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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

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Dr. M. Iqbal SaifChairman Graduate Research Center, Foundation University Rawalpindi Campus (FURC), Pakistan

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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

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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

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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


Mr. Naeem Ullah


Mr. Muhammad Awais

Lecturer, Foundation University Rawalpindi Campus (FURC), Pakistan

Ms. Asiya Sohail


Editorial Team

Ms. Nida Abbas


Ms. Azka Nawaz


Online Submission available at:http://fujbe.fui.edu.pk/[email protected]


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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

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41

68

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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

[email protected]

Zaib MaroofLecturer, Faculty of B&T, Foundation University Rawalpindi Campus, Pakistan

[email protected]

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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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

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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

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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,


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& 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


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


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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


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:


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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


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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).

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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


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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)


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.


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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)


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


between employee empowerment and for continuance commitment.


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


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between employee empowerment and for normative commitment.


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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Maryam ZebPhD Scholar, International Islamic University Islamabad, Pakistan

[email protected]

Ahmad SherPhD Scholar, Iqra University Islamabad Campus, Pakistan

[email protected]

Muhammad AwaisPhD Scholar, Iqra University Islamabad Campus, Pakistan

[email protected]

Hussaun A. SyedMasters of Business Economics, Wilfrid Laurier University, Toronto, Canada

[email protected]

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

Zeb, Sher, Awais, & Syed

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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,


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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


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Strategic Flexibility

H2H4 H3

H1

Organizational Learning

l Information Acquisitionl Knowledge Disseminationl Shared Interpretationl Organizational Memory

Enhanced CustomerPerformance


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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


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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


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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,


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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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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


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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,


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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

[email protected]

Muhammad Naeem KhanPhD Scholar, Iqra University Islamabad Campus, Pakistan

[email protected]

Owais Ahmed KhanMBA (Supply Chain Management), Federation University, Australia

[email protected]

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

Khan, Awais, Khan, & Khan

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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


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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


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



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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



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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


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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

[email protected]

Muhammad AwaisPhD Scholar, IQRA University Islamabad, Pakistan

[email protected]

Dr. Kashif Ur RehmanProfessor, IQRA University Islamabad, Pakistan

[email protected]

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


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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


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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


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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


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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


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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


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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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and their implications for economic development. In Proceedings (pp. 119-158).

Rahman, M. M., & Uddin, M. T. (2012). Saving mobilization and its impact on economic growth: a

case study on Bangladesh. International Journal of Arts & Sciences 2012.

Rodrik, D., & Subramanian, A. (2009). Why did financial globalization disappoint?. IMF staff

papers, 56(1), 112-138.

Siddiqi, F. A. (2010, April 21). Bangladesh stock market -- possibilities and problems. The Financial

Express.

Tripathi, V., & Sethi, S. (2010). Integration of Indian stock market with World stock markets. Asian

Journal of Business and Accounting, 3(1), 117-134


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Adiqa Kausar KianiAssociate Professor, Economics Federal Urdu University, Islamabad

[email protected]

Sana UllahPh.D. Scholar, Federal Urdu University Islamabad, Pakistan

[email protected]

Zaib MaroofLecturer, Faculty of B & T, Foundation University Islamabad, Pakistan

[email protected]

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)

Kiani, Ullah, & Maroof

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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


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


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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


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


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)


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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

Bibliography

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Kothari, C. R. (1978). Quantitative Techniques. 3rd edition. New Delhi: Vikas Publishing House


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PVT LTD, 99.

Nordhaus, W., & Tobin, J. (1972). Is Growth Obsolete?, In Economic Research: Retrospect and

Prospect, (5th ed., pp. 1-80). New York: National Bureau of Economic Research.

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Rahman, T., Mittelhammer, R. C., & Wandscheider, P. (2005). Measuring the quality of life across

countries: A sensitivity analysis of well-being indices (No. 2005/06). Research Paper, UNU-

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Sach, J. D., & Warner, A. M. (1997). Sources of Slow Growth in African Economies. United Nations

Development Program (2011) Human Development Report. New York: Oxford University

Press.


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