ORGANIZATIONAL CULTURE AND EMPLOYEES' INNOVATIVE BEHAVIOR: THE MEDIATING ROLE OF EMPLOYEE EMPOWERMENT

Abstract

This paper is aimed at examining the effect of organizational culture on innovative behaviour among employees in the private sector banks within Sindh Province in Pakistan and the effects mediated by employee empowerment. In the current competitive banking world, innovation is essential to the performance of organizations, quality of their services, and long term growth. Although earlier studies have recognized the significance of organizational culture and empowerment in terms of facilitating innovation, few studies have investigated these associations in developing nations, especially in the banking industry in Pakistan. This research paper fills this gap by incorporating theoretical views of Social Exchange Theory, Componential Theory of Creativity, Contingency Theory, Psychological Empowerment Theory and Self-Determination Theory and presents a holistic explanation to the way the organizational culture affects employee innovation. The research is quantitative in nature and cross-sectional research design. The target population will include all employees of bank in the private sector within Sindh Province. Convenience sampling was embraced due to resource and accessibility limitation. The minimum sample size was estimated at 132 using G*Power software, but to have a strong statistical analysis 500 survey questionnaires were sent, which produced 412 valid answers, which corresponds to response rate of 82.4. The survey tool was created with reference to the existing literature and was pilot tested in order to be reliable and understandable. It assessed five dimensions of organizational culture, which include management style, cooperation, adaptability, reward system, and formalization, employee empowerment, and the innovative behavior of employees in a five-point Likert scale. Partial Least Squares Structural Equation Modeling (PLS-SEM) was used in data analysis. The model of measures proved to be highly reliable and convergent with all the Cronbach alpha values, as well as the AVE values, greater than 0.70 and 0.50 respectively. Both the Fornell-Larcker criterion and Heterotrait-Monotrait (HTMT) ratio were used to determine the discriminant validity. The structural model indicated that the positive direct impact of all the five dimensions of organizational culture on the innovative behavior of employees is positive and significant and the employees are empowered which moderates four out of five dimensions. It is important to note that reward system directly impacted but was not mediated by empowerment which means that extrinsic rewards impact innovation without any intervention of empowerment processes. Indicators of model fit were good explanatory and predictive (R 2 = 0.746, SRMR = 0.088, NFI = 0.942) and PLS Predict analysis validated the predictive applicability of the model to the innovative behavior of employees. The results mention the importance of organizational culture and empowerment in increasing innovative behavior within banking organizations. The style of management, collaboration, flexibility and formalization directly and indirectly affect innovation, through enabling employees, focusing on their autonomy, competency, meaning and impact. The reward system encourages innovation in itself, implying that extrinsic rewards operate in conjunction with empowerment mechanisms. The implications of these results are huge in terms of theory as they further extend the literature of organizational culture, employee empowerment and innovation within a developing country setting. In practice, the research offers recommendations to the managers of banks to develop cultural and human resource practices that encourage empowerment, teamwork, flexibility, and flexible structures to establish an innovative culture. Finally, the paper has highlighted the fact that organizational culture is a complex determinant of the innovative behavior of employees and that employee empowerment is one of the most important ways of converting the cultural practices into innovative results. Through the strategic combination of leadership practices, collaborative norms, flexible structures, and motivational systems, the banks of the private sector will be able to increase their innovative potential and competitiveness in a fast-paced financial environment.