553
.77**
1
KI
3.69
.502
.53**
.72**
1
OM
3.77
.468
.50**
.65**
.64**
1
SF 3.89 .474 .65** .83** .69** .79** 1ECP 3.60 .769 .38** .42** .67** .80** .68** 1
Engaging Customers by Fostering Learning Process and Strategic Flexibility Together in Cellular Sector of Pakistan
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FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
The above table explains the descriptive output and correlation of the research variables. The mean of
organizational learning (information acquisition, knowledge dissemination, knowledge
interpretation and organizational memory), strategic flexibility and customer performance has been
shown through column mean. The mean value ranged from a low of 3.60 to a high of 3.89 which is
above average in the organizations. The above table also indicates that a positive correlation exists
between information acquisition and enhanced customer performance (r=0. 388, p < 0.01). This is
consistent with the previous studies. Organizations that engage themselves in acquiring information
from the external environment are in a better position to satisfy the needs of their customers (Santos-
Vijande, Lopez-Sanchez, & Trespalacios, 2012). There exists a positive correlation between
knowledge dissemination and enhanced customer performance as well (r=0. 429, p < 0.01). Ramírez,
Morales, & Morales, (2012) argue that the better system and processes in the organization for
knowledge distribution, the better will be the strategies in dealing with changing customer
preferences. Knowledge interpretation has positive correlation with enhanced customer
performance (r=0. 670, p < 0.01). Similarly, a positive significant correlation has been identified
between organizational memory and enhanced customer performance (r=0. 807, p < 0.01).
Knowledge interpretation and organizational memory, both are important constructs of
organizational learning. The information is interpreted, shared and stored in the organization to
manage the uncertainties in the business environments in order to satisfy the customers (Noruzy,
Dalfard, Azhdari, Nazari-Shirkouhi, & Rezazadeh, 2013). Organizational learning improves the
customer satisfaction which adds to better performance of the organization (Hung, Lien, Yang, Wu,
& Kuo, 2011). These findings support the hypothesis H1.
The above table also explains that a positive significant correlation exists between information
acquisition and strategic flexibility (r=0. 658, p < 0.01), knowledge dissemination with strategic
flexibility (r=0. 658, p < 0.01), knowledge interpretation with strategic flexibility (r=0. 691, p <0.01
and between organizational memory and strategic flexibility (r=0. 798, p < 0.01). These findings are
consistent with the previous studies. Organizations that are involved in a learning process are more
flexible and facilitate strategic flexibility to respond the changing market needs by capturing the
opportunities and neutralizing the threats (Kenny, 2006). They learn better about their customers
through organizational learning process and in a better position to satisfy the needs of their customers
(Hung et al., 2011). These findings support the hypothesis H2.
Furthermore, strategic flexibility has a positive correlation with enhanced customer performance
(r=0. 680, p < 0.01). These findings are also consistent with previous researches. Strategic flexibility
has been cited as an important source for the organizations to deal with the external business
environment. According to Shimizu & Hitt (2004), if organizations want to satisfy their customers,
Zeb, Sher, Awais, & Syed
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FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
then they must focus on strategic flexibility and must be capable to adapt changing business needs
which resulted in changing demands of their customers to sustain competitive advantage. Strategic
flexibility has been considered as dynamic core competency which helps the organization to better
serve their customers need to attain competitive advantage (Cingoz & Akdogan, 2013). These
findings support the hypothesis H3.
Multiple Regression Analysis
Table 2. (Organizational learning and Strategic Flexibility)
Model Variables B F-Change t Sig
IA
.028
.50
.005
KD
.446
7.97
.000
KI
.020
.41
.000
OM
.438
9.42
.000
R=.902 , R-square =.813,
Adjusted
R-square =.809
189.242
.000
a. Dependent Variable: SF
The above table shows that the value of the R²=.813, (P<0.001) which indicates a correlation
between the variables. The value of adjR²=.809, (P<0.001) shows that 80.9% variation in strategic
flexibility is explained by the variation in the constructs of organizational learning. The relationship
between the variables is statistically significant and value of F=189.242, (P<0.001) shows that
constructs of organizational learning depicts the strategic flexibility. A regression analysis predicting
strategic flexibility from constructs of organizational learning is statistically significant where the
values of β with t-statistics lie in the significant level.
Table 3. (Organizational learning and Enhanced Customer Performance,
Strategic flexibility as a mediator)
Model
Variables
B
F-Change
t
Sig
2
(Constant)
-2.06
-7.49 .000
IA
.287
2.86
.005
KD
-.75
-7.58 .000
KI
.73
8.59
.000
OM
1.26
15.24 .000
R=.879 , R-square =.772, Adjusted R-square =.767 147.584 .000
(Constant) -2.34 -9.12 .000
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FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
3
IA
.26
2.89
.004
KD
-1.08
-10.11
.000
KI
.72
9.19
.000
OM
.95
10.13
.000
SF .73 5.86 .000
R=.900, R-square =.810, Adjusted R-square =.805 147.511 .000
a. Dependent Variable: CP
Model Variables B F-Change t Sig
The table shows that the value of the R²=.772, (P<0.001) which indicates a correlation between the
variables. The value of adjR²=.767, (P<0.001) shows that 76.7%% variation in enhanced customer
performance is explained by the variation in the constructs of organizational learning. The
relationship between the variables is statistically significant and value of F=147.584, (P<0.001)
shows that there exists a positive relationship between organizational learning and customer
performance. Moreover, The value of R² has been changed from R²=.772 to R²=.810 that depicts that
organizational learning and strategic flexibility explain 81% of the variance. Secondly, both steps
have significant results F=147.584, (P<0.001) and F=147.511, (P<0.001). A regression analysis
predicting enhanced customer performance from constructs of organizational learning and strategic
flexibility is statistically significant where the values of β with t-statistics lie in the significant level
resulting in partial mediation. The results of the finding show that strategic flexibility act as a
mediator between the constructs of organizational learning and enhanced customer performance.
The literature on strategic flexibility reveals that it is a source of competitive advantage for the
organizations which provide them with an ability to control their external business environment.
That's why organizations who have control on their competitive landscape are in a better position to
have a competitive edge over their competitors in the marketplace (Nadkarni & Herrmann, 2010).
Furthermore, strategic flexibility has been recognized as an organizational resource or core
competency by some organizations which help them to grab market opportunities in the turbulent
business environment and allows them to perform better. However, this has been discussed
previously in literature that not all organizations are able to recognize, create and exploit market
opportunities (Saini & Johnson, 2005). Organizational learning allows organizations to learn
continuously and act as a strategic capability which is the ability of the organizations to create long
term customer value because it helps them in adapting to volatile market conditions (Kandemir &
Hult, 2005). Therefore, organizations must focus on organizational learning process along with
strategic flexibility to sustain competitive advantage in the changing business environment. These
Zeb, Sher, Awais, & Syed
30
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
findings support the hypothesis H4.
Conclusion, Limitations and Recommendations
Findings of the study indicate that organizational learning enhances the ability of the organization to
respond to the changing market needs that is strategic flexibility. Further, organizations that are
involved in the learning process are able to capture the significant knowledge or information required
to adapt the external environment. Therefore, the cellular companies of Pakistan must be capable of
creating knowledge from both internal and external environments. They must develop and manage
the systems and procedures through which they acquire the relevant information and ensure the flow
of knowledge in the organization regarding customers and competitors. This will allow the
companies to be in a better position to ensure that new technology and customer preferences are
adapted which eventually becomes the learning culture of the organization. These companies are
operating in a competitive environment which requires having strategic flexibility because it allows
them to lead the change. Adaptation to the changing business environment has become a necessity for
the firms because of changing requirements of the customers (Grewal & Tansuhaj, 2000).
Management learning has been acknowledged as the antecedent to strategic flexibility in previous
literature and also as a competency for the organizations for attaining competitive advantage and
improved performance. Therefore, organizations are required to be able of learning in their process
of creating effective strategies in order to maintain strategic flexibility. Organizations learn from their
internal environment by implementing the strategies which enhance the increase flow of knowledge
and ultimately the performance of the organization (Dickson, Farris, & Verbeke, 2001). The cellular
companies must make sure that the acquired information should be provided to the right groups in a
timely manner and discarding those which are not operative anymore. The interpretation of the
acquired and shared information is critical for the success of these companies because this allows
them to finally develop and act on the strategies to satisfy the changing customer needs. Furthermore,
the cellular companies are required to be strategically flexible to adapt to changing business markets.
They must renew their resources and capabilities and their application to various courses of actions
which also involves generating and managing strategies to maintain their competitive position in the
industry.
Organizational learning facilitates strategic flexibility to shape the market evolution by capturing the
market opportunities and neutralizing the market threats. Therefore, the greater the process of
organizational learning greater will be the organization's ability to respond to dynamic business
environment by utilizing the resources effectively and efficiently (Shimizu & Hitt, 2004; Kenny,
2006). The mediation in the study indicates that with the knowledge of organizational learning,
Engaging Customers by Fostering Learning Process and Strategic Flexibility Together in Cellular Sector of Pakistan
31
FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
companies are in a better position to enhance customer performance by responding quickly to the
changing business environment. This shows that with the help of information and experience,
organizations are able to enhance customer performance. Likewise having such competencies helps
the organization to fully utilize its resources and to adapt to the changing environment. Therefore,
findings suggest that cellular companies are required to be flexible in order to face the unpredictable
conditions in business market because their greater capability proved to be dependent on
organizational learning. So, to face the global challenges of 21st century business markets,
organizations must be responsive as compared to its main competitors.
The current study provides empirical evidence that organizations with strategic flexibility can predict
future changes, whether these changes are related to competitors, customer preferences or
technological evolutions and are in a better position to act timely. The cellular companies must be
proactive to take the advantage of market opportunities and protect themselves from external threats
in order to have a sustainable competitive advantage. Intense competitions in the market have made it
difficult for these companies to better function and implement right strategies to increase their growth
and performance. Therefore, they are required to focus and give priority to the dimensions of
organizational learning in order to improve their strategies, enabling organization to better respond to
the changing preferences of the customers and to attain competitive advantage. The current research
also highlights the innovation aspect of the services of the cellular companies since customer
preferences are changing day by day. Organizational learning positively influences the performance
of the organization and has a direct relationship with the innovation of the firm (Noruzy, Dalfard,
Azhdari, Nazari-Shirkouhi, & Rezazadeh, 2013). The companies are required to retain their
customers by offering the services which are preferred by them.
This research has several managerial implications which are valuable for the managers in the severe
changing business condition in Pakistan. The critical feature of organizational learning is to balance
both internal and external environments for the survival of the organizations which is also an
important feature of strategic flexibility. The results of the study specify that by focusing on
organizational learning process, managers can the changing market conditions and requirement by
reconfiguring their resources and competencies flexibly. The organizational learning and strategic
flexibility both are key constructs in developing the managing strategies which provide better results
and can contribute to the competitive advantage in the industry. Managers must focus on
organizational learning along with strategic flexibility to respond to the changing preferences of the
customers in a timely manner.
The first limitation of the study is that the sample was only from the cellular sector of Pakistan and
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was selected only from the main offices of the companies. The study is cross-sectional in nature and
focuses only on the importance of the constructs of organizational learning along with strategic
flexibility to enhance customer performance and to sustain competitive advantage. Organizational
memory is an important construct of the organizational learning process but very little consideration
has been given to its empirical study. Further studies may focus on each step of the organizational
learning process in enhancing the business, employee performance or internal structure of the
organization or by considering other factors including different types of flexibility in mediating the
relationship. Future studies should focus on other manufacturing or service sector of Pakistan to fill
the gap in the literature and to provide organizations with a framework that will help them in
sustaining competitive advantage in a long run.
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Moderating Effect of Employee's Emotional Intelligence on the Relation of Emotionally Intelligent Project Manager and
Employee Engagement
Shahbaz KhanMS (HR), SZABIST Islamabad, Pakistan
Muhammad AwaisPhD Scholar, Iqra University Islamabad Campus, Pakistan
Muhammad Naeem KhanPhD Scholar, Iqra University Islamabad Campus, Pakistan
Owais Ahmed KhanMBA (Supply Chain Management), Federation University, Australia
Abstract
Employee's engagement is one of the very important topics in business world from years.
Organizations are focusing on success by engaging its employees and retaining the talent with skills
and competencies necessary for growth and sustainability. A multifaceted conception about
engagement is influenced by numerous factors like organizational communication and managerial
styles. To keep employees engaged manager needs to have certain abilities and skills, one of the
ability is that a leader should be emotionally intelligent, who can understand his own emotions and
feelings as well as of his workforce. Emotional intelligence consists of adaptive emotional
functioning involving inter-related competencies relating to perception, understanding, utilizing and
managing emotions in the self and others. Researchers in diverse fields have studied emotional
intelligence and found the construct to be associated with a variety of factors such as mental health,
relationship satisfaction, and work performance. The present study intends to investigate the
moderating impact of employee's emotional intelligence on the relation of managers' emotional
intelligence and employee engagement. The results of this research demonstrate that through
emotional intelligence a manager can control his employees and he can use them according to the
requirement of organizational goals. However, sometimes there are employees who are also
emotionally intelligent and they use their own emotional intelligence that enhances their work
engagement and causes other positive outcomes. These employees are engaged at work not because
of their managers' emotional intelligence or leadership, but due to their own high emotional
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intelligence. For this research questionnaire was used to collect the data that was distributed in
different construction companies working in Rawalpindi and Islamabad. Those questionnaires were
adapted from the other research papers. The total sample size for this research paper is 274
employees and unit of measure is individual, for data collection simple convenience sampling
technique was used. The study also offers suggestions for future research on the basis of certain
limitations.
Key words: Manager Emotional Intelligence, Employee Emotional Intelligence, Employee
Enagement
Introduction
Employee's engagement and emotional intelligence has been among the most popular topics for
researchers to work on. Employee's engagement provides substantial advantages to an organization
over their competitors and a track which leads towards success. Likewise, an organizations where
employees are committed and engaged with their work will always have a competitive edge on others
in the industry as employees will be more willing to work and the chances of employee's turnover
will be very low. So, every organization regardless of differences in management styles, masses and
types are investing too much in order to apply those polices and make them part of their values in
order to keep their working force engaged and committed without any second thoughts. A workplace
where people are engaged and inspire others to stay committed to their work is more productive.
Business communities and societies now days are observing an extraordinary change taking place in
the world-wide marketplace, that every organization is striving to retain and fight for talent. As time
is passing by, the organizations are progressing forward into a wide open environment where there
are no defined boundaries for a business. This has increased the demand of talent search, talent
retention, employee growth and their engagement. By keeping these changes in a view various trends
have been identified by the Special Expertise Panels (SHRM) in 2006 trends report. And it has a
substantial effect on the engagement of employee.
Today, engagement of employees has developed as a basic driver for business accomplishment and
aggressive commercial centers. Not just engagement can possibly fundamentally influence skillful
employee's retention, efficiency and reliability; it is likewise a key connection to consumer loyalty,
organization notoriety and general partner esteem. The employee engagement is a concept which has
gathered attention from both academic and practitioner groups and for the better understanding of
this concept a number of methods have developed by those groups. However, several authors have
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introduced their own techniques and reinterpretations of employee engagement after conducting
well detailed and comprehensive researches in order to explain and better understand this concept.
Employee engagement is considered as a complicated phenomenon because there are so many
factors associated with this concept which affects the level of employee engagement. Thus, every
organization uses different technique to keep their employee motivated and engaged as there is not a
single standard technique which can be adopt for every organization. While every organization may
characterize employee engagement in its own way, eventually, the way to viable engagement will be
established in the adaptability of methodology most fitting for every individual firm.
Based on the work of Goffman (1961), Kahn (1990) was the first one who introduced the term
personal engagement and defined it as “the harnessing of organizational members personalities
during their different engagement; performing different work roles, they apply and present
themselves as mentally, physically, and emotionally sound”. Numerous scholars (Kahn, 1990;
Slater, 1966; Smith & Berg, 1987) have proposed the idea that there is a need to explore this
phenomena in numerous fields like sociology (Merton, 1957), and psychology (Freud, 1922). The
individual looks to forestall absolute seclusion or change by being in a consistent condition of
instability towards and far from the gathering (Kahn, 1990). Once the research was completed Kahn
came up with 6 different forward and backward fluxes and named that as, “personal disengagement”
and “personal engagement”. The employees beliefs about organization like how the organization
will be led by the management and who will be the leader of the organization and what will be the
working conditions within that organization they are working with totally depends on the mental
facets of employee engagement. The other facet in employee engagement is emotional element that
is associated with employee's feelings about aforementioned three factors and that depends on the
positive or negative attitude of the employees towards the organization, management and its
leader(s). Third facet of khan's definition of employee engagement is associated with the physical
aspect that relates to the physical drives engaged by an individual with the intention to perform their
organizational role(s). An important indication of employee's engagement towards his or her job and
towards the organization in which they are work is their emotional commitment. Actually, the degree
and nature of execution rely upon heart over psyche (mind). Emotional commitment is the scale of
how much an employee enjoys his job, how much inspiration he derives from it and how much
ownership he associates with it. This phenomenon of emotional commitment is a key indicator when
gauging an employee's engagement and performance at the workplace.
The aim of this study is listed below:
Ÿ The purpose of the research is to analyses the impact of manager emotionally intelligent on
Moderating Effect of Employee's Emotional Intelligence on the Relation of Emotionally Intelligent Project Manager and Employee Engagement
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employee engagement level.
Ÿ To explore the moderating role of employee emotional intelligence on the relationship of
manager emotional intelligence and employee engagement.
There are few gaps which have been identified by the researchers for further research work. As this
research work is based on the future recommendation of the Benjamin, Palmer, and Gignac (2012).
Plenty of research has been conducted on the degree of emotional intelligence, swept under the
carpet, as measuring the effect on satisfaction, performance and productivity of the employees.
Various previous studies have focused on the emotional intelligence as an emerging and increasingly
validated predictor of job performance. But this study uses an emotional intelligence of managers
with employee's engagement to measure the correlation of both variables while keeping the
employees EI as a moderator. This is a key feature about this research. It may be that people high in EI
are committed to work not as a result of their supervisor's EI or managerial style, but because they
direct their own emotions adequately and coexist well with colleagues.
This research paper will help out all the organizations to understand that how important is the
development of emotional intelligence for a leader to keep their employees motivated, engaged,
satisfied and committed with the organization where they are working Understanding the concept of
emotional intelligence is in the favor of both the organization and the leader because it makes easier
to manage one's own emotions and to control and understand other's emotions on different situations
and manage them accordingly. Without any surprise organizations which want to retain their best,
highly skilled, performing employees are investing too much on them to keep them motivated and
satisfied so that they remain committed with organization. But on the other hand organizations are
also focusing to conduct different training and development programs for their employees in order to
get best out of their workforce. So this research paper will focus on the development of emotional
intelligence of the leader and the employees which can be beneficial for an organization in many
ways.
The research questions of the present study are follow:
Ÿ What is the impact of manager emotional intelligence on employee engagement level?
Ÿ Does employee emotional intelligence moderates the relationship of manager emotional
intelligence on employee engagement level?
Employee Engagement
There are so many scholars who have written about employee engagement extensively in their
literature of management sciences and the other famous press releases like in the Washington Post
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(2005), in Workforce Magazine (2005) and Harvard Business Review (2005). Additionally as
specified by Saks (2007) worker's engagement has turned into an interesting issue among counseling
firms and in the well-known business press. On the other hand, workforce engagement is a mind
boggling subject with numerous relevant issues from worker satisfaction to initiative trust to worker
improvement, to give some example. An advance expression at the term is necessary.
Gallup research group was the inventor of this term "employee engagement" and it attracted scholars
and researchers from various fields. Researchers have shown that there is a statistical relationship of
Employee engagement with profitability, productivity, customer satisfaction, employee retention
and safety (Buckingham, 1999; Gonzalez, Molina & Coffman, 2002). But on the other hand, same
relationships with other common organizational idea like job satisfaction have not been found
(Fisher, 1992).
Rafferty (2005) and others demonstrated the term employee engagement originates from two basic
concepts which gained a distinguished recognition in empirical research on the academic grounds;
those subjects are Organizational Citizen Behavior (OCB) and Commitment (Hayday, Perryman, &
Robinson, 2004). Additionally employee engagement has overlaps and similarities with
aforementioned 2 concepts.
Robinson et al. (2004) conducted their study on employee engagement and were not able to clearly
identify the extent to which employee engagement has an impact on commitment and (OCB).
However, it is logical to believe that the extent to which an employee is engaged in his job he will be
more committed. Rafferty et al. (2005) also differentiated the two earlier concepts of employee
engagement - Commitment and organizational citizen behavior (OCB); as this is the two ways
mutual course between the organization and the employees.
Bateman, Lucey, and Hines (2005) translated the Gallup Engagement Index as calculating "how
every individual worker associate with your organization and how every individual representative
unites with your clients". They call an inverse of this sincerely unemployed.
DDI (2005) used this definition "The degree to which individuals esteem, appreciate and have
confidence in what they do". DDI additionally expresses that its calculation is same as the workers
loyalty and satisfaction.
Authors like Coffman, Fleming, and Harter (2005) defined committed employees as an engaged
employees and they used engaged employees as a synonym of committed employees.
Concelman and Wellins, (2004) mentioned employee engagement in their research work as an
external force that creates energy within employees to achieve high degree of performance in their
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work. “This desired energy” is related to pride and job ownership, organizational commitment, more
discretionary struggle (energy and time), excitement and passion, commitment to accomplishment
and the end result. They also denoted engagement of employees as a feeling or attitude which they
feel toward their organization and work and named it as a combination of loyalty, ownership,
commitment and productivity.
Hayday, Perryman, and Robinson (2004) described the term engagement as an attitude which drives
employees positively toward the company and organizational values. Employee engagement creates
awareness among the employees to understand the business situations, creates a work understanding
with co-workers in order to increase work performance so that consequently produce work benefits
for the organization. Further they added that an organization must produce and encourage
engagement, because it is a two-way affiliation between employee and employer. Although there are
numbers of similarities between engagement, organizational citizenship behavior and commitment.
But it is an advance form of the employee commitments. When the workforce is having low level of
engagement at work that will cause different issues regarding quality of work performance, increase
in turnover ratio, high absenteeism, safety issues. Consequently all these issues will damage the
productivity of business which will cause the low profitability. (Harter, Schmidt, & Hayes, 2002.)
In 2005 business communicator quoted definitions of three well experienced practitioners of
employee engagement. The definitions are mentioned below:
1. Engagement is two different aspects of the same situation, the information expected to
accomplish one's occupation successfully and an inspiration to put on that learning.
2. Enhancing the devotion of the workforce in order to achieve a desired business result.
3. Employee engagement considered as a social process because due to this people develop
personal connection with strategy and try to bring change in their routine work.
Konrad (2006) conducted a research and stated that employee engagement has 3 interconnected
components i-e emotional, cognitive, and behavioral facet. And he further explained these facets like
the cognitive facet of worker engagement includes employees' views which they have about their
company, its working conditions and its leaders. The other facet in employee engagement is
emotional element that is associated with employee's feelings about aforementioned three factors
and that depends on the positive or negative attitude of the employees towards the organization,
management and its leader(s). The last facet that is behavioral element of the employee engagement
considered as a value added feature for an organization because it is based on the extra efforts of
engaged employees that they put on their work in the shape of extra hours, using mental capabilities
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and dedicate extra energy to the work and to the organization.
Little and Little (2006) research shows that engagement is much associated with a practical concept
rather than the “academic” concept. During their research work they came up with a question
whether employee engagement is an important idea that needs to be added in management
information or it is something which is laid off within existing research work. Little and Little (2006)
believed this word is famous by reason of the most working bosses who wish to address the hitches
regarding performance and enthusiasm of the employees. Finally, they recommended in their
research that a standard approach should be used to already present research work in order to
determine how engagement of employees is linked and enhance the existing knowledge of this field.
If engagement acts like it has a strong bond with organizational commitment, job satisfaction or job
involvement and at the end it gives us same results then managers can enhance the engagement level
among their subordinates by these three constructs. In contrast the academics and scholars should
accept the employee motivation as feature of the employee engagement which has been avoided by
the older researches. It can be used for the betterment of employees and originations if we simply
understand the type of its concept and its behavioral intentions, relationship with attitudes and its
behaviors.
Emotional Intelligence
Despite the fact that definitions for EI change, it can for the most part be portrayed as an individual's
capacity to assess the feelings of oneself as well as other people, to precisely express and direct one's
feelings, lastly to utilize this information to direct considerations and activities (Mayer, Salovey,
Caruso, & Sitarenios, 2001). Mayer and Salovey (1990) are the 1st one who introduced the emotional
intelligence as a concept of social intelligence, which was separate from general intelligence. As
indicated by them, EI is the capacity to screen one’s own and others' feelings, to separate among
them, and utilize the data to guide someone reasoning and activities In a later endeavour, they (Mayer
& Salovey, 1997) extended their model and categorized emotional intelligence as the ability of an
individual to comprehend accurately, gauge, and express emotion; the ability to grow to and generate
opinions when they inspire thought; the ability to grasp emotion and passionate knowledge; and the
ability to manage emotions to spread enthusiastic and scholarly improvement. The criticism is
always there on the research work of emotional intelligence. Specialists are debating over its
displays, estimation devices, and instructional method. However this dubious civil argument has
persuaded the scientists to study the development in more points of interest (Brown & Stys, 2004).
This debate gives differentiating perspectives about the investigation of passionate knowledge.
Some are of the perspective that it is a "myth" (Matthews, 2007). Becker (2005) believes that
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enthusiastic insight is general knowledge and has no science in its study, while Brown and Stys,
(2004) are of the perspective that investigation of passionate insight is experimental in nature.
Emotional Intelligence alludes to the capacity to process enthusiastic data as it relates to the
observation, digestion, interpretation, regulation, and administration of feeling (Brackett et al.,
2006). It includes an arrangement of mental capacities with which people utilize abnormal state
methods in regards to their demeanor to sentiments, clarity of emotions, capacity to segregate among
emotions, and disposition controlling techniques (Mayers & Brackett, 2003). It is the capacity to do
precise thinking about feelings and the capacity to utilize feelings and enthusiastic information to
upgrade thought (Lopes et al., 2005). Enthusiastic insight has been discovered to be related with
variables, such as, compassion, verbal knowledge, extraversion, openness to emotions, self-regard,
and life fulfillment (Chan, 2004; Bastian et al., 2005; Extremera & Fernandez-Berrocal, 2006).
Similarly, keen people are regularly depicted too balanced, warm, veritable, relentless, and hopeful
(Ivcevic et al., 2007). The capacity to evaluate, direct, and use feelings has been discovered to be
connected with a mixture of better results, including business and scholarly execution (Ashkanasy &
Daus, 2005; Boyatzis, 2006).
Enthusiastic insight is about mindfulness of what we feel and it is the most key activity to which
permits us to do discretion. Emotional intelligence is the aptitude that both administrators and
workers need to make effective association. It is the expertise when you need to impart your touchy
data to your partners and when you have to talk. (Indvik & Johnson, 1999). James (2002) defined the
emotional intelligence as the methodology through which we comprehend and control our own
feelings and comprehend the feelings of the individuals around us. Individuals with the high level of
enthusiastic insight generally realize that how much their feelings can be compelling and the degree
to which they can influence feelings of others. Passionate insight is most crucial component for the
chiefs and it assumes an essential part in the administration.
Goleman (2006) separated the 18 skills of EI into four primary groups that envelop our
comprehension of individuals: self-management, relationship management, self-awareness, and
social awareness. Emotional Intelligence incorporates four centre segments: self-management,
relationship management, self-awareness, and last one is social awareness and dealing with our
associations with others. When we create knowledge and a more profound comprehension of what
drives others, we get to be more compassionate and all the more sincerely strong and we are better
ready to adjust our own style to impact others. Barling, Slater, and Kelloway (2000) stated that EI
involves five attributes: comprehending one's feelings; knowing how to oversee them; emotional
self-control, capacity to postpone satisfaction; comprehending others' feelings or compassion; and
managing connections. Lubit (2004) separated EI into two noteworthy parts: social competence and
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personal competence. Individual ability alludes to mindfulness and the capacity to deal with those
emotions adequately (self- administration). Individual ability is the mix of self-management and
self-awareness (i.e., the capacity to oversee viably the recognized emotions). The parts of
mindfulness are attention to feelings and their effect and the consciousness of qualities and
shortcomings. The segments of self-administration are passionate restraint, flexibility (i.e.,
adaptability in adjusting to changing circumstances and snags), respectability, trustworthiness,
dependability, drive to develop and attain to, accomplishment introduction, persistent learning,
ability to take activities, and confidence. Nasir (2011) said in a research paper that the reviewed
model suggested by Goleman (2006) classifies four areas for EI (emotional intelligence) that contain
20 skills. The four main areas are: Self- Awareness, Social Awareness, Self-Management and
Relationship Management.
Self-awareness
Flanagan, (2013) described in his research that first of all a leader should be aware of himself
completely that what are the important values that make him a manager, he should be aware of how
his hidden views and beliefs disturb performance, also aware of his leadership style & relationships
style; to identify his emotional causes and responses that he will use to deal with both work
difficulties and with emotionally sensitive workers, team and interested party. So we can say that self-
awareness is all about to understanding the own moods, feelings, emotions and the ability which
drives him (Flanagan, 2013). Neuroscience is a field of the science which also determines the benefits
of self-awareness for a leader; it demonstrates that a manager should develop his own emotional
awareness and self-regulation first. Deep understanding of self- awareness generate a greater sense
of awareness which enables a manager to identify the flaws accurately and with a great confident, a
person holding such abilities should consider himself as a distinguished, god gifted and unique
person. This is a great tool for someone willing to measure his own sense of emotions. If a person who
is clear about his desires and wants will follow it knows what he wants can pursue it enthusiastically.
Because there is no one in this world who is perfect by nature but the one who is aware of his weak
spots can cater them well. The individual who recognized what moves him to a passionate
engagement experience little difficulty staying persuaded.
Self-management
Self-management is one of the core competencies of emotional intelligence, and it refers to “the
capacity to oversee stretch and tackle vitality to make a condition of health and sound harmony
between body, brain and soul, without overindulging in one range to the detriment of another”
(Wolmarans, & Martins, 2001) or “the capacity to direct one own interior feelings and drive”
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(Goleman, 1998). In alternate words, it empowers the people to change their feelings by adapting as
per situational variables originating from the outside environment. The managers having self-
management ability are exhibited by the capacity to react in tough conditions through utilizing
wisdom instead of using defensive techniques with the short- tempered party. They are aware of how
to avoid panicking in distressing circumstances, how to remain protectiveness to a base level, & how
to maintain discernment with others. Those managers are great at tuning in, as well as capable in
persuading their subordinates amid the contentions. The managers, who regularly behave in a certain
way and practice the self- management often, will feel that their workers and employees are more
engaged towards the work and organization.
Managers are then exceptionally set to have a positive impact on their followers and subordinates.
Pioneers who effectively deal with their own feelings and deliberately take care of the mental
environment of the association are better ready to keep up representatives' inspiration, responsibility
and dedication. At the point when a pioneer corresponds with energy, genuineness and passionate
rationality, they find themselves able to fundamentally move the enthusiastic set purpose of the
gathering and help to speak a percentage of the doubts and nerves that are triggered throughout times
of progress or vulnerability.
Social awareness
Social awareness is another competence of the emotional intelligence which means the capability to
recognize the feelings of others, relationship management (have a talent to work as
a good team member). For a successful manager it is essential to possess the skills of understanding
emotions of others, motivation, resolution of conflicts, persuasion and cooperation with others.
Social mindfulness includes sympathy and understanding, understanding others 'points of view and
sentiments, energy about others' qualities and shortcomings, political mindfulness, regard for others,
peace promotion aptitudes, communitarian methodology, comical inclination, influence, and the
capacity to influence differences. Social ability grows by paying consideration on the feelings and
conduct of others, trying to comprehend others' conduct through reflection and exchanges with
outsiders, considering different approaches to manage circumstances, and watching the impacts of
one's activities. Social ability can be upgraded by watching others, contemplating why individuals
carry on and respond in a way they do, and distinguishing conduct that appears to be useful in
discriminating circumstances (Lubit, 2004).
Schwartz (2010) identified five main causes which can impact emotions of the employees in a
negative way, reducing motivation, commitment level and the moral of those employees as a result.
Those factors are as follows;
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1. Arrogance and absence of respect;
2. Being treated unethically;
3. Being unacknowledged;
4. Lack of attention from employer (listened or heard); and
5. Impractical deadlines.
Sincerely intelligent managers consequently concentrate mostly on the mental environment of the
association and work with their initiative group to construct a culture where representatives feel
sheltered and acknowledged and have the capacity to completely partake in taking care of business
issues.
Relationship management
Wannamaker (2005) described the final area in Goleman's unique model of emotional intelligence
comprised of taking care of relations. Goleman explains that the capacity of taking care of a
relationship is to some extent the capacity of overseeing feelings in others (Wannamaker, 2005).
Interpersonal relationships alludes to "a natural comprehension of, and profound level of watching
over individuals; a genuine sympathy toward their prosperity, development and advancement, and
satisfaction and acknowledgment for their triumphs" (Wolmarans & Martins, 2001) or “the capacity
to secure and keep up commonly fulfilling relations that are portrayed by closeness and fondness”
(Joseph & Newman, 2010). The managers who are good in their interpersonal relationships are more
likely to have longer relations with others (employees or subordinates) and maintain a good
understanding by showing interest in their well-being and prosperity. Such managers effectively
support, acknowledge and work for the accomplishment of the task of their employees. So, we can
say that a manager who has strong interpersonal relationships with their subordinates will produce
more engaged workforce.
Literature review
Examination has demonstrated that Emotional Intelligence is the basic component that impacts the
distinctive routes in which individuals grow in their lives, occupations, and social aptitudes; handle
dissatisfaction; control own feelings; and coexist with other individuals. Many researchers have
concluded this through their empirical studies that the only difference between an essentially
splendid individual and a splendid administrator is because of a man's Emotional Intelligence. At the
end emotional intelligence is the one thing that directs the way individuals manage each other and
comprehend feelings. Subsequently, EI is viewed as critical for business pioneers in light of the fact
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that on the off chance that they are inhumane to the state of mind of their staff or group, it can make
disappointment and, thusly, not get the best out of individuals.
According to (Modassir & Singh, 2008) group EI includes each individual's EI as well as the
aggregate competency. Moreover, the social abilities needed of individuals inside a sincerely astute
group and a centered preparing philosophy can be separated into five ranges: comprehensiveness,
flexibility, confidence, compassion, and impact. Mayer, Salovey, and Caruso (2004) anticipated two
substitutes of Emotional Intelligence: the capacity model and the mix model. The capacity models
place Emotional Intelligence inside the circle of such insight; wherein feeling and thought
communicate in important versatile ways. In this way, Emotional Intelligence is seen much like
verbal or spatial insight, with the exception of that it works on an enthusiastic substance.
Goleman (2006), views emotional intelligence as “abilities such as being able to motivate one self
and persist in the face of frustration; to control impulse and delay gratification; to regulate one's
moods and keep distress from swamping the ability to think; to emphasize and to hope
(Asadollahfam, Salimi, & Pashazadeh, 2012). Goleman's loose definition of EI included many
positive attributes that were not part of intellectual intelligence, and opened gates for many
researchers to capitalize the concept of EI (Wiegand, 2007). Goleman's model is considered as a
mixed model of emotional intelligence and consists of five skill areas, which are divided into
personal and social competences.
It is essential for project managers to have complete and legitimate information about an emotional
insight on the grounds that administrator must have an understanding and knowledge of how to
manage his workers in a specific circumstance as administrators who are emotionally intelligent
successfully manages their representatives when workers are anxious and where supervisors having
low level of emotional intelligence may yell at their workers when they need backing from their
directors. EI is about tranquility, you need to evaluate the circumstance calmly and then respond as
per the circumstance. Emotional intelligence for managers has now become vital as it has a
constructive outcome on the administration and the execution, progress and outcomes of the
association (Myers, 1997).
In his research on emotional intelligence Specter said that a supervisor can work as a mentor for his
workers in regards to generate and enhance the emotional intelligence. The directors with a high level
of passionate insight request that his representatives examine their sentiments and delicate data with
their partners or they can talk about with director (Fox & Spector, 2000). Further Bagshaw added that
emotion assumes essential part on the association at work. Because mood of emotionally intelligent
manager has an impact i-e the positive emotions act as a positive change on the employees and
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overall working condition of the organization and similarly negative emotions work like a negative
ĎĆchange in the associations. Consequently, the low level of emotional intelligence may be the
cause of loose temper, fright and aggression. So, positive feelings help positive vitality while
negative feelings support negative vitality (Bagshaw, 2000b). In 2003, two scholars Bardzill and
Slaski (2003) came with the result that the top management of an organization must perceive the
significance of emotionally intelligent conduct and prize it effectively. Encouraging feedback of a
sincerely canny environment guarantees the advancement of an administration orientated
atmosphere.
Tsaousis and Nikolaou (2005) introduced that EI effectively support to understand and implement
the policy change in the organization. More particularly, it is guaranteed that workers with low level
of control on feelings respond adversely towards the further alterations since those workers are not
very much outfitted to treat adequately with the requests and the emotional results of such an
upsetting, candidly lavish method. Conversely, representatives with a capacity to utilize their
feelings fittingly (since they are hopeful and regularly take activities) for the most part choose to
reframe their view of a recently presented change program and view it as an energizing test.
Companies attitude towards change exhibit positive association with the utilization of feelings for
critical thinking and control of responses. Leaders who can identify and manage their own emotions
and who display self-control and delay gratification, serve as role models for their followers, thereby
earning followers' trust and respect. This would be consistent with the essence of idealized influence.
In fact, a study (Gardner & Stough, 2002) demonstrated those managers who understand the
components of emotional intelligence possess a great ability to observe correctly the degree to how
much the expectation of an employee can be increased.
Another study (Kompaso & Sridevi, 2010) described that emotional element and rational factors are
included in many causes which directly affect the employees' engagement at work and their work
related experiences.
Lanz (2013) suggested in his study that the components of emotional intelligence can develop the
ability of agility and flexibility. These abilities can be generated and enhanced with practice and
exercise. Once the mangers clearly understand which factors generate these abilities in a person and
what are the factors which create problems, they can adopt these behavioral patterns and avoid
issues. Once these abilities have been developed in a leader then he will be able to respond differently
and will use different behavior patterns in a particular situation or actual moment. This approach
makes a manager to use most suitable behavior in order to keep their employees and team loyal and
engaged (Lanz, 2013).
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Training was conducted in New York by dale Carnegie on the topic of emotional driver of employee
engagement and according to this training it was concluded that manager's emotional intelligence
can affect the employees' engagement. Further, they included for this thought that it has the quantity
of representatives who are completely drawn in is positively connected to the encouraging emotions
and good feelings of the manager, for example, roused, cheerful, edify, eagerness, and so on; while
the quantity of workers who are completely withdrawn is nearly identified with the negative feelings
of the managers, for example, furious, frightful, controlled, exhausted and so on. According to Tung
and Khuong (2014), association with administrators assumes the most persuasive part in anticipating
duty, which verifiably upheld for utilizing pioneer's emotional intelligence knowledge at work
environment. Those experimental proofs proposed the potential utilizations of manager's emotional
intelligence in advancing workforce engagement. Few researchers demonstrated in their manual that
relationship management is one of the core competencies of emotional intelligence and it was the
very significant aspect that has a very strong positive effect on the degree of employees' engagement.
Because a manger who has the good understanding and excellent skills of interpersonal relationship
can maintain a long lasting relations at working environment, this will enable him to effectively
motivate employees emotionally so they may be able build a great sense of loyalty and faith among
themselves (Hayward, Amos, & Baxter, 2008). On the basis of empirical studies and it findings Ho,
Mai, and Nguyen have given the guidelines to the supervisors to control their feelings in order to
advance the level of workforce engagement at working environment. This outcome suggested an in
number impact of the passionate wise administration in holding and adding to the workers
engagement (Quang, Khuong, & Le, 2015).
Emotional Intelligence specifically when worker encounter a constructive feeling, they are aware of
how to keep their emotions long lasting; Employees organize occasions others appreciate;
Employees have a knowledge of the non-verbal communication other individuals send are the
overwhelming variables which affect the representative work engagement conduct (Ravichandran,
Arasu, & Kumar, 2011).
In their research Gignac & Palmer, ( 2011) clarified that individuals high in emotional intelligence
are secure at work not as an after effect of their manager's EI or their administrative style yet since
they executive their own particular feelings sufficiently and coincide well with associates. The part of
emotional intelligence knowledge in administration is one of the central focuses in the present
authority writing. According to (Higgs, 2004), significant leadership knowledge rely on upon the
capacities to comprehend and control feelings at working environment; along these lines, the
capacity connected with EI knowledge will influence to the capacity to oversee individuals. In
addition, since the supervisors' feelings have an impact on the representatives' behaviors. (Bagshaw,
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2000a), A study suggested that emotional intelligence is one of the capabilities that distinguish a
successful manger form an unsuccessful manager (Dulewicz & Higgs, 2000). Reference (Schutte et
al., 1998) recommended that emotional intelligence of the supervisors is powerfully connected with
a desired organizational culture, for example, more noteworthy hopefulness, less wretchedness, and
less impulsivity in the workplace. At the point when EI is cultivated by the directors, there will be the
increment in worker inspiration, participation, execution, work engagement, efficiency, and benefits
(Quang et al., 2015). As a result of those reasons, the EI idea can't be isolated from the idea of
initiative and hence this idea is worth to take thought in any association.
Gignac, and Palmer, (2012) research work has demonstrated an important connection between an EI
of supervisors and engagement levels of their workforce, a hefty portion of the ideas we have
advance in the talk of these outcomes need to be inspected in future exploration. Future exploration
looking at the effect an EI improvement program for directors has on levels of representative
engagement with their staff would be especially valuable in supporting (or marking down) huge
numbers of the suppositions we have advance. A critical highlight of this exploration would be to
control for individual worker's emotional intelligence (Palmer & Gignac, 2012). On the basis of
relevant literature review, the empirical results generated from the study generally supported for the
arguments made by (Schutte et al., 1998), and (Ramchunder & Martins, 2014) about the potential
application of emotional intelligent leadership in engaging workforce. Although most of the
emotional intelligence competencies have favorable impact on a level of workforce engagement
(Quang et al., 2015).
Emotional intelligence has been used many times by the different scholars in their researches as a
moderator with various different variables but I quoted few references that have used EI as a
moderator with employee work engagement in order to back my research framework. Myriam and
Sonja (2011) conducted a research and used emotional intelligence as a moderator with employee
work engagement. They further suggested that, this exploration grows the present writing on
emotional worker in a few ways: First, it examinations a segment of EI as a moderator of the
relationship between emotional worker and work engagement. It has been estimated that emotional
intelligence may moderate the relationship between emotional workers and business related
prosperity, this presumption has gotten however minimal academic consideration (Grandey, 2000).
A study was conducted later on with 84 service providers, without a doubt discovered a moderating
impact, demonstrating that the negative relationship between surface acting and well- being was
weaker for service provider with high emotional competence (Giardini & Frese, 2006).
The manager's capacity to emphatically impact others is a basic expertise for the individuals who
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need to hold their organization's best ability, stay focused and unleash the innovative vitality of
representatives. Studies demonstrates (Goleman, 1995) those managers who exhibits greater amount
of emotional intelligence are best set to deliver an elite culture and convey more greater amounts of
budgetary execution. Start leadership development projects that give more importance and priority
to an emotional intelligence to prepare managers in the aptitudes that have the greatest effect to
driving and engaging workers and conveying primary concern business results. So the EI aptitudes
managers need to create to absolutely impact employees' execution, inspiration and engagement in
the association.
Because of the changing meanings of worker engagement, the consequences of diverse studies get to
be hard to look at. This is on account of every study may take a gander at the subject of representative
engagement through an alternate lens, contingent upon the definition they choose. As indicated by
Ferguson (2007), with a general meaning of worker engagement lacking, it can't be precisely
characterized and along these lines it can't be measured and hence overseen. As per Robinson et al.
(2004), while it has been noticed that worker engagement has been characterized from multiple
points of view, various those definitions inside of their develop are like more settled con-auxiliary
definitions identifying with authoritative responsibility and hierarchical citizenship conduct (OCB).
Robinson et al. (2004) characterize engagement as an advanced form of commitment which makes
you wonder, "is worker engagement just old wine in another bottle".
Research Framework
On the basis of above literature this research model has been developed. It contains three variables in
it. Managers' emotional intelligence (EI) is the independent variable (IV). This is basically a
composite variable which consist of four skills of the emotional intelligence those are self-
awareness, self-management, relationship management and social awareness. Employee
engagement is the dependent variable (DV) of this research which, as already discussed, will be
measured through the four scales which are role engagement, team engagement, management
engagement and organizational engagement. Final variable for this research is a moderator between
the managers' EI and employee engagement and that is employees' emotional intelligence. That is the
new contribution to this area of study.
As it has been mentioned before that many researches have been conducted on emotional
intelligence and employee engagement and various studies have examined the impact of managers'
EI and employees' EI on employee work engagement separately, but no one has ever discussed the
impact of employee's emotional intelligence (EI) in their research work as a moderator between these
two which is the important feature of this study.
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Managers' EIEmployee
Engagement
Employees' EI
H1
H2
Independent variable (IV): Manager's emotional intelligence Moderator (M): Employee emotional
intelligence Dependent variable (DV): Employees Engagement On the bases of above research
framework the following two hypotheses can be generated:
H : Emotionally intelligent project managers have a significant direct relationship with the 1
level of employee's engagement.
H2: Employee emotional intelligence has a moderating effect on the relationship of Manager
emotional intelligent and employee engagement.
Research Methodology
Questionnaires are used as a data collection tool for this study on emotional intelligence and the
employee's engagement. During the usage of questionnaires as an instrument it was made sure that
the personal information of respondents remain anonymous. For various other reasons questionnaire
is an appropriate methodology in order to conduct this research. The questionnaire used in this
research paper was purely adaptive and not a single question was generated by author of this research
paper. The questionnaire which was used for the measurement of project manager's emotional
intelligence (which is independent variable of this paper) adaptive from the Genos Emotional
Intelligence Inventory (Genos EI) which deals with the four main skills of the emotional intelligence
such as self-awareness, relationship management, social awareness and self-management. The
important point about the questionnaire is that the respondents of these questionnaires are direct
report who will give us emotional intelligence rating of their project manager. For this purpose there
were total 14 questions in the instrument and these questions were divided into four different
emotional intelligence competences. The first two competences included four questions each under
their titles and the last two had only three questions. The measurement scale which was used for this
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questionnaire was 5 likert scales. So every item was denoted with the five likert scale such as 1 is for
strongly disagree, 2 for disagree, 3 for neutral, 4 is for agree and 5 is for strongly agree.
The second portion of this questionnaire is about the emotional intelligence of direct reports (which
is moderating variable of this research) to provide self-rating of their own EI. Where the employees
have to respond about their own emotional intelligence so for this purpose a questionnaire was
adapted from the Genos EI a short form of Self-Rated items and it also includes 14 items in it. The
same measurement scale has been used for this portion too that is five likert scale from 1 to 5 starting
from strongly disagree to strongly agree. The last and final questionnaire is for employee
engagement (which is the dependent variable of this research) and the questionnaire followed for the
measurement of employees' engagement ratings was adapt from the Engagement Survey by Genos
that is consisted of 12 inventory items. Therefore every item is consisted of eight likert scales starting
from 1 which is used for the each item is rated on strongly disagree, 2 for disagree, 3 for neutral, 4 is
for agree and 5 is for strongly agree. The Genos Engagement survey was divided into four subscales
and employee's engagement will be observed on the bases of these subscales; role engagement;
management engagement; team engagement; and organization engagement.
Population and sample selection
Population for this research paper is construction companies working in twin cities, Rawalpindi and
Islamabad. There are total of 125 construction companies which running their operations in these
two cities of Pakistan. From the total of 125 only 43 construction companies are working in capital
Islamabad and rest of the 82 are running their operations in Rawalpindi. For this research paper total
of 20 construction companies were selected. Out of these 20 companies 5 were form Islamabad and
rest of 15 were form Rawalpindi. The total of 300 questionnaires were distributed out of which 274
questionnaires were received back after proper filling. And we have excluded some of the
questionnaires because those were not properly filled and rests of the questionnaires were not
returned by the respondents.
Simple convenience sampling technique is used in order to select sample. Questionnaires were then
distributed to the employees of selected construction companies. The unit of measure for this
research paper is individual because all the data is collected from the employee. The rating about the
manager's emotional intelligence is also provided by their employees on the bases of perceived and
experience.
Analysis and Interpretation
In this section of the research paper the whole empirical portion of the study is discussed which
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includes the variable and items, demographic, Skewness and kurtosis, reliability, correlation,
regression and moderation regression. Starting with the variables and their items There are total 40
items used for three variables in the questionnaire for the purpose of data collection and these items
are distributed into three portions and each portion containing a variable is divided into different
numbers of items. First variable which is an independent variable (Managers' EI) consist of 14 items
in it, the data for the managers EI is collected from the employees perceived and experience bases
that how they feel and find their manager's emotional intelligence in term of self, social awareness
and self, relationship management. Same as the second variable is dependent variable (Employees'
Engagement) contains also 12 items in the questionnaire which is the indicator of employee's
engagement level. That how much it is affected by the emotional intelligence of the manager. And the
final variable is Employees' EI (moderator) have 14 total items which is used to calculate the total
variation in the relation of manager's EI and engagement level of employees. The above given table is
showing the whole distributions of the variable and it items.
Variables
Cronabach’s Alpha
No of items
Managers’ EI 0.88 14
Employees’ EI 0.81 14 Employees’ Engagement 0.83 12
Initially the data was collected from the 40 employees in order to calculate the value of Cronbach's
Alpha which is the common method to measure the total reliability of data collection. The initial data
was collected from the construction companies of Rawalpindi and conducted a pilot testing on it.
From this initial data out of 40 people there are 38 employees who were male and only 2 employees
were female. For the measurement of internal consistency reliability I conducted the pilot testing
separately on every variables item. The Cronabach's alpha value for the managers' emotional
intelligence is 0.88 which means that the data we collected for the MEI form employees is 88%
reliable. For the second variable which is (employees emotional intelligence) EEI when I calculated
the Cronbach's alpha value for this, it was 0.81 which indicates that the data is 81% internal
consistent reliable. And the final variable for this study is employee engagement (EE) I measured the
Cronbach's alpha value for this variable which was 0.83, this is the indication of high internal
consistency of the data which means that this data is 83% reliable. The overall value of the
Cronbach's alpha for the data collection is showing the high internal consistency of reliability of the
data. There were total of four demographics used for this study those are gender, age, qualification of
the respondents and their total amount of work experience in the field of construction.
Scale 1 is denoted for the work experience between1 and 3 year, 2 is used for 4 to 6 year, 3 represent
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the value of 7 to 9 years, 4 as 10 to 12 years of experience in their profession and finally 5 is for more
than 12 years of experience of respondents in their field. Now the mean value of age is 2.52 which is
closest to 3 that indicated that the maximum number of average people who respond to the
questionnaire is between the age group of 31 to 35 and the mean value of experience given in the table
is 2.49 which is also near to the 2 this is showing that the employees who respond to the questionnaire
is having experience between 4 to 6 years.
Gender of respondents (N=266)
Gender Frequency Percent
Male
247
92.85
Female 19 7.15
Total
266
100.0
The above given table is showing the total sample size and its distribution between the genders and
their percentage values for this research work. The table is representing that the total sample size of
this research work is 266 (N=266) which is calculated trough the online software named as Raosoft
sample calculator. This is the simplest way to calculate your sample size for the research studies. As
mentioned before the total sample size of this research paper is 266 in which 247 respondent are male
and rest of the respondent are females which are 19 in numbers. According to the percentage values
the table shows that out of 100% respondents 92.85% are male and rest of 7.15% are female.
Age group of respondents (N=266)
Age group Frequency Percent
20-25
26
9.8
26-30 96 36.1
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60
31-35
127
47.7
36-40
13
4.9
41 and above
4
1.5
Total 266 100.0
The above given table is showing the quantities of participant according to their age groups and there
values in percentages. There are five age groups in total stating from 20 years and end more than 41
years of age. According to the data collection it can be observed that the higher number of
participation was from the age group of 31 to 35 which are 127 totals in numbers and this is the 47.7
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Qualification level of respondents (N=266)
Qualification Frequency Percent
Matric
2
0.8
Intermediate
65
24.4
Bachelor
177
66.5
Master
22
8.3
Total 266 100.0
This table is the representation of a qualification level of the participants. In this table there are four
level of education starting from matriculation and ends up with master and above. The highest
portion of the participant of the questionnaire is belong with the bachelor level of education which
are 177 total in numbers out of 266 and this is 66.5% of the whole of data sample size. The second
largest portion belongs to the intermediation level of education which is 65 in number and the total
representations of participants are 24.4 in term of percentage. The remaining are masters which are
22 and 8.3% and the lowest education level is matric which have the least number of participants are
only 2.
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% percent of the whole respondents. The second major portion is age group of 26 to 30 which are 96
in number and 36.1% of the total sample rest of the values are very nominal like participant having
are between 20 to 25 are 26 and the person between 36 to 4 are 13 and more than 41 are very few in
number those are 4.
Experience level of respondents (N=266)
Experience Frequency Percent
1-3 Years
25
9.4
4-6 Years
117
44.0
7-9 Years
101
38.0
10-12 Years
14
5.3
Greater than 12 Years
9
3.4
Total 266 100.0
Above given table is showing the number of years that a participant is having in their professional
life. The largest portion of this research participants having experience between 4 to 6 year which are
Moderating Effect of Employee's Emotional Intelligence on the Relation of Emotionally Intelligent Project Manager and Employee Engagement
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MEI EE EEI
Mean 3.82 3.77 3.97
Std. Deviation
.474
.396
.384
Minimum
1.29
2.58
2.64
Maximum 5.00 5.00 4.93
Statitics
The above table is showing the mean and standard deviation values of MEI (manager emotional
intelligence), EE (employee engagement) and EEI (employee emotional intelligence) which are
3.82, 3.77 And 3.97 respectively. The mean values are closer to the 4 that is clear indications of the
most of respondents agree with the statements given in the questionnaire. And the values of std.
deviation are also (.47, .39 and .38) not very high which means that distribution is in related with the
mean. If we compare the mean and std. deviation of all the variables will show that the variation
between the data is not very high this is the indication of normally distributed data or the data is
related to each other.
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117 in total and 44% of the whole sample size and second largest is 101 having experience between 7
to 9 years and it is the 38% of the research sample. And other are very few in number person having
greater than 12 years of experience are 9, 14 are those who have between 10 to 12 years of experience
and only 25 participant are havingleast amount of work experience of 1 to 3 professional experience.
Pearson Correlation (N=266) Variables
EE
MEI EEI
EE
MEI
1
1
EEI
.842**
.791** 1
**Correlation is significant at the 0.01 level (2 -tailed).
711**
The above data shows the Pearson correlation values of all the variables. A correlation value shows
that relationship of the entire variable with each other that the variables are either strongly correlated
or there is a weak correlation between them. Now from the above given values in the table indicates
that there is a strong positive relationship between the managers' emotional intelligence and
employees' engagement as their value is 0.711 at a significance level of 0.01 (as the values is more
than .600 up to 0.99 shows the strong correlation of the variables whereas the value 1 show the perfect
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Regression for Managers’ Emotional Intelligence and Employees’ Engagement
Model 2R
2R Β t Sig.
Managers’ EI
.50
.50 .59
16.4 .00
a.
Predictors: (Constant), Managers'
EI
b. Dependent Variable: Employees’ Engagement
After conducting the regression analysis on the MEI and EE variable the above calculations are
showing that the values of R-square, standardized beta, t-value and significance value. The value of
R-square shows the total variation in dependent variable due to change in independent variable so it
can be described that if there is a change is MEI the EE will be changed by .505 where the significance
level of .000. And the beta value is 0.593 which show the unit change in IV will cause unit change in
DV. So it can be described as if one unit change occurs in MEI it will affect 0.593 unit change in EE.
The value of the t is showing the fitness of the variable the less the value of t the fitness of variable will
be high. The significance level shows that hypothesis is accepted because it is .000.
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correlation). In other words it can be described that if there is an increase in the value of MEI then the
value of EE will also increase by 71.1%. The value of employees' emotional intelligence and
employees' engagement is .842 which is also a very strong positive correlation of the variables. An
increase in the value of EEI will affect an increase in the value of EE by 84.2%. Further at the end of
the table the value of EEI and MEI show the positive strong correlation between the variables. As
their value is .791 at significance level of 0.01, it can be said that an increase in the value of EEI will
affect an increase in the value of MEI by 84.2%. The values of all the variables are indicating that the
independent variable has a strong positive affect on the dependent variable. In order to relate this
statement with hypothesis it can be described that an increase in the managers' emotional intelligence
will affect the employees' engagement in a positive way.
Moderation (Baron and Kenny moderation)
Step IV DV 2R F-stat B Beta t- value Sig.
1
IV
DV
.505
269.4
.593
.711
16.4
.000
2
IV
MV
.626
331.2
.641
.791
21.0
.000
3
MV
DV
.808
441.6
.871
.942
27.3
.000
4
IV*MV
DV
.779
395.9
.664
.883
25.7
.000
Moderating Effect of Employee's Emotional Intelligence on the Relation of Emotionally Intelligent Project Manager and Employee Engagement
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The above table indicates the moderating effect of the variable which is calculated through Baron and
Kenny method. This is basically a four step method in each step we calculate the regression analysis
of different variables. Like in first step there is a regression analysis of MEI (IV) and EE (DV) where
the value of R-square is 0.505 which indicates that the total variation in employee engagement is .505
due to the change is managers emotional intelligence and their unstandardized beta value is 0.593
shows that one unit change in MEI bring 0.593 units changes in EE. In second step there is calculation
of regression analysis of MEI (IV) and EEI (M) where the R-square value is greater than the previous
value which is 0.626 that is the indication of variation in moderator due to change in MEI, the unit
change is EEI is 0.641 due to one unit change in MFI. And in third step there is a calculation of
regression of EEI (M) and EE (DV) which shows that the variation in EE is high that is 0.808 due to
change in EEI and their beta values shows the total units changes are 0.871 due to one unit change is
EEI. At the end there is a calculation of regression of Interaction term (MEI*EEI) and EE (DV) where
R-square value is .779 demonstrate the variation change in EE because a change in interaction term.
The result shows that there is a significant relation of the variable and manager's EI is having
significant impact on employees'engagement whereas the moderator also has a positive relation with
the relationship of MEI and EE. If there is unit change in EEI it will affect EE by 0.871 units which
shows a strong relation between two.
Findings and Results
After analyzing the results of this research, it can be concluded that there is a strong positive
correlation between all the variables as every variable contains a value higher than 0.7 which is the
sign of strongly correlated. The results of regression analysis also support the hypothesis of this
research paper. Because there is a significant variation in employees' engagement level due to the
change in managers' emotional intelligence as when the R - square was noted initially before adding
any moderator it was 0.505 but when the moderator was added between the relation of M EI and EE it
can be noticed clearly that there is a prominent increase in the value of R-square which is 0.779. This
is a sign of moderation affect. On the basis of all above calculations and tests we can confidently say
that there is an impact of manager's emotional intelligence on the employee's work engagement. If a
manager possesses a high level of emotional intelligence then his employees will be more engaged
towards the work. And if a manager does not possess understanding of emotional intelligence then it
will affect employee's engagement level negatively. Because an emotional intelligent project
manager can easily understand the feelings and behaviors of their employees and he can manipulate
their feelings according to the will and requirements of organizations..
When the employee's emotional intelligence adds with the emotional intelligence of the employees it
Khan, Awais, Khan, & Khan
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helps an organization in a positive way like it increases the engagement level of employees. Some
employees have their own emotional intelligence and they are engaged with work and organization
by themselves and not because emotional intelligence of their project manager or his leadership
style. But when we check the collective effect of both managers and employees' emotional
intelligence then results show that it is more effective than the individually.
Limitations and Recommendations
Some limitations can be pointed out for this research paper. One of the key limitation which I want to
mention is the selection of small sample size. Almost 125 construction companies are running their
operations in twin cities but I chose only 20 on the basis of convenience. So, large amount of potential
is still there in the population for the data collection so anyone can apply this study on greater number
of sample size. Secondly, in the present study the number of female participants was very little, it is
suggested that the future study should design there sample by inculcating equal ratio of male and
female participants. This will give more generalizability to the subject under study. I suggest that
female representation should be higher than this therefore we can apply it on more generalized
portion of the society. Third limitation of this study is that, I used emotional intelligence as a
composite variable as it has different competencies and dimensions so for the future research the
effects of its dimensions and competencies can be separately observed by the researcher.
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Analyzing the Capital Market Movements and Saving Patterns of South Asian Countries: Evidence from Pakistan, Bangladesh, and Sri Lanka
Mah-a-Mobeen AhmedPhD Scholar, IQRA University Islamabad, Pakistan
Muhammad AwaisPhD Scholar, IQRA University Islamabad, Pakistan
Dr. Kashif Ur RehmanProfessor, IQRA University Islamabad, Pakistan
Abstract
This paper examines the role of capital market and saving pattern in the acceleration of economic
growth in Sri Lanka, Pakistan and Bangladesh with special emphasis on the impact of financial
sector reforms initiated in 2000. The data used in this study was collected from the period of 2000 to
2012 of 3 South Asian countries namely, Pakistan, India and Sri Lanka. The result showed that
Pakistan tryed to improve its saving patterns but didn't achieve its goal. Pakistan achieved its higher
saving pattern in 2003.Pakistan was trying to strengthen its stock market as it considered as a proxy
of economy. Pakistan achieved its goal during the period of 2002-07. Pakistan was trying to focus on
its “human development” Pakistan started achieving its goal in 2011 & 2012, which was the period
of “Pakistan People's Party (PPP)”, as PPP is most dominant in Pakistan in terms of pay structure
reforms. Bangladesh was trying to improve its saving patterns and has also achieved its goal.
Bangladesh achieved its higher saving pattern in 2009.Bangladesh was trying to strengthen its stock
market as it considered as a proxy of economy. Bangladesh was continuously achieving its goals
during the period of 2002-11. Bangladesh was trying to focus on its “human development”, but
Bangladesh didn't achieve its goal because of some mismanagement of policies. Sri Lanka was trying
to improve its saving patterns but didn't achieve its goal properly because of too much uncertainty &
fluctuations. Sri Lanka was trying to strengthen its stock market as it considered as a proxy of
economy. Sri Lanka was continuously achieving its goal during the period of 2002-06. Sri Lanka
tryed to focus on its “human development”, but Sri Lanka didn't achieve its goal because of some
negligence of strategies. Sri Lanka achieved its higher saving pattern in 2005.
Key Words: Capital Investment, Savings
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Introduction
Capital markets are the sale and purchase of equity and debt instruments markets. Capital markets
channel savings and investment between capital providers, such as individual and institutional
investors, and users of capital, such as companies, governments and individuals. Capital markets are
vital to the performance of the economy, because the capital is a critical component to generate
economic output.
Openness in capital markets unhurried the financial developments which escorts towards domestic
savings. Higher saving depends upon higher per capita income but higher per capita income causes to
decline in domestic saving (Ding, 2014). Aizenman et al. (2007) showing that developing countries
that tend to rely more on domestic rather than foreign finance for their investment do better in terms
of growth. These results show that the real constraint to growth in developing economies is not
domestic saving, as presumed in the standard neoclassical model, but inadequate investment
opportunities due to weak financial systems or other institutional weaknesses.
Saving endorse higher economic performance. Capital market development increases the country
economic growth due to the availability of high investment opportunities. High savings can arouse
economic growth through investments. Markets react promptly to any news, at times even any forms
of instability including but not limited to escalating political tensions, war or even rumors of war,
change in regulatory environment (business), deemed as negative by the business (investing)
community and interest rate fluctuations in general performance of the economy (Moneybiz, 2008).
Some other variables like population, movements in global markets, money supply growth,
manufacturing sector growth and aggregate deposits of scheduled banks affect the various economic
changes (Gera, 2007). A majority of research has been conducted on household saving and
consumption behavior, focusing on the developed as well as developing countries. Yet a few of them
have analyzed the capital market movements and saving patterns especially of Pakistan, Bangladesh
and Sri Lanka. The rationale for taking these countries among other developing countries is that
Pakistan is a country which espoused an upright growth despite of a lot of structural problems,
political issues, security issues, capital market volatility. Bangladesh economy has been growing up
to 6% per year since 1996 regardless of political issues, meager infrastructure, 2008-9 financial
crises, and squat execution of economic reforms.
Pakistan economy is facing long run energy issues and security concerns. Pakistan textile industry is
affected a lot from these issues and, therefore, has started moving to Bangladesh. Now Pakistan is
taking Bangladesh as a competitor. Bangladesh also has energy problems but they are running it able-
bodied. However, the cost of doing business in Pakistan has increased due to energy crises (Salamat,
Ahmed, Awais, & Rehman
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Tauseef, & Enterprises, 2011). Pakistan textile industry moved to Bangladesh (Dhaka). Bangladesh
not only share common culture with Pakistan, but it also has more investor friendly policies, cheaper
labor and tax free access to 37 countries like European union, Canada and Australia. Foreign
investors are reluctant to do investment in Pakistan because of security concerns. As textile business
moves from Pakistan to Bangladesh, it shows an emerging trend in labor and capital movement in
globalizing world: first there was a shift from west to developing countries but now shifts are
between frontier markets. The recent surge in economic activity and increased foreign participation
in the Sri Lankan market call for an examination of the inter market relationships and dynamic
linkages between Sri Lanka and its trading partners because the interdependence structure has
implications for market efficiency, profitable investment opportunities, risk diversification, and
international policy co-ordination. Pakistan is the second largest trading partner of Sri Lanka in
South Asia. Sri Lanka was the first country to sign a Free Trade Agreement with Pakistan, which
became operational from June 12, 2005. The relationship also fosters on strong mutual Sino-Pakistan
and Sino-Sri Lankan relationship, as China maintains strong mutual interest in the economic and
military development of Sri Lanka and Pakistan. Free Trade Agreement FTA between Pakistan and
Sri Lanka implemented in year 2005 has opened new avenues for business communities of both
countries to expand trade and economic activities utilizing tariff concession being granted to import
goods of each other's country. Sri Lankan President on 07 April 2015 said that the two sides have
agreed to improve their economic and trade ties and welcomed Pakistani investment in capital
markets. Therefore, this study is objectify to cover these gaps in the published literature by
emphasizing on the estimation and analysis of dynamic panel models of firms' profitability and
consideration of Pakistan's manufacturing sectors in this regard. A country having higher income
tends to have higher saving rate- this fact has been taken to correlate saving rate, income per capita,
prosperity and poverty (Norman, 2002). Capital Market imperfections, such as unavailability of risk
sharing instruments can transpire socially undue saving. Yash, Pal, Davar, Suveera and Gill (2007)
cram showed that the growing age factor and experiences lead towards maturity. Individuals used
these factors for deciding whether to do investment or not. Yash et al. (2007) study showed that
individuals in order to meet their family economic needs used their maturity factor while using their
surplus funds that is in the form of savings. In global utter the intermittently pragmatic fact is the co-
movements of stock prices across the capital market movements.
Ali (2011) in his cram investigated that the relationship between individual investors' perceptions
about capital market movements and their trading intentions affects their saving behavior. A pilot
study was conducted in this area by Rahman (2001), where he put the emphasis on monetary savings.
Recently, he presented a discussion paper Chaudhry (2001), with an estimated saving function but
Analyzing the Capital Market Movements and Saving Patterns o South Asian Countries Evidence from Pakistan, Bangladesh, and Sri Lanka
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with special reference to financial sector reform that began in late 1980. But the relationship between
savings and economic growth is not shown in all studies. Lasky (2007) studied the connection
between total demand and the propensity to save in the format of "growth pause '. Steindl examined
outstanding cases and situations that pressed growth saving rates of economic growth slowed the
growth rates of savings have dropped. As a result, the analysis showed that the savings rate increases
are not necessarily economic growth accelerators. There has been another study by Religion (2007)
to show the impact of economic growth in savings. But there was a technical difficulty, as economic
theory suggests that there is synchronization between financial growth and the provision of current
researchers trying to study this kind of relationship.
The HDI measures human development in terms of progress in education, health, and living
standards. With an HDI score of 0.537, Pakistan is ranked among 'low human development'
countries, in the company of Sub-Saharan African countries like Kenya, Angola and Nigeria. At 146,
the country is also trailing its regional peers. Sri Lanka was ranked at 73 and termed a 'high human
development' country. India (135) and Bangladesh (142) were in the 'medium human development'
category (UNDP's latest Human Development Report, 2013).
But that poor regional showing is more than a static snapshot. The report shows that Pakistan's HDI
rank has dropped one place between 2008 and 2013. During the same time, Sri Lanka scooped up,
India's HDI rank went up one notch, and Bangladesh also improved one slot. What's more, while
these countries have improved their HDI scores over this period, Pakistan's score of 0.536 in 2008 is
almost the same in 2013 (UNDP's latest Human Development Report, 2014).
Trends in Pakistan's HDI componentindices 1980-2012
Ahmed, Awais, & Rehman
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Pakistan's 2012 HDI of 0.515 is above the average of 0.466 for countries in the low human
development group and below the average of 0.558 for countries in South Asia. From South Asian
countries which are close to Pakistan in 2012 HDI rank and population size are India and Bangladesh
which have HDIs ranked 136 and 146 respectively (set Table A).
Table A: Pakistan’s HDI indicators for 2012 relative to selected countries and groups
HDI
value
HDI
rank
Life
Expectancy
at birth
Expected
Years of
Schooling
Mean
years of
schooling
GNI
per
capita
(PPP US$)
Pakistan
0.515
146
65.7
7.3
4.9 2,566
Sri Lanka
0.383
73
74.9
10.7
4.4 9,778.6
Bangladesh
0.515
146
69.2
8.1
4.8 1,785
South Asia 0.558 — 66.2 10.2 4.7 3,343
Low HDI 0.466 — 59.1 8.5 4.2 1,633
Analyzing the Capital Market Movements and Saving Patterns o South Asian Countries Evidence from Pakistan, Bangladesh, and Sri Lanka
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The objective of the study is to investigate the saving patterns effect on the investment in capital
markets of Pakistan, Sri Lanka and Bangladesh. This study is organized in three parts. First part
represents an introduction, second part represents the graphical analysis and discussion, third part
represents the conclusion and recommendations.
Capital market movement and saving pattern of Pakistan
According to the series 1, Pakistan was trying to improve its saving patterns but was unable to
achieve its goal as there is just a nominal difference between the values of years 2000 & 2011 which
are: 20.35 & 21.29. Pakistan achieved its higher saving pattern in 2003 with the value of 27.95.
During 2003, most of the new companies entered in Pakistan through which the rate of
unemployment was reduced, thus, resulting in higher saving pattern as the saving patterns are
directly associated with employment (Roberto, 2013). Pakistan's economy augmented its great
development for the third year in succession in 2004-05 with monetary development achieving its
most noteworthy yearly rate of 8.4 for every penny in two decades, the fifth time in the nation's
history that it surpassed 8 for every penny development mark. Financial recuperation has raised the
apparent abundance of families and in this way helped certainty, prompting higher utilization. The
following lifting of total interest thus has prodded credit request. With expanded lending, it has
empowered more request, thusly bolstering once more into monetary action and consequently,
mirroring a more extensive ethical circle. This positive prospect for shopper request, if managed, will
be an urgent backing for the administration's major macroeconomic approach focus for 2005-06.
According to series 2, Pakistan was trying to strengthen its stock market as it is considered as a proxy
of economy. The above mentioned graph is showing that Pakistan was achieving its goal during the
period of 2002-07 as Pakistan was achieving 46.11% of GDP in the form of stock market
capitalization in 2007. It was the ending period of Gen. Retd. Musharraf and during this period a lot
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of new companies entered in Pakistan and in the stock market of Pakistan too which was the reason of
success. Tripathi (2010) study examines that individual perception and preferences leads towards
their investing and saving behavior. Real GDP developed by 8.4 % for every penny in 2004- 05 as
against 6.4% for every penny a year ago and surpassed the objective (6.6%) for the year by a wide
edge. The sharp get in development this year is ably bolstered by a stellar execution in expansive
scale producing (15.4%), amazing recuperation in horticulture (7.5%) and a solid development in
administrations area (7.9%). The agri-business division developed by 7.5 for every penny in 2004-
05, which is higher than genuine development of 2.2 for each penny a year ago and an objective of 4.0
percent. Real yields, representing 37 for every penny of horticultural quality included, developed by
17.3 for each penny as against an insignificant 1.9 for every penny a year ago. Minor yields, which
contribute 12 for every penny of quality expansion in farming, developed by 3.1 for each penny in
2004-05 over a year ago 2.6 percent.
According to series 3, Pakistan was trying to focus on its “human development”, but Pakistan started
achieving its goal in 2011 & 2012, which was the period of “Pakistan People's Party (PPP)”, as PPP is
most dominant in Pakistan in terms of pay structure reforms.
Capital market movement and saving pattern of Bangladesh
According to the series 1, Bangladesh was trying to improve its saving patterns and ihas also
achieved its goal as there is a huge positive difference between the values of years 2000 & 2011,
which was: 26.95 & 38.04. Bangladesh achieved its higher saving pattern in 2009 with the value of
38.85. During the period of 2005-10, most of the new companies entered in Bangladesh from other
Asian countries because of high energy crisis. Through this high level of industry growth, the rate of
unemployment was reduced. The saving patterns are directly associated with rate of employment
Analyzing the Capital Market Movements and Saving Patterns o South Asian Countries Evidence from Pakistan, Bangladesh, and Sri Lanka
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(Roberto, 2013). Bangladesh has possessed the capacity to accomplish GDP development at more
than 6 percent on a normal notwithstanding amid the time of worldwide budgetary emergency. By
definite assessment of Bangladesh Bureau of Statistics, GDP development remained at 6.71 percent
in FY 2010-11 which was higher than 6.07 percent development in FY 2010-11. The economy
recorded 6.31 percent GDP development rate in the current monetary year 2011-12 according to the
temporary assessment. In accomplishing GDP development, three primary areas of the economy
such as agribusiness, industry and administration division made real commitments. Due to high base
impact prompted by more than 5 percent development in farming division amid the most recent two
years, the development of horticulture segment decreased marginally to 2.53 percent in the current
financial year, which was still agreeable.
According to series 2, Bangladesh was trying to strengthen its stock market as it considered as a
proxy of economy. The above mentioned graph is showing that Bangladesh was continuously
achieving its goal during the period of 2002-11 as Bangladesh had achieved 18.3% of GDP in the
form of stock market capitalization in 2011.Merchant banks were allowed by regulatory authority to
render loans for buying shares. Such loans were considered as major source of funding for all
financial institutions including banks and brokerage houses of DSE till 2007( Emerging Markets
Monitor, 2007d,p.13).Banks established their brokerage houses and merchant banking wings for
participating in capital market (Islam 2007). With huge financial strength in shape of liquid assets
banks expands capital market quickly. It was reported that a new stream of investors actively
participated in investment activities in capital markets which also encouraged institutions to play
their role (Siddiqi, 2010).Bangladesh Capital Market witnessed a very low foreign investment before
the global financial meltdown that was only 52.8 Million USD (Ahmed,2008).The main factors for
this phenomenon in capital market economy were poor Socio, Economic, Demographic, and
Political and Governance indicators in the country (Dhaka Stock Exchange, 2007, p.2). DSE was not
crashed or affected at the time of financial meltdown in capital market of world because of low
participation of international investors in it. In 2008 DSE witnessed a tremendous increase in foreign
investment that is up to 150 % and international investor injected foreign fund in Dhaka Stock
Market due to stable government and friendly trade policies while considering it a safe haven for
capital investors (Ahmed, 2008). Transfer of funds from foreign market to DSE rescued the capital
market and made it more stable though very little outflow of international investment occurred till
2010(Bangladesh Country Review, 2010).
According to series 3, Bangladesh was trying to focus on its “human development”, but Bangladesh
was unable achieve its goal because of some mismanagement of policies . If there comes a shock in
foreign capital market, people perceive that it would also affect their domestic capital market. Based
Ahmed, Awais, & Rehman
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on their expectations the people used their savings for investment in capital market.
Capital market movement and saving pattern of Sri Lanka
According to the series 1, Sri Lanka was trying to improve its saving patterns but was unable to
achieve its goal properly because of too much uncertainty & fluctuations as there is just a nominal
difference exist between the values of years 2000 & 2011, which was: 21.53 & 22.14.Sri Lanka
achieved its higher saving pattern in 2005 with the value of 24.16. In the background of the enormous
human and resource misfortunes coming about because of the tidal wave of December 26, 2004, a
lull in the pace of changes and a swelling oil import bill, Sri Lanka is relied upon to see a development
rate in the scope of 5-5.5 percent in 2005. The report noticed that a debilitating of the macroeconomic
environment - showed in a tenacious develop of inflationary weight from mid- 2004 - will require
that proper approaches be embraced to face and resolve developing basic irregular characteristics if
the nation is to guarantee a successful post-tidal wave recuperation.
According to series 2, Sri Lanka was trying to strengthen its stock market as it is considered as a
proxy of economy. The above mentioned graph is showing that Sri Lanka was continuously
achieving its goal during the period of 2002-06 as Sri Lanka was achieving 27.48% of GDP in the
form of stock market capitalization in 2006.Sri Lankan economy and capital markets were
revitalized by visionary leadership of President Mahindra Rajapaske, when he resolved the terrorist
conflicts of almost three decades in May, 2009.
President liberated the Sri Lankan Economy from terrorism and made it as a growing economy.
Bloom Berg (2010-11) reported that Columbian Stock Market as best performing stock market due
to better sentiment of investors and business community. This splendid growth in capital market of
Sri Lanka was due to untiring efforts of the President for resolving long-lasting conflict in North
Analyzing the Capital Market Movements and Saving Patterns o South Asian Countries Evidence from Pakistan, Bangladesh, and Sri Lanka
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region of the country. However, due to long period of uncertainty accompanied by constraints in all
front including political, economic and social failed to mature the Colombian market for absorbing
new fruits of growth. First two Years after liberation from terrorism conflict and resolution of issue
prevailing in north , CSE takes two years consecutively for correction which ultimately transform
into stagnation in Feb, 2011 to August, 2012. But Sri Lanka achieved its higher range in 2010 with the
value of 40.20% of GDP.
According to series 3, Sri Lanka was trying to focus on its “human development”, but Sri Lanka
didn't achieve its goal because of some negligence strategies. There was a very little difference exist
among the values of 2000 & 2011, which was: 0.679 & 0.743.
Conclusion and Recommendation
This study examines the capital market movements and saving pattern of South Asian countries
(Pakistan, Bangladesh and Sri Lank). In recent decades, economic development experts have
stressed the significance of saving and investment in the dynamic progress of the least developed
countries. However, as the paint experimental results, and the exchange rate, the savings rate of
growth is less important in the economy of Bangladesh, Sri Lanka and Pakistan. The result shows
that Pakistan was trying to improve its saving patterns but was unable to achieve its goal. Pakistan
achieved its higher saving pattern in 2003. Pakistan was trying to strengthen its stock market as it is
considered as a proxy of economy. Pakistan achieved its goal during the period of 2002-07. Pakistan
was trying to focus on its “human development” Pakistan started achieving its goal in 2011 & 2012,
which was the period of “Pakistan People's Party (PPP)”, as PPP is most dominant in Pakistan in
terms of pay structure reforms. Bangladesh was trying to improve its saving patterns and has also
achieved its goal. Bangladesh achieved its higher saving pattern in 2009. Bangladesh was trying to
strengthen its stock market as it is considered as a proxy of economy. Bangladesh was continuously
achieving its goal during the period of 2002-11. Bangladesh was trying to focus on its “human
development”, but Bangladesh didn't achieve its goal because of some mismanagement of policies.
Sri Lanka was trying to improve its saving patterns but was unable to achieve its goal properly.
Siri Lanka was trying to strengthen its stock market as it is considered as a proxy of economy. Sri
Lanka was continuously achieving its goal during the period of 2002-06. Sri Lanka tryed to focus on
its “human development”, but Sri Lanka didn't achieve its goal because of some negligence of
strategies. Sri Lanka achieved its higher saving pattern in 2005. We believe, economic and
environmental damage long-term planning, and the lack of political stability is responsible in this
regard. In order to improve the saving pattern and capital market efficiency we must highlight the
liberalization of interest rates and the continuance of monetary reform so that it can achieve
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economic efficiency in the monetary market. In short, the most important challenge faced by
Bangladesh, Sri Lanka and Pakistan is a low level of literacy (less human resources) .They need to
raise the literacy rate significantly. The State must focus on developing highly educated workforce
and train them properly so that they can accelerate the pace of financial growth. Based on the above
conversation and analysis you can observe the effects of these policies.
From above mentioned real life examples from Asian Stock Markets, it was concluded that properly
managed macroeconomic policies brings the fruits from capital market. For stability at financial
front monitoring institutions played vital role along with regulatory authorities for controlling
monetary affairs of the country. The invitational role in fiscal and monetary front boosts the
confidence of investors and industries. Improvement in Literacy rate contributed significantly in
growth of country's GDP.
Relations with neighboring countries count a lot for growth of economies. Firm and consistent
policies at economic front saves economies from inflation and collapse of capital and financial
markets while promoting savings. Industrial Development in rural areas of any country along with
massive infrastructure development enhances the connectivity and finally results in rising living
standard. Government should provide better environment along with provision of basic facilities for
boosting living standard of public, thus, encouraging domestic savings and investment.
The monetary sector reforms in these countries is an ongoing process which has enhanced in the last
decade. Absence of such reforms will cost economy in terms of decreased savings and investments,
thus, weakening financial sector. This would endanger the prospects for a wide range of high rates of
economic growth in the short and medium term. Financial sector development, therefore, proposed
through sustainable reform and effective spread of capital market educational program up to root
level needs to be strengthened, as to protect the interest of new investors. Finally setting up a separate
judiciary mechanism for settlement of disputes in the share markets (within a specified time limit)
and restore the investors' confidence can be considered seriously. To guide and restore the confidence
of individual investor in capital market, the regulatory authority should take necessary actions to
encourage corporate governance rating among listed companies, which will enable investors to
differentiate the good governance companies from the rest and can then attach higher value to those
firms. Without improving the governance of the market and eliminating scope of manipulation, it
will be difficult to attract good scripts at the desired level. In this endeavor, regulators must adapt
continuously to the changes in the economy and the pressures of globalization.
Surplus Labor of Pakistan is a key to generate foreign remittance which ultimately increased the
savings of our country. For promoting this key source Government should provide training to build
Analyzing the Capital Market Movements and Saving Patterns o South Asian Countries Evidence from Pakistan, Bangladesh, and Sri Lanka
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skilled labor by increasing their competency and capability. Government should focus on
expenditures relating to development instead on non-development, as development expenditures
result in increased income and higher rate of saving. Government should devise stable price policies
for facilitating business and industrial sector for enhancement of saving. Investor friendly
mechanism of interest rate will increase the savings. Provision of stable fiscal and monetary policy
encourages the inflow of foreign direct investment. Interest rate affects savings positively and
significantly. So, financial market should provide more incentives in form of high returns to people in
order to enhance the savings.
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Where we are going? Empirical Analysis of Pakistan's Economy
Adiqa Kausar KianiAssociate Professor, Economics Federal Urdu University, Islamabad
Sana UllahPh.D. Scholar, Federal Urdu University Islamabad, Pakistan
Zaib MaroofLecturer, Faculty of B & T, Foundation University Islamabad, Pakistan
Abstract
Since, Pakistan achieved independence, socio-economic development has faced various challenges.
The human development index (HDI), published annually, shows several weaknesses. Furthermore,
the HDI does not take into account several important indicators, and is an inappropriate mechanism
by which to measure human development. The present study assess the level of Pakistan's social
economic development (SED) based on 20 developing countries and using new variables. Socio-
economic development is the process of social and economic development in a society which is
measured by indicators, such as mean years of schooling, education expenditure (%GDP), life
expectancy, health expenditure (%GDP), crime, corruption, GDP, level of employment, GINI index,
agriculture, industries, services, exports, investment, and total reserves. In the light of these
variables Pakistan's economic development is i n much better condition as compared to social
development. Pakistan is socially and economically very backward in latest year.
Keywords: Health, Education, Economic Development
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Introduction
There has been an explosion of interest in recent years in Pakistan and other countries in macro-
indicators and composite indexes of economic and social well-being. This reflects growing
recognition of the important role macro-indicators can play as a tool for evaluating trends in and
levels of economic and social development and for assessing the impact of policy on well-being. In
recent years, many scholars and development organization have attempted to create a broader
composite measure of economic and social well-being at the community, national and international
levels. In the past few years Pakistan has faced troubles with socio-economic development. Human
Development Index (HDI), best known macro- indicator in the world, has been severely criticized
such as, weights are arbitrary and unjustified and on the grounds that the three components of the
index are highly correlated and hence give redundant results. Most of vital indicators are missing in
index for instance crime, GNI index, whether development based on agricultural or industrial sector.
This rigorous index provides a clear picture of Pakistan's each sector and also informs which sectors
are more problematic. In the context of Pakistan, it is very important to assessing social and
economic trends for the analysis or evaluation of public policy. This paper provides insights for the
development of macro-indicators that provide an assessment of social and economic indicators.
Literature review
There are several parameters under which the regional social scene can be studied, namely,
development index. Development index is a criterion to understand the development level of any
country. Nowadays researchers and policy makers determine the standard level for any country. It is
determined on the different objective and gain main purpose of these indexes. Such as, HDI account
the three indicators and measure the level of human development. So in this study we use different
variable to obtain objective of study. Similarly, Ghaus et al. (1996) used eleven indicators relating to
the health, education and water supply sectors to rank districts Pakistan in terms of social
development. Overall, Punjab appears to have the highest level of social development followed by
Baluchistan, NWFP and Sindh. Since, t h e concept of health and education become crucial
determinants of human wellbeing, human capital can be measured in terms of education level and
health. So , education and health are important elements to assess the economic development for
country. Gallup et al. (1998) and Barro and Lee (1993) finds a strong relationship between health and
economic growth, using life expectancy at birth as basic measure of overall health of the population.
They concluded that improved health is associated with faster economic development. Sach and
Warner (1997) and Becker et al. (1998) are supported in term of empirical research.
Later, attempts to construct a measure of social welfare include Camp and Speidel's (1987)
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International Human Suffering Index, which employed ten indicators including adult literacy,
income, infant mortality, nutrition and personal freedom. Similarly, Biswas and Caliendo (2001) use
the PCA method and give equal weights for the three components; GDP Index 32 percent, Life
Expectancy Index 34 percent and Education Index 34 percent. Development of macro-indicators
(Rahman, Mittelhammer, & Wandschneider, 2003) measuring quality of life or well-being at the
broadest level domains can include basic dimensions of quality of life, such as economic, social, and
political, and environmental well- being as well as education and health.
Many proposals have been put forth in the past to construct an index reflecting either human
development or the level of wellbeing. Some of these proposals didn't even include a measure of
income per capita; for example, the Level of Living Index (Drewnowski & Scott, 1966) includes
dimensions of nutrition, housing, education, health, environment, and others; and the Physical
Quality of Life Index (PQLI) (Morris, 1970) which combines literacy rates, infant mortality and
longevity. In the context of Pakistan we sum up all majors indicators and measure the level of
Pakistan.
Several types of indexes of economic and social well-being are identified, such as, Index of
Economic Well-Being (IEWB) developed by the Centre for the Study of Living Standards (Osberg &
Sharpe, 1998, 2002); the Genuine Progress Indicator (GPI) developed by the San Francisco think
tank, Redefining Progress (Cobb, Halstead, & Rowe, 1995); the Index of Social Progress (ISP)
developed by Richard (1997) and the Quality of Life Index (QOL) by Morris (1970) and Economic
Welfare (MEW) developed by William Nordhaus and James Tobin (1972). These indexes are part of
literature and provide sound methodology for new index developers.
Methodology on Socio-Economic Development Index
In the literature on development, a number of techniques have been used to measure the composite
index of development indicator. The first is the Z-sum technique which is the latest one famous for
measuring each indicators performance. The Z score is the standardized score, which has different
mean and different variance. The higher the Z scores means more developed is the region.
In this approach, equation for the normalized value (Kothari, 1978) is as follows:
Ÿ Z is called the standard variation number of standard deviations from x to the mean of the
distribution.
Ÿ X represents value you want to normalize
Where we are going? Empirical Analysis of Pakistan's Economy
x− µz =
s
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Ÿ µ represents mean of the distribution
Ÿ ơ represents standard deviation (S.D) of the distribution. The Number of Homicides and GINI
index standardized scores must be changed because they are inversely associated to development,
so positive score become negative and negative score become positive. Finally, we find the
average of the area under the curves previous normalized. These vales replace in socio- economic
development equation.
SED = SD + ED
The values of the SED index vary between 0 and 1, values close to 0 indicate that Pakistan have very
low level of Socio-Economic development. On the other hand, values close to 1 indicate that the
Pakistan has a very high level of Socio-Economic development. Sub-indices
SED = 50 %( SD) + 50 %( ED)
Where are we going? Empirical Analysis of Pakistan's Economy
Data and Descriptive Analysis
In this paper, we used sample based panel dataset of 20 developing countries (Afghanistan, Bahrain,
Bangladesh, Botswana, Egypt, Ethiopia, Indonesia, Iran, Kuwait, Malaysia, Mauritius Morocco,
Pakistan, Qatar, Saudi Arabia, Syria, Tunisia, Turkey and U.A.E) to analyze social and economic
level of development in Pakistan, however we could not measure the other 19 countries index. The
datasets include detailed information on each variable in tables 1. The data of 2008-2012 was used
and was provided by the World Bank, CPI Index, UNDP and UNODC. Unfortunately, the World
Bank does not provide GINI index data in time series, so one maximum number within five year was
used. All other data given is completed in estimation and the average of each variable was used.
Before proceeding to empirical analysis, it is very important to have an overview of social and
economic indicators of Pakistan. Approximately Pakistan has Grade 5 year of education. Majority of
the Pakistanis have life expectancy of 65 years, it is tremendous. Education and health expenditure
(%GDP) is quite low as compared to developed countries. Similarly, crime and corruption is
prevalent in Pakistan. In crime Pakistan is leading among the selected panel.
The number of new entrants per decade increased gradually. Table 3 also shows that Pakistan's
economy basically i s labor intensive. These sectors grew very satisfactorily as compared to other
countries: employment to population ratio, agriculture value added (%GDP) and service value added
(%GDP). There is no doubt that the exports of goods & services and Industries have poor
performance as compared to other countries.
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Table 1. Major Sources of Indicators
Indicators Data Source
of schoolingMean years UNDP
Education
expenditure
(%GDP)
World Bank
Life
expectancy
at birth, total
(years)
Health
expenditure
(%GDP)
Number
of
Homicides
UNODC
Corruption
CPI Index
GDP
per
capita,
PPP
(constant
2005
international
$)
Employment
to
population
ratio,
15+,
total
(%)
GINI
index
Agriculture value
added
(%GDP)
Industries value
added
(%GDP)
Service value
added
(%GDP)
Exports of goods
and
services
Investment
Total reserves (includes gold, current US$) Million
World Bank
World Bank
World Bank
World Bank
World Bank
World Bank
World Bank
World Bank
World Bank
World Bank
World Bank
Table 2. Social Development Index (SD) in Pakistan
Social Development Indicators Value
Mean years of schooling
4.8
Education expenditure (%GDP)
2.48
Life expectancy at birth, total (years) 65
Health expenditure (%GDP) 2.88
Number of Homicides
12905
Corruption 27
Where we are going? Empirical Analysis of Pakistan's Economy
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Table 3. Economic Development Index (ED) in Pakistan
Economic Development Indicators Value
GDP per capita, PPP (constant 2005 international $) 234
Employment to population ratio, 15+, total (%) 51.1
GINI index 30.02
Agriculture value added (%GDP)
24.35
Industries value added (%GDP)
21.27
Service value added (%GDP)
54.37
Exports of goods and services
12.91
Investment
16.31
Total reserves (includes gold, current US$) Million 14254.4
Results
Basically there are four scenarios that emerge following the calculation of the social and economic
development level for the Pakistan under study. In first scenario country attains a level of social and
economic more than 0.50. The second scenario country attains a level of social more than 0.50 and
economic less than 0.50. The third scenario country attains a level of social and economic
development less than 0.50. Unfortunately, Pakistan lies in third scenario where both social and
economic development is miserable. Relatively economic development is much better to social
development in Pakistan. Last scenario country attains a level of social development less than 0.50
and economic development more than 0.50.
Area under the curve values depends on the Standardized (z) values, if Standardized (z) increase the
area under the curves values also increase and vice versa. Same as, if a Standardized (z) value is
negative then area under the curves vary between 0 - .50; if a Standardized (z) value is positive then
area under the curves vary between 0.50 to 1. Such as, we see all the social indicators Standardized
(z) value is negative and Area under the curve values lie in 0 to 50.
Table 4. Social Development Index (SD) in Pakistan
Indicators Mean(µ) STDV( )s Standardized Area under curve
Mean years of schooling 6.38 2.10 -0.75 0.22
Education expenditure (%GDP) 4.05 1.86 -0.84 0.20
Life expectancy at birth, total (years) 68 8.95 -0.44 0.33
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Health expenditure (%GDP) 4.7 1.82 -1.015 0.146
Number of Homicides 3216.8 5976.5 -1.62 0.052
Corruption 41.1 15.76 -0.89 0.186
Average 0.19
Indicators Mean(µ) STDV( )s Standardized Area under curve
Note: The sign of standardized Number of Homicides change because the indicators are inversely related with �)development. Mean for all countries under study ( , Standard Deviation for all Countries under study (�).
The Table 4 acknowledged the performance of social parameters and asses the performance of economic
indicators. As it can be seen that Standardized (z) has both positive and negative values. No doubt, Agriculture,
Service and GINI index Standardized (z) are positive Area under the curve values lie in 0.50 to 1. Remaining
indicators values vary between 0 - 0.50 because Standardized (z) are negative.
Table 5. Economic Development Index (ED) in Pakistan
Indicators Mean(µ) STDV( )s Standardized Area under curve
GDP per capita, PPP (constant 2005 $) 15169.3 17485.54 -0.73 0.23
Employment to population ratio, 15+, total 55.5 14.2 -0.30 0.38 (%) GINI index 37.9 9.4 0.84 0.79
Agriculture value added (%GDP) 11.6 11.9 1.06 0.85
Industries value added (%GDP) 36.8 13.2 1.1 0.12
Service value added (%GDP) 51.1 10.2 0.311 0.62
Exports of goods and services 41.9 24.3 1.18 0.11
Investment ( Gross capital formation) 25.4 6.2 1.46 0.07
Total reserves (includes gold) Million US$ 52828 113699 0.33 0.37
Average 0.40
Note: The sign of standardized GINI index change because the indicators are inversely related with
development. Mean for all countries under study (µ), Standard Deviation for all Countries under
study (s)
Where we are going? Empirical Analysis of Pakistan's Economy
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Figure 1. Classification of the SD and ED
.8.6.4.2
ED < 0.50
ED < 0.50
.2
SD > 0.50 S4S3 SD < 0.50
.6
SD
ED > 0.50 ED < 0.50
S1SD > 0.50S2 SD > 0.50 .8
Table 6. Pakistan Social-Economic Development Index (SED) and the Development Status
Matrix (DSM)
Pakistan level Social Development (SD) 0.19 Economic Development (ED) 0.40 Socio-Economic Development
(SED)
0.30
Development Status Matrix (DSM) S3
As stated in the start of paper, no country is free from socio-economic problems. It is very important f
o r policy-makers and development professionals to gauge social and economic indicators. As
expected, Pakistan's economic development is much better as compared to social developed
(Ayasrah, 2012; UNDP, 2012). But we cannot image very less level of social development (0.19) in
Pakistan. Why social developed is less? There are several reasons, such as, one of the major
bottleneck of Pakistan's development is slow rate of progress in thebasic fields of education and
health. Rates of net primary enrolment and completion increased up to the mid -2000s but, thereafter,
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slowed and fluctuated in 2011- 2012 (Pakistan Millennium Development Goals Reports, 2013).
Basic social development indicators of Pakistan gain no Government incentive. Every year
thousands of people die due to several diseases and millions of people don't get to go to school.
Pakistan has shown considerable yet insufficient progress for achieving the targets set for 2015
(Pakistan Millennium Development Goals Repots, 2013). Overall, Pakistan is off track on all social
indicators (Pakistan millennium development goal reports, 2013). Education is one of the indicators
that i f improved, can promote social, economic, political condition of the nation.
Conclusion
The main contribution of this paper is that it measures the level of development in the context of
social and economic indicators. It is clear that Pakistan's socio-economic development is miserable,
as it was found that Pakistan has poor social development when compared to economic development.
Pakistan has been unsuccessful to improve the social and economic variable such as, number of
homicides, education expenditure (%GDP), health expenditure (%GDP), corruption, exports of
goods and services, investment (Gross Capital Formation) and industries value added (%GDP).
These conclusions have very clear policy implications for Pakistan. Social and Economic recovery is
a priority for Pakistan. It is very important for socio economic development and should be addressed
by government. The Pakistan's government should, therefore, take note of these issues, where
indicator's poor performance exists.
Where are we going? Empirical Analysis of Pakistan's Economy
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The article can be submitted via e-mail as per the specified format.
Any deviation from the prescribed format may result in either delayed processing or rejection of the
submission, for which the author/s would be responsible.
Content, Length, and Formatting
It is the author's responsibility to ensure that the submitted paper i s clear, relevant and thought-
provoking. The basic requirements include:
Abstract
The abstract should not exceed 250 words along with the mention of;
a) Author's name (s) and affiliation
b) Email address
c) Title and abstract content
The abstract should be based on a concise summary of the study that is content and scope of the
research and should identify with the study's objectives, its methodology and its findings,
conclusions, or intended results.
Maximum of 7 key words could be added in the end.
Introduction
The Introduction should provide a clear statement of the problem, and relevant literature on the
subject. Methods and procedures used in the research should be described in detail. Results should
be clearly elaborated and must provide a comprehensive picture. Detailed interpretation of data
should be included. In t h e discussion section findings should be interpreted in view of the present
study as well as the past findings in that area. Conclusions should be given at the end of article. It
should describe the validity of observation and other published work dealing with the same type.
Finally the implications of the study should be given to establish the study's relevance and
significance.
Author's Guideline
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FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
Paper size Specification
Author's Guideline The formatting should be done keeping the following in mind;
a) A4 size paper
b) Margins 1.25 inch on all sides
c) Font size 12 Times New Roman with 1.15 - line spacing (body text)
d) Title, subtitles, abstract and references single spaced with 4 font size
e) Referencing, graphics & tables as per APA format and will be part of the total page count.
Tables and Figures
a) Tables must be in the Microsoft Word table format, and should be created using Times New
Roman text, 10 point size. APA-style provided elsewhere must be preferred.
b) Figures must be clearly produced in black and white. All text included in figures should be Times
New Roman (10 point minimum).
c) Tables and figures may be oriented horizontally (landscape) or vertically (portrait) within the
allotted space.
d) Each table and figure should be identified with a table or figure number and a descriptive title.
e) For any data not generated by the author(s), the source of the data should be given (in short form)
below the table or figure and also should be listed in full in the references.
Footnotes and References
a) Footnote material should be incorporated into the text wherever required. If footnotes are
necessary, the note number should be typed in the form of superscript in the text. The notes should be
mentioned at the end of the page as endnotes.
b) References should be integrated into the text in short form and listed altogether at the end of the
article in the APA referencing.
c) For research articles with three or more authors, the first author's name following “et al.” should
be used. For multiple citations, alphabetize citations by author's last name may be used.
d) The author(s) should make sure that the in-text citations (including citations in footnotes, tables,
and figures) correspond to the list of references/ bibliography at the end of the study.
Author's Guideline
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FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
Copyright Transfer
a) The publication of the submission will be withheld to establish the originality of the
work to ensure that it has not been submitted for publication elsewhere.
b) Submission of a paper also implies that, upon acceptance of an article by the
journal, the author(s) will transfer copyright of the article to the publisher.
Miscellaneous
a) The A m e r i c a n Numeric System should be followed to quote any figures (one b i l l i o n
= 1 , 0 0 0 , 0 0 0 , 0 0 0 ; o n e t r i l l i o n = 1,000,000,000,000), rather than lakhs and crores.
b) Spell out all numbers from one to ninety-nine, unless:
i. the number contains a decimal point, e.g., “6.2” and “ 0.12”
ii. the number precedes a percent sign or a unit of measure, e.g., “47%” and “16µm”
c) Each author will be entitled to one copy of the issue in which his or her article appears.
Note:
The editor reserves the right to amend, abridge or otherwise alter the contents of the paper to make it
suitable for the publication. However, every attempt will be made not to affect the spirit or
effectiveness of the paper.
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FOUNDATION UNIVERSITY JOURNAL OF BUSINESS AND ECONOMICS
Call for Papers
Dear Researchers,
This is to inform you that we are currently accepting original research articles for evaluation and
publication in our February, 2018 volume 3 No. 1. We would like to invite you to contribute your
Research Paper for publication in “Foundation University Journal of Business & Economics
(FUJBE)”. Papers published in “FUJBE” receive high publicity and enjoy great reputation. The
scope of the journal includes; Accounting, Finance, Human Resource Management, International
Business, Marketing, Organizational Behavior, Strategic Management, Services, Economics and
other areas related to business.
The article submissions are accepted at [email protected]
Graduate Research Center
Huge credit goes to the vision and dedication of Maj. Gen. Khadim Hussain, HI (M) (Retd) Rector
Foundation University Islamabad, who helped materialize the seemingly abstract mission of
“inspiring creative inquiry and research” through the establishment of a Graduate Research Center
(GRC). The aim of GRC is to create an environment which facilitates both the seasoned and
amateur researchers to jointly address the development issues of social and industrial life in a
collaborative manner. It also strives to provide a platform to the students and faculty of the university
to utilize the available infrastructure, generate innovative research ideas, seek help in
commercialization, employ the current facilities and discover new avenues for research publications,
become reputable member of the existing research groups and seek expert advice on designing a
project proposal, data collection tools and analysis.
The contributors and readers of the Foundation University Journal of Business and Economics are
encouraged and invited to identify new avenues for the promotion of scientific and collaborative
research activity for the benefit of national economy and humanity at large. The Editorial Board
greatly acknowledges the contribution of GRC in the publication of its current issue.
Dr. M. Iqbal Saif
Associate Dean/Chairman GRC
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FOUNDATION UNIVERSITY FOUNDATION UNIVERSITY
ISLAMABAD RAWALPINDI CAMPUS
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Phone: +92-51-5788446, 5788450, 5788378 Phone: +92-51-5151437, 5151438
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