top management political skill, market orientation and

Top Management Political Skills, Market Orientation and Business Value 1

Top Management Political Skill, Market Orientation and Business Value in an

Emerging Economy: Evidence from Pakistan

Muhammad Jehangir,

Abdul Wali Khan University, Pakistan

Postdoctoral Fellow University of Kentucky, USA

Joe Labianca

University of Kentucky, USA

Zahoor ul Haq

Abdul Wali Khan University, Pakistan


Abstract

This study investigates the role of top management political skills in business opportunity

recognition and business value creation. Top management teams are vital to a firm’s value

creation for many reasons including, their involvement in key projects, their role in decision-

making, their responsibility to meet customer needs, and their role in evaluating competitors.

Therefore, a strong commitment from top-level management towards market orientation plays a

key role in the creation of firm value. Data from 187 top-level managers show that the political

skill of top-level management contributes to higher level of market orientation that therefore

increases firm value. The better use of social astuteness, networking ability and interpersonal

skills of top-level management for business strategy development may help organizations to gain

competitive advantage in market turbulent environment.


Introduction

For many years business practitioners, scholars and researchers alike have considered the

importance of politics within an organization. All business endeavors require political

maneuvers to run the organization. Strategies and policies having political blended behaviors are

more likely to be successful (Ferris et al 2005). Political skill is the combination of social

understanding, and the ability to adjust ones’ behavior with the demands of the situation, which

in turn, motivates trust and confidence from business associates (Ferris et al 2005; 2007). One’s

political skills predict effective job performance with the comparison of social effectiveness like

networking ability (Semadar, Robins, & Ferris, 2006), political skill abilities also influence a

person’s general mental abilities and personal characteristics (Liu, et al, 2007). Political skill has

a great impact on employment opportunities, income potential, bottom-up positioning and career

satisfaction (Ferris, et al, 2009).

The involvement of senior managers in developing strategic orientation influences better

business outcomes (Jaworski and Kohli, 1993). Prior research suggests the valuable role of top

management for innovation and business performance (Yu-hui, 2008; and Teo, et al., 2009).

Top management can utilize and deploy resources that positively affect business functions and

help to remove the obstacles that may hinder a project’s success. Consequently, an increased

amount of top management ties are assumed to be linked to enhanced project performance.

Management support is directly related to the development of higher quality policies and

practices for the successful implementation of various strategic orientations. The primary

structure of skills in the organizations is based on the prior work experience of management and

employees. In current study, managerial political skill in the development of market oriented

strategies has been observed to explore the contribution of social networks in creating firm value.


Political Skill

Political skills are a theme that have been present in businesses and organizations for

many years, and have had a tremendous impact on the successes and failures of those businesses

and organizations. Ferris et al, (1999) developed the concept of political skills and established

its constructs for judging the multidimensional managerial and organizational implications.

They later renamed the term Political Skill Inventory (PSI). Pfeffer (1981) explained the

political perspective within an organization and urged that political skill is important for the

success of the organization. He suggested the term be used for research to develop a good

understanding of the construct. Mintzberg (1983), stated, “political skill as the exercise of

influence through persuasion, manipulation and negotiation.”

Since the 1970’s an interest in organizational politics has rapidly grown with the

complexity and ambiguity of the dynamism of working environments within organizations, thus

it tends to adopt the political skills and new approaches to solve the dynamic problems faced

within business activities (Cascio 1995).

Advances in technology, a prevalence of industries focused on product improvement,

specialization, information sharing, and customer service, have often made traditional systems of

business obsolete. Old-fashioned, mechanistic organizations, limited in their ability to cope with

turbulent business conditions, are adapting more organic structures that place emphasis on the

use of human and intellectual capital to meet organizational goals. These organizations have

flatter hierarchies, are less formal, and are more flexible in addressing complex work problems

with seemingly uncertain resolutions (Daft, 2004).

To cope with changes in organizational environments and structures, organizational

politics have become recognized as an important and necessary channel through which power is


distributed, decisions are made, and work goals are realized (Pfeffer 1981; 1992). Echoing the

words of Pfeffer, we feel that in many cases organizational politics are the best and only way to

resolve work conflicts and make organizational decisions.

Salancik & Pfeffer’s (1977) interpretation of the strategic-contingency model of power

helped fuel the rising interest in how politics affect workers and organizations. These authors

have suggested that the distribution of organizational power is contingent upon the problems

most consequential to the organization’s survival. Managers can gain power by obtaining

control of critical work activities and exploiting ways of completing these activities through the

use of social capital (i.e. other people). In response to this theory, concerns have been raised

over the misuse or abuse of power within organizations and the use of manipulative AND

deceptive political behaviors to gain power. Wary of exploitation, researchers warned against

the dark side of political behavior (Ferris & King, 1991).

Therefore, political behavior began to take on a negative connotation, and was

discouraged by many organizations and HR administrators. Only recently have theorists

considered political behaviors to be motivated by desires for improved outcomes for the self

and/or for the organization (Ferris, Perrewe, Anthony, & Gilmore, 2000).

Academics and practitioners are beginning to frame politics in a more positive light. A

building block for this shift was laid nearly 50 years ago with Thompson and Tuden’s (1959)

quadratic-categorization of decision situations. These authors proposed that the way decisions

are made is contingent upon the agreement over organizational goals and how these goals should

be realized. According to their model, with exception to situations where there is full agreement

over what to do and how to do it, attempts to influence or the use politics will always emerge

when decisions are being made.


Pfeffer (1981) expanded on the work of Thompson and Tuden with his theoretical

modeling of the conditions producing the use of power and politics in organizations. Pfeffer’s

model contends that the use of politics in organizations is the response to conflicts over

important decisions when there is a dispersion of power across decision makers. He argues that

conflict will arise when resources are scarce, organizational units are interdependent, or there are

discrepancies in work goals across units or departments.

In such situations, managers need to use politics to lobby for access to resources or for

decision-making power. Pfeffer asserts that when the conditions of his model are met, “the use

of power is virtually inevitable and furthermore, it is the only way to arrive at a decision” (pg.

70). Consequently, those managers with the will, and the skill, to use politics are most likely to

achieve their personal and/or organizational goals.

To add to this, Ferris and his colleagues (1999) have initiated research treating the

appropriate use of political behaviors as a skill-set indicative of good performance and

successful outcomes, rather than as actions detrimental to organizational functioning.

Acknowledgement of political behavior as a skill-set, and a viable business tool, has

opened many doors for HR interventions that were not explored while politics remained

stigmatized as an organizational ailment. By identifying and encouraging desired political

behaviors, HR administrators can use the assessment of political skill for purposes of

recruitment, selection, training, and managerial development.

The Political Skill Inventory (PSI) was developed to target four key dimensions of

desired political behaviors: social astuteness, interpersonal influence, networking ability, and

apparent sincerity (Ferris et al., 2005). These elements of political skill are similar to the

characteristics of social intelligence. Researchers studying the applications of social intelligence


argue that effective leaders need to exercise social perceptiveness and behavioral flexibility when

dealing with social interactions in the workplace (Zaccaro, Gilbert, Thor, & Mumford, 1991). In

other words, good managers need to be able to discriminate between social contexts and know

how to monitor behavior depending on the demands of a specific context.

Pfeffer (1992) claims that successful managers strategically position themselves within

the communication network, develop powerful allies, and build rapport with those who have

access to resources. All of these behaviors are focused on the maintenance of networks.

Politically skilled individuals exercise what Culbert (1996) refers to as a mind-set

orientation in determining how to interact with those they wish to influence.

Politically skilled managers also build lasting relationships with stakeholders and

influence potential clients with diverse interests by analyzing political arenas, choosing strategies

aligned with audience expectations and styles, and by demonstrating behavioral flexibility and

genuineness in the execution of these strategies.

Market Orientation

Pelham and Wilson (1996) argued that, the ability of a firm, to outperform less market-

oriented competitors is based on its ability to develop long term superior customer value. A firm

with better market orientation develops a positive reception for understanding the potential

customer and market requirements. Technological advancement enables the firms to interact

with customers in a more advanced and efficient way. It has been noted that customer

relationship management enables the firms to deal with the customers more effectively and

efficiently (S. H. Chien et al., 2008). Further, he found that relational information processes are

positively influenced by customer retention and satisfaction.


Empirical efforts have been taken for the consequences of market orientation as well,

while the majority of research is devoted to the relationship of market orientation and business

performance (Diamantopoulos and Hart, 1993; Pitt et al., 1996; Ruekert, 1992; Slater and

Narver, 1994). Most of the researchers directly linked market orientation to business

performance. However, Webster (1988) argued that market orientation cannot influence business

performance directly, and that there should be some mediating variables or strategic decisions.

Market orientation, which reflects the organization’s commitment and the continuing

assortment of information, will amplify the influence (Chien et al., 2008).

Conceptual Model and Hypothesis Development

This conceptual model demonstrates the specific linkages, and the causal directions of the

constructs investigated in the study. Drawing from the specifics of the conceptual model,

hypotheses can be formulated and tested through several suitable statistical analytical techniques

to determine the validity of the theory as postulated by the researchers (Sekaran, 2000).

Theoretical Framework

Conceptual Model

Political Skill

social astuteness

interpersonal

influence

networking

ability

Market Orientation

Customer Orientation

Competitor Orientation

Inter-functional Coordination

Business Value

Financial Performance

Non-financial Performance


Hypothesis

H1: Top management political skill contributes to higher level of market orientation.

H2: Top management political skill and market orientation are positively related to business

value.

Method

In this study, a simple random sampling technique is used to gather the samples

necessary for quantitative examination (Lee and Lings, 2008). Firms are randomly selected from

the population of companies available in the local Chamber of Commerce directory. The

advantage of using this directory was the availability of the industry type, URL, E-mail address,

company address, contact numbers and geographical locations. The population was approached

through personally administered questionnaires and postal surveys, in which 187 complete

responses were received from a sample size of 373. The total response rate is 51.5%, acceptable

for data analysis (Sekaran, 2003; Gunasekaran and Ngai, 2008).

Discussions

The demographic profile of the respondents is presented in this section to provide an

insight into their composition, gender, occupational background, academic background, as well

as company background as shown in table 1. Additionally, this section will provide a summary

on the basic statistics pertaining to each of the constructs examined in this current study. The

response rate and respondent characteristics included as well as certain features of the companies

in the sample to highlight its characteristics.


Table 1: Demographic Profile

Full Time Employees Frequency Valid%

Gender Male

Female

102

85

56.4

43.6

Education

PhD

Master

Bachelor

Diploma

8

87

43

49

2.8

30.3

49.8

17.1

Position

CEO

Director

General Manager

IT Manager

Business Manager

48

44

33

34

28

23.7

22.3

18.5

18.8

16.7

Table 2: Full Time Employees

Experience Frequency Valid%

Less than 1 year

1-2 years

3-5years

5-10

More than 10

23

54

70

32

8

15

25.8

45.3

11.1

2.8

Reliability of the Constructs

To analyze the reliability of the survey instrument, Cronbach Alpha test has been used.

According to Nunnaly (1978) and Joreskog and Sorbom (1989), the value of .70 is an acceptable

for Alpha reliability. The results show an above-acceptable value of Cronbach Alpha reliability.

The results of the Alpha Reliability are shown in Table 5.


The Cronbach’s alphas for the constructs were computed using the scale reliability

procedure in SPSS and presented in Table 5 below. The reliabilities of most constructs in this

present study fall within an acceptable range (0.701 to 0.878).

The data analysis is carried out using the Statistical Package for Social sciences (SPSS for

Windows version 16.0). The instrument total number of respondents for this research is (No. of

Cases 187). Based on this data, the reliability of the survey instrument has been used to test the

Cronbach’s Alpha. According to Nunnaly (1978) and Jöreskog and Sörbom (1989), .70 is an

acceptable Alpha reliability value. The Alpha reliability less than .70 has been excluded, only the

results of above .70 have been accepted.

The overall Cronbach’s Alpha reliability of this data is 0.932 with 44 items, which shows the

reliable data for analysis

Table 3: Reliability of the constructs

Variables No. of Items Cronbach’s Alpha

Political skill

social astuteness

interpersonal influence

networking ability

4

6

3

0.831

0.875

0.842

Market orientation

Customer Orientation

Competitor Orientation

Interfunctional Coordination

5

6

6

0.865

0.822

0.823

Business Value

Financial Performance

Non-financial Performance

8

6

0.738

0.768


Factor Analysis

After conducting reliability analysis and descriptive statistics, factor analysis was

performed to identify the underlying factors. Factor analysis can be used to determine what

items should be included or excluded in further analysis. To make an effective use of factor

analysis in a study, the criterion, namely, priori conceptual belief about the number of factors to

include in factor analysis, the screening test, and the interpretability of the factor solution should

be considered (Green and Salkind 2003).

Factor analysis is concerned with whether the covariance or correlation among a set of

observed variables can be explained in terms of a smaller number of unobservable constructs

known as common factors (Landau and Everitt, 2004). Factor analysis is one of the most

commonly used techniques for data reduction and structure detection. Moreover, it may also be

used to decide which items on the scale are to be included or excluded from the measure.

In this study, factor analysis (varimax factor rotation) was conducted to identify the

underlying factors affecting EC capability and business performance.

Political Skill Factor Analysis

After conducting reliability analysis to assess the reliability of the scale used to measure the

variables of interest, it is also important to conduct factor analysis. In this case the political skill

variables for each item were analyzed for factor detection. Table shows three variables with 16

items in political skill construct. All items of Social astuteness have achieved the acceptable

loading. However, the item II6 and II4 of Social astuteness factor and NA2 and NA1 of

Networking ability factor have achieved low loading. Thus, these items will not be used in

further analysis.


Table 4: Results of Factor Extraction and Factor Loading

Items Social

astuteness

Social

astuteness

Networking

ability

SA2 .852

SA1 .835

SA3 .803

SA4 .759

II2 .789

II3 .740

II1 .729

II5 .754

II6 .684

II4 .649

NA5 .738

NA6 .720

NA4 .718

NA3 .712

NA2 .681

NA1 .537

Extraction Method: Principal Axis Factoring.

Rotation Method: Varimax with Kaiser Normalization.

Market Orientation - Factor Analysis

Similar with Political Skill, Market Orientation variables in this case for each item on it are

significant to be analyzed for factor detection. There are three variables with 17 items in Market

Orientation construct as mentioned in Table. In the Customer Orientation factor, 1mor4 and

1mor5 have achieved the acceptable loading, yet the remains have achieved the low ones. 2mor2

and 2mor1 of competitor Orientation support factor have achieved low loading and the rest has


achieved an acceptable loading. The third factor, Interfunctional Coordination factor’s items

have achieved an acceptable loading except 3mor1.

Table 5: Results of Factor Extraction and Factor Loading

Items Managerial

Expertise

Top

management

Support

Learning

Capacity

1mor3 .799

1mor4 .736

1mor5 .589

1mor2 .588

1mor1 .551

2mor 4 .809

2mor 3 .785

2mor 5 .737

2mor 6 .716

2mor 2 .618

2mor 1 .600

3mor 6 .854

3mor 3 .851

3mor 5 .833

3mor 2 .810

3mor 4 .760

3mor 1 -------

Extraction Method: Principal Axis Factoring.

Rotation Method: Varimax with Kaiser Normalization.


Business performance Factor Analysis

The factor analysis helps with extracting the inconsistency of items for further analysis.

Business performance possesses two variables, namely financial and non-financial performance

which both is measured by 12 items. In financial performance variable frp5 and fpr4 have

achieved the acceptable loading while all of the non-financial items have achieved the acceptable

loading except nfp3 and nfp1. These two items have been extracted for further analysis.

Table 6: Results of Factor analysis and Factor Loading

Items Financial

Performance

Non-

financial

Performance

fpr4 .715

fpr5 .714

fpr6 .654

fpr2 .644

fpr3 .568

fpr1 ------

nfp4 .816

nfp5 .809

nfp6 .762

nfp2 .752

nfp3 .591

nfp1 -----

Extraction Method: Principal Axis Factoring. Rotation Method: Varimax with Kaiser

Normalization.


Conclusion and Future Directions

By investigating the political skill of top-level management in order to achieve the higher

level of market orientations that ultimately lead to better business performance, this research is

vital for the organizations and managers. Investigating political ties of top-level management

that have an impact on the development of better market orientations includes the contribution to

the business performance. This research also highlights the impact of market orientations that is

influenced by the social networking ties of top-level management on firm performance. It is

essential because given limited resources to the managers; they need to know that strategies and

skills are worth focusing on in order to improve business performance. The findings of this

research may provide a better understanding, and some alternative explanations, of the influence

of social networking on firm performance. It is also helpful in providing the dynamic capability

perspectives of market orientations and social networks in terms of better understanding and

usage of the social capital to achieve a competitive advantage. This research should be taken into

consideration for the successful development of market orientation. This study will prove to be

valuable among enterprises that are dealing with networks, and additionally contribute some

valuable insights into the development of firm value by utilizing political skill of top-level

management.


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top management political skill, market orientation and

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