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National College of Business
Administration and Economics
Lahore
HIGH PERFORMANCE WORK SYSTEM AND BUSINESS PERFORMANCE:
A SOCIAL CAPITAL PERSPECTIVE
BY
ALI ASAD
DOCTOR OF PHILOSOPHY IN
BUSINESS ADMINISTRATION
MARCH, 2018
ii
NATIONAL COLLEGE OF BUSINESS ADMINISTRATION AND ECONOMICS
HIGH PERFORMANCE WORK SYSTEM AND BUSINESS PERFORMANCE:
A SOCIAL CAPITAL PERSPECTIVE
BY
ALI ASAD
A dissertation submitted to School of Business Administration
In Partial Fulfillment of the Requirements for the Degree of
DOCTOR OF PHILOSOPHY IN
BUSINESS ADMINISTRATION
MARCH, 2018
iii
AUTHOR’S DECLARATION
I, Ali Asad here by Stated that my PhD thesis titled “High
Performance Work System and Business Performance: A Social Capital
Perspective” is my own work and has not been submitted previously by me
for taking any degree from this university “National College of Business
Administration and Economics ”or anywhere else in the country/world.
At any time if my statement is found to be incorrect even after my
graduate the university has the right to withdraw my PhD degree.
ALI ASAD
March, 2018
iv
PLAGIARISM UNDERTAKING
I solemnly declare that research work presented in the thesis titled
“High Performance Work System and Business Performance: A Social
Capital Perspective” is solely my research work with no significant
contribution from any other person. Small contribution/help when ever taken
has been duly acknowledged and that complete thesis has been written by me.
I understand the zero-tolerance policy of the HEC and University
“National College of Business Administration and Economics” towards
plagiarism. Therefore, I as an Author of the above titled thesis declare that no
portion of my thesis has been plagiarized and any material used as reference is
properly referred/cited.
I undertake that if I am found guilty of any formal plagiarism in the
above title thesis even after award of PhD degree, the university reserves the
right to withdraw/revoke my PhD degree and that HEC and the University has
the right to publish my name on the HEC/University Website on which names
of students are placed who submitted plagiarized thesis.
Ali Asad
v
CERTIFICATE OF APPROVAL
This is to certify that research work presented in the thesis, entitled
“High Performance Work System and Business Performance: A Social
Capital Perspective” was conducted by Mr. Ali Asad under the supervision of
Dr. Suleman Aziz Lodhi. No part of this thesis has been submitted anywhere else
for any other degree. This thesis is submitted to the School of Business
Administration in partial fulfillment of requirements for the degree of requirements
for the degree of Doctor of Philosophy in the field of Business Administration,
School of Business Administration, National College of Business Administration and
Economics, Lahore.
Student Name: ALI ASAD Signature:
Examination Committee:
a) ExternalExaminer1:
Dr. Ishfaq Ahmad Signature:
Assistant Professor
Hailey College of Commerce
University of the Punjab, Lahore
b) External Examiner2:
Dr.Talat Islam Signature:
Assistant Professor
Institute of Business Administration (IBA)
University of the Punjab, Lahore
c) Internal Examiner:
Dr. Mattiullah Butt Signature:
Associate Professor
National College of Business Administration
& Economics, Lahore, Pakistan.
Supervisor Name: Dr. Suleman Aziz Lodhi Signature:
Name of Dean/HOD: Dr. Alia Ahmed Signature:
Name of the Rector: Prof. Dr. Munir Ahmad Signature:
vi
DEDICATION
To
Almighty Allah
&
Prophet Muhammad (Peace Be Upon Him)
I dedicate this to my Beloved Parents for all their love &
attention which has made it possible for me to make it up to this
point. This thesis is expressly dedicated to the memory of my
father, who left us with the most precious asset in life,
knowledge. I know that he would be the happiest father in the
world to know that his son has successfully completed his thesis.
May Allah place his soul among the righteous; and to my mother,
for her continuous blessings and prayers and whose love and
guidance throughout my life can never be repaid. I also dedicate
this work to my learned supervisor Dr. Suleman Aziz Lodhi, who
bestowed me with the courage, the commitment and the
awareness to follow the best possible route, with his unmatchable
style and best possible training. I wish to dedicate this research
report to all the Greatest Minds that have made a huge difference
in this world, and have made this world a better place.
vii
ACKNOWLEDGEMENT
All praise to the gracious, the greatest Almighty Allah who blessed me
with the courage and made my efforts fruitful in the form of completion of this
research to a happy end. Without Allah’s mercy and blessing, a dissertation
like this would never have come to fruition.
It gives me immense pleasure to express deepest gratitude to
Prof. Dr. Suleman Aziz Lodhi for his pieces of advice and encouragement.
His masterly expression, stimulating criticism, moral support, inspiring
comments and strong motivation compelling me to think freely and write
independently throughout my Ph.D. research work. I am grateful to him for his
perceptiveness and guidance during my research work.
I am deeply thankful to my all respected professors; in particular
Prof. Dr. Munir Ahmad, Dr. Alia Ahmad, Prof. Dr. Muhammad Hanif,
Dr. Amman Ullah, Dr. Muhammad Shafique, Dr. Ashfaq Ahmad and Dr. Rub
Nawaz Lodhi, for providing professional guidance, support and research
orientation. Without their help and support, I could not have been able to
complete my study successfully.
I am deeply indebted to and would like to thank Prof Dr. Khalil Ahmed
and Mr. M.A. Jahangir for their constant support and guidance throughout this
journey. I would also like to thank Mr. Muhammad Ali Raza, Mr. Muhammad
Ali, Mr. Amir Zahoor and Muhammad Awais who helped me a lot in
completing this thesis with their knowledge and skills. They were always there
for me whenever I needed their help and needed to understand something. I
will never forget their unconditional friendship and the tough time which we
spend together. I am proud to be a part of this wonderful group.
I am especially thankful to my younger brothers Shams-ul-Hassan, Asif
Hussain, my wife and whole family for supporting me all through my career as
well encouraging me for completion of this research.
I must say that I feel grateful to be among you people and for all your
contributions in your individual capabilities.
viii
SUMMARY
Social capital has become significant resource for all the organizations
in order to achieve better business performance and larger market share. Social
capital is comparatively more important for small medium enterprises SMEs
whose scope of working is limited and mostly these SMEs work in particular
setting where organizations have more competition and less resources.
Businesses all around the world are facing emerging challenges regarding
working systems, legitimacy and customer need analysis. Corporations today
face problems linked with internal factors as well as external factors. Internal
factors are a bit easier for the firms to manage and regulate according to the
vision of the company but external factors are beyond the control of the
corporations and deep study is required to manage the working of the company
according to the external forces which are working in the external environment
of the corporation. Different theories tried to address this socio economic
problem of business in contemporary world but little attention has been given
on High Performance Work System which is becoming key factor in the
growth of business and development of new enterprise. Successful business in
Pakistan also faces internal and external threats which can be mitigated with
the help of High Performance Work System. Our study has explored the link
between business development and High Performance Work System. The link
between business performances with work system is gaining importance in the
field of human resource management and the most important element in this
relation is high performance work system. The developing studies on high
performance work system is making room for the understanding of managers
that how it influence the firm performance.
Previous research has revealed mixed results of high performance work
system with relation to business performance but still there is a ‘black box’ in
this area which is directly related to the human resource management. Many
researchers have come up to the conclusion that HPWS has direct or indirect
impact on business performance. In this study the researcher has tried to
explore the most important part of HPWS which is human resource
management and within the paradigm of human resource the researcher has
worked on staffing, job description, training, participation, mobility, incentive
reward, appraisal, job security, networks building and team learning
behaviour. Social capital is measured through cognitive, structural and
relational dimensions. Business performance is computed through financial,
operating and innovative measures.
ix
The study aims to explore a high performance work system in social
capital perspective in which organization can maintain and develop the
competitive advantage through internal firm structure. The study also explores
the link of leadership styles to enhance the SMEs business performance by
social capital. The study is based on strong theoretical foundations in which
researcher has worked primarily under the umbrella of social capital theory.
It attempts to prove the structural link between HPWS and business
performance using 625 respondents of SMEs sector. Data was collected
through questionnaires.
Considering the limitation of SPSS and AMOS, this research has been
conducted by using SMART PLS that has the capacity to manage both
formative and reflective form of models. For structural model, test of
predicative and coefficient of determination have been applied and before the
path coefficient, validity and reliability was checked by the researcher.
The study unfolds structural relationship between HPWS, social capital,
leadership styles and business performance. The model developed in the study
is effective in enhancing the business performance of SMEs through social
capital and leadership styles. This research reveals that HPWS plays pivotal
role in SMEs business performance and its role differs in different
organizations. One of the basic elements regarding HRM has direct influence
on business and this is leadership style and leadership empowerment.
x
LIST OF TABLES
Table
No. Title Page
4.1 Multivariate Methods 49
4.2 Guidelines For Measurement Model 50
4.3 Evaluation of Measurement Model 52
5.1 Respondents Profile 55
5.2 Correlation Coefficient 57
5.3 Validity Test 59
5.4 Reliability Test 61
5.5 Model Path Coefficient 64
5.6 Model Testing 66
xi
LIST OF FIGURES
Figure
No. Title Page
3.1 Social Capital Business Performance (SCBP) Model 38
4.2 Positivists and Post-Positivists 43
5.1 Structure Equation Model 62
xii
TABLE OF CONTENTS
AUTHOR’S DECLARATION ................................................................................... iii PLAGIARISM UNDERTAKING .............................................................................. iv CERTIFICATE OF APPROVAL ................................................................................ v DEDICATION ............................................................................................................ vi ACKNOWLEDGEMENT.......................................................................................... vii SUMMARY .............................................................................................................. viii LIST OF TABLES ....................................................................................................... x LISTOFFIGURES ....................................................................................................... xi
Chapter 1 INTRODUCTION ................................................................................... 1 1.1 Background of the Study ..................................................................................... 1 1.2 SMEs in Pakistani Perspective ............................................................................ 3 1.3 Statement of the Problem .................................................................................... 5 1.4 Research Questions ............................................................................................. 5 1.5 Research Objectives ............................................................................................ 5 1.6 Significance of the Study..................................................................................... 6
1.6.1 Scope of Study ........................................................................................... 6 1.7 Methodology ........................................................................................................ 6 1.8 Organization of the Thesis .................................................................................. 7
Chapter 2 LITERATURE REVIEW ....................................................................... 9 2.1 High Performance Work System (HPWS) .......................................................... 9 2.2 Business Performance and Social Capital ......................................................... 10 2.3 Leadership Style ................................................................................................ 13
2.3.1 Transactional Leadership Style ................................................................ 15 2.3.2 Transformational Leadership ................................................................... 17 2.3.3 Authentic Leadership ............................................................................... 18 2.3.4 Empowering Leadership .......................................................................... 20
2.4 Business Performance of SME .......................................................................... 21 2.5 Empirical Studies on HPWS and Business Performance ................................. 22 2.6 Integrating HPWS, Social Capital and Business Performance of SMEs .......... 23
Chapter 3 THEORETICAL FRAMEWORK: SOCIAL CAPITAL
PERSPECTIVE ............................................................................................... 25 3.1 Knowledge Society ............................................................................................ 25 3.2 Knowledge based view (KBV) of the Firm....................................................... 26 3.3 Knowledge Productivity .................................................................................... 28 3.4 Performance as Social Process .......................................................................... 28 3.5 Social Capital Theory ........................................................................................ 29 3.6 Dimensions of Social Capital ............................................................................ 30
3.6.1 The Structural Dimension ........................................................................ 30 3.6.2 The Relational Dimension ........................................................................ 31 3.6.3 The Cognitive Dimension ........................................................................ 31
xiii
3.7 Consolidating Conceptual Model ...................................................................... 32 3.7.1 High Performance Work System and Business Performance .................. 32 3.7.2 High Performance Work System and Social Capital ............................... 34 3.7.3 Leadership Style and Social Capital ........................................................ 36
Chapter 4 RESEARCH METHODOLOGY ........................................................ 39 4.1 Research Process ............................................................................................... 39 4.2 Philosophy of Research ..................................................................................... 39 4.3 Research Approaches ........................................................................................ 40 4.4 Positivists and Post-Positivists .......................................................................... 41
4.4.1 World View .............................................................................................. 41 4.4.2 The Nature of Research ............................................................................ 42 4.4.3 Researchers as Positivists and Post-positivists ........................................ 42 4.4.4 The Methods ............................................................................................. 43 4.4.5 Findings as Positivists and Post-Positivists ............................................. 44
4.5 Data Collection Method .................................................................................... 44 4.5.1 Population of Study .................................................................................. 45 4.5.2 Sampling Techniques ............................................................................... 45
4.5.2.1Method-1 ....................................................................................... 46 4.5.2.2Ratio Method ................................................................................. 47
4.5.3 Sample Size .............................................................................................. 47 4.6 Operationalization of Constructs ....................................................................... 47 4.7 Data Analysis ..................................................................................................... 48
4.7.1 Structural Equation Modeling Approach ................................................. 49 4.7.2 Formative and Reflective Models ............................................................ 50 4.7.3 Evaluation of Measurement Model .......................................................... 51 4.7.4 Evaluation of the Structural Model .......................................................... 52
Chapter 5 DATA ANALYSIS ................................................................................ 53 5.1 Analytical Procedures ........................................................................................ 53
5.1.1 Preliminary Data Screening ..................................................................... 53 5.1.2 Missing value Analysis ............................................................................ 53 5.1.3 Aberrant Values........................................................................................ 54
5.2 Descriptive Statistics ......................................................................................... 54 5.3 Relationships between Variables ....................................................................... 55 5.4 PLS Model Analysis .......................................................................................... 57
5.4.1 Analysis of Measurement Model ............................................................. 58 5.4.2 Validity Test ............................................................................................. 58 5.4.2 Reliability Test ......................................................................................... 60 5.4.3 Analysis of Structure Model .................................................................... 61
5.4.3.1 Impact of HPWS on Business Performance ................................ 63 5.4.3.2 Impact of HPWS on Social Capital .............................................. 63 5.4.3.3 Impact of Social Capital impact on Business Performance ......... 63 5.4.3.4 Impact of Leadership style on social capital ................................ 64
5.5 Overall Model Testing and Estimation ............................................................. 66
xiv
Chapter 6 CONCLUSION ...................................................................................... 67 6.1 Practical Implications ........................................................................................ 68 6.2 Scientific Contribution ...................................................................................... 68 6.3 Managerial Contribution ................................................................................... 69 6.4 Limitations of the study ..................................................................................... 70 6.5 Directions for Future Research .......................................................................... 71
REFERENCES ........................................................................................................... 73 Appendix A ................................................................................................................ 99 Appendix B ............................................................................................................... 100
1
CHAPTER 1
INTRODUCTION
Business performance of the organization is linked with many elements.
The first element is the vision of the organization in which it determines its
scope and horizon. Business performance of corporations can be enhanced by
adopting different ways but one of the most significant measures is the
adoption of High Performance Work System which includes advanced Human
resource practices. These human resource practices are implemented in best
possible way by merging all the resources according to the desired results.
The researchers, technicians and scholars of human resource
management suggest that developmental approach of High Performance Work
System (HPWS) could prove helpful and important approach for better
business performance (Appelbaum, 2000; Combs, Liu, Hall, & Ketchen, 2006;
Kehoe & Wright, 2013).
1.1 BACKGROUND OF THE STUDY
In order to excel in a competitive market, some factors are needed by the
organizations that boost up the workers to work hard and achieve the
organizational goal. One of the important factors to work hard in an
organization is its work force (Pinder, 2014). For the organizational
development and to motivate and enhance the workers’ efficiency it is
important to implement certain techniques. HRM has become a significant and
substantial aspect for the prosperity of a firm or organization, because human
recourses are responsible for developing and building up the firm or
organization to achieve its goals and objectives efficiently and effectively.
According to Kabene, Orchard, Howard, Soriano, and Leduc (2006),
human resource is the key element in the success of any corporation and if
they are given proper platform they can show miracles for the company.
Markova and Ford (2011) argued in their study that workers’ readiness to use
their knowledge, skills and creativeness determines the organizational success.
To improve the employees’ performance, incentives and benefits are used as
an effective tool. Organizations try to increase and motivate the personnel’s
task performance extrinsically and intrinsically by various practices.
2
Human resource tools are valuable, productive and fruitful for business
performance of the firm. Many researchers have highlighted positive results of
HPWS, but still there is a ‘black box’ in this area of human resource and this
area in linked with leadership in the corporation. (Banks &Kepes, 2015;
Messersmith, Patel, Lepak, & Gould-Williams, 2011; Savaneviciene &
Stankeviciute, 2010). In the field of human resource management a new aspect
has gained importance which is high performance work system and this aspect
HPWS has been given less importance in research particularly in relation with
small medium enterprises working in Pakistan.
In the past different human resource practices have been observed by the
organizations but all these practices kept on changing according to the need of
time and demand of organization. Many studies advocate on the way of
human resource by focusing on interpersonal connections inside the
organization(Rahim, 2015; Yang & Maxwell, 2011). The previous studies
have essentially highlighted that social connections are a principal firm
resource(Collin & Clark, 2003; Jiang & Liu, 2015). Social relationships among
employees help in yielding positive results for the firm by encouraging
convenient access to more noteworthy collection of data, lessening the
requirement for formal control, encouraging aggregate activity of the
organization and organizational intellectual capital (Maurer, Bartsch, & Ebers,
2011; Ngah & Ibrahim, 2012; Santos-Vijande, López-Sánchez, &
Trespalacios, 2012).Social capital plays important role in the success of small
medium enterprises.
Most essential and important factor for the today's economy is
knowledge and it is helpful for building practical competitive advantage.
Among organizations knowledge management is an expanding consideration
towards the social capital(Garvey & Williamson, 2002; Gibbons et al., 1994).
This adjustment in context starts in the work ofPolanyi and Knowledge (1958),
who explained the idea of knowledge, representation on various
epistemological suspicions. Similarly it is exchanged to a more social
perspective. People learn through a procedure of individualism and
externalism with the changing environment of the corporation. The concept of
learning moves on with time and ultimately learning becomes “knowing”.
Learning in this illumination is on a very basic level of social, individual and
connection bound (Garvey & Williamson, 2002). At the end of the day:
information is a social procedure of knowing. This point of view indicates an
alternate exploration approach when examining learning improvement and
knowledge sharing(Huemer, von Krogh, & Roos, 1998).
Human action is based on the past experience and acquired knowledge
which he is having in his mind. Knowledge has become important resource of
3
all the organizations where resources are meager and competition is growing,
in such case knowledge is the backbone for the sustained development of the
firm. (Harrison & Kessels, 2004).
Knowledge based economy needs helping environment where leader
and workers both learn from the surrounding and from each other. In this way
more and more skills are acquired by the workers and these workers become
rare asset for the organizations. (Wernerfelt, 1984).
1.2 SMEs IN PAKISTANI PERSPECTIVE
State bank of Pakistan in2013 has explained business as, “any
organization where number of employees are less than 50 and its annual
turnover is less than Rs, 150 million can be called as small medium enterprise.
Less research has been conducted on the role of small enterprises in the
development of the state economy (Nguyen & Bryant, 2004).
Employees of any organization are directly influenced from the HR
policies and the growth of skill development of employees is also linked with
HRM. (Nguyen & Bryant, 2004)It covers the areas such as promoting
relationship amongst owner and workers, issues regarding employees, their
appraisal system, their promotion and transfer to other places, finding right
man for the right job, their job satisfaction and sustained motivation,
developing organizational citizenship behavior, enrollment and selection,
training and improvement, consideration and remuneration.
This study has explored the significance of HRM in SMEs as an
explorative measure but larger share of research is dedicated to the descriptive
measures regarding HRM. All over the world SMEs have developed their
business and in most of the states these SMEs have proved fruitful for the
country. In the same way Pakistan is no different and SMEs have done a lot in
the development of the economy of Pakistan. It has been reported that over the
last two decades Pakistan faced the problem of unemployment and this
problem was primarily solved by the SMEs which gave employment
opportunities to the people of Pakistan.(Dougherty & Herd, 2005).
According to State Bank of Pakistan (SBP, 2013) fundamental role of
SMEs in the economic development is economic growth and to protect jobs
therefore reduces poverty. On the account of this importance of SMEs in the
overall industrial development it is important that SMEs must work for the
betterment of the society(Cravo, Gourlay, & Becker, 2012).
4
SMEs are the basic engine in the business of any country and Pakistan is
no different. More than 3 million enterprises are working in the country and
these SMEs play pivotal role in the betterment of society. These SMEs of the
country give 40% of the GDP, accommodate 80% of employment and almost
30% of export. (Rohra & Panhwar, 2009).
Different roles are performed by SMEs but most important are
innovation based management, improvement of social fabric, and enhancement
of daily standard of living. Hence the financial development of Pakistan can
take place on the basis of more and more SMEs(Khalique, Bontis, Abdul
Nassir bin Shaari, & Hassan Md. Isa, 2015).Apart from SMEs importance and
considerable contributions, Pakistani SMEs keep on to face different threats
and difficulties, for example, inadequate financial assets, absence of
management abilities and skills, unskilled labors, low innovative capacities,
poor foundation, a mind boggling tax collection framework, absence of
government support, troubles to get loans from financial organizations and
mismanagement of different assets like intangible assets in the
organizations(Dasanayaka, 2011).
Currently Pakistani’s SME’s performance has not found to be in
accordance with the available resources and opportunity(Berry, Aftab, &
Qureshi, 1998).Most of the declines of SMEs take place in the very initial
phase where most of the challenges become known to the company. These
challenges generate fear in the entrepreneur and he resists in continuing the
business. This resistance to start a business leads to industrial failure and
country fails to prosper on the basis of business. (Stanworth, Purdy, Price, &
Zafiris, 1998).
This situation is alarming and if it continues then the country will face
economic stagnation, joblessness of youth and depletion of resources. This is
high time for Pakistan to promote SMEs for better financial growth and
sustained development. Increase in competition is demanding the companies to
constantly change the way of doing business with the help of new trends and
technologies. Many researchers have agreed with the aim of HPWS as an
essential source for the success of SMEs and that is related to their
performance(Abdullah & Sofian, 2012; Yew Wong & Aspinwall, 2004).
There lies one problem in minds of our Pakistani people which is related
to the misunderstanding of the idea of high performance work system and
realization of the fact that knowledge is best tool for the sustained
development of the country.
5
1.3 STATEMENT OF THE PROBLEM
SME business in Pakistan is passing through severe uncertain situation
including economic, political, technical, and nevertheless human resources and
thus facing problems while trying to perform better in strict environmental
pressure(Stonkutė, 2015; Tipu & Fantazy, 2014). Therefore the organizations
need to improve business performance by uncovering new avenues. Innovation
is required in HR practices because all over the world HR practices have been
developed to meet the challenges of the time and environment.
There is a need to explore the possibility to increase business
performance by more effective use of Social Capital in an organization. A
developing body of knowledge is carried on Social Capital and its role in
Business Performance. So also look into in HPWS area empowers us to build
up a more valuable comprehension of the idea of the connection between
business performance and management systems.
1.4 RESEARCH QUESTIONS
In order to increase the performance of Pakistani SMEs without
injecting additional capital or other resources. High Performance Work System
may be one of the most important responses.
Therefore this study explores the role of HPWS in performance of
SMEs. The leadership styles of the SMEs and social capital are the
supplementary line of investigation in this study.
Therefore the major questions for this study are:
1. How does HPWS effect on business performance of Pakistani
SMEs?
2. How does high performance work system effect on social capital?
3. How do leadership styles effect the social capital in Pakistani SMEs?
1.5 RESEARCH OBJECTIVES
The aim of the research is to explore the structural model with HPWS
and social capital to achieve the overall organizational performance of SMEs
by using Structural Equation Modeling (SEM). Objectives of current study are;
6
1. To present a broad HPWS model for the Pakistani SMEs with social
capital perspective.
2. To investigate the HPWS model at Pakistani SMEs level and to
explore its relationship with organizational performance.
3. To develop an understanding regarding which leadership style(s) can
promote social capital in Pakistani SMEs.
1.6 SIGNIFICANCE OF THE STUDY
Existing literature of HPWS and business performance indicates that
HPWS has positive relationship with business performance of SMEs.
Performance of any organization can be improved by using the set of HR
practices, social capital and leadership style. All the companies of the world
try to achieve best business performance and in this regard different techniques
are being used by different organizations. This study signifies that HR
practices can influence the company performance to great extent and many
firms all over the world have achieved their milestones on the basis of better
HR practices.
The results of this research would provide assistance to researchers and
academicians for developing SMEs business performance model by using
social capital to enhance the overall performance. The results are intended to
help the managers of SMEs to implement the set of human resource practices
in the business. This study also helps the business leaders that which style of
leadership is more appropriate to increase the social capital in the SMEs. It
also provides the guidelines to the business leader for implementing HPWS in
their organizations for the effective business performance.
1.6.1 Scope of Study
The study focused on the relationship among HPWS and business
performance in social capital perspective. The study would also highlight that
how leadership style(s) help to increase the social capital in SMEs of Pakistan.
Better leadership style can ensure steady development of the business and it
attracts best social capital resource that is available in the surrounding.
1.7 METHODOLOGY
The methodology of the study provides the way of scientifically solving
the research problem. The objective of the study is to investigate the role of
7
HPWS in business performance of SMEs by using social capital and
leadership style. The study uses post-positivist approach to analyze the
research problem. Existing literature was studied which was directly or
indirectly linked with the research problem of the current study and helps to
develop the rational of model to check the relationship of HPWS, business
performance, social capital and leadership styles of the SMEs business.
After developing the model with the help of literature, data has been
collected for empirical testing of the model in the SMEs sector of Multan
Region, Pakistan. Data is collected through questionnaires on the 5 point likert
scale from the employees of SMEs sector. The researcher used a close ended
questionnaire for data collection. For data analysis, statistical results according
to the hypotheses included data screening and preparation of statistical results,
measurement model for each category for the constructs. Different analysis has
been used to see the impact and test all the relationships of the research model.
Smart PLS has been used for data analysis.
1.8 ORGANIZATION OF THE THESIS
The sequential steps of thesis includes detailed introduction of the topic
in which it has been discussed that what this study is all about and what is the
significance of the topic? Research gap has been explained in this section and
managerial implications have been highlighted. Then comes literature review
which contributes towards better understanding of research problem, the
development of conceptual framework of relationships between dependent,
Independent and mediating variables of the study, selection and
conceptualization of constructs, operationalization of constructs, empirical
testing, and finally the discussion of the results. The theoretical part of thesis
consists of two chapters, which presents the detailed introduction, objectives of
study, problem statement, and significance of the study, research gap and
literature review and finally a conceptual framework is established for the
development of hypotheses for properly analyzing the research problem at
hand. Following the theoretical part are the chapters related to research
methodology, data analysis and interpretations, and discussion of the obtained
results. A brief description of each chapter is given as following:
The first chapter provides the detailed introduction, objectives of study,
problem statement, and significance of the study to fill the research
gap.Chapter 2 provides literature review regarding HPWS, leadership styles
and social capital impact on elevating business performance. This includes
evidences from various scholars’ comprehensive literature on firm’s
8
performance in contrast with leadership styles. While, Chapter 3 will provide
the theoretical foundation of proposed research model.
Chapter 4 provides useful insight into the research design and
methodology used in this study. First part provides information about the
research context, e.g., Pakistan where the research has been conducted, sample
of population, and research design. Second, part provides information about
the measures that have been used to operationalize various constructs of the
proposed research model proposed.
Chapter 5 includes results, procedures tables and interpretation about
data analysis of statistical results according to the proposed hypotheses. For
preliminary data screening and preparation of statistical results, VIF values for
measurement model of each category for the constructs. The analysis has been
used to see the impact and test all the proposed relationships of the proposed
research model.
Chapter 6 presents comprehensive discussion about the empirical
findings of this study. It highlights some key contributions along with its
implications for both the researchers and the managers especially in SMEs
sector of Pakistan. But the end, the study discusses key limitations along with
some future suggestions and issues to be addressed in future.
9
CHAPTER 2
LITERATURE REVIEW
Keeping in view the different explanations regarding HRM and social
capital it has been explored that much work has been done previously on these
terms and its important to mention the important work of the past for better
understanding of high performance work system.
This review of literature helps to identify the basic components of
human resource, strategic human resource management and SMEs. Many
researchers point out the functions of the relevant literature which is a
benchmark of different studies. It gives a structure to build up the significance
of the study.
2.1 HIGH PERFORMANCE WORK SYSTEM (HPWS)
The HR structure that improves employee expertise, assurance, and
efficiency is frequently called “high-performance work system” (HPWS).
HPWS denotes towards the employee HRM practices that certainly distress
arrogances, enthusiasm and outcome(Muduli, 2015; Sels et al., 2006). HPWS
represents a structure or bunch of human resources practices intended to boost
employee’s expertise, assurance and participation such that employee’s turn
out can be a cause of supportable competitive edge. These HR practices not
only include recruitment and selection rather these also include training and
development with appraisal system. HPWS is a bunch of HR practices and its
purpose is to elevate exploitation of employees’ information, services, and
aptitudes for the advantage of organization(Combs et al., 2006).It is to be
noted that HPWS cannot be achieved by implementing only one strategy or
practice rather many different practices are being observed by the company to
achieve HPWS. These practices must be supported by latest tangible and
intangible resources so that efficiency of the employees and self efficacy of the
individuals can be explored and enhanced.
Many researchers do not comply on an exact set of practices including
an HPWS outline (Datta, Guthrie, & Wright, 2005), practices can be abridged
addicted to six extensive practices; communication, employee compensation,
employee flexible job, teamwork, employee training and staffing. The aim of
every HR practice is to choose, develop and motivate employees which help to
create employee’s output that improves competitive advantage. More
10
precisely, HPWS raises organizational efficiency through generating
circumstances where employees become extremely involved within
organization and put their selves to achieve organizational objectives (Muduli,
2015; Ramsay, Scholarios, & Harley, 2000).There are multiple advantages of
HPWS which includes job satisfaction of the employee, achieving the level of
self actualization, notion of growth and development and organizational
citizenship behavior. This HPWS is already used by multinational corporations
which face international competition all over the world. HPWS is bunch of HR
employees’ practices that influence positively on the motivation, behavior and
employees’ performance (Kehoe & Wright, 2013).The human resource
systems that help to increase in employees skills, abilities, loyalty and
effectiveness usually refers towards HPWS (Wood & de Menezes, 2011).
HPWS indicates a structure or collection of human resource practices
that intends to increase employee’s ability, loyalty and participation so that it
turn into the competitive advantage for the organizations (Wagner III &
Hollenbeck, 2014). HPWS is the bundle of HR practices which helps optimize
the consumption of employees’ expertise such as knowledge, skills and
abilities (KSA) for better organizational performance. In spite of the fact that
scientists don't agree to a particular arrangement of HRM practices for a
HPWS. (Dickinson et al., 2011; Messersmith et al., 2011).It is important for
better HR practices that training and development of the employees must take
place on timely basis and skilled labor should be preferred on ordinary labor. It
is the duty of HR practitioners to make sure that all the employees are heading
towards one direction and one common goal is insight to be achieved by them.
Best system takes place when workers are shuffled from one department to the
other department and at the end right man for the right job is selected for the
better performance of the organization. HR Practices would be sum up into a
group. The objective of each practice is to encourage and develop the human
resource of the firm to encourage them to generate outputs that boost
competitive advantage.
2.2 BUSINESS PERFORMANCE AND SOCIAL CAPITAL
Resources of any organization are mostly available in the society and
surrounding where the company performs its functions. It depends on the
strategy of the firm that how much it takes advantage from the environment
and whether it manipulates the resources in its favor or not. Any society has
both the tendencies positive and negative for corporate world and it depends
on the vision and mission of the firm whether to exploit the society in its favor
or not. All the policies of the company are regulated according to the need of
the society and all the products are sold the external environment of the
11
company at the same time. It can be said that different resources are taken
from the society, these resources are processed and these are delivered back to
the society in the form of finished goods or services.
Social capital is the mutual dealing and coordination of organizations
with the external environment which includes institutions, political forces,
marketing hubs and government departments. It can be said that social capital
is influenced by all the external forces i.e. political, social, historical and
economic. With time the external environment of the organization changes and
with this change social capital also changes. Numerous analysts have regularly
conceptualized social capital as an alternate arrangement of assets(Inkpen &
Tsang, 2005). It is correlated with the human capital. It fundamentally
concentrates on outside linkages and from advantages that result from basic
gaps found inside the system of connections. Social capital has additionally
been clarified as an interior marvel as "some part of social structure that
encourages certain activities of people inside the structure"(Portes, 2000). It
incorporates the distinctions among these social capital sources as a divergence
between "bridging" and "bonding". It is essential for any corporation to
communicate and exchange different elements from the society. No
corporation can work having indifferent attitude towards the society. Many
organizations go for corporate social responsibility activities in order to have
good name in the society so that people support the firm and play role in the
development of the firm.
Social capital assets incorporate a subjective measurement that speaks to
the "mutual representations, understandings, and frameworks of importance
among gatherings"(De Carolis & Saparito, 2006).The subjective measurement
mirrors the mutual reason and significance made through enduring connections
inside the association or gathering. At long last, social capital assets are
additionally made out of a social measurement, which speaks to the trust,
commitments, and duties that outcome from the individual connections that are
made through the auxiliary and subjective measurements. Social capital means
the constructions of relationships among individuals. Conferring to Huvila,
Holmberg, Ek, and Widén-Wulff (2010) it is constructed of two components:
the social connection that a person has and that delivers access towards
resources of these relations, and the both amount and the quality of these types
of resources. The people and person are linked to be the real bases of this
capital. Main contribution towards social capital occurs because the
predictable mutuality in an affiliation when the contributor imagines to receive
some arrival on their speculation or unity that originates from recognition in
the similar group (Huvila et al., 2010).
12
Significance of social capital was seen in the MNCs in the past but with
the passage of time SMEs gained their importance and many of such SMEs
turn into MNCs by dint of their hard work and visionary leadership. Now
social capital has become extremely important for emerging SMEs as it has
been concluded that no organization can work alone and cooperation with the
society is necessary for the company. According toWinter (2000) influential
assistances towards the arena of social capital, are with a dissimilar theoretical
input. According toRichards and Reed (2015) opinion of social capital by way
of a concept of worth only to advantaged individuals, toward broader
obligations of community-wide value formation, inquiry have “consolidated
around an understanding of social capital as norms and networks of social
cooperation” (Patulny & Lind Haase Svendsen, 2007).
Society is like the body of human being and organization is like one
organ of the body that is useless without the body. Every organization has to
exchange its elements from the society and the working of firm is two way
process in which organization is giving something to the surrounding and in
response surrounding is giving resources to the organization. Bridging the
social capital maneuvers “across diverse social divisions” (Pearce & Davey
Smith, 2003) and can be well-thought-out as the figurative emollient needed to
“get ahead” (Evans & Syrett, 2007).Wallis, Killerby, and Dollery (2004)
reported that the World Bank admitted that social capital is a forerunner
towards economic capital, by important insinuations aimed at poverty-
alleviation approaches. Moreover, Wallis et al. (2004) climaxed its latent
towards the generation of favorable circumstances for maintainable growth,
although only when mutual arrangements of social capital are excellently
industrialized (Wallis et al., 2004).
Social capital remained quasi academic topic because it was considered
purely company based process but with the growth and development in
business social capital has turned into a vital chapter of business studies.
Significance of SMEs regarding social capital evolved with globalization when
different companies of the entire world spread their working in foreign states
in pursuit of more profit and larger market share. This spread of the companies
revealed that every community presents its particular threats and challenges
which are different from the other societies. Second point was revealed that
most of the resources are hidden in the society and if company has high
performance system only then these hidden resources can be exploited for the
betterment of the business and organization. Last point for SME revealed that
these are working in highly competitive world where there is no room for
lethargic act or slow moving policies. Extremely vibrant atmosphere is
experienced by the SMEs in which these have to compete the surmounting
MNCs on one hand and their own SME competitors on the other hand. The
13
similar researchers remarked that marginalized clusters may have stocks of
bonding capital, and canister therefore “get by”; yet, deprived of not only
suitable bridging capital, but also they are constrained in “getting ahead”. This
is demonstrated by a numerous resource-rich countries that bomb to grasp their
economic possible, owing to inadequacies in the level of social interconnection
(Richards & Reed, 2015).Conceptualized as connecting social capital,
Woolcock and Narayan (2000) recognized this such as the vertical relations
among groups and institutes with access toward the power and as well as
resources. Bertotti, Harden, Renton, and Sheridan (2011) proposed that even
enduring any latent enhancements in parallel bonds and bridges, this
postponement towards Putnam’s commencement of social capital concedes that
without the essential access towards command and resources, several
reimbursements will be limited.
Nahapiet and Ghoshal (1998) have suggested that social capital
dimensions were considered effective and useful. Dimensions are structural,
cognitive and relational. Structural dimension alludes to the general example
of associations between performing actors, which is who you reach? And how
you contact them? (Wasserman and Faust, 1994). In a social connection,
individuals cooperate with each other with various types of reasons and
inspirations, while it is similarly basic and work situated in the hierarchical
setting. A portion of the human asset practices may build the communication,
open doors among representatives through influencing work relations and
interpersonal relationship, which help to expand the social relationship among
workers. Relational social capital alludes to the nature and attributes of
connections. Trust and reliability are key features of this
dimension(Fukuyama, 1995).Employees have chances to contact with each
other, it is a bit more that they have inspiration to assist and cooperate with
each other, see each other's need, assist each other, and additionally discover
the most ideal way they can cooperate to accomplish a best result.
Local settings of organization helps the company to create positive
social capital as no company can interchange the resources in a vacuum and
continuous exchange of elements is required for the firm. Cognitive
dimension, which alludes to those assets giving common image,
understandings and frameworks of importance among parties(Järvelä, 1995).
2.3 LEADERSHIP STYLE
Most important element for better business performance and steady
growth of firm is proactive and visionary leadership. It has been observed over the last many years that vibrant leadership generates unexpected results. For MNCs system and policies are important but for SMEs most important
14
element is astounding and innovative leadership. Leadership style is being included in this study in order to measure its effect on the whole scenario. It has been revealed that leadership shortage is experienced at all organizational levels. Leaders are not born, instead leadership skills can be learned through practice(Northouse, 2015; Sipe & Frick, 2015). In the business world normally, management and leadership are considered as two different functions where management addresses ‘stability’ and leadership emphasizes on ‘change’ in the organization (Schein, 2006).
It is prime responsibility of the leader to evoke the notions of humanity in
the employees and to interact with the external world for the better reputation of the organization. Leader is the pilot of the firm and his vision will influence the working of the firm. It is to be noted that owner or manager can also be the leader of the company and their decisions have great impact on the business performance of company. It is found that entrepreneurial competencies play a fundamental role in SMEs success worldwide, especially when faced with severe challenges due to globalization of businesses (Hazlina Ahmad, Ramayah, Wilson, & Kummerow, 2010). It is suggested that in an organization’s success entrepreneurs at some decision making position have a significant influence. Further suggested, that entrepreneurs should be conscious about their own role job behavior in order to operate their business successfully because it may leave a positive or negative impact on their business (Mitchelmore & Rowley, 2010).
Leader is also responsible for the availability of the resources and
resources are mostly limited or extremely expensive for the companies which are working in the given environment. Social capital is the only way out for the leader to manage the resources for the company at the right time in minimum possible amount. Non availability of the resources and expensive resource allocation is the negligence of the leader and leader can minimize this risk of resources with the help of social capital. It is found in the study that goal-oriented leadership style was significantly dominant in the organization(Young & Dulewicz, 2006). They found that Indian leaders invest in people. Unlike Western CEOs almost all of the Indian leaders described that their source of competitive advantage in their companies is their people (Cappelli, 2010).
It has been acknowledged that in the success of small and medium businesses, leadership is an important factor(Arham, Boucher, & Muenjohn, 2013). Furthermore, it is to investigate relationship between leaders and their education, experience, industry and achievement motivation in order to ultimately attain small businesses performance objectives. Further, it is suggested that in small firms, in order to get maximum output from employees, leaders must take opinion from their employees before making decisions and setting up targets. Hence, employees get motivated by participation and small
15
firms can expect better performance(Santamaria-Kisiel, Rintala-Dempsey, & Shaw, 2006).
Leadership is basically concerned with the ability to influence others.
But it is not so simple. Leadership is the ability to influence followers in a
specific direction to achieve organization goals(Higgs & Dulewicz, 2016). A
wrong view about leadership is that it is found only in top level management.
But the reality is that it is found in all levels of organization. It can also be
practiced by an employee who has no formal authority of leader(Kim &
Mauborgne, 1992). It is not easy to change mind of others and it becomes
more difficult in top management because of the intricacy of the position. And
because of this organization continually arrange training programs, skills
development programs and hunt for new talent(Barrett & Lavelle, 2000).A
leader cannot become leader if he does not have followers who are ready to act
on his one command. Leader always has a vision and mostly this vision is in
his mind which is not easily understood by the followers. It is the duty of the
leader to make sure that the vision of the leader is well communicated to the
followers and they have understood the path to achieve this vision. Leader
gives direction, guidelines and he gives the solutions to the problems to the
people he is driving.
2.3.1 Transactional Leadership Style
Transactional Leadership styles are based on power of reward and
punishment. The transactional leader works through forming perfect
arrangements because of which it is open that what is compulsory of their
dependents, and the prizes that they acquire for following instructions.
Punishments are not at all times stated, but they are also implied and proper
structures of discipline are typically positioned(Bass, 2008).
Transactional mode of leadership is also known as managerial
leadership. Transactional leadership theories are among the most provocative
in that they improve hierarchical borders and are naturally autocratic. In the
most advanced form, they define authoritarian repression. A leader just says to
his or her followers "do it" and the followers do it without any
question(Goleman, Boyatzis, & McKee, 2002).Personal ties of the leader for
better business transactions are important for steady growth of business. It is
the reciprocity of the ties which the leader is having in the society and in this
way a lot of effort and time is saved by the firm to manage the resources for
proper functioning and better business performance.
16
The transactional leader frequently uses management by exception
(MBE), working on the norm that if anything is operating to well-defined (and
therefore expected) performance then it does not need concentration. Anomaly
require admiration and reward for be more than predicted, whereas some kind
of counteractive action is used for performance hope(Di Fabio & Saklofske,
2014).With the help of social capital the leader gets valuable information in
time and he is able to channelize the information into profit making for the
company. It is to be noted that information and channel both are based on
social capital which gives competitive advantage to the organization.
Transactional leadership signifies that to have somewhat in substitute
for some other thing or usually indicated as dependent incentive structure. The
energetic association among a transactional leadership style and a supporter is
replacing one thing with another; suppose exchange among the leader and
worker and a assurance of incentive when a worker shows worthy performance
or for some significant things (Bass, 2008).Bass (1986) described that
transactional leadership should be available when changes in degree or
negligible changes can be seen as the aftereffect of authority and an exchange
in which supporter’s needs are met. Correspondingly, rendering to Dartey-
Baah (2015), transactional leadership “speaks to those trades in which both the
predominant and the subordinate impact each other proportionally so that each
infers something of quality". In a theoretical analysis of these two outlines, one
may very much characterize value-based administration, for example, an
initiative strategy began on a recommended assertion among a pioneer and his
subordinates or adherents, where individually every side envisions of the other
a satisfaction of the settled terms of exchange to be sure of the presence of the
relationship winning amongst pioneer and subordinate.
Conferring to Bolden, Gosling, Marturano, and Dennison (2003), this
initiative strategy has been the "customary model of administration with its
roots from an authoritative or business point of view in the main issue".
Subsequently, to guarantee the achievement of execution (budgetary), such
pioneers put efforts towards the foundation of precise parameters, methods,
directions and execution models, joined with the development of reward and
disciplinary frameworks to force hopeful work practices and demoralize
undesirable ones, correspondingly. This situation therefore delineates value-
based pioneers as extra errand and objective arranged than individuals
arranged (Dartey-Baah, 2015).
The value-based organization explains leadership practices from three
points of view: administration by special case, possibility and reward more
divided into two: latent and dynamic (Bass, 1997).Leader of value based
organization will tend to tilt towards corporate capitalism in which profit
17
making is important but using minimum resources is more important. Hence
the leader would try for credit facilities on the basis of his personal standing
and he will try to manipulate the stakeholders in order to agree to his vision
and decision. Administration by special case (dynamic) means the usage by
pioneers of a micromanagement strategy of taking care of subordinate or
supporters(Bass, 1986).This encompasses the leader disbursing comprehensive
attention toward the actions of subordinate or followers to be ensuring a severe
devotion to well-known procedures and similarly also deliver quick corrective
strategies or measures to precise unconventionalities or mistakes. Conversely,
passive management by exception talk about transactional leadership
behavior’s that funding subordinate or followers certain managerial space to
permit them to carry out their purposes, on the other hand only demands for
interference when there are unconventionalities or problems of unmet
performance criteria (Bass, 1986; Dartey-Baah, 2015).
2.3.2 Transformational Leadership
The impression of transformational leadership was initially discussed by
Burns (1978) in his vital book, Leadership, as a brand new worldview for
thought and particularly in the investigation of both administration and in
addition behavioral brain research. Rendering to Burns (1978),
transformational administration is authority that has the impact of "changing"
devotee’s arrogances, trust, and practices. He contrasted transformational
administration and the additional much of the time happening value-based
initiative, which had before vanquished authority, study and work out.
Changing administration infers into play when there is an anticipated need or
request by forthcoming devotees. Smolders favored that the changing pioneers
accomplishment of these needs. Drive in; in the origination of fulfilling the
yearnings of devotees, changing initiative has a part of ethics. This moral
measurement incorporates supporter’s needs, prerequisites, objectives and
principles and the adherents and in addition pioneers are changed toward a
more prominent kingdom of motivation and ethical quality(Bi, Ehrich, &
Ehrich, 2012).It is upto the vision of the leader whether to transform the
organization into resource based or knowledge based. Resource based
organization will try to have the resources which are rare, inimitable and non-
movable. With the help of these types of resources the firm will be having
competitive edge on other companies working in the same surrounding. But
resource based organization cannot make it sure that its resources will remain
unique for the long span of time where as knowledge based view of firm has
the tendency that it may remain ahead from other firms for a longer span of
time due to its better knowledge management and intellectual capacity.
18
Scholars have scrutinized the notion of transformational leadership
intensively in recent decade (Eisenbeiss, van Knippenberg, & Boerner, 2008;
Kearney & Gebert, 2009) and originate this notion is operational both in terms
of improving follower’s enactment expectations and transforming their
personal standards and self-concept addicted towards, a higher level of desires
and aspirations(Burns, 1978).It is the responsibility of the leader to acquire and
comprehend knowledge at first stage and then impart and disseminate it to the
employees so that proper transformation of knowledge will take place. In fact
transformational leadership is the transfer of valuable knowledge from the
leader to the follower.
Transformational leadership is currently narrowly allied with a variety
of outcomes affecting to the individual and follower’s originality (Eisenbeiss
et al., 2008), fulfillment and performance (Vecchio, Justin, & Pearce, 2008)
organizational obligation, work extraction and, task recital and as well as
organizational citizenship behavior and absence (Piccolo & Colquitt, 2006;
Wang & Walumbwa, 2007). Between these individual consequences,
originality has a considerable influence on endorsing organizational innovation
and also inexpensive advantage (Bi et al., 2012).
2.3.3 Authentic Leadership
This branch of leadership developed its roots after much debate on
transformational leadership in which it was argued that transformational
leadership can be self-acquired and it may not be authentic(Alok, 2014;
Avolio, Walumbwa, & Weber, 2009). It is the duty of Transformational
leaders to develop team work in their organization, lead by example, follow
the vision, and motivate the group for high achievement (Kouzes & Posner,
2007). Authentic leadership is a “process that transmutes both the leader and
as well as the followers in an ethically inspiring way. Pseudo-transformational
leaders pursue their self-seeking ends over the followers”(Alok, 2014).Much
arguments appeared in favor and in opposition of authentic leadership but it
was concluded that it deals with rights of both leader and the follower and in it
both are willing to help and support each other. (Gardner, Cogliser, Davis, &
Dickens, 2011).
The concept of authenticity is based on self-introspection where the
person realizes what he is and what he does (Hannah, Avolio, Luthans, &
Harms, 2008). Realization of self is one element of this process and it is
difficult to measure the degree of authentic and unauthentic leadership.
(Gardner et al., 2011). Authenticity and authentic leadership both are growing,
emerging abilities, and patterns of behaviors(Alok, 2014).
19
There are almost for basic elements of authentic leadership which
include realization of self, personal ethical standards, accountability and
transparency of system. (Kouzes & Posner, 2007; Walumbwa, Avolio,
Gardner, Wernsing, & Peterson, 2008).Participatory and motivating leadership
requires that leader must get involved with the work of the employees and tell
them easier solutions for better firm performance. Realization of self is that
what are the standards of persons for him and how these standards effect the
others around him. All those leaders who are authentic care about their
emotions, likings and dislikings, biases and prejudices and limitations. The self
managed ideals of these authentic leaders encourage them to have relational
transparency. These leaders do not only try to develop their own self rather
they try to spread the morals in their surroundings. They try to control their
passion and retain to self efficacy for the progression. Authentic leaders
observe the above mentioned four basic elements of leadership (Alok, 2014;
Walumbwa et al., 2008).Authentic leadership has the tendency to face the
challenges that are troublesome for the firm and it has the capacity to meet
personal and structural problems.
Authentic leaders practice the behaviors of unrealistic influence,
stimulation motivation, intelligent stimulation, and individualized deliberation
in a moral manner and affect the awareness of follower. Authentic leaders
intelligently inspire their followers in a lively communication that encourages
queries, discussion, and the attempt to express creative resolutions to
difficulties. Inauthentic leaders target on the ignorance of their followers so their
followers will more freely receive unclear picture of the leader regarding their
morality and true purposes. This recognition, increased through the elevation of
vagueness and inconsistency, delivers occasions for the self-enhancement of
aspirants (Bass & Steidlmeier, 1999; Nichols & Erakovich, 2013).
Authentic leadership is more traditional and easy to maneuver by the
owner manager whereas inauthentic leadership is more modern and flexible in
its working. Authentic leadership is fast and it does not take much time in
decision making whereas non authentic leadership takes time in solving issues
regarding the organization. Authentic leaders use rigid indication and improper
conversation on the qualities of the matters, while inauthentic leaders use
incorrect judgment and be contingent on authority to make their influences. As
an alternative of rational discussion, inauthentic leaders hinge on emotional
argumentation. The inauthentic leader eyes a facing to hide his/her factual
intent. What expressions like intellectual inspiration is nothing beyond the
leader sounding intelligent towards complicate followers obsessed by doing
what the leader desires(Nichols & Erakovich, 2013).
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2.3.4 Empowering Leadership
New domain of leadership emerged in the recent times called
empowering leadership. It has two basic dimensions that high performer
employees get leadership power in their career secondly leader himself
designate few powers to the high performers (Vecchio, Justin, & Pearce,
2010). It has been discussed earlier that authorities of a leader can be practiced
by a person whose formal designation is something else but due to his dint of
work or due to approval of leader, he performs the duties of a leader. Powers
of leader do not circle around reward or punishment rather leader can change
the deadline of the task, he can change the team, he can change the process, he
can change the system but its only vision of the organization that he cannot
change all alone. For rapidly changing circumstances which are faced by the
SMEs it is important that fast decisions must be taken by the firm and all such
decisions are the primary responsibility of the leader. Empowering leadership
means to give discretionary power to the leader and with this decision making
power leader is answerable for the success or failure of the organization. If
leader does not have the decision making power then he cannot be blamed for
the failure and cannot be praised for success. Leader authority creates
submission on the part of subordinates as they realize that leader is observing
their work and he has the capacity to reward or punish them according to their
work.
For the development of empowering leadership there are few elements
which help this leadership style to great extent. These elements are decision
making power and transparency, innovation and new procedures for new
challenges, and eliminating the obstacles in the way to progress (van Dijke, De
Cremer, Mayer, & Van Quaquebeke, 2012).It is revealed through the
discussion that empowerment descends from the upper top management to the
lower managers. Managers cannot get the power from other means and it is
upto the mind of top management that whether they want to share their power
with the staff or not (I. Wong Humborstad et al., 2014; Liden & Arad, 1996;
Rapp, Ahearne, Mathieu, & Schillewaert, 2006).It has been written in the
earlier study as well that decentralization of authority to some level is better
for firm performance and for the skill development of employees. (I. Wong
Humborstad et al., 2014; Vecchio et al., 2010). Organizational effectiveness is
also achieved if the power is given to other employees and this
decentralization of power leads towards autonomy of the departments in the
longer run. (Cordery, Morrison, Wright, and Wall 2010).
This study proposes that leader can motivate the employees and he can
win the trust of the employees if he disseminates the power to subordinates.
21
(G. Chen, Sharma, Edinger, Shapiro, & Farh, 2011; Cordery et al., 2010) and
connecting subordinates in creation conclusions about the work (G. Chen et
al., 2011; Huang, Iun, Liu, & Gong, 2010).Previous research also revealed that
leader with better personal relations have more tendency to impart power to
others. (Hassan, Mahsud, Yukl, & Prussia, 2013).It is common observation
that leader having more trust of the workers can solve the problems of the
company in much better way as compared to the leader who does not enjoy
workers confidence. The idea of empowering leadership may not be perfect in
complete sense but it has been discussed earlier as well that combination of
empowering and LMX is one of the best combination for leaders (Hassan et
al., 2013; Yukl & Becker, 2006), and many researches go in favor of LMX
with delegation. (O'Donnell, Yukl, & Taber, 2012).
2.4 BUSINESS PERFORMANCE OF SME
Any business firm’s main objective is to get better the operational
performance at any stage. Through the vocation of different sorts of
performance measures, organizations can evaluate the productivity and
viability of their business procedure vis-à-vis their vital goals. Besides,
performance estimation apparatuses can help organizations in assessing their
resources designation forms keeping in mind the end goal to decide how
resources can be better overseen and circulated to the suitable channels(Chen,
Chen, & Peng, 2008).The theory of resource based view of firm promotes this
idea that better firm performance can be achieved if the firm has resources
which are valuable, rare, non movable and inimitable. These resources provide
organization the competitive advantage to secure more market share and more
profit from the business. These resources do not remain the same and with
time transformation is necessary. Social capital is one of the new trend in
intangible asset
Generally, numerous performance measures plans have been based
around financial perspectives, overlooking critical non-budgetary perspective. The assessment of the performance of banks, for instance, for the most part utilizes finance related files, giving a basic portrayal about the bank's budgetary performance in contrast with past periods (Chen et al., 2008).Concentrating just on financial angles, be that as it may, is insufficient for administration to manage the changing business environment(Hsu, 2005). According to Carlin and Guthrie (2001), HPWS are pragmatically adjoined with business performance of a firm. HPWS is integral part of organization which effects each and every employee and in this way it has the tendency to influence all the workers of a firm at the same time. A higher comprehension of HPWS can be created through a hypothetical linkage to proximal results
22
emerging from the average inner social structure of the association. Hence, we try to interface HPWS practices to firms’ organizational innovation and organizational operating performance. Efficiency at last prompts better finance related performance, while flexibility manages the open door to maintain upper hand. Enhanced efficiency is accomplished through the lessening of managerial overhead expenses. A profoundly talented workforce with the obligation and power to settle on choices lessens the requirement for administrative positions that watch individuals who look after the performance of individual work in the organization. Furthermore, worker interpersonal networks may build access to convenient data while likewise lessening monitoring costs (Adler & Kwon, 2002).
2.5 EMPIRICAL STUDIES ON HPWS AND
BUSINESS PERFORMANCE
Human resource practices must be competitive advantage when they
maintain exceptional resources that give the worth to firm(Barney, Wright, & Ketchen, 2001).Previous literature explained how human resource functions or particularly HPWS help to enhance firm performance. It holds that human resource management practices enhance employee’s capability by attainment and enlargement of organizational human capital as a result individual motivation and performance on work place that is enhanced which leads to employees encouragement(Pinder, 2014).
Human resource functions can progress in firm performance by enhancing employee’s skills and knowledge. Human resource system works step by step and for better system it starts its working from the induction of the worker who joins the organization after complete scrutiny and then he is given the training for the particular job. After getting the training he is observed by the system if he is doing his best or if he must be sent to the department on the basis of right man for the job. The advantage of sustainable performance of the organization may leads to individual problem solving and also will increase employee motivation and commitment towards job(Ichniowski, Shaw, & Prennushi, 1997; Snell & Dean, 1992).Human resource management framework provides chance for employee to contribute to firm performance(Collins & Smith, 2006). A few researchers incorporated an organizational level to clarify the relationship between HPWS and individual employee’s outcome (Lu, Chen, Huang, & Chien, 2015)Takeuchi, Chen, & Lepak, 2009).
Numerous current studies on HPWS are focusing firm level only, but
many researchers have argued that there is also a need to study the phenomena
on employee level(Bae, Chen, David Wan, Lawler, & Walumbwa, 2003;
23
Ramsay et al., 2000; Way, 2002).The study conducted by Nishii demonstrates
that human resources build unpredictable attribution for HPWS, and that these
variables are differentially linked with employees’ commitment and job
satisfaction. It also demonstrates that when these variables are studied on
organizational level then they link to organizational citizenship behaviors and
customer satisfaction(Nishii, Lepak, & Schneider, 2008). Finally, some
moderators were also projected that confine the positive correlation of HPWS
and business performance (Iverson & Zatzick, 2011).
Current study intends to explain the role of social capital and how
HPWS may facilitate the firms to develop competitive advantage with help of
employees of the organization. The competitive advantage can also be develop
through leadership styles. Many previous studies on this topic presented
meaningful propositions. This study explored that firms may build and
maintain social networks among top management team members through
HPWS and these networks may help to improve the business
performance(Collins & Clark, 2003).
2.6 INTEGRATING HPWS, SOCIAL CAPITAL AND BUSINESS
PERFORMANCE OF SMEs
The aim of the study is to explore the link in social capital, HPWS and
SMEs performance and also explores that how leadership style (s) helps to
enhance the social capital. HPWS not only help to enhance the SMEs
performance but also change the employee relationship through social
connection. Simultaneously, the human capital role in HPWS context, the firm
developed a cluster of people who were mutually dependent and interactive.
(Pugh, 2016; Tsai, Horng, Liu, & Hu, 2015).
Social capital has three basic dimensions through which it integrates
with other elements. These three dimensions are structural dimension,
cognitive dimension and relational dimension. These dimensions vary from
one society to the other. Structural dimension of social capital is used in the
societies where legitimacy is supreme and institutions are strong enough to
implement their policies in letter and spirit. The reason for this interaction is
formalization of the system in which institution I stronger than the individual
and system cannot be overlooked by any single person. In such society every
organization must have strong structure to deal with the external departments
working in the society. On the other hand relational dimension of the social
capital mostly works in the societies which are traditional and passing through
developing stage. Such societies do not have strong institutional structures and
individuals enjoy more power than the department and in such societies leader
24
must have personal relations with powerful individuals to meet the challenges
of the organization. In social perspective, people work together and interact
with each another for multiple reasons on work place. It is quite common at
work place to interact in very formal way to share their expertise. Interpersonal
skills may be the reasons for further interaction. The tools of HPWS help to
increase the interaction with each other through interpersonal skills of the
employees(Wojtczuk-Turek & Turek, 2015). Employees are interacting each
other, help each others, it not only necessary that interaction is only for
motivation, understand each other and work better for the better SMEs
performance.
25
CHAPTER 3
THEORETICAL FRAMEWORK:
SOCIAL CAPITAL PERSPECTIVE
This chapter investigates literature which describes the relationship
between knowledge productivity, learning and social capital theory. The
narrative of social capital coded with knowledge management has also been
explored with relation to organization work system and importance of
leadership. Social capital helps in the promotion of business by providing
latest and available knowledge which is essential for all the units of
organization. In this way different departments of the company increase their
efficiency to optimal level and when this efficiency is combined in the form of
whole business growth, it generates extra ordinary results. There is expanding
proof that knowledge is inalienably a social and arranged procedure that is
unequivocally affected by qualities of social capital (Van Der Sluis & De Jong,
2009).
Social capital is drawn from the society and due to this reason the
resources which are taken from the society are more synchronized with the
prevailing system and policies. Social capital reveals an obvious conclusion
regarding individuals as it expects to comprehend productive relations. The
principle recommendation of this part is knowledge existing in the society, the
competitive advantage which the company can have is the constant search for
prevailing knowledge which is fully equipped with latest technology and social
definitions (Harrison & Kessels, 2004). Knowledge productivity is the
procedure of distinguishing, assembling and translating applicable data,
utilizing this data for innovation, and applying these capacities to move
forward furthermore, fundamentally develop work procedures, items and
administrations. Knowledge efficiency is an exploration of idea which is
combination of ideas of development and knowledge (Verdonschot, 2009).
3.1 KNOWLEDGE SOCIETY
No century in mankind's history has experienced such a large number of
social changes and such radical ones as the twentieth century (Drucker &
Wilson, 2001). Knowledge management is a developing field which is gaining
its roots on the basis of proper management of resources. Mega production of
goods requires abundance of resources which need proper utilization of
resources in minimum possible time with the aim of perfection. This challenge
26
can only be dealt with the help of knowledge based system which will allow
every resource to give its ultimate output and prove fruitful for the
organization. It is easier to find knowledge resource from the society but it is
difficult to utilize the resource in best possible way and to maneuver the
resource for future challenges. The move to a knowledge society and a
knowledge based economy is among the most prominent. Fundamental to this
viewpoint is the capacity of associations to make and use knowledge as the
principle asset for quality creation. In our insight economy, the use of learning
has changed capital and raw materials(Jansen, Steenbakkers, & Jägers, 2012).
The fundamental norm for this society is that knowledge constitutes the
significant segment of each human movement. Human movement includes
human actions, experiences, relations and research. The interesting part of
human movement is that it is different in every society and it generates
knowledge with different processes and of different types. It is up to the
organization that how this knowledge is adopted and converted in the favor of
the firm for better performance. In a quickly advancing economy, where
knowledge is the principle authoritative currency, associations must have the
capacity to catch on quickly, adjust routinely to new difficulties, and guarantee
that laborers can build and share deliberately profitable learning and
additionally gain specialized and intelligent capacities and ceaselessly enhance
and develop. This concept of a learning economy requires reinventing of the
hierarchical environment, with a prevailing part for the consistent
advancement of workers. It also reflect profoundly rebuilding our assets from
being exclusively capital and work to the abilities of representatives and the
knowledge they acquire and apply in their work(Harrison & Kessels, 2004).
3.2 KNOWLEDGE BASED VIEW (KBV) OF THE FIRM
The working and systems of the organizations have changed to great
extent because the economic basis of firms were material and resource based
in the past but with the rapid advancement of information and technology the
economic basis of firms have shifted to information based generation.
Researchers realized that knowledge based specialists are more important for
the corporations as compared to the material resources. Researchers started to
give more emphasis on the working environment of the firm which must be
innovative, learning oriented and skill developing. Most of the skills of
workers can be learnt from co workers if the organization environment is
supporting and top management is broad minded. (Foss, Husted, &
Michailova, 2010).
27
Most of the companies today have realized that knowledge is the best
competitive advantage and knowledge oriented system and specialists must be
given priority in the organizations. Products and services are made for the
fulfillment of the demands of the people and these cannot be changed at once
but in the making of products knowledge based system can play pivotal role
for the growth of organizations and better delivery of the goods. The
significance of knowledge based system is that each and every department of
the corporation can use knowledge system and all the stages of product
development can take advantage from this system. Knowledge based system is
cheap, it gives competitive advantage and it improves the quality of product
and services. The unique feature of knowledge system is that it is ever growing
system and there is no limit of knowledge for the firms. Knowledge spreads
and enhances itself with time and new technologies continue to appear in the
systems on the basis of knowledge. This feature of knowledge system enables
all the firms to become knowledge based firm and to make their distinction on
the basis of different knowledge and latest technology (Zack,
2003).Knowledge can be an outstanding asset only if it is rare in the society,
immovable and inimitable for other organizations. It must be kept in mind that
knowledge in society keeps on changing and improving with the change in
technology and globalization. Knowledge is intangible asset and this asset has
vast scope regarding policies, system and working. This resource is difficult
for the competitive companies to imitate or to acquire from the market,
secondly knowledge and technology is not accessible to only few firms rather
this asset is available for each and every company and any company can
acquire best and latest knowledge on the basis of research and learning. (Hitt,
Biermant, Shimizu, & Kochhar, 2001).
Knowledge management can be enhanced through organizational
learning in which firms create such an environment where individual is
provided the space to grow and develop his skills. Open system and liberal
democratic culture promotes learning in the firms and employees share each
other skills and knowledge for better results. This sharing of ideas provide the
workers a chance to learn more skills during work hours. Mutual knowledge
exchange enables the corporation to find quick solutions to emerging
challenges (M. Hitt, Ireland, & Hoskisson, 2012). The working structure of
knowledge based firms is different from traditional style of structure in a way
that knowledge management is closely linked with society and less resources
are consumed for more output(Argote & Ingram, 2000; Starbuck, 1992).
Knowledge management is considered more informal way of
management in which bureaucratic style is set aside and liberal values are
pinned in the system (Rylander & Peppard, 2004). The unique aspect of
knowledge management asset is that it is not visible and any company and take
28
competitive advantage with the help of this unseen resource. Another positive
point of this asset is that its scope is extremely vast and any firm can get any
type of rare knowledge which can become core value of the firm(Curado &
Bontis, 2006). Social actors play important role in the development of any firm
and these include culture, demography, people and values and all these assets
are intangible from which the firm can take advantage any time. (Hitt et al.,
2001). There is obvious link between knowledge based view of firm and
human resource management(Harrison & Kessels, 2004; Matlay & Fowler
Davis, 2009).
Most of the researchers agree that firm better performance is the
outcome of HR policies and all those firms which apply practical HR policies
also give importance to knowledge based system. Human resource
management encourages the workers to learn from each other and from the
environment, HR policies give liberty to the employees to interact with each
other and with social actors at the same time. In this way high performance
work system achieves better firm performance with respect to financial gain,
innovative ideas and better administration (Boxall & Macky, 2009; Boxall &
Purcell, 2011; Matlay & Fowler Davis, 2009).
3.3 KNOWLEDGE PRODUCTIVITY
The gap in the literature regarding knowledge productivity is explored
by many researchers who believe that the productivity of the firm can be
enhanced through knowledge to great extent. This productivity is achieved
through knowledge and this knowledge is easily available in the society where
the firm is working. This easy accessible knowledge gives the firm competitive
advantage and sustained growth. This can be achieved with maximum
interaction of employees with each other and with the society at the same time.
Learning environment of the firm is the key to knowledge productivity
in which employees skills are developed and firm performance gets better.
This knowledge productivity supports manufacturing and services and also the
administration system of the company (Keursten, Verdonschot, Kessels, &
Kwakman, 2006).
3.4 PERFORMANCE AS SOCIAL PROCESS
In the most recent decade, the researchers tried in the field of human
resource management. They focused on the social setting to clarify procedures
of individual learning, team learning and organizational improvement
(Berings, Doornbos, & Simons, 2006; Tynjälä, 2013).It has been observed that
29
individuals may represent the culture of the society and at times individuals are
different from the established norms of the society. Performance can be an
integral part of the society but there are some societies which are slow moving
but their individuals are extremely vibrant and progressive and vice versa.
Performance in the past was considered part of the society as a whole and its
sole importance was lacking but in recent times performance has come up with
different definition and it has been revealed that even single company with
best set of skills can out-perform other organizations working in the same
setting. Performance today depends on the working of the firm and social
environment cannot be blamed for the fiasco of any organization. This has
suggestions for our point of view on performance through learning. It is no
more adequate to clarify performance as a sound, individual procedure,
predominantly on the grounds that this dismisses the social environment. In the
connection of this study, performance through learning is seen as inserted in a
social situation.
The principles for social learning to enhance business performance have
been developed. The first principle refers to make good social connection
between employees, the second refers to the substance part that lies at the heart
of each development process, and the third demonstrates that overseeing or
arranging figuring out how to enhance is not really conceivable(Korthagen,
Kessels, Koster, Lagerwerf, & Wubbels, 2001).The field of human resource
management becomes more vibrant by interlinking with social capital and this
can be done only on the basis of social networks. Social networking has
developed its importance in the field of economics, management, marketing
and business research (Akçomak & Ter Weel, 2009).
3.5 SOCIAL CAPITAL THEORY
Social capital is the idea in which different type of asset is disclosed
which is based on the individuals and groups who are working in the society. It
is estimated that corporation works in a given setting and no firm can work in
isolation. While working in any society it is important for the firm to have
close ties with the people and system around the company. These ties of
organization are the relations of top management of the company with the
resourceful people working in the same society. These relationships of
managers can provide astounding support to the company as any organization
takes the resources from the society and provides the products and services to
the society. With better understanding and communication of the organization
with external elements the company generate fruitful results and better firm
performance (Baron, 2000).
30
There are three different sources from where this social capital generates
its roots. Idea is the first source that company must believe on the fact that
social capital is a hidden asset which must be exploited for better firm
performance. Second source is the structure of organization that how this
social capital can be utilized for the betterment of the company. Last source is
the policies and procedures which will continue to take advantage from the
social capital for the sustained growth of the company.
The above mentioned sources gave new horizons to the theory of social
capital and managers started to adopt the sources of social capital in their
companies. It is to be noted that only these three are not the last sources of
social capital rather many constructs are evolving for social capital which need
the attention of researchers (Burt, 1997; Paldam & Svendsen, 2000).
3.6 DIMENSIONS OF SOCIAL CAPITAL
There are different aspects of social capital and most of these aspects are
discussed by Nahapiet & Ghoshal, 1998, these aspects are the structural,
relational and cognitive. Social capital can be defined as the total of all the
resources which are present in a society and which can be exploited through
personal relations and close groups around the individual.
3.6.1 The Structural Dimension
The basic measurement is the example of relations between performers
in a social system. The basic measurement depends on the basic
recommendation that system bindings give access to assets. Structural
dimension is more formal and legitimate as it is recognized and observed by
all the organizations of the society. Structural dimension is the coded rules and
regulations which must be followed by the firms and the level of transparency
which must be observed by all the firms. It is the communication process of
the stake holders which is mandatory for all the firms and through this
communication companies become aware of a lot of potentials and challenges
at the same time. The system design of ties constitutes a critical feature of
social capital, implying that the arrangement of the system has an essential
effect on the openness of data and assets(Nahapiet & Ghoshal, 1998). The
informal organization point of view on learning contends that learning is
influenced by social access through bases of relations, utilization of these
associations through collaboration.
31
3.6.2 The Relational Dimension
The social measurement depicts the nature of a social structure. A
standout amongst the most determined obstructions to exchanging best
practices inside of associations is the presence of exhausting relations between
the source and beneficiary. At the point, when connections are high in trust,
individuals are additionally ready to participate in social trade as a rule. This
makes reliability of people. Standards and approvals speak to a level of
agreement in the social framework. Where a standard exists and has
demonstrated successfully, it constitutes a capable, however some of the time
delicate type of social capital (Szulanski, 1996).Relational dimension is
closely linked with the social ethics and business practices. Trust is the key
construct of relational dimension and if the stake holders of the business
experience trust on each other only then the business performance increases to
great extent.
Besides, commitments and desires satisfy a vital feature in social capital.
Commitments and desires speak to a pledge or obligation to attempt some
action later on. Commitments contrast from summed up standards in that, they
are framed through summed up desires inside of a specific relationship. The
last thing inside of the social measurement is personality and identification.
Distinguished and recognizable proof is the procedure whereby people
consider themselves to be individuals from a particular social
gathering(Forsyth, Lai, & Kielhofner, 1999).
3.6.3 The Cognitive Dimension
The cognitive measurement concerns the common significance and
elucidation of system individuals. Learning and significance are inserted in a
social setting; they are both made and maintained through continuous
connections in such cooperatives (Nahapiet & Ghoshal, 1998).Cognitive
dimension of social capital is based on the skill and learning of individual that
how much he takes the advantage of the external environment and how he
manipulates the circumstances for better business performance. Leadership
style is one example of cognitive dimension in which leader plays important
role for the betterment of the firm. All the external relations of the firm are
based on leader and the advantage of social capital can be drawn by the leader
himself. The intellectual measurement comprises of shared dialect, codes and
shared stories (Putnam, Feldstein, & Cohen, 2004).The cognitive dimension of
social capital speaks to shared implying that goes about as the social oil inside
of systems. The cognitive dimension can be seen as a system of particular
words, expressions, codes and stories of system individuals.
32
3.7 CONSOLIDATING CONCEPTUAL MODEL
The main purpose of the current study is to check the effect of HPWS on
the performance of Pakistani SMEs and the mediating effect of social capital
and also study the effect of leadership style on social capital. This study
proposes the model which is based on the relevant literature. Indicators of the
HPWS are participation, mobility, training, staffing, job description, appraisal,
job security, incentive reward. Whereas, the indicators of firm’s performance
includes operational, innovation and financial performances of SMEs sector.
3.7.1 High Performance Work System and Business Performance
The study related to human resource management indicated mediators
through which HPWS enhance firm performance. HPWS are controlled by
enhancing knowledge, skills and abilities of employees(Becker, Huselid,
Becker, & Huselid, 1998).Extensive recruitment and selection procedures in
employment help to get knowledge, skills and abilities for firm. Knowledge,
skills and abilities are highly developed by human resource attributes on the
basis of coaching, guidance, appraisal system, job structure and job definition.
(Hoque, 1999).Energy and motivation can be infused in the employees on the
basis of high performance work practices which include appraisal system,
training and development and better job design (Delery & Shaw,
2001).Motivation of employees can also be enhanced with the help of
employee commitment and it be achieved through better human resource
practices, liberal system and equal opportunity for staff (Pfeffer,
1998).Learning behavior and social relations are integral part of high
performance work system and these elements help in growth of firm
performance (Collins & Clark, 2003; Kehoe & Wright, 2013; Ramsay et al.,
2000; Takeuchi et al., 2009). The most important element for the organizations
is the proper implementation of internal system in which the skills, knowledge
and capabilities of the workers should be fully utilized by the firm (Huselid,
1995). High performance work system increases the firm output with help of
selection, training, job structure and motivation.
Several SHRM researchers have pointed out three mediators that affect
the organizational performance. Ultimately, HPWPs are operated by three
aspects such as (a) enhancing employee’s knowledge, skills, and abilities
(KSAs), (b) empowering employees to act, and (C) motivating employees to
perform these skills for better performance. (Becker, Huselid, Becker, &
Huselid, 1998; Becker, Huselid, Pickus, & Spratt, 1997; Combs, Liu, Hall, &
33
Ketchen, 2006). Broad recruiting and selection of staff or employees recruiting
to execute knowledge, skills, and abilities (KSAs), for organizational
performance (Hoque, 1999). In addition, knowledge, skills, and abilities can be
improved among employees by providing trainings, improving job design, and
compensational awards for skills development (Hoque, 1999; Russell,
Terborg, & Powers, 1985). In an earlier study, Bailey (1993) claimed that
employees typically performed below their natural potential by way of they
own optional utilization of their time and talent(T. Bailey & Foundation,
1993).Substantially, employees need motivation to leverage their knowledge,
skills, and abilities (KSAs). Thus, HPWPs are crucial such as incentives,
compensation, performance appraisal, and internal promotional policies by
offering inducements to increase motivation among employees (Wright &
Kehoe, 2008). Moreover, HPWPs, for instance, job security, flexible working
schedules, mechanism to resolve employees’ grievances, and comprehensive
compensation plans can also increase the level of motivation with higher
commitment of employees (Ahmad & Schroeder, 2003; Theriou &
Chatzoglou, 2008).
Liberty at work place and discretionary power is strength of any
organization if it wants to take full advantage from the knowledge and skill of
the workers (Thomas Bailey, 1993; Becker et al., 1998).In this context job
structure is important construct for SHRM policies. With the help of better job
structure organization can implement high performance work system for better
performance (Buller & McEvoy, 2012; Delery & Doty, 1996; Wright, Smart,
& McMahan, 1995).
Motivation of the employees can be enhanced with the help of HPWS,
job satisfaction, mutual cooperation, fairness in system and growth in
career(Carvalho & Chambel, 2014; Delery & Shaw, 2001). High performance
work policies not only develop the system rather it also enhances the
knowledge, skill and abilities of the employees and hence better firm
performance is achieved. The knowledge, skill and abilities of the employees
can be enhanced with the help of liberal environment where workers can give
their ideas and suggestions to the top management and in this way the
employee commitment and motivation also increases (Evans and Davis 2005).
They both suggested that HPWS has influence on the internal policies of
the organization then it influences the employees and at last in gives better
results in business growth. HPWS promotes team work and this team work
promotes the resource exchange on the part of employees and as a result firm
prospers to great extent.
34
In addition, HPWPs including employees’ trainings, incentives,
compensation and staffing selectivity enhance typical norms and standards are
helpful in selecting and retaining workers and managers to enhance such
organizational norms. Thus, norms reciprocity and standards build
organizational flexibility by increasing cooperation in complex problem-
solving environment (Tsai & Ghoshal, 1998). Likewise, HPWPs include job
design, employee performance, appraisal. Training and development which
enforce common ideologies in the minds of the employees. This set of thinking
which is common in employees gives the strength to the firm to perform better
in the competition (Durlak, Weissberg, Dymnicki, Taylor, & Schellinger,
2011).These unique changes in the system of firm gives strength to the firm
and makes it flexible and liberal for the employees (Evans & Davis, 2005).
In short, HPWPs, improve staff productivity that increases
organizational performance through two interactive and overlapping processes.
Firstly, they provide employees knowledge, skills, and abilities that is essential
to perform job responsibilities, employees motivation and available
opportunities to perform such tasks for organizational growth (Delery & Shaw,
2001). Secondly, HPWPs improve the internal social structure within
organizations, that facilitates the communication and cooperation among
employees (Combs et al., 2006; Evans & Davis, 2005). Collectively, such
processes increase job satisfaction among employees and it helps to increase
motivational level in employees and it encourages workers to work with
dedication for better productivity and proper decision making (Johns, 2006).
Therefore, it is expected that;
H1: High performance work system will be significantly and
positively correlated with SMEs business performance
3.7.2 High Performance Work System and Social Capital
HPWS helps to enhance the social capital in the firm, which helps
employees/individuals for building better relationship, cooperation and
communication. The study of explored the framework that was an excellent
effort to demonstrate how the social capital of the firm can mediate the
relationship between HPWS and firm performance. The researcher argued that
HPWS help to enhance social capital of the firm.
Typically, organizations face massive pressure in transferring employees
or workers within the departments that creates intensive interpersonal
relationships among their staffs. In addition, interpersonal contacts within
organizations also create illegitimate and other diverse conflicts and distrust
35
among employees’ people involved in such issues and it may stalk from
disagreements concerning the jobs to be carried out. In contrast, ever
increasing employees demands cannot be easily settled because of limited
resources of the organizations. In the previous studies, various scholars
indicated that unhealthy working environment, higher level of role conflicts
and lower level of trust require serious and dedicated efforts that may produce
a great level of employees burnout, an exhaustion (Jackson, Schwab, &
Schuler, 1986; Schwab & Iwanicki, 1982).
In previous study, Cropanzano, Rupp, & Byrne, (2003) climed that such
working circumstances diminish organizational commitment among
employees and firms cannot achieve human capital to gain best possible
productivity from their employees (Cropanzano, Rupp, & Byrne, 2003). In
result, such types of problems are critical and organizations face problems to
resolve employees’ issues because to achieve firm better performance,
profound working of skilled workers is needed which is given by the company
by using human capital from the society. In this way social support of the firm
can be achieved if the organization has good ties with the employees and
employees have better connections in the society.
By giving trust to the employees lot of daily problems of the firm are
solved as workers trust the company and keep working for the betterment of
the organization. This harmony between employer and the employees give
positive cognitive vibes to the workers and they show organizational
citizenship behavior at the work place. In this way the mutual connections of
the employees give positive results to the firm (Umphress, Labianca, Brass,
Kass, & Scholten, 2003). The irony of situation is that these indirect social
resources are not given much value in most of the corporations and employees
fail to get emotional support from the firm at the hour of need. Utilization of
social resources and developing profound trust with the employees is such a
unique feature of any organization that it can give competitive advantage to the
firm in the corporate world. It is upto the top management of the firm that
whether they create environment of trust and loyalty between the workers and
the firm or not and if trust is developed then trust breeds cooperation and
mutual understanding between the employees (Granovetter, 1985; Portes &
Sensenbrenner, 1993).
Trust on each other is developed in more formal structures where
organizations force the rules and internal environment strictly(Featherstone,
Hepworth, & Turner, 1991). Trust among employees encourage them to take
risk as they are certain that their colleagues will assist them and with mutual
cooperation they achieve remarkable objectives (Edmondson & Woolley,
1999). It is concluded here that social capital gives optimism to the firm and
36
firm remains away from all time accountability and punishment system and in
this way all the stake holders become beneficial of the environment (Seers,
Petty, & Cashman, 1995; Uzzi, 1997).Therefore we expect;
H2: High performance work system is significantly and positively
correlated with social capital.
H3: Social capital mediates the relationship between high performance
work system and SMEs business performance.
3.7.3 Leadership Style and Social Capital
Power of leader can be extended beyond the control of immediate
juniors and he can try to give direction to the mind set of people around him.
Both Balkundi and Kilduff (2006) believed that leadership revolves around the
person and it up to the person that whether he generates leadership qualities in
him or not. All these leadership styles develop the understanding between
employees and organization which is necessary for the betterment of the firm.
A prudent leader gives limited liberty to his workers and he maintains better
ties with the society as well. Leader attitude gives confidence to his
subordinates and this confidence turns into trust and mutual understanding
(Balkundi & Kilduff, 2006). Projects which are based on information system
need such a leader who can build trust in the employees regarding work and
organization(Tansley & Newell, 2007). Advanced leaders think one step
further from the organization and try to build an environment of cooperation
with the social capital and external stakeholders (Maak, 2007). Leader is a
dynamic person who has vast vision with profound personal ties and ability to
use resources in best possible way.
Type of leadership can be revealed through the type of behavior which
the leader is showing. (Dubrin, 2001). Today’s firms need successful leaders
who understand the complications of the rapidly changing world wide business
environment. Different leadership styles may affect organizational
effectiveness, growth or performance(Jung, Chow, & Wu, 2003).The role of
leadership style on social capital has not received the attention it ought to have
in literature. The enhancement of leadership helped to developed
organizational resources and capability (the relationships between individuals
and organizations) (Ireland, Hitt, & Vaidyanath, 2002).
Vibrant strategic top management tries to harvest maximum output by
infusing social capital in the business activity in different ways. First they do
not think of themselves as leaders rather they believe that they are responsible
37
for the sustained development of the company. For this reason they devote
their lives to the company and act for the betterment of the business (Hitt,
Ireland, & Harrison, 2005).
These leaders try to make contacts with the stake holders on personal
level and try to achieve the target in best possible way. Thirdly they become
coach for the employees and teach them the teamwork in which all the
employees think in the same way. Fourth point is that these leaders are aware
of the fact of collaboration and competition. They know how and where to
collaborate and where to compete with other firms (Hitt et al., 2005). It has
already been discussed in the previous studies that utilization of group
resources make the group more dynamic and effective (Balkundi & Kilduff,
2006). Social capital has emerged as active construct of the company
competency and it is directly linked with leadership capabilities. Leader must
be aware with the potential of social capital (Zacharakis & Flora, 2005).Before
the starting of the year 2000, firms were spending $50 billion every year for
the development of leadership (Lockwood, 2006) It was found from the
experiences of the companies that single leadership had the tendency to uplift
the firm to great extent. This significance of the leaders convinced the firms to
train the leaders at any cost as they can handle any situation in best possible
way (McCallum & O'Connell, 2009).
Previously the traditional leadership style observed that leader must
have better personality traits, he must act like a leader, and he must have
solution to all problems by taking calculated risks (Balkundi & Kilduff, 2006).
With time the dimensions and external environments of the company has
changed to great extent and old type of leaders may not perform better due to
these sudden changes (Cohen & Prusak, 2001).
The policies of company are changed with the change in external
environment and it has been observed that external changes are taking place on
daily basis. These changes include the supplier alternatives, latest technology,
legitimacy problems and customer needs. All these changes are new
challenges for the leaders(Cohen & Prusak, 2001). Due to these reasons the
leadership today needs to be well equipped with the view of new trends and
solutions available in the market. This study proposes that
H4a: Authentic Leadership has significant impact on social capital.
H4b: Empowering Leadership has significant impact on social capital.
H4c: Transactional Leadership has significant impact on social capital.
H4d: Transformational Leadership has significant impact on social
capital.
38
Figure: 3.1 Social Capital Business Performance (SCBP) Model
Framework is built in light of previous literature. Conceptual framework
asserts to test the effect of HPWS factors (participation, mobility, training,
staffing, job description, appraisal, job security, incentive reward, network
building and teams learning behavior) on business performance specific
factors (financial performance, operating performance and innovation
performance) by using leadership styles and social capital in context of SMEs
of Multan, Pakistan. Moreover, to explore this relationship further, it aims to
explain the role of leadership style to enhance the social capital in the SMEs
sector.
39
CHAPTER 4
RESEARCH METHODOLOGY
The previous chapter builds theoretical framework for the study. This
section explores the research methodology for examining the role of HPWS
towards high business performance keeping in view leadership styles and
social capital of SMEs Multan, Pakistan. Kothari (2004), defines that research
methodology is a systematic mean of solving research problem. This includes
the design of research, geographical study, and target population of the study,
defining sampling techniques and size. It further discusses data collection
procedures, data analysis, reliability and validity precautions related to the
research design.
4.1 RESEARCH PROCESS
M. Saunders, Lewis, and Thornhill (2007)has explained the research
process with the help of research onion. Research onion has layers or stages
which help the researchers to understand and develop the research strategy for
their study. The onion of research process highlighted the effective sequence
of research methodology for the study can be developed. This framework of
research is fruitful for the research to design the research methodology in the
different context (S. Becker, Bryman, & Ferguson, 2012).
4.2 PHILOSOPHY OF RESEARCH
Research philosophy suggests the course of action to know the reality of
the problem which is being examined by the researcher (Bryman, 2015). It can
be the basic meaning towards the knowledge. The suppositions made through
research philosophy provides the means for data examination(Flick, 2015).
Knowledge originated from different paradigms and research helps in
creating more and more paradigms. This knowledge is created on the basis of
reason and logic and hence it is without any fault or error. All the studies
which are conducted on scientific basis have rational results and these studies
become part of knowledge as these are acknowledged by all scientists of the
time. These are not as per normal procedure conflicting with each other, but
instead the choice of research theory is portrayed by the kind of data being
analyzed in the examination cell. Consequently, understanding the
40
examination hypothesis being used can elucidate the assumptions regular in
the exploration of the research technique.
Two primary ontological frameworks can light up the exploration
reasoning methodology: positivism and constructivism(Monette, Sullivan, &
DeJong, 2013). These frameworks might be depicted in an unforeseen route,
(for instance, experimentation and interpretation) yet the fundamental doubts
are widely relative (Bryman, 2015). Positivism expects that reality exists when
self-governing of the thing is analyzed. Basically this suggests the significance
of marvels is dependable between subjects. Then again, constructionism
suggests that the characteristic hugeness of social phenomenon is made by
each passerby or get-together(Östlund, Kidd, Wengström, & Rowa-Dewar,
2011). In this rationality, one can never accept that what is being broken down,
can interpret comparatively among individuals and the key philosophy is to
examine complexities in the respondents' understanding. Research tries to find
out problem area or gap that how this problem can be solved and what are the
reasons for the occurrence of this problem.
The aim of the current study is to generate link of social capital, HPWS
and SMEs business performance. Therefore the study is conducted in post-
positive paradigm. The focus intends to throw light on the role of Chief
Executive Officer (CEO) and Top level management which can help to
enhance the social capital in SMEs.
4.3 RESEARCH APPROACHES
Inductive and Deductive are the two approaches which are common
processes and used by many researchers like (Raulin & Graziano, 2004). In
research approach (deductive), the aim of researcher is to verify their
developed theories and drawn hypothesis by explaining the construct and
generalize idea. Deductive research approach involves a process which starts
from a theory and end to findings (Bell & Bryman, 2007). So, this process is
used in many studies to examine the quantitative data. Research is addition to
the knowledge and such knowledge which is tested and accepted by all. To
make this knowledge acceptable for all different processes are adopted in
which conclusion is drawn on scientific bases. Both these approaches are used
to get to the conclusion which will be an established one on the basis of
rational footings.
Inductive research approach, however, is just the opposite of deductive
approach. Talking about a process which starts from obtained findings from
researchers then develop a theory is called the inductive approach (Bryman
41
and Bell, 2007). The empirical data in inductive approach is observed and
analyzed with a purpose to make new theory or make more predictions (Raulin
& Graziano, 2004).The deductive approach is used for orientation of thesis.
This approach is quite appropriate for the current study as our intensions are
conducting a research about a specific topic getting the findings and
concluding the results rather than building a new theory.
Qualitative and quantitative are the two methods in the field of
management and business for analysis purpose (Bell & Bryman, 2007). The
research strategy which uses to emphasize in data collection, data analysis by
quantification is called quantitative approach. And also Trochim (2006)
discussed that the form of quantitative methods is in numeric form which
contains confirmatory and much better to say the deductive approach to
analyze the data. On the other side, the research strategy that use to emphasize
on words rather than quantification of the collection of data and data analysis
is usually called qualitative research (Bell & Bryman, 2007).Questionnaires
are used for data collecting and quantitative method is applied in this study,
while considering the above discussion.
4.4 POSITIVISTS AND POST-POSITIVISTS
For positivists, the objective of examination is depicting what we
encounter through observation and assessment keeping the end result in mind
to forecast. The social phenomenon is seen as an article that can be
concentrated 'logically'. Positivism expects that social phenomenon can be
drawn closer with investigative technique and makes various suspicions about
the world and the way of research. On the other side Post-positivists trust that
the world may not be 'knowable'. They perceive the world as vastly mind
boggling and open to interpretation(O'leary, 2004).Positivists are of the
opinion that if one problem in one setting can be solved then the same type of
problem can be solved in different setting and time as well. On the other hand
post positivists argue that with the change in setting the process and reason for
the same problem change and new technique will be used to solve same
problem in different setting. They believe that the doings of nature are
different in different environments.
4.4.1 World View
Positivists trust that the world is an altered element whose riddles are
not past human comprehension. They trust that the world is: understandable
what we don't know will be revealed later on as innovation enhances and
42
science develops; unsurprisingly there are laws, hypotheses, and proverbs that
direct the world, for instance the hypothesis of relativity and the law of
gravity; and particular in truth and reality – there is a truth out there that is
material to all. They believe that everything happens for a reason and with help
of scientific ways these reasons can be explored through experiences and
experiments.
Post-positivists see the world as: questionable science may help us to
sometime clarify what we don't have a clue, yet there are numerous things that
we have become wrong in the past and numerous things that we may never
have the capacity to comprehend in all their multifaceted nature; variable the
world is not altered, "truth" can rely on upon the points of confinement of our
capacity to characterize moving wonders; and various in its substances what
may be "truth" for one individual or social gathering may not be "truth" for
another(O'leary, 2004).
4.4.2 The Nature of Research
For positivists, social exploration is a simply logical tries that require to
take after set principles and methodology. It includes investigation of those
things that can be seen, felt, listened, tasted, and noticed as the justification for
all investigative information; also, it is frequently reductionist includes the
investigation of discrete parts of a framework, instead of the framework itself
or its interconnectivity. The nature of research differs with the objective in
mind that whether research is conducted on the process of a system or whether
research is conducted on the problem area faced by the researcher. It is up to
the researcher that research is conducted on the theory and process of the
problem or research is being done on the solution of the problem.
For post-positivists, reflexive examination requests that understandings
of the experimental attempt start to shift. While exploration can be founded on
the faculties, it can likewise be: natural hunches, figurative understandings,
and the inventive are all legitimized as proper methods for knowing and
investigating the world; and all-encompassing scrutinize necessities to
investigate frameworks on the grounds that the entire is frequently seen as
more than the entirety of the parts.
4.4.3 Researchers as Positivists and Post-positivists
Positivists trust that examination is an expert action that should be
embraced via prepared and qualified 'researchers'. Specialists ought to be:
43
specialists for the most part researchers who have fitting background and
capabilities; and constantly objective a scientist's close to home predispositions
have no part in the exploration endeavor. The reason of exploration is to create
information not dependent upon the scientist's convictions, goals, or
predispositions.
Post-positivists trust that the conventional gap between the scientist and
the work they scrutinize is the one that can (and ought to) be decreased. Post-
positivists analysts can act in ways that are: participatory and community
oriented as opposed to research concentrating exclusively on a specific
gathering, post-positivist specialists can likewise work both for and with
members; and subjective scientists recognize being quality bound.
Source:O'leary (2004)
Figure 4.2:Positivists and Post-Positivists
4.4.4 The Methods
For positivists, strategies are characterized sets of methods that should
be completed with demanding detail. The systems are normally: deductive
analysts test a hypothesis and search for affirmation through perceptions;
44
speculation driven analysts propose a conditional articulation that they
endeavor to demonstrate/negate; solid scientists use strategies that will give the
same results under rehashed trials; and reproducible methodological strategies
can be rehashed by other researchers who will gather comparable findings.
For post-positivists, strategies frequently dismiss or develop the
standards of scientific method. Methods are frequently: inductive the
procedure moves from particular perceptions to more extensive speculations
and hypotheses; trustworthy while dependability in strategy may not be
conceivable, post-positivists endeavor to utilize orderly and thorough ways to
deal with exploration; and auditable, the connection particular nature of
scrutinizing may not fit reproducibility, but rather research ought to be obvious
through full and straightforward explanation of strategy
4.4.5 Findings as Positivists and Post-Positivists
Positivists for the most part need their discoveries to have expansive
appropriateness to the entirety of a populace. Findings are for the most part:
quantitative spoke to through numerical information; measurably huge results
are appeared to be valid past simple shot; furthermore, generalizable findings
are pertinent to a population beyond the sample.
Post-positivists perceive the uniqueness of circumstances and/or social
gatherings yet can even now look for more extensive quality in their
discoveries. They look for discoveries that are: idiographic will most likely be
unable to be summed up, yet have their own inherent worth or are transferable
the lessons gained from one setting are relevant to different connections;
profitable post-positivist specialists are frequently inspired by both the creation
of social information and commitments to change; and subjective results are
regularly spoken to through symbolism and words.
4.5 DATA COLLECTION METHOD
For data collection, the study used questionnaire. This data will help to
give the answer about research questions and problem. Questionnaires were
distributed to respondents depending on the targeted sample size(M. N.
Saunders, 2011)and was used to collect quantitative data in this study. The
questionnaire for this research consisted of close-ended questions. The
researcher used questionnaire as a research tool because firstly, it was cheap
and free from interviewer bias. Secondly, the respondents had adequate time to
45
give well thought-out answers. Finally, the study used self-administered
questionnaire to collect data.
4.5.1 Population of Study
The study is focusing on employees of SMEs in Multan region,
Pakistan. “A population may be a group of people, organizations, houses,
records, legislators, objects and so on having common observable
characteristics. The specific nature of the population depends on the purpose of
investigation.” The target population for this study includes CEOs/employees
of SMEs in Multan, Pakistan. According to Security and Exchange
Commission of Pakistan (SECP), total 2609 SMEs are registered in Multan
regional office.
4.5.2 Sampling Techniques
“A sample is a sub-set of the target population and it is used to represent
the population of the study and samples usually provide a greater degree of
flexibility than do census. Thus, information gathered from the sample can be
generalized to general population of study if the samples are carefully selected
to reflect the population characteristics. In order for the results to be reliable,
the sample should represent a miniature of the population”(Krejcie & Morgan,
1970).
In the literature, there are several ways of determining a sample size
such as mathematical formula, principle of 40% (Huysamen, 1991), 25%
general rule of thumb and use of statistical tables (Bartlett, 2001). “Sampling is
the process of selecting units (e.g., people, organizations) from a population of
interest so that by studying the sample we may fairly generalize our results
back to the population from which they were chosen. The determination of
sample size is influenced by many factors that need to be taken into account
simultaneously. The factors include the cost and time constraints, variability of
elements in the target population, required estimation precision and whether
the findings are to be generalized and, if so, to what degree of
confidence”(Joseph F Hair, 2007).
Sample size selection is important element for the research because it
includes the time and resources which will be spent on the research. More time
and expenses will be required for large sample size. Hence it was necessary for
the researcher to balance between time, resources and sample size. It was kept
in mind that the size of data must be sufficient to help the research and
46
findings and maximum efforts must be done to have appropriate results.
Sample size must be appropriate according to the need and research and many
statistical formulas are present to calculate sample size. Data is checked
manually also that there is no mistake in collecting and counting and then
standard deviation, precision and degree of confidence is checked. Researcher
in this research has used convenient sampling. It must be kept in mind that
survey based study need different type and number of data whereas for
secondary data analysis different type of data is required.
Particular size of data is required in CFA Confirmatory Factor Analysis
and in EFA Exploratory Factor Analysis to determine the factor loading and
other statistical measures. In factor analysis there are two methods for the
selection of sample. Both types of selection is observed by many researchers
(MacCallum, Widaman, Zhang, & Hong, 1999; Velicer & Fava, 1998). First
method supports the idea that there should be one absolute number of sample
to have better factor analysis. Second method claims that SVP subject to
variable ratio is important in sample selection. These methods are further
divided and its explanation is given below.
4.5.2.1Method-1
Rule of 100: Some studies suggested that sample size supposed to not
be less than 100(Gorsuch, 1990; MacCallum et al., 1999). Researchers
suggested that sample size should be 100 in the case of less than 20 variables
then result will be satisfactory(Arrindell & Van der Ende, 1985; Gorsuch,
1990). Santos (1999) Recommended that sample size must be 5 times of the
number of variables. Garson (2008) recommended that if factor loading is low
than sample size should be increased.
Rule of 150:Hutcheson and Sofroniou (1999) recommended another
rule of 150, to eliminate the chance of multi-collinearity sample size must be
larger than 150..Rule of 200: Many researchers suggested that sample size
should be less than 200 number (Arrindell & Van der Ende, 1985; Luby,
Svrakic, McCallum, Pazybeck, & Robert Cloninger, 1999).Rule of
250:Guadagnoli and Velicer (1988) suggested that satisfactory sample size
should not less than 250 for any study. 300 sample size also recommend
(Norušis, 2005).
Rule of Significance: Studies suggested that “to get appropriate chi-
squared results, the sample size be 51 more in number than variables of the
study”(Garson, 2008; Lawley & Maxwell, 1973). Rule of 500: Comrey, Lee,
Comrey, and Lee (1992) presented ranking regarding sample size. They
47
suggested that when sample size is 100 then it will consider as poor, 200 as
fair,300 as good,500 as very good and 1000 considered as excellent.
4.5.2.2Ratio Method
A ratio of 2:1: MacCallum et al. (1999) recommended that respondents
should be double of each item of variables. He further suggested that number
of variables should be not exceeded by 100.A ratio 3:1 to 6:1:some researchers
suggested that respondents ratio must be 3 to 6but as a whole sample size
should not less than 250. (Arrindell & Van der Ende, 1985; Fabrigar, Wegener,
MacCallum, & Strahan, 1999).
A ratio of 5:1: many studies recommended that respondents ratio must
be 5:1 (Bryant, Yarnold, & Grimm, 1996; Fabrigar et al., 1999; Garson, 2008).
Ratio of 10:1 is also suggested by some researchers in their studies (Everitt,
1975; Marascuilo & Levin, 1983; Velicer & Fava, 1998).
4.5.3 Sample Size
On the bases of above discussion, the study uses the ratio of 5:1 because
lower sample size may cause the waste of resources and over sample size uses
more resources(Ahmad, Amin, Aleng, & Mohamed, 2012; Lenth, 2001). There
are 125 items of variables which were included in the study, Variable are;
HPWS, Social Capital, Leadership Style and Business Performance. Detail of
these items is given in Appendix B. So, study selected a sample of 625
(125:625) respondents. The sizes of 625 respondents were the employee/CEO
of SMEs sector of district Multan, Pakistan. 547 questionnaires were received
and 31 questionnaires were found with incomplete required information. Total
516 responses were used for analysis and response rate was 82.56%.
4.6 OPERATIONALIZATION OF CONSTRUCTS
Conceptual framework asserts to test the role of HPWS on business
performance. Framework is built in light of previous literature and theory. The
questionnaire is based on the scale. Questionnaire is attached in appendix B.
For measuring the HPWS, the study used 27 items which is formed by (Sun,
Aryee, & Law, 2007) with different dimensions which is mention above in
model. Two other dimensions of HPWS which have included in this study are:
social networks building and team learning behavior. For measuring social
networks building, this study has adapted 8 items scales which is formed by
48
(Collins & Clark, 2003). To measuring team learning behavior, this has
adapted 4 item scale of (Edmondson, 1999).
For this study, respondents were asked to provide performance data on
the distributed questionnaires. Current study has adopted the following
dimensions for measurement of business performance:
(1) Operational Performance
(2) Financial Performance
(3) Innovation Performance
The operational performance has 5 items and financial performance has
6 items measures which have been adapted from (Bowersox, Closs, Stank,
&Keller, 2000). Two items Innovation performance measures has adapted
from(Yli‐Renko, Autio, & Sapienza, 2001). Social capital contain its
dimensions such as relational cognitive and structural which have been used
for this study. For measuring each dimension, there is 4 items scale which has
been to adapted from (Leana & Pil, 2006).
For current study there are four leadership styles. To measure
Empowering Leadership, the study has been adapted 38 items scale by
(Arnold, Arad, Rhoades, & Drasgow, 2000). To measured Transformational
leadership style, this study adapted 5 items scale by (Antonakis, Avolio, &
Sivasubramaniam, 2003). For measuring transactional leadership style, two
items scale was adapted for this study which was developed by (Sosik &
Godshalk, 2000). Another style is authentic leadership, to measure this style 16
items scale has been adapted from (Walumbwa et al., 2008).
4.7 DATA ANALYSIS
In order to address the research problem, and its associated
questions/objectives, data collected from various sources must be compiled
and analyzed (Yin, 1994).In this study quantitative tools were used to analyze
and present data from all the different population categories. Structural
equation modeling (SEM) approach allows researcher to study the serious of
relationship between variables simultaneously. Many studies in management
and social sciences use SEM approach due to availability of famous software
like AMOS and Smart PLS.
49
4.7.1 Structural Equation Modeling Approach
Partial Least Square ( PLS) is described as non parametric structural
equation modeling (SEM) technique which is multivariate analyses of second
generation(Fornell & Larcker, 1987). First PLS approach, Wold (1985) has
attempted to build nonlinear iterative PLS modeling. PLS modeling is fruitful
and effective when the objective is to confirmation of theory and theoretical
background knowledge is rare. It’s a mix with multiple regression and PCA
(Principle Components Analysis).It’s a powerful tool for analysis to small
number of sample size, scales and residual distribution. PLS method is very
effective in the case of prediction.
Structural equating modeling is based on covariance which helps to
identify the issues of SEM within the unmeasured variables(Wiley, Seminar
Press, & America, 1973). SEM approach helps to identify the series of
relationship at the same time in the study. Researcher from social science and
management sciences apply SEM Approach by using popular software like
Smart PLS.
Table 4.1
Multivariate Methods
Generations Primarily Exploratory Primarily Confirmatory
First Generation
Techniques
Cluster analysis
Exploratory factor
Multi dimensional scaling
Analysis of variance
Multiple regression
Logistic regression
Second Generation
Techniques PLS-SEM
CB-SEM, including
Confirmatory factor
analysis
PLS is second generation strong statistical tool for model building and
identify the serious of relationship in complex model. It also helps to
construction of theory and casual effect analysis. PLS is used for cause and
effect analysis where complex model depends on the exogenous and
endogenous variables which is also helpful for the theory development and
casual effect analysis (Wold, 1985), like in current study which measured the
effect of HPWS on social capital and business performance of SMEs.
PLS-SEM is an OLS Regression based estimation method that decides
its measurable properties. The strategy concentrates on the forecast of a
particular arrangement of hypothesis connections that defined the clarified
change in the dependent variables, like OLS regression models. Along these
50
lines, the center of PLS-SEM is more on expectation than on clarification,
which makes PLS-SEM especially valuable for thinks about on the
competitive advantages(Joe F Hair, Ringle, & Sarstedt, 2011; Joe F Hair,
Sarstedt, Ringle, & Mena, 2012). Just like CB-SEM, PLS-SEM does not
upgrade a one of a kind worldwide scalar capacity. The absence of a
worldwide scalar capacity and the subsequent absence of worldwide goodness
of fit ensure are generally viewed as significant disadvantages of PLS-SEM.
At the point of utilizing PLS-SEM, perceived that the term fit has diverse
implications with regards to CB-SEM and PLS-SEM. Fit insights for CB-SEM
are gotten inconsistency between the model (hypothetical) and observational
covariance matrix, while SEM concentrates into the inconsistency between the
approximated estimations the dependent variables and qualities anticipated by
the model being referred(Joe F Hair et al., 2012). PLS have ability to handle
small sample size, formative and reflective type of models, capable to handle
different measurement scale models. It also has ability to handle with different
type of data like ordinal, nominal and interval.
4.7.2 Formative and Reflective Models
At the point when developing the constructs, the researchers consider
two broad sorts of measurements: reflective and formative models. The
reflective estimation model has used a long ago in the field of social science
and is directly help to test the theory.
Table 4.2
Guidelines for Measurement Model
Criteria Decision Reference
Causal priority between
the indicator and the
construct
From the construct to
the indicators: reflective
From the indicators to
the construct: formative
(Diamantopoulos &
Winklhofer, 2001)
Is the construct a trait
explaining the
indicators or rather a
combination of the
indicators?
If trait: reflective
If combination:
Formative
(Fornell &
Bookstein, 1982)
Do the indicators
represent consequences
or causes of the
construct?
If consequences:
reflective
If causes: formative
(Rossiter, 2002)
51
Is it necessarily true
that if the assessment
of the trait changes, all
items will change in a
similar manner
(assuming they are
equally coded)?
If yes: reflective
If no: formative
(Chin, 1998)
Are the items mutually
interchangeable?
If yes: reflective
If no: formative
(Jarvis, MacKenzie,
& Podsakoff, 2003)
In the reflective measurement model, items are correlated within
conceptual construct. Individual item of each construct should be
interchangeable. If any item removes from construct, meaning of construct
should not be change. On the other hand, formative model construct have no
correlation between items. If any items removes from the construct, meaning
of that variables also change due to non-correlated items. It is important to
decide about construct that either it is reflective or formative for analysis
otherwise type I and type II can be generated (MacKenzie, Nichols, Sutton,
Kawanishi, & Bailey, 2005).
In the field of business education, research usually used the formative
measurement model which is more appropriated (Joe F Hair et al., 2011; Ten
Have, 2007). It is very difficult for researcher to decide that model is formative
or reflective in nature. Formative measurement model, items are not specific
inter correlated with each other (Diamantopoulos, Riefler, & Roth, 2008). In
formative measures only calculated weighted average which is similar to the
regression analysis.
4.7.3 Evaluation of Measurement Model
A model evaluation measurement indicates the relationships between
variables and items of empirical study. The evaluation measurement model
helps us to compare the theoretical frame work and actual result of model
which is representative of sample data. The results of evaluation measurement
model from SEM-PLS having some evaluation criteria of nonparametric.
Table 4.3 showed the different evaluation criteria about both models
(reflective and formative).
52
Table 4.3
Evaluation of Measurement Model
Reflective Measurement Formative Measurement
Internal consistency
(composite reliability)
Indicator reliability
Convergent validity
(average variance extracted )
Discriminant validity
Convergent validity
Collinearity among indicators
Significance and relevance of outer
weights
In reflective model, items are correlated with constructs. Reflective
model can be measured through item loading size. In the case of formative
model measurement, loading size can be misleading because items are not
correlated. Therefore, formative model can be evaluated through the weight of
latent construct. Weight of the each construct provide the information that how
much each construct is contributing in the formative model(Harris, 1989).
4.7.4 Evaluation of the Structural Model
Evaluation of structural model either its formative or reflective these test
are being applied to evaluation of any model. Due to limitation of other
software like SPSS are not able to handle formative model of current study
(Bagozzi & Fornell, 1982). To study formative model, Smart PLS version 3.0
has been selected to test the structural model and find out the links in
dependent and independent variables. It also provided the test like;
Coefficients of determination (R2)
Predictive relevance (Q2)
Size and significance of path coefficients
f2 effect sizes
q2 effect sizes
PLS is always suitable to study the relationship of the complex model. It
also helps to find out the series of relationship at the same time.
53
CHAPTER 5
DATA ANALYSIS
Data analysis chapter presents work as a way to ensure validity,
reliability and regression analysis. For this reliability analysis has been
performed by taking independent variable as High performance work system
and dependent variable as business performance separately with the help of
VIF values.VIF values are calculated separately to ensure reliability of each
construct. After gauging validity and reliability of the constructs, correlation
and regression analysis has been conducted to measure the impact of HPWS
on business performance of the SMEs at Multan, Pakistan.
5.1 ANALYTICAL PROCEDURES
The study performed initial data screening test to check the missing
values, aberrant values for further analysis like normality, bivariate correlation
and other analysis to measure and prove the research hypotheses. Values of the
results are in number through which it is decided to accept or reject the
hypotheses.
5.1.1 Preliminary Data Screening
The preliminary data screening is performed through the analysis of
control variables missing values, aberrant values or abnormal value,
descriptive statistics, normality and correlation(J. F. Hair, Babin, Black, &
Anderson, 2010). For the purpose collected data is screen at initial level to
ensure the suitability of data for further analysis.
5.1.2 Missing value Analysis
For the purpose of data screening, firstly missing value analysis is
performed, because presence of any missing or null value in data set can cause
problems or difficulty by providing some nature of incorrect, incomplete or
misleading outcomes(J. F. Hair et al., 2010).
In case, if null or missing values exist in the data then more frequently
these missing values are replaced by “Mean Substitution Method” in SPSS
software(J. F. Hair et al., 2010). In missing value analysis, the study could not
54
find any missing value in data set. Its mean data file is suitable for further
analysis.
5.1.3 Aberrant Values
Aberrant values are “those values in the data set that fall outside the
response categories. As the scale of current study ranged from 1 to 5 so those
values which will lie outside this range were recognized as aberrant values”.
The reason behind this presence of aberrant values could be the clerical error
during data entry process. If aberrant values exist in any data file then a new
variable named “aberrant” is created in that data file to compute those values
that do not fall in category of 1 to 5. But, in current data file no aberrant value
was found.
5.2 DESCRIPTIVE STATISTICS
Basic descriptive statistical analysis has been applied to understand the
numeric values however it did not tell the whole story of the study. It describes
about the respondent’s gender, education, marital status, experience and age of
the current study. Arithmetical mean (average) is calculated due to very low
observation in the respondent data. Standard deviation which is helpful to
know the variation in the variables is calculated. According to Table 5.1,
87.6% males and 12.4% females were respondent. Usually, males are high in
number as compared to females in the culture of Pakistan. According to the
data, 22.3 percent are single and 77.7 are married.
Employees experience is always considered valuable in the
organizations. The data showed that 12.2 percent of employees have 3 or less
than 3 years experience. 29.5 percent employees of SMEs are with 4 -6 years
experience and 27.9 percent employees are with 7-9 years experience. It
further indicates that 14.7 percent employees have 10-12 years working
experience. Only 15.7 percent employees have 13 years above experience.
55
Table 5.1
Respondent’s Profile
Factors Profiles Percentages (%)
Gender Male 87.6
Female 12.4
Marital Status Single 22.3
Married 77.7
Experience
0 year -3 years 12.2
4 years -6 years 29.5
7 years - 9 years 27.9
10 years -12 years 14.7
13 yearsand above 15.7
Respondent Age
25 years or less than 25 years 3.9
26 years -30 years 21.9
31 years -35 years 39.7
Above 36 years 34.3
Educational Level
Metric 2.7
FA 5.2
BA 26.7
MA 60.1
MPhil 5.2
The above mention table indicates that 34.3 percent of employees are
above 35 years old,39.7 percent Employees fall in the age group of 31-35
years. Under 25years employees also participated in this research which were
only 3.9 percent of total respondents. Only 21.9 percent respondents were from
26-30 years age group.
The table also represent that the educational level of different
respondents: 60.1 percent respondents have master degree in different
subjects.26.7 percent B.A qualified, 5.2 percent are FA passed and 2.7 percent
respondents were matric qualified. Only 5.2 percent are highly qualified with
the degree of MPhil.
5.3 RELATIONSHIPS BETWEEN VARIABLES
It is important to find out the relationship for all the variables like
HPWS, social capital, business performance and leadership styles. Finding
from the correlation coefficient of quantitative data help to provide the
strength of relationships between variables (independent and dependent).
56
The word ‘r’ showed the value of correlation coefficient. The value of
“r” is between -1 to +1 regardless the number of respondents. The value “0”
indicated that there was no correlation between independent and dependent
variables. If “r” values is -1 or +1, indicates the high correlation between
variables. Positive and negative values of correlation indicate the expansion or
deduction of the values in other variable. However, the value of high “r” does
not mean that variables have cause and effect relationship.
Pallant and Manual (2001) Suggested that if the value of correlation is
0.9 or greater than multicollinearity exits. For the purpose, this study checks
the relationships between variables, applied correlation by using SPSS that
shows that no bivariate correlation values exceed by 0.9. It can be summarized
that all the independent variables are independent in nature so there is no
chance for multicollinearity.
Correlation results are shown in Table 5.2. Result indicates that HPWS
has positive relationship with all the variables like business performance and
social capital. As Collins and Clark (2003) concluded that HWPS has positive
effect on business performance. The relationship remains significant between
HPWS and different leadership styles like empowering leadership,
transformational leadership, transactional leadership and authentic leadership.
In reflective measurement model, there is high value of
correlationbecause the entire items are depended on each other. But in the case
of formative model, the value of correlation can be high, low, positive,
negative and zero. Formative constructs are not correlation / depended on each
other (Chin, 1998; Hulland & Business, 1999). In this current study all the
formative indicators are correlating in the following Table.
57
Table 5.2
Correlation Coefficient
Variables 1 2 3 4 5 6 7 8 9 10 11
1. HPWS 1
2. OP .531**
1
3. FP .582**
.514**
1
4. IP .542**
.366**
.513**
1
5. SSC .596**
.397**
.387**
.408**
1
6. RSC .512**
.420**
.413**
.373**
.638**
1
7. CSC .570**
.439**
.412**
.446**
.544**
.660**
1
8. EL .724**
.503**
.573**
.521**
.515**
.558**
.558**
1
9.Transformational Leadership
.511**
.262**
.439**
.495**
.356**
.328**
.415**
.614**
1
10. Transactional Leadership
.511**
.312**
.335**
.436**
.397**
.368**
.376**
.513**
.601**
1
11. AL .608**
.396**
.536**
.473**
.410**
.369**
.393**
.633**
.615**
.568**
1
**. “Correlation is significant at the 0.01 level (2-tailed)”.
Above Table 5.2 shows the correlation coefficient of different
constructs. All the constructs have relationship with each others. HPWS, social
capital (SCS,RSC and CSC), business performance (OP,IP and FP) and
leadership styles (Empowering Leadership, Transformational Leadership,
Transactional Leadership and Authentic Leadership) have significance
relationship with each others. This relationship help to support the theory
which is presented with the reference to role of HPWS, social capital and
leadership styles in business performance.
5.4 PLS MODEL ANALYSIS
This study analyzed the data by using Smart PLS 3.0 version like
coefficient of determination, Path coefficient and predictive relevancy. All the
constructs were included in analysis as formative indicators. Formative model
result analysis has two stages by using PLS. In the measurement model, there
was assessment of reliability and validity of the each construct which was used
58
in the study. In the 2nd
stage of the analysis, formative model was analyzed by
the Path coefficient and predictive relevancy(Barclay, Higgins, & Thompson,
1995).
5.4.1 Analysis of Measurement Model
Measurement model analysis helped to authenticate the reliability and
validity of the constructs which are included in the study model. It should be
ensured that indicators are formative and reflective before checking the model
reliability and validity. If model indicators are reflective in nature then items
reliability, construct, discriminate and convergent validity can be analyzed.
But in the case of formative indicators, correlation between variables items is
not required. Therefore, there is no need to check the reliability of the model.
This is not making any sense to compare the loading of the variables indicators
so no need to check the internal consistency.
According to Petter, Straub, and Rai (2007),Gefen and Straub
(2005),Diamantopoulos et al. (2008), in the case of formative indicators no
need to apply reliability test because of factorial unity so Cronbach’s Alpha is
not required. Andreev, Heart, Maoz, and Pliskin (2009) suggested that to
check the reliability of the formative indicators the test of multicollinearity
should be adopted. However in this second opinion has been followed.
5.4.2 Validity Test
To prove the validity of the formative model the bootstrapping approach
has been applied. Validity test indicated that three indicators are significant
and remaining one indicator is found insignificant. It is suggested by Petter et
al. (2007) that insignificance indicators should be removed but Nunnally and
Bernstein (1994) augured thatit may be change inthe theoretical aspect. Jarvis
et al. (2003) also suggest that removal oftheinsignificance indicator negatively
effects on content validity of the formative construct.
59
Table 5.3
Validity Test
Name of Construct Code Weight t-value Sig.
HPWS
EA 0.091 1.606 0.109
EJD 0.054 1.038 0.300
EJS 0.108 2.016 0.044
EM -0.004 0.074 0.941
EP 0.224 3.445* 0.001
ER 0.114 1.768 0.078
ES 0.187 3.394 0.001
ESNB 0.191 2.838 0.005
ET 0.118 1.447 0.149
ETLB 0.268 4.387* 0.000
Business Performance
FP 0.432 30.705* 0.000
IP 0.417 26.433* 0.000
OP 0.397 32.162* 0.000
Social Capital
CSC 0.509 8.437* 0.000
RSC 0.217 2.888 0.004
SSC 0.434 6.961* 0.000
Leadership Style
AL 0.214 3.098* 0.002
EL 0.737 14.853* 0.000
Transactional 0.152 2.504 0.013
Transformational 0.026 0.393 0.694
Significance:*At 1%(2.576) **At 5%(1.96) *** At 10%(1.645)
Note: HPWS=High performance work system, EA= Appraisal, EJD= Job Description, EJS= Job Security,
EM=Mobility, EP= Participation, ER=Reward, ES=Staffing, ET= Training, ESNB Social Network Building,
ETLB= Team Learning Behavior, OP= Operational Performance, FP= Financial Performance, IP=
Innovative Performance, SSC= Structural Social Capital, RSC= Relational Social Capital, CSC= Cognitive
Social Capital, AL= Authentic Leadership and EL= Empowering Leadership
Weight of the constructs was calculated by using bootstrapping through
PLS 3.0 version in Table 5.3 that indicate that how each indicator represented
the construct. As far as HPWS construct is concerned employee team learning
behavior has highest contribution towards HPWS as compared to any other
indicator. Employee mobility is insignificant indicator but due to the
theoretical perspective of the construct and maintaining the content validity it
was not removed from the main construct.
In business performance construct, financial performance indicator is
main contributor towards its construct as compare of the other indicators like
operating performance and innovation performance. All the indicators of
business performance construct found significance. In the observation of above
60
Table 5.3, social capital construct has three indicators. All indicators were
found significant. Cognitive social capital indicator has highest contribution
towards the social capital construct as compare to other indicators like
structural and relational dimensions of social capital.
In measuring the leadership styles, empowering leadership is main
contributor of this construct as compare to other indicators. Transformational
leadership style has very low contribution towards this construct. All the
indicators were found significant.
5.4.2 Reliability Test
The construct reliability of the formative indicators much be executed
with the help of multicollinearity test suggested by (Andreev et al., 2009).
With the help of Variance Inflationary Factor (VIF) multicollinearity can be
deducted because high collinearity between indicators can cause the instability
in results and it is also difficult to understand the role of indicators in
construct. For this purpose, SPSS has been used to perform the test of
multicollinearity. It is suggested that the values of VIF should be less than 10.
Lesser than 10 VIF values does not indicate the problem of multicollinearity
(Marx & Smith, 1990).
61
Table 5.4
Reliability Test
Name of Construct Code VIF
HPWS
EA 1.895
EJD 2.010
EJS 1.858
EM 2.107
EP 2.619
ER 2.070
ES 2.073
ESNB 2.476
ET 2.169
ETLB 1.834
Business Performance
FP 1.944
IP 1.924
OP 1.894
Social Capital
CSC 2.330
RSC 2.533
SSC 2.164
Leadership Style
AL 2.461
EL 3.239
Transactional 1.943
Transformational 2.391
The result of above Table 5.4 showed that the values of VIF is less than
10 of every indicators of the constructs which help to concluded that there is
no any multicollinearity issue. The values of VIF are given in the above Table
5.4.
Note: HPWS=High performance work system, EA= Appraisal, EJD= Job Description,
EJS= Job Security, EM=Mobility, EP= Participation, ER=Reward, ES=Staffing, ET=
Training, ESNB Social Network Building, ETLB= Team Learning Behavior, OP=
Operational Performance, FP= Financial Performance, IP= Innovative Performance,
SSC= Structural Social Capital, RSC= Relational Social Capital, CSC= Cognitive Social
Capital, AL= Authentic Leadership and EL= Empowering Leadership
5.4.3 Analysis of Structure Model
Measurement model is confirmed reliability and validity from the above
discussion and analysis. Analysis of measurement model consists on
application of the tests like significance of relation from beta values, goodness
of fit from R2and model predictive power.
62
To understand the role of HPWS in social capital and business
performance of the SMEs through SEM this is based on partial least square
(PLS). PLS is non parametric technique which is not required the data
normality. Figure 5.1 showed the analysis of structure of measurement model
which including the result of weights, path coefficients and coefficient of
determination through structure equation modeling by Smart PLS vision 3.0.
Figure 5.1:Structure Equation Model
Formulation of hypothesis in research has importance and has generally
measured through path coefficient analysis. Path coefficient allowed the
fulfillment of proposed hypotheses (Sáenz, Aramburu, & Rivera, 2007). For
this purpose applied coefficient by using bootstrapping technique using 500
re-samples. Table 5.5 showed the result of model path coefficient.
63
5.4.3.1 Impact of HPWS on Business Performance
It has been revealed from the results of data analysis that HPWS has a
positive and significant impact on business performance. Result suggests that
the HPWS (independent variable) impact on business performance (dependent
variable) therefore it can be concluded that relationship exist between HPWS
and Business Performance in SMEs of District Multan, Pakistan. HPWS has
significant impact on the business performance indicators such as operational,
financial and innovative business performance. Some previous researches in
this context also proposed the positive impact of HPWS on business
performance i.e. operational, financial and innovational by (Ichniowski, Shaw,
& Prennushi, 1997; Snell & Dean, 1992);(Pinder, 2014) . Moreover, these
results are similar which were previously explored by (Combs, Liu, Hall, &
Ketchen, 2006; Takeuchi, Lepak, Wang, & Takeuchi, 2007; Way, 2002).
Hence in lieu of above mentioned results it is concluded that result of 1st
hypothesis is accepted.
5.4.3.2 Impact of HPWS on Social Capital
Table 5.5 shows that that the impact of HPWS on Social Capital shows
the positive and significant relationship. The result also suggests that HPWS
and social capital are related each other. This positive and significant effect
claims that there is relationship in one direction between HPWS and Social
Capital. The result showed that HPWS has significant impact on social
capital`s dimensions i.e. cognitive social capital, relational social capital and
structural social capital of SMEs employees. The results of current study are
consistent and reliable with results of several previous studies conducted by
(Evans & Davis, 2005; Gant, Ichniowski, & Shaw, 2002; Leana & Van Buren,
1999). Thus, the result claims that H2 is accepted.
5.4.3.3 Impact of Social Capital impact on Business Performance
Result of above table 5.5 shows the positive and significant impact of
Social Capital on business performance This suggests that relationship
between social capital and business performance is in same direction and
significant. Maximum utilization of social capital promotes the growth of
business and same is the case with SMEs of Multan, Pakistan that better
implementation of social capital will lead to better SM performance. These
findings are consistent with the studies conducted by (Bosma, Van Praag,
Thurik, & De Wit, 2004; Cooke & Wills, 1999; Santarelli & Tran, 2013; Stam,
Arzlanian, & Elfring, 2014) Thus, the results claim that H3 is accepted.
64
5.4.3.4 Impact of Leadership style on social capital
The result of table 5.5 showed the mix results of leadership style and
social capital relationship. It is found in the results that Leadership style i.e.
Authentic Leadership, Transformational and Transactional leadership has
insignificant relationship with social capital. But Leadership style i.e.
Empowering leadership has found significant and positive relationship with
social capital. This empowering leadership style helps to enhance the social
capital in SMEs of Multan , Pakistan.
Table 5.5
Model Path Coefficient
Hypo-
thesis Model Path
Beta
values t-values Sig. Decision
H1
HPWS and Financial Performance
0.275 4.474 0.000
Supported HPWS and Operation
Performance 0.403 5.783 0.000
HPWS and Innovation Performance
0.175 3.052 0.002
H2
HPWS and cognitive social capital
0.368 6.636 0.000
Supported HPWS and relational social
capital 0.261 3.977 0.000
HPWS and structural social capital
0.438 6.451 0.000
H3
Business Performance and cognitive social capital
0.329 7.249 0.000
Supported Business performance and
relational social capital 0.132 2.173 0.030
Business performance and structural social capital
0.236 4.961 0.000
H4
Authentic Leadership and cognitive social capital
-0.086 1.635 0.103 Not
Supported
Authentic Leadership and relational social Capital
-0.061 1.091 0.276 Not
Supported
Authentic Leadership and structural social capital
-0.016 0.288 0.773 Not
Supported
Empowering leadership and cognitive social capital
0.275 4.474 0.000 Supported
Empowering leadership and relational social Capital
0.403 5.783 0.000 Supported
Empowering leadership and structural social capital
0.175 3.052 0.002 Supported
Transformational leadership and cognitive social capital
0.086 1.541 0.124 Not
Supported
65
Hypo-
thesis Model Path
Beta
values t-values Sig. Decision
Transformational leadership and relational social Capital
-0.080 1.492 0.136 Not
Supported
Transformational leadership and structural social capital
-0.029 0.472 0.637 Not
Supported
Transactional leadership and cognitive social capital
0.042 0.912 0.362 Not
Supported
Transactional leadership and relational social capital
0.108 2.124 0.034 Supported
Transactional leadership and structural social capital
0.106 2.291 0.022 Supported
Table 5.5 has beta values, t-values and their level of significance. Result
indicated mix values. Some found significant beta values and others found
insignificant. HPWS and business performance has significant relationship
which is found in the studies of (Combs et al., 2006; Takeuchi, Lepak, Wang,
& Takeuchi, 2007; Way, 2002). HPWS and social capital also found
significant relationship which is consistent with the studies of (W. R. Evans &
Davis, 2005; Gant, Ichniowski, & Shaw, 2002; Leana & Van Buren, 1999).
The result showed that all social capital dimensions have significant impact on
business performance of the SMEs expect relational dimension of the social
capital. The study includes the leadership impact on social capital. Result
showed the only significant impact of empowering leadership style on social
capital. Remaining all styles like authentic leadership, Transactional leadership
and Transformational leadership styles have insignificant impact on social
capital.
According to Chin (1998) the values of path coefficient must be at least
0.20. Some coefficient path are greater than 2.0 i.e. HPWS and cognitive
dimension, HPWS and relational dimension, HPWS and structural dimension,
business performance and cognitive dimension, business performance and
structural dimension, empowering leadership and cognitive dimension and
empowering leadership and relational dimension. But some path remain
insignificant because path value is less than 0.20 i.e. Business performance and
relational dimension, Authentic Leadership and cognitive dimension,
Authentic Leadership and relational dimension, Authentic Leadership and
structural dimension, Empowering leadership and structural dimension,
Transformational leadership and cognitive dimension, Transformational
leadership and relational dimension, Transformational leadership and
structural dimension, Transactional leadership and cognitive dimension,
Transactional leadership and relational dimension and Transactional leadership
and structural dimension.
66
5.5 OVERALL MODEL TESTING AND ESTIMATION
The dependent variable explained the value of R2
by the independent
variable. The value of R2 of the business performance which is explained by
the HPWS is 36% while the value of cognitive dimension is 38%, Relational
dimension is 37% and structural dimension is 35% in the overall model testing
and estimation. Overall model having good R2 values which help to explained
the good explanatory power.Cohen (1988) has categories the values of R2 and
their effect: Large effect=36%, Medium Effect =25% and small effect= 10%.
The values of R2 in this study are more than 36% means large effect.
According to Bellman (2003) the value of R2 should be more than 10% which
is satisfactory and best reporting in the research.
Table 5.6
Model Testing
Model Path R2
Q2
Sig.
Cognitive social capital 38% - 0.000
Relational social capital 37% - 0.000
Structural social capital 35% - 0.000
Business performance 36% - 0.000
Stone Geisser test of predictive relevance - 0.115 -
Predictive validity of the model can be checked by non parametric test
of Stone Geisser (Q2). Q
2value should be greater than zero (0) to justify that
model has validity (Chin, 1998). Higher value from zero will show that model
has predictive relevance.
In the current study, the value of Q2 is greater than zero (0) which means
that model has predictive power. Table 5.6 shows that HPWS, social capital,
leadership styles are important drivers for business performance.
67
CHAPTER 6
CONCLUSION
High performance work system has become need of the hour due to less
resources and more competition. Only fast and better system can sustain the
growth of the company otherwise all the competitive firms will get lead in the
market. This HPWS is more important for SMEs as these enterprises have less
resources and limited surroundings. To overcome the problem of limited
resources it has been discussed that social capital must be manipulated by the
owner manager of the firm for better business performance. The objective of
the research is to investigate the impact of HPWS on social capital and SMEs
business performance of the Multan district, Pakistan. Among HPWS
constructs strategic human resource management has affected enhanced
business performance the most among all the other three constructs of SMEs.
In the beginning of this study, some hypotheses were formulated on the
bases of path coefficient which were calculated by using Smart PLS 3.0
version. The main objective of this thesis was to create structural link between
HPWS, social capital, leadership styles and business performance. According
to Chin (1998) the values of path coefficient must be at least 0.20 to analyzed
the hypotheses purposefully. Some values of path coefficient found significant
and some other insignificant. The hypotheses can also be checked by
coefficient of determination and test of Stone Geisser. Enough evidence as
empirically found to accept hypotheses H1,H2,H3 and H4 such as (Combs
et al., 2006; Takeuchi et al., 2007; Way, 2002);(W. R. Evans & Davis, 2005;
Gant et al., 2002; Leana & Van Buren, 1999).
After applying the different test like reliability and validity measurement
model, path coefficient and Stone Geisser test, this can be decided from the
measurement and structural that 38% variance in cognitive dimension, 37%
variance in Relational dimension, 35% structural dimension and 36% variance
in business performance successfully explained. This study overall concluded
that the HWPS is positive correlated with high business performance of the
SMEs sector of Multan, Pakistan. Leadership style like empowering leadership
has positively correlated with social capital. Empowering leadership style
helps to enhance social capital in SMEs. Transactional leadership, authentic
leadership and transformational leadership styles have negative impact on
different social capital dimensions. Therefore, this study provides the first ever
empirical evidence that social capital helps to enhance the SMEs business
performance.
68
6.1 PRACTICAL IMPLICATIONS
This study can be taken by the owner managers as a guide in whom it
has been explained that how manager can take advantage from the social
capital without spending many expenses and how resources can be generated
in bounded setting where competition is also very high. To increase awareness
among employers/owners/managers and the key decision makers in the SMEs
to implement this HPWS model efficiently in order to achieve organizational
goals and objectives and there by maximizing business performance, this study
further enables the decision makers to take necessary steps so as to explore and
address the changing needs and wants of their human resource which is
directly proportion to the overall performance by using social capital.
Ultimately, it reminds managers about two parallel mechanisms that
work together to lead to the collective performance, for instance, the individual
and the interpersonal relationships. Some practices are originally designed to
improve or motivate individuals and it may also has a certain influence on the
interpersonal relationships among employees. Managers should take this into
consideration when designing the practices, utilizing the positive influences
and avoid the negative effects. Secondly, when some managers still feel doubt
whether HWPS could indeed help with the firm performance, this study offers
additional support for the HWPS' positive side, especially for the highly
technical company that offers employees' motivation, knowledge transfer and
innovation are extremely important. In spite of these practical implications,
one also needs to note the boundaries in actual practice. The investments in
human capital and in changing HR practice systems are all costly.
Organizations require to compare the benefits and investments in such
kinds of decisions. As was discussed, organizational social capital is an
important resource for all organizations, but is especially important for those
organizations that are knowledge-intensive, rely on individuals' commitment
and intrinsic motivation that require individuals' close cooperation, and they
focus on continuous innovation. In these organizations, social capital is
extremely critical and cultivating social capital by transforming human
resource management practices may be more beneficial for them.
6.2 SCIENTIFIC CONTRIBUTION
The purpose of the study is to put in into existing body of the knowledge
(theory) by considerate that how high performance work system can affect on
social capital that lead to overall organizational performance. The purpose of
69
current research is to investigate the social context of the organization by
including social capital theory. Human resource and social capital relationship
is considered future prospective of organization (Cleveland, Byrne, &
Cavanagh, 2015; Kessels & Poell, 2004; Nakamura & Yorks, 2011). This
study helps to developing a conceptual framework for SMEs which will help
to look insight into organizational performance by using social capital.
6.3 MANAGERIAL CONTRIBUTION
In knowledge economy, organization should plan efficient working
environments that will help to knowledge efficiency by using social
interactions and called all employee to contribute(Amado, Stancliffe,
McCarron, & McCallion, 2013; M. M. Verdonschot, De Witte, Reichrath,
Buntinx, & Curfs, 2009). The purpose of the study is to put into practice by
providing Strategic human resource management researcher, technicians and
scholars for interference on the scientific basis to sustain the organization
performance by using social capital.
The results of this study outline several useful implications regarding the
management of HPWPs and retention of engaged employees in the workplace.
Work engagement is a long-term and continuous process. Therefore, managers
need to understand the critical role of social exchange for work engagement
and its performance outcomes (Saks, 2006).Managers should provide
employees with training, empowerment and rewards that would make them
feel obliged to respond to the organization via elevated levels of work
engagement and performance outcomes. Specifically, management of the
SMEs should make sure that appropriate reward policies are implemented
within the organization. Management of the SMEs should also ensure that they
have continuous training programs for improving employees’ technical and
behavioral skills and provide them adequate and proper responsibility and
authority for managing customer requests and delivering effective service
recoveries. The presence of continuous and effective training and
empowerment practices, coupled with employees’ perceptions of fairness in
rewards, would enable managers to retain a pool of engaged employees who
can deal with customer requests and complaints effectively and go beyond
their formal role requirements for satisfying customers. As stated by Bakker,
Schaufeli, Leiter, and Taris (2008), it is important to retain engaged employees
in the workplace, because they often have positive emotions and better
psychological and physical health than disengaged employees. On the other
hand, it should be noted that the acceptance of empowerment by frontline
employees is not a sure thing, because it may result in stress (Yavas
&Babakus, 2010). With this realization, a significant implication for managers
70
is the need for training employees successfully to accept responsibility and
authority in challenging service encounters. On a closing note, the
aforementioned implications would also be useful for managers of SMEs
because of the fact that there is a lack of qualified manpower in most
organizations that are devoid of contemporary human resource management
practices.
6.4 LIMITATIONS OF THE STUDY
Due to paucity of time, this research is being conducted through same
questionnaire designed from the perspective of management, decision makers
who are responsible for HPWS model implementation and the employees who
are experiencing such implications in their respective organizations. For in
depth analysis a separate set of scale for management and employees is highly
desired.
The study used cross-sectional data for evaluating the research
hypotheses. This practice does not permit firm conclusions in terms of
causality. Although the hypothesized relationships have been developed based
on SET and empirical evidence, in future studies using longitudinal data for
testing the relationships reported in this study would be beneficial. Second,
training, empowerment, and rewards are the indicators of HPWPs. However,
there are also other indicators of HPWPs, for instance, internal career or
promotion opportunities, teamwork, and work-family balance (Ji, Tang, Wang,
Yan, & Liu, 2012). The inclusion of other relevant HPWPs in the research
model would shed further light on their relationships with work engagement
and performance outcomes.
The study was limited to the local SMEs firstly due to uncertainty and
security threats, and secondly management, owners of SMEs and employees in
other cities would need little bit more guidance in filling up questionnaire,
thirdly the required response rate was high in this area because of social and
political networking. Scope of this study remained limited to one or two cities
due to less resources and time but in the given resources best possible results
have been incurred. It was also difficult to intrude in the working of SME and
to get the answer as to how these SMEs communicate with social capital and
how they achieve competitive advantage.
Since people are not aware of the benefits of research and considered as
a futile exercise, therefore, a few did not respond seriously while providing
information in the questionnaire. Even with all the above limitations, this study
71
is a true contribution in the literature of High Performance Work Systems on a
macro level and particularly in Pakistan on a micro level.
6.5 DIRECTIONS FOR FUTURE RESEARCH
1. HPWS model can be studied, once applied successfully in the SMEs,
separately from the employees’ perspective in but with a few
changes in the questionnaire, that is only from the employee point of
view. Since employees would then be the best judge to experience
change due to implementation of HPWS model in their organization,
therefore employee’s response and participation in the future
research would give a better insight about the effectiveness of the
HPWS model implications.
2. The future study may include SMEs from other cities of Pakistan as
well. Since, cultural differences can also play vital role in assessing
HPWS extended model in detail. One can test other HPWS indicators
as well to see its mediating effect on HPWS and on the overall
performance of SMEs.
3. Using the same data sets one can study leadership style and its
effects on SMEs, which can be taken as a complete separate and in-
depth study for further research based on new developed model of
HPWS and SME’s performance. Improvements in strategic HRM in
order to increase SMEs performance can be taken separately as a
future research topic.
4. Leadership style must be given priority in future studies because
leader can generate a lot of resources from social capital for the
betterment of the organization. It must be explored that what are the
measures of the leader which take maximum advantage from the
social capital.
5. Aspects of HR and leadership in SMEs of different sizes and ages
can be studied separately. In addition, moderating factors can be
included in the same model to test effects on the implementation of
HPWS in SME’s thereby effecting on SME’s performance.
6. The inclusion of other relevant HPWPs in the research model would
shed further light on their relationships with work engagement and
performance outcomes.
72
7. In future studies using cross-national samples would be beneficial for
evaluating the applicability of the research model to other countries
like Turkey, USA and China.
73
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APPENDIX A
Table 1
Sample Items
Variable Dimensions Items
1. High Performance Work System(HPWS)
Participation(Sun et al., 2007) 4
Mobility 5
Job security 2
Staffing 4
Training 4
Job Description 3
Appraisal 3
Incentive Reward 2
Team Learning Behaviour (Edmondson, 1999) 4
Social network building (Collins & Clark, 2003) 8
2. Social Capital
Structural 4
Relational 4
Cognitive 4
3. Business Performance
Operational (Bowersox et al., 2000) 5
Financial (Bowersox et al., 2000) 6
Innovative Yli‐Renko, Autio, & Sapienza, 2001) 2
4. Leadership Style
Empowering Leadership(Arnold et al., 2000) 38
Transformational Leadership(Antonakis et al., 2003) 5
Transactional Leadership (Sosik & Godshalk, 2000) 2
Authentic Leadership(Walumbwa et al., 2008) 16
100
APPENDIX B
Questionnaire
Dear Sir/Madam
We are studying High Performance Work System and Business Performance:
Social Capital Perspective. Please express your current feelings for your organization.
Your secrecy and personal identity will be strictly retained. The results will be used for
research purpose only.
1. Personal Information
Gender
Male Female Marital Status
Single Married Total Work Experience
(years)………………..
Age: Below 25 26-30 31-35 above 35
Educational Degree: Designation:
Below are items that organizations may use in the management of their employees. For
each item, indicate the extent of your agreement or disagreement as a description of the
practices employed at all employee levels by your venture.
High Performance Work System
2. Please rate the following statements regarding
Participation
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Employees in our firm are often asked to participate in
decisions. 1 2 3 4 5
b) Employees are allowed to make decisions. 1 2 3 4 5
c) Employees are provided the opportunity to suggest
improvements in the way things are done. 1 2 3 4 5
d) We keep open communications with employees. 1 2 3 4 5
3. Please rate the following statements regarding
Mobility
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Employees have few opportunities for upward
mobility.(R) 1 2 3 4 5
b) Employees do not have any future in this organization.
(R) 1 2 3 4 5
c) Promotion in this organization is based on
seniority.(R) 1 2 3 4 5
d) Employees have clear career paths in this organization. 1 2 3 4 5
e) Employees who desire promotion have more than one
potential position they could be promoted to. 1 2 3 4 5
101
4. Please rate the following statements regarding
Employee Training
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Extensive training programs are provided to
employees. 1 2 3 4 5
b) Employees will normally go through training
programs every few years. 1 2 3 4 5
c) There are formal training programs to teach new hires
the skills they need to perform their job. 1 2 3 4 5
d) Formal training programs are offered to employees in
order to increase their promotability in this
organization.
1 2 3 4 5
5. Please rate the following statements regarding
Staffing
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Great effort is taken to select the right person. 1 2 3 4 5
b) Long-term employee potential is emphasized. 1 2 3 4 5
c) Considerable importance is placed on the staffing
process. 1 2 3 4 5
d) Very extensive efforts are made in selection. 1 2 3 4 5
6. Please rate the following statements regarding
Job Description
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) The duties in this job are clearly defined. 1 2 3 4 5
b) This job has an up-to-date description. 1 2 3 4 5
c) The job description for a position accurately describes
all of the duties performed by individual employees. 1 2 3 4 5
7. Please rate the following statements regarding
Appraisal
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Performance is more often measured with objective
quantifiable results. 1 2 3 4 5
b) Performance appraisals are based on objective
quantifiable results. 1 2 3 4 5
c) Employee appraisals emphasize long term and group-
based achievement. 1 2 3 4 5
8. Please rate the following statements regarding
Job Security
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Employees in this job can be expected to stay with this
organization for as long as they wish. 1 2 3 4 5
b) Job security is almost guaranteed to employees. 1 2 3 4 5
102
9. Please rate the following statements regarding
Reward
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Individuals in this job receive bonuses based on the
profit of the organization. 1 2 3 4 5
b) Close tie or matching of pay to individual/group
performance. 1 2 3 4 5
10. Please rate the following statements regarding
Social Networks Building
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) You are provided expense accounts for developing
job-related personal contacts. 1 2 3 4 5
b) You have received training to develop personal
relationships with key internal stakeholders. 1 2 3 4 5
c) You are evaluated on their ability to develop
relationships with employees across different areas of
the firm.
1 2 3 4 5
d) The top management frequently discusses strategies
for developing personal relationships with key external
stakeholders.
1 2 3 4 5
e) You are provided financial incentives for developing
job-related personal relationships with key internal
employees.
1 2 3 4 5
f) In this organization, you are evaluated on their ability
to develop relationships with key external
stakeholders.
1 2 3 4 5
g) In this firm there are incentives for developing job-
related personal relationships with key internal
stakeholders.
1 2 3 4 5
h) You mentor one another on how to cultivate job-
related personal relationships with other employees of
this firm.
1 2 3 4 5
11. Please rate the following statements regarding
Team Learning Behaviour
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Criticize each other’s work in order to improve
performance. 1 2 3 4 5
b) Freely challenge the assumptions underlying each
other’s ideas and perspectives. 1 2 3 4 5
c) Engage in evaluating their weak points in attaining
effectiveness. 1 2 3 4 5
d) Utilize different opinions for the sake of obtaining
optimal outcomes. 1 2 3 4 5
103
Business Performance
12. Please rate the following statements regarding
Operational Performance
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Customer satisfaction of our company is better than
that of key competitors. 1 2 3 4 5
b) Quality development of our company is better than
that of key competitors. 1 2 3 4 5
c) Cost management of our company is better than that of
key competitors. 1 2 3 4 5
d) Responsiveness of our company is better than that of
key competitors. 1 2 3 4 5
e) Productivity of our company is better than that of key
competitors. 1 2 3 4 5
13. Please rate the following statements regarding
Financial Performance
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Return on investment of our company is better than
that of key competitors. 1 2 3 4 5
b) Return on assets of our company is better than that of
key competitors. 1 2 3 4 5
c) Return on sales of our company is better than that of
key competitors. 1 2 3 4 5
d) Average profitability of our company is better than
that of key competitors. 1 2 3 4 5
e) Profit growth of our company is better than that of key
competitors 1 2 3 4 5
f) Sales growth of our company is better than that of key
competitors 1 2 3 4 5
14. Please rate the following statements regarding
Innovation Performance
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Develop new products and enhance existing products
considerably 1 2 3 4 5
b) Improve our product /technology tremendously 1 2 3 4 5
104
Social Capital
15. Please rate the following statements regarding
Structural dimension of Social Capital
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Employees who work in this firm engage in honest
communication with one another. 1 2 3 4 5
b) Employees who work in this firm have no hidden
agendas. 1 2 3 4 5
c) Employees who work in this firm willingly share
information with one another. 1 2 3 4 5
d) Employees who work in this firm take advantage of
their family relationships to share information 1 2 3 4 5
16. Please rate the following statements regarding
Relational dimension of Social Capital
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Employees who work in this firm have confidence in
one another. 1 2 3 4 5
b) Employees who work in this firm show a great deal of
integrity with each other. 1 2 3 4 5
c) Overall, employees who work in this firm trust each
other. 1 2 3 4 5
d) Employees who work in this firm are usually
considerate of each other’s feelings 1 2 3 4 5
17. Please rate the following statements regarding
Cognitive dimension of Social Capital
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Employees who work in this firm are committed to the
goals of this firm. 1 2 3 4 5
b) There is a common purpose shared among employees
who work in this firm. 1 2 3 4 5
c) Employees who work in this firm view themselves as
partners in charting the firm’s direction. 1 2 3 4 5
d) Employees who work in this firm share the same
vision for the future of this firm. 1 2 3 4 5
105
Leadership Styles
18. Please rate the following statements regarding
Empowering Leadership (Leading By Example)
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Sets high standards for performance by his/her own
behavior 1 2 3 4 5
b) Works as hard as he/she can 1 2 3 4 5
c) Works as hard as anyone in my work group 1 2 3 4 5
d) Sets a good example by the way he/she behaves 1 2 3 4 5
e) Leads by example 1 2 3 4 5
19. Please rate the following statements regarding
Empowering Leadership
(Participative Decision-Making) Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Encourages work group members to express
ideas/suggestions 1 2 3 4 5
b) Listens to my work group's ideas and suggestions 1 2 3 4 5
c) Uses my work group's suggestions to make decisions
that affect us 1 2 3 4 5
d) Gives all work group members a chance to voice their
opinions 1 2 3 4 5
e) Considers my work group's ideas when he/she
disagrees with them 1 2 3 4 5
f) Makes decisions that are based only on his/her own
ideas 1 2 3 4 5
20. Please rate the following statements regarding
Empowering Leadership (Coaching)
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Helps my work group see areas in which we need
more training 1 2 3 4 5
b) Suggests ways to improve my work group's
performance 1 2 3 4 5
c) Encourages work group members to solve problems
together 1 2 3 4 5
d) Encourages work group members to exchange
information with one another 1 2 3 4 5
e) Provides help to work group members 1 2 3 4 5
f) Teaches work group members how to solve problems
on their own 1 2 3 4 5
g) Pays attention to my work group's efforts 1 2 3 4 5
h) Tells my work group when we perform well 1 2 3 4 5
i) Supports my work group's efforts 1 2 3 4 5
j) Helps my work group focus on our goals 1 2 3 4 5
k) Helps develop good relations among work group
members 1 2 3 4 5
106
21. Please rate the following statements regarding
Empowering Leadership (informing)
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Explains company decisions 1 2 3 4 5
b) Explains company goals 1 2 3 4 5
c) Explains how my work group fits into the company 1 2 3 4 5
d) Explains the purpose of the company's policies to my
work group 1 2 3 4 5
e) Explains rules and expectations to my work group 1 2 3 4 5
f) Explains his/her decisions and actions to my work
group 1 2 3 4 5
22. Please rate the following statements regarding
Empowering Leadership
(Showing Concern/Interacting with the Team) Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) Cares about work group members' personal problems 1 2 3 4 5
b) Shows concern for work group members' well-being 1 2 3 4 5
c) Treats work group members as equals 1 2 3 4 5
d) Takes the time to discuss work group members'
concerns patiently 1 2 3 4 5
e) Shows concern for work group members' success 1 2 3 4 5
f) Stays in touch with my work group 1 2 3 4 5
g) Gets along with my work group members 1 2 3 4 5
h) Gives work group members honest and fair answers 1 2 3 4 5
i) Knows what work is being done in my work group 1 2 3 4 5
j) Finds time to chat with work group members 1 2 3 4 5
23. Please rate the following statements regarding
Transformational Leadership
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) I go beyond self-interest for the good of the group. 1 2 3 4 5
b) Idealized Influence I consider the moral and ethical
consequences of decisions. 1 2 3 4 5
c) Inspirational Motivation I talk optimistically about the
future. 1 2 3 4 5
d) Intellectual Stimulation I reexamine critical
assumptions to question whether they are appropriate. 1 2 3 4 5
e) Individualized I help others to develop Consideration
their strengths. 1 2 3 4 5
107
24. Please rate the following statements about
Transactional Leadership
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) I make clear what one can expect to receive when
performance goals are achieved. 1 2 3 4 5
b) I keep track of all mistakes. 1 2 3 4 5
25. Please rate the following statements about
Authentic Leadership
Str
on
gly
dis
ag
ree
Dis
ag
ree
Neu
tra
l
Ag
ree
Str
on
gly
Ag
ree
a) I can list my three greatest weaknesses. 1 2 3 4 5
b) My actions reflect my core values. 1 2 3 4 5
c) I seek others’ opinions before making up my own
mind. 1 2 3 4 5
d) I openly share my feelings with others. 1 2 3 4 5
e) I can list my three greatest strengths. 1 2 3 4 5
f) I do not allow group pressure to control me. 1 2 3 4 5
g) I listen closely to the ideas of those who disagree with
me. 1 2 3 4 5
h) I let others know who I truly am as a person. 1 2 3 4 5
i) I seek feedback as a way of understanding who I
really am as a person. 1 2 3 4 5
j) Other people know where I stand on controversial
issues. 1 2 3 4 5
k) I do not emphasize my own point of view at the
expense of others. 1 2 3 4 5
l) I rarely present a “false” front to others. 1 2 3 4 5
m) I accept the feelings I have about myself. 1 2 3 4 5
n) My morals guide what I do as a leader. 1 2 3 4 5
o) I listen very carefully to the ideas of others before
making decisions. 1 2 3 4 5
p) I admit my mistakes to others. 1 2 3 4 5
Thank you so much for your precious time and cooperation