volume 2 (issue 2) september 2018

116
Volume 2 (Issue 2) September 2018 ISSN: 2523-0417 (Online) ISSN: 2521-5876 (Print)

Upload: others

Post on 16-Oct-2021

1 views

Category:

Documents


0 download

TRANSCRIPT

Volume 2 (Issue 2)September 2018

ISSN: 2523-0417 (Online)

ISSN: 2521-5876 (Print)

University of Wah Journal of Management Sciences (UWJMS)

Volume 2, Issue 2, September 2018

ISSN (Print): 2521-5876 & ISSN (Online): 2523-0417

i

UNIVERSITY OF WAH

JOURNAL OF MANAGEMENT SCIENCES

Volume 2 (Issue 2)

September 2018

Department of Management Sciences

University of Wah, Wah Cantt

University of Wah Journal of Management Sciences (UWJMS)

Volume 2, Issue 2, September 2018

ISSN (Print): 2521-5876 & ISSN (Online): 2523-0417

ii

University of Wah Journal of Management Sciences

The ‘UW Journal of Management Sciences’ (UWJMS) is a bi-annual publication of the University of

Wah, Wah Cantt, Pakistan. UWJMS is an international journal dedicated to advancing the

understanding of the intricacies of management in private and public sector through empirical

investigations and theoretical analyses. UWJMS is a double-blind peer-reviewed journal that publishes

quality articles in the field of management sciences.

Aim and Scope

The Journal aims to provide a focus for worldwide expertise in the required techniques, practices and

areas of research; present a forum for readers to share common experiences across the full spectrum of

industries and sectors in which management research is conducted; cover all areas of industry and

management; and link theory with practice by publishing case studies and covering the latest important

issues in special series. The journal aims at wide circulation and visibility of its research to professionals

and practitioners both within Pakistan and internationally.

The editorial board welcomes quality research articles from all areas of management sciences. The

board also encourages quality research from the newly developing business and management fields.

Therefore, ‘UWJMS’ welcomes papers in the areas of:

Business,

Marketing,

Entrepreneurship,

Technology and Innovation,

Human Resource Management,

Finance,

Knowledge Management

Economics,

Employees/Consumers Psychology,

Business Ethics and

Sustainable Development etc.

University of Wah Journal of Management Sciences (UWJMS)

Volume 2, Issue 2, September 2018

ISSN (Print): 2521-5876 & ISSN (Online): 2523-0417

iii

EDITORIAL BOARD

Patron

Prof. Khaliq Ur Rehman Shad

Vice Chancellor, University of Wah

Executive Editor

Prof. Mushtaq Ahmad

Dean, Faculty of Management Sciences, University of Wah

Editor-in-Chief

Dr. Saman Attiq, Assistant Professor, UW

Associate Editor(s)

Dr. Nasir Mehmood, Assistant Professor & HOD, Faculty of Management Sciences, University of Wah

Assistant Editor(s)

Dr. Faiza Saleem, Assistant Professor, Faculty of Management Sciences, University of Wah

______________________________________________________________________

ADVISORY BOARD

INTERNATIONAL MEMBERS

Prof. Amin U Sarkar

Dean, College of Business and Public Affairs

Alabama A&M University Huntsville, USA

Prof. Muhammad Shahbaz

Professor

Montpellier Business School, France

Prof. ZHANG Xiaojuan

Professor

Wuhan University, China

University of Wah Journal of Management Sciences (UWJMS)

Volume 2, Issue 2, September 2018

ISSN (Print): 2521-5876 & ISSN (Online): 2523-0417

iv

Prof. Kubilay Ozyer

Associate Professor

Gaziosmanpasa University, Turkey

Prof. Sema Polatci

Associate Professor

Gaziosmanpasa University, Turkey

Prof. Balal

Associate Professor

University of Science & Technology, China

Prof. Rabia Imran

Associate Professor

Department of Management Sciences, Dhofar University, Oman

Dr. Abdul Karim Khan

Assistant Professor

UAE University, UAE

Dr. Amjad Shamim

Assistant Professor

University Teknologi PETRONAS, Malaysia

Dr. Muhammad Imran Qureshi

Director & Senior Lecturer

University Kuala Lumpur, Malaysia

Dr. Aila Khan

Senior Lecturer, School of Business

Western Sydney University, Australia

NATIONAL MEMBERS

Prof. Rauf I Azam

Vice Chancellor, Professor

University of Education, Lahore

Prof. Farzand Ali Jan

Vice Chancellor, Professor

IQRA National University, Peshawar

University of Wah Journal of Management Sciences (UWJMS)

Volume 2, Issue 2, September 2018

ISSN (Print): 2521-5876 & ISSN (Online): 2523-0417

v

Prof. Idrees Khawajah

Dean, Professor

Air University School of Management, Air University, Islamabad

Prof. Khurram Shahzad

Associate Dean, Department of Business Administration, RIPHAH, Rawalpindi

Prof. Abdul Raheman

Dean, Faculty of Management Sciences

University of Gujrat, Gujrat

Prof. Shujaat Mubarak

Dean, Faculty of Management Sciences

Muhammad Ali Jinnah University, Karachi

Prof. Mohsin Butt

Air University School of Management

Air University, Islamabad

Prof. Sajid Bashir

HOD & Associate Professor

Faculty of Management Sciences, Capital University Science & Technology, Islamabad

Dr. Imran Hameed

HOD & Assistant Professor, Lahore Business School

University of Lahore, Lahore

Dr. Farida Faisal

Director, University Institute of Management Science

PMAS Arid Agriculture University, Rawalpindi

Dr. Hassan Rasool

Assistant Professor, Pakistan Institute

of Development Economics, Islamabad

University of Wah Journal of Management Sciences (UWJMS)

Volume 2, Issue 2, September 2018

ISSN (Print): 2521-5876 & ISSN (Online): 2523-0417

vi

The Editor’s Note

I am pleased to introduce ‘University of Wah Journal of Management Sciences’, the emerging journal in the

field of management sciences. UWJMS will provide a platform for the original research in the field of

management, marketing, finance, human resource management and economics. The objective of UWJMS is to

publish up-to-date, high-quality and original research papers alongside relevant and insightful reviews. As

such, the journal aspires to be vibrant, engaging and accessible, and at the same time integrative and

challenging. Each issue of the journal will incorporate mix of qualitative and quantitative research papers

covering emerging aspects of management sciences.

Our editorial policy is governed by independent quality control, blind peer-review, strict adherence to HEC

policy requirements, zero tolerance to plagiarism and adherence to academic ethics in publishing. These

guiding principles are guaranteed by our Editorial/Advisory Board that contains world class national and

international scholars of high repute who have great contribution in the field of management sciences. This

issue contains the research related to the areas of marketing, management, finance, and organizational change.

We are grateful to our contributors of this issue. Our team led by imminent scholars and administrators aspire

to lead this journal to reach the height of perfection, and authenticity in the field of management sciences. We

are pleased to share that we aspire to make this journal a world-class publishing platform by producing

original research and getting membership in renowned abstracting agencies. Our goal is to make it recognized

journal by all regulating agencies including HEC very soon. It is only possible when the contributors of this

journal share their valuable wisdom in the shape of up-to-date knowledge in the form of research papers

whether qualitative or quantitative to this journal.

In conclusion, I would like to thank our Vice Chancellor (University of Wah) and all members of our Editorial

Board/Advisory Board and Contributors for joining us in this new fascinating and promising academic

project.

Dr. Saman Attiq

Editor-in-Chief

University of Wah Journal of Management Sciences

University of Wah Journal of Management Sciences (UWJMS)

Volume 2, Issue 2, September 2018

ISSN (Print): 2521-5876 & ISSN (Online): 2523-0417

vii

UNIVERSITY OF WAH JOURNAL OF MANAGEMENT SCIENCES

Volume 2, Issue 2, September 2018

Titles Page

1.

The Effect of Board Characteristics as Corporate Governance Attribute on Firm

Performance in Pakistan

Faiza Saleem

01-16

2.

3G/4G Mobile Network Band Wagon in Pakistan: A Mixed Method Inquiry into

Consumer Adoption Attitude

Moin Ahmed Moon1, Amna Farooq2, Ghazanfar Ali Abbasi3

17-35

3. Impact of Paternalistic Leadership on Project Success through Employee Creativity

with Moderating Role of Supervisor Expectations for Creativity

Asif Mehmood Rehmani1, Shabbar Hussain2

36-56

4.

Factors and Theories Determining Dividend Policy: Empirical Evidence from Pakistani

Banks

Nasir Nadeem1, Adnan Bashir2, Sumaira Gulzar3

57-72

5. Impact of Transformational Leadership on Project Success: Mediating role of Team-

Building and Moderating Role of Human Resource Management Practices

Khurram Yazdani1, Fuad Bashir2

73-90

6. Impact of Store Environmental Characteristics on Customers’ Impulse Buying

Behavior: Mediating Effect of Customers’ Positive Emotional Responses

Aneela Yaqoob1, Saman Attiq2, Nasir Mehmood3

91-105

The Effect of Board Characteristics as Corporate Governance Attribute on Firm Performance in Pakistan

1Faculty of Management, Universiti Teknologi Malaysia, Johor, Malaysia.

E mail: [email protected]&

[email protected]

University of Wah Journal of Management Sciences

Volume 2, Issue 2, September 2018, pp. 01-16

The Effect of Board Characteristics as Corporate Governance Attribute on

Firm Performance in Pakistan Faiza Saleem

Article History:

Received:

13 Jun, 2018

Revised:

20 Sep, 2018

Accepted:

30 Sep, 2018

ABSTRACT

Purpose: Most of the prior studies followed board characteristics as corporate

governance attribute, the study to follow on the basis of literature support to use

board characteristics as one of the corporate governance attributes. The objective of

this research study is to investigate the effect of the board of director's characteristics

on firm performance of the Pakistani oil and gas firms listed on Pakistan Stock

Exchange (PSX).

Methodology/Design: Data was collected from the annual reports of oil and gas

firms listed on (PSX). The study applies pooled OLS regression on all oil and gas

firms listed on PSX for the period from 2008-2015. Return on assets (ROA) is used

as a proxy for measuring firm performance which is the dependent variable. Whereas

the independent variables used in the study are board size, board independence, CEO

duality, board activity.

Findings: The board size and board independence are found significant factors of

firm’s performance in Pakistan. Whereas, CEO duality and board activity are

insignificant in determining the performance of firms in Pakistani oil and gas firms.

Implications: The outcomes and findings of the present study are significant for,

regulators, legislators and investors, in order to determine which governance

mechanism is important in improving firm performance in Pakistan.

Key Words: Return on assets, board size, CEO duality, board activity.

1. Introduction

The Corporate governance is a phenomenon in which corporations are controlled and

managed. The concept of corporate governance got rise in 1990’s due to occurrence of huge

bankruptcies and corporate scandals globally such as Enron, Xerox, WorldCom, Parmalat, Royal

Ahold, Flowtex are few examples of high profile cases and scandals (Ronen & Yaari, 2008).

These corporate collapse had decreased investors’ confidence and trust in financial statements

(Fodio et al., 2013) due to which it will be difficult for the companies to generate capital equity

Faiza Saleem

2

from investors and stock markets (Agrawal & Chadha, 2005). The criticism on the above said

corporate scandals indicates the lapse in appropriate supervision on management by the audit

committee and the board of directors (Al-Matariet al., 2012). In Pakistan, corporate scandals are

still there such as Taj company scandal, Mehran bank scandal, national bank scandal, Pakistan

Telecommunication Companies Limited (PTCL) privatizations are few cases. These corporate

collapses push the Security and Exchange Commission of Pakistan (SECP) regulatory authority to

develop a set of codes in order to increase governance practices, investor protection and reducing

the trust deficits among the owner, agent and business community.

Consequently, for long time survival of firms, the significance of corporate governance

attributes has been highlighted by these large world corporate frauds and scandals (Mokhtar et al.,

2009). So the first codes were issued in March 2002 and are revised and re-released in 2012.

Although the corporate governance codes in Pakistan are revised and re-released, but still the

corporate governance environment in Pakistan is not mature enough and most of the businesses

are controlled and managed my family members. In addition, in Pakistani companies the number

of independent directors is insufficient, CEO is in duality and ownership is concentrated and is in

the hands of a few large stockholders, mostly controlled by the family (Shabbir, 2012; Tahiret al.,

2012). Hence the conflict of interest is between large and small shareholders (Shleifer & Vishny,

1997). The reason for all these conflicts are due to the separation of ownership and control in

public companies which is called as agency problem (Jensen & Meckling, 1976).

Fama and Jensen (1983) suggested that firms need various monitoring and control

mechanisms in the form of corporate governance attributes in order to overcome agency problems

and increasing firm value. One of the control mechanism is board characteristics, as most of the

prior studies followed board characteristics as a corporate governance mechanism, the study to

follow on the basis of literature support (Brennan, 2006). The reason for choosing this attribute is

that the main decision-makers in the business are the board of directors because they have the

authority to revert all decisions that are made by the topmanagement (Fama & Jensen, 1983;

Hermalin & Weisbach, 2003). Agency theoryprophesies that boards will enrich the honor of a firm

financial reports by observing the management. Evidence from previous studies suggested that

various board characteristics such as board size, the composition of independent directors, the

CEO duality and board activity may power the effectiveness of their monitoring role (Blacket al.,

2006; Johlet al., 2015; Yermack, 1996). Moreover, the previous researches have shown that board

characteristics are positively related with a firm performance in various economies however

alternative crick of this research shown that there is no any association between board

characteristics and firm performance. To bring together the contradictions and indecisive findings

from the prior researches, this current research examined the association between board

characteristics and firm performance for the oil and gas firms listed on Pakistan stock exchange

(PSX).

The Effect of Board Characteristics as Corporate Governance Attribute on Firm Performance in Pakistan

3

In this research study, firm performance will be determined through board characteristics

as one of the corporate governance attributes. In Pakistan, corporate governance is at its

preliminary stage, although the codes of corporate governance in Pakistan are revised and

rereleased in 2012. Therefore, proper application of corporate governance and its practice is not

streamlined in Pakistan yet. Hence, the current research study will establish an empirical

association of board characteristics with firm performance in Pakistan. Board characteristics is one

of the important element of firm’s performance. This current research study is going to be

conducted in the oil and gas sector of Pakistan. The results obtained from this particular study will

help any other sector to obtain competitive edge by incorporating appropriate corporate

governance practices in the firms, also help to increasing the performance of the company.

Moreover, the results will provide important information to policy makers in order to take proper

measures to confirm the actual implementation of corporate governance practices in Pakistan. The

research objectives of the study are; (1). To determine the effect of board size on firm performance

in Pakistan. (2). To find out the impact of board independence on firm performance in Pakistan.

(3).To evaluate the effect of CEO duality on firm performance in Pakistan and finally (4). To

investigate the impact of board activity on firm performance in Pakistan.Generally, the significant

contributions of this study are twofold, namely theoretical development (knowledge) and policy

implication. In relation to theoretical development, this study fills the gap in the literature by

capturing the impact of various board characteristics on firm performance in oil and gas sector in

Pakistan. In relation to policy implication, the findings of the current study can be fruitful for

external auditors, regulators and legislators in their attempts to enhance the quality of monitoring

mechanisms. There are also implications for users of financial statements and investors, especially

for those who have keen interest on investing in oil and gas sector in Pakistan.

2. Literature Review

2.1 Board Characteristics and Firm Performance

Board characteristics are the most significant attribute of corporate governance due to its

relevance for planning and decision-making for organizations (Lam & Lee, 2012). The boards of

directors mitigate the grievances and improve the relations between stakeholders and firms in

order to improve the level of financial growth (Fama & Jensen, 1983). Thus, the effectiveness of

the board calculated through a number of parameters like independence, size, CEO duality, and

activity.

2.1.1 Board Size and Firm Performance

Board size refers to the total number of board members on the board (Gulzar & Wang,

2011; Iraya et al., 2015; Masood & Shah, 2014; Uwuigbeet al., 2014). According to Lipton and

Lorsch (1992), the best board size should make up of eight (8) or nine (9) directors, and greater

Faiza Saleem

4

numbers will decrease the effectiveness due to problems regarding the process and coordination

(Jensen, 1993). Board size seems to be different from one country to the other country, In case of

Pakistan the revision of codes of corporate governance in the year 2012 does not specify the exact

number of board members, the average number of members in the board are 6-7 in most of the

firms in Pakistan. According to Johl et al. (2015), the appropriate size of the board should be

determined how effectively the board is able to operate as a team.

The previous research studies provided mixed results on the association between board

size and firm performance. Sandaet al. (2010), Chan and Li (2008), De Andres et al. (2005), and

Mokhtar et al. (2009) revealed that large number of members on the boards are related with

weaker firm performance. Likewise, Yermack (1996) used Tobin’s Q ratio as a proxy for

determining the value of firm performance, the result shows that there is a negative relationship

between board size and firm performance. The previous studies which were conducted to analyze

the association between board size and firm performance revealed negative results (Eisenberg et

al., 1998; Mak & Kusnadi, 2005; Ujunwa, 2012), the result shows that larger board is ineffective

in improving the financial performance of the companies.

On the contrary, the other views also claimed that small board size shows more

competency to monitor the CEO's behaviors in addition to making appropriate decisions for the

firm and increase firm performance. The Meta-analysis technique has been used by Dalton et al.

(2003), revealing that larger the board size, greater the firm performance irrespective of the nature

of the business and which measure was used to determine financial performance. However, De

Andres and Vallelado (2008) favors for larger board to evaluate for creating more value for firm.

This finding. was also .supported by some other prior studies by Shukeriet al. (2012), Brennan

(2006), Daily and Dalton (1993) and Johlet al. (2015). There are some other similar researchers

who found that there is no significant association between board size and firm performance

(Bhagat & Black, 2002; Connelly & Limpaphayom, 2006). On the basis of the above-mentioned

facts and empirical evidence, the study proposed the following hypothesis for empirical testing:

H1: There is a negative association between board size and firm performance.

2.1.2 Board Independence and Firm Performance

Board independence means the percentage of independent non-executive directors in the

total number of members in the board (Irayaet al., 2015). The independent directors play a major

role in arbitrating the conflicts. between management and shareholders and enhancing the

transparency and compliance of accounting reports (Kent et al., 2010). According to Jensen and

Meckling (1976), transparency of boards to monitor and control the opportunistic behavior of

management is more concerned with pressure of outsiders. The board consists of executive and

non-executive directors who are either non-independent or dependent directors. The Pakistani

revised codes on corporate governance 2012 recommended that it is mandatory to have at least

one or one third independent directors of the total members on the board.

The Effect of Board Characteristics as Corporate Governance Attribute on Firm Performance in Pakistan

5

The greater number of non-executive .directors on the board tend to be negatively related

to the fraudulent financial statement because independent directors do not have any self-interests

and they control managerial activities to protect the interests of investors (Williamson, 1988). The

literature posits the inconsistency between the independence of board and performance of firms.

Dehaeneet al. (2001) and Rhoades et al. (2000) support the argument of selecting independent

board as outsiders for transparent results and the protection of stakeholders’ interests, which may

result higher level of return on equity. Lam and Lee (2012) investigated that large number of

independent directors on the board tend to lead increasing firm performance as compared to the

board with more executive directors. Consistent with this argument, the prior studies which were

conducted to analyze the association between board independence and firm performance revealed

positive results (Connelly & Limpaphayom, 2006; Kamardin, 2009; Krivogorsky, 2006; Lefort &

Urzúa, 2008; Ponnu, 2008). Few researchers such as Ericksonet al. (2005), Coleset al. (2001),

Agrawal and Knoeber (1996), Klein (2002) and Yermack (1996) found a negative relationship

between board independence and firm performance. On the contrary, De Andres et al. (2005),

Bhagat and Black (2002), Haniffa and Hudaib (2006)and Nahar Abdullah (2004)have failed to

find a statistically significant association .between board independence and firm performance. On

the basis of the above-mentioned facts and empirical evidence, the study developed the following

hypothesis.

H2: There is a negative association between board independence and firm performance.

2.1.3 CEO Duality and Firm Performance

CEO duality means when a person carries both roles of the firm's CEO and chairman of

the board (Apadore & Zainol, 2014; Kamran & Shah, 2014; Nugroho & Eko, 2012). The argument

in favor of CEO duality explains that, when CEO duality occurs in a firm, it will provide a more

flexible environment for management and may provide more effective monitoring (Cornett et al.,

2008; Davidson et al., 2004; Jensen, 1993). Moreover, the impartiality and quality of board control

is generally perceived to suffer if the CEO is also the board chairperson. In case of Pakistan CEO

is in duality as most of the businesses are run by family members and all the posts are occupied by

family members. Therefore the performance of the firm is affected.

According to Rahman and Haniffa (2005) the role of CEO’s duality is viewed with the

help of stewardship theory and agency theory. Agency theory suggested that it is necessary to keep

the roles of CEO and board chair separate in order to ensure the supremacy of board over

management (Hashim & Devi, 2008). While, the stewardship theory suggests that by keeping the

role of CEO and board chair unite, the authority and decision making of chair/CEO get enhanced

that help in creating better performance and higher value for the firms. Brennan (2006) declared

the negative association between CEO duality and firm performance. Moreover, Heenetigala and

Armstrong (2011) concluded that duality of CEO impact negative on the firm's performance, so

single entity on two positions may be biased in decision making in the firms. Likewise, Lam and

Faiza Saleem

6

Lee (2012) described that CEO duality has a significant but negative relationship with firm

performance. The findings of this study is consistent with the agency theory which suggests that

board duality promotes CEO entrenchment by reducing board monitoring effectiveness and

impedes firm performance. Consistent with this argument, the prior studies which were conducted

to analyze the relationship between CEO duality and firm performance revealed negative results

(Coleset al., 2001; Feng et al., 2005; Judge et al., 2003; Sanda et al., 2010; Ujunwa, 2012).

In relation to the CEO duality, other similar studies found no significant association

between CEO duality and firm performance, indicating that the duality is neither a motivation nor

a constraint for managers to increase firm performance. These findings are consistent. with prior

studies by Carapeto et al. (2005), Schmid and Zimmermann (2008) and Wan and Ong (2005). On

the basis of above-mentioned facts and empirical evidence, the study proposed the following

hypothesis for empirical testing:

H3: There is a negative association between CEO duality and firm performance.

2.1.4 Board Activity and Firm Performance

Board activity provides an opportunity to discuss all of the important issues of the firm

on a timely basis. The frequency of board meetings is considered to be an important way of

improving the effectiveness of the board. Board activity has been defined as the number of

meetings conducted by the board in a year (Gulzar & Wang, 2011). According to Ronen and Yaari

(2008), board activity is a key element of board operations and it is the responsibility of the board

of directors to attend board meetings. In Pakistan, the revision of codes of corporate governance in

2012 recommended to attend board meeting on regular basis in order to increase firm

performance. Also, it is mandatory for the board to disclose the number of board meetings

conducted in a year. There are contradictory suggestion found for frequency of board meetings

conducted in a year. Lipton and Lorsch (1992), favor for having frequent meetings for better

performance while Carcelloet al. (2002) had reservation for frequent meeting due to fear of high

cost but at the same time, they are found agreed with notion of frequent meeting due to chance of

in depth audit for better performance. It was also found that companies with poor board

attendance at meetings perform .significantly worse than boards which has good attendance during

financial crisis. On the contrary, the other view claim that frequent attendance of board meeting is

not always useful or effective in increasing firm performance (Vafeas, 1999). Also, there are

pessimist point of view with respect to waste of time, increase in travelling and administrative cost

that may lead to firm less productive (Evanset al., 2002). On the basis of above-mentioned facts

and empirical evidence, the study proposed the following hypothesis for empirical testing:

H4: There is a negative association between board activity and firm performance.

The Effect of Board Characteristics as Corporate Governance Attribute on Firm Performance in Pakistan

7

3 Research Methodology

3.1 Research Design

According to Bickman and Rog (2008), research designs serves as the architectural

blueprint of a research project, linking design, data collection, and analysis activities to research

questions. The study employs a quantitative research approach based on the extensive literature

reviewed. In the quantitative research approach, data can be analyzed in terms of numerical

values. According to Punch (1998), the quantitative methodology is the best approach in order to

get a better understanding of a research problem through numerical tendency.

3.2 Population, Sampling and Data Collection

For analyzing the effect of board characteristics on firm performance, secondary data was

collected from published annual reports of the oil and gas firms listed on PSX for the period of

2008-2015. The collection of data for analysis started from the year 2008 due to its availability on

published sources that is Data stream (Thomson Reuters) and annual reports by oil and gas

companies. However, some firms were established after 2008, some of firms in duration of this

time where dropped from stock exchange and some have incomplete data; therefore the target

population of this study only contains 16 oil and gas firms selected from oil and gas sector.

The reason for choosing oil and gas sector is that Pakistan is undergoing the worst

shortage of oil, gas and electricity (Saleh, 2015). The main reason for this is inappropriate

distribution of resources, unstable law and order situation, poor management and bad governance

(Saleh, 2015). Since the oil and gas sector has a massive share in the country’s economic growth

this sector hold great significance. The present research study used panel data techniques.

Moreover, census sampling technique is adopted for the collection of secondary data from oil and

gas firms listed on PSX. The criteria for sampling are: (1). The firm remained listed on PSX

during the selected period of time (Tabassum et al., 2013), (2). Only firms with complete required

data are included (Latif & Abdullah, 2015) and (3). Firms with incomplete data are excluded

(Shah et al., 2009).

3.3 Dependent and Independent Variables

The dependent variable used in this study is Return on Assets (ROA) which is used as a

proxy to measure firm’s performance. The reason for choosing this variable is justified from some

prior studies (Johl et al., 2015). Whereas, board activity, board size, CEO duality and board

independence are the independent variables used in this study. Table 3.1 shows the list of selected

dependent and independent variables along with their formulation.

Faiza Saleem

8

Table 1: Definition of Variables

VARIABLES Formulation

Dependent Variables

Return on Assets (ROA) Measured as a percentage of net profit after taxes to total

assets of the firm

Independent Variables

Board Size ((BS) Total number of members on the board

Board Independence (BI) Number of independent directors

CEO Duality (CEODL) CEO duality is represented by a dummy variable with the

assigning value 1 if the role of CEO and chairman are

combined and 0 otherwise

Board Activity (BA) Number of board meetings conducted in the year

4 Results and Data Analysis

The quantitative data analysis would be adopted by using pooled OLS regression. The

data has been analyzed using the STATA software. Equation 1 provides the association between

board characteristics and firm performance by using a regression model.

ROAit = β0 + β1BDSit + β2BDINDit + β3CEODLit + β4BDAit + εit

(1)

4.1 Descriptive Statistics

Descriptive statistics are brief descriptive coefficients that summarize a given data set,

which can be either a representation of the entire population or a sample of it. Descriptive statistics

are broken down into measures of central tendency and measures of dispersion. The measure of

central tendency include the mean, median, and mode, while measures of dispersion include the

standard deviation, minimum and maximum. To obtain an overview of the nature of data set,

descriptive statistics analysis were employed for dependent and independent variables.

The descriptive statistics are shown in Table 2, which depicts the mean, minimum,

maximum, and standard deviation of all the variables which have been taken under study. Return

on Assets (ROA) varies from -0.268 to 0.513, with a mean value of 0.110 and standard deviation

of 0.123 respectively. Board size of a firm (BDS) varies from 6.000 to 15.000 with a mean value

of 9.234 and standard deviation of 2.601 respectively. The mean value of board independence

(BDIND) is 1.781, ranging from 0.000 to 9.000 with a standard deviation of 2.350. CEO duality

(CEODL) varies from 0.000 to 1.000, with a mean value of 0.750 and standard deviation of 0.434

respectively. The mean value of board activity (BDA) is 5.625, ranging from 4.000 to 16.000 with

a standard deviation of 2.224.

The Effect of Board Characteristics as Corporate Governance Attribute on Firm Performance in Pakistan

9

Table 2: Descriptive Statistics

STATS Mean Min Max Std. Dev. Observations

ROA 0.110 -0.268 0.513 0.123 192.000

BDS 9.234 6.000 15.000 2.601 192.000

BDIND 1.781 0.000 9.000 2.350 192.000

CEODL 0.750 0.000 1.000 0.434 192.000

BDA 5.625 4.000 16.000 2.224 192.000

ROA = Return on Assets, BDS = Board Size, BDIND = Board Independence, CEODL = CEO

Duality, BDA = Board Activity

4.2 Correlation Analysis

To examine the strength and direction of relationship between board characteristics and

firm performance, analysis of correlation matrix was estimated. The findings of the correlation

matrix are presented in Table 3. The table shows that the correlation coefficients of board

independence with board size is 43.49% at the level of 1% significance. Likewise, board activity is

significant at 1% level with board size at 21.98% of correlation. Similarly, the correlation

coefficients of return on assets with board size is -16.86% at the level of 10% significance. The

correlation coefficients of board activity with board independence 17.85at the level of 10%

significance. Less the value is good for the firm indicating that there is no multicollinearity issues

in the given data. , A number of previous studies such as Hairet al. (2006); Gujarati and Porter

(2009) suggest 0.8 at the beginning at which multicollinearity concerns may harm the regression

analysis.

Table 3: Correlation Matrix

BDS BDIND CEODUL BDA ROA

BDS 1

BDIND 0.4349*** 1

CEODL 0.0012 -0.018 1

BDA 0.2198*** 0.1785* -0.0108 1

ROA -0.1686* 0.1035 0.0068 0.0208 1

The p-values shown in parentheses i.e. ***, **, and * denotes significance at 1%, 5% and

10% levels, respectively. ROA = Return on Assets, BDS = Board Size, BDIND = Board

Independence, CEODL = CEO Duality, BDA = Board Activity.

Faiza Saleem

10

4.3 Variance Inflation Factor (VIF) and Tolerance Test

Table 4 presents the findings relevant to VIF and tolerance value for the sample of oil and

gas firms listed on PSX. The condition of VIF and tolerance is that, if the value of VIF is more

than 10 and the value of tolerance is less than 0.10 for any variable, it means the variable has some

problem, which further needs to be addressed. The result of this test shows that the variance

inflation factor (VIF) value was less than 10 and the tolerance value of variables was more than

0.10. Thus, this indicates that there is no evidence for the multicollinearity problem between

predictor variables.

Table 4: VIF and Tolerance Test

Variable VIF 1/VIF

BDS 1.270 0.7898

BDIND 1.240 0.8032

CEODUL 1.000 0.9994

BDA 1.060 0.9431

BDS = Board Size, BDIND = Board Independence, CEODUL = CEO Duality, BDA =

Board Activity

4.4 Pooled OLS Regression Analysis

Pooled OLS model is also known as a constant coefficient model, is generally used for

estimating unknown parameters in a linear regression model. It helps to reduce the errors between

the estimated points on the line and the actual observed points (Hill et al., 2008). It is assumed that

the intercept and coefficient are homogenous for all firms. In general, ordinary least square

regression model ignores the individual and time effects. Table 5 shows the result of pooled OLS

regression of oil and gas sector listed in PSX.

Table 5: Pooled OLS Regression of Board Characteristics with Firm Performance

Dependent Variable Independent Variables Coefficients P-value

Firm Performance

(ROA)

BDS -0.0127*** 0.001

BDIND 0.0111*** 0.007

CEODUL 0.0032 0.871

BDA 0.0023 0.562

Cons 0.1933 0.000

R Square 0.068

F-Statistics 3.450

Prob (F- Stat) 0.000

The p-values shown in parentheses i.e. ***, **, and * denotes significance at 1%, 5% and 10%

levels, respectively.

The Effect of Board Characteristics as Corporate Governance Attribute on Firm Performance in Pakistan

11

According to Table 5, the F statistics was highly significant (F = 3.450, p-value < 0.000),

indicating that board characteristics could be considered to be influencing firm performance. The

R square value is 0.068 which indicates that the variables in the model explained only 6.8% of the

variation in firm performance. According to Gujarati and Porter (2009), the objective in regression

analysis is not to obtain a high value for R square but rather to obtain dependable estimates of the

true population regression coefficients and draw statistical inferences about them. The researcher

should be more concerned about the logical or theoretical relevance of the explanatory variables to

the dependent variable and their statistical significance; if the R square is low it does not mean the

model is necessarily poor (Gujarati & Porter, 2009).

According to Table 5, the finding of the regression model indicates that board size -

0.0127 (p = 0.001) is negatively significant to the firm performance. The result showed that firms

with more board size will cause a decrease in firm performance thus supporting H1a. The findings

are supported by some prior studies (De Andres & Vallelado, 2008; Sandaet al., 2010). The Table

also shows that board independence 0.0111 (p = 0.007) is positively significant to the firm

performance. The results revealed that an increase in board independence will cause an increase in

firm performance thus supporting H2a. The results are supported by some previous studies

(Connelly & Limpaphayom, 2006; Lefort & Urzúa, 2008; Ponnu, 2008). Whereas CEO duality

and board activity have no significant relationship with firm performance. These findings are

consistent with some previous studies (Carapeto et al., 2005; Schmid & Zimmermann, 2008).

5 Conclusion and Future Recommendations

In the overall sample of oil and gas firms listed on PSX, board size remained significantly

negatively and board independence is significantly positively correlated with a firm performance

by using OLS regression. The findings show that small board and more independent directors on

the board is effective in increasing firm performance (Kamardin, 2009; Krivogorsky, 2006; Lefort

& Urzúa, 2008; Sanda et al., 2010). However, the findings found that CEO duality and board

activity does not affect firm performance in the oil and gas sector in Pakistan.In Pakistan revision

of Corporate Governance codes in 2012 in Pakistan improve governance mechanism in Pakistan

specifically board composition and structure in order to create good dynamics of board

composition discussion which will lead to better firm performance and create good value creation

to shareholders.

This study relies on quantitative information published in the DataStream system and

annual reports. Future research may need to adopt qualitative information and use appropriate

research methodologies to provide enhanced evidence on the association between board

characteristics and firm performance in various economies. Future research could consider if there

are other board characteristics variables that could be used to investigate the said

relationship.Future research may consider a longer time frame with the resulting impact between

board characteristics and firm performance.

Faiza Saleem

12

References

Agrawal, A., & Chadha, S. (2005). Corporate Governance and Accounting Scandals. Journal of

Law and Economics, 48(2), 371-406.

Agrawal, A., & Knoeber, C. R. (1996). Firm Performance and Mechanisms to Control Agency

Problems between Managers and Shareholders. Journal of Financial and Quantitative

Analysis, 31(3), 377-397.

Al-Matari, Y. A., Al-Swidi, A. K., Fadzil, F. H. B., Fadzil, H., & Al-Matari, E. M. (2012). Board

of Directors, Audit Committee Characteristics and the Performance of Saudi Arabia

Listed Companies. International Review of Management and Marketing, 2(4), 241-251.

Apadore, K., & Zainol, S. S. B. (2014). Determinants of Corporate Governance and Corporate

Performance among Consumer Product Industry in Malaysia: A Theoretical Model.

International Journal of Academic Research in Accounting, Finance and Management

Sciences, 4(2), 159-165.

Bhagat, S., & Black, B. S. (2002). The Non-Correlation between Board Independence and Long-

Term Firm Performance. Journal of Corporation Law, 27(2), 231-273.

Bickman, L., & Rog, D. J. (2008). The Sage Handbook of Applied Social Research Methods: Sage

Publications.

Black, B. S., Jang, H., & Kim, W. (2006). Does Corporate Governance Predict Firms' Market

Values? Evidence from Korea. The Journal of Law, Economics, and Organization, 22(2),

366-413.

Brennan, N. (2006). Boards of Directors and Firm Performance: Is there An Expectations GAP?

Corporate Governance: An International Review, 14(6), 577-593.

Carapeto, M., Lasfer, M., and Machera, K. (2005). Does Duality Destroy Value? Working paper,

from http://papers.ssrn.com/sol3/papers.cfmabstract_id=686707.

Carcello, J. V., Hermanson, D. R., Neal, T. L., & Riley, A. R. (2002). Board Characteristics and

Audit Fees. Contemporary Accounting Research, 19(1), 365-384.

Chan, K. C., & Li, J. (2008). Audit Committee and Firm Value: Evidence on Outside Top

Executives as Expert‐ Independent Directors. Corporate Governance: An International

Review, 16(1), 16-31.

Coles, J. W., McWilliams, V. B., & Sen, N. (2001). An Examination of the Relationship of

Governance Mechanisms to Performance. Journal of Management, 27(1), 23-50.

Connelly, J. T., & Limpaphayom, P. (2006). Board Characteristics and Firm Performance:

Evidence from the Life Insurance Industry in Thailand. Journal of Economics, 16(2),

101-124.

Cornett, M., Marcusb, A., & Tehranianb, H. (2008). Corporate Governance and Pay-for

Performance: The Impact of Earnings Management. Journal of Financial Economics,

87(2), 357-373.

The Effect of Board Characteristics as Corporate Governance Attribute on Firm Performance in Pakistan

13

Daily, C. M., & Dalton, D. R. (1993). Board of Directors Leadership and Structure: Control and

Performance Implications. Entrepreneurship Theory and Practice, 17(3), 65-81.

Dalton, D. R., Daily, C. M., Certo, S. T., & Roengpitya, R. (2003). Meta-analyses of financial

performance and equity: fusion or confusion?. Academy of Management Journal, 46(1),

13-26.

Davidson, W. N., Jiraporn, P., Kim, Y. S., & Nemec, C. (2004). Earnings Management Following

Duality-Creating Successions: Ethnostatistics, Impression Management, and Agency

Theory. Academy of Management Journal, 47(2), 267-275.

De Andres, P., and Vallelado, E. (2008). Corporate Governance in Banking: The Role of the

Board of Directors. Journal of Banking and Finance, 32(12), 2570-2580.

De Andres, P., Azofra, V., and Lopez, F. (2005). Corporate Boards in OECD Countries: Size,

Composition, Functioning and Effectiveness. Corporate Governance: An International

Review, 13(2), 197-210.

Dehaene, A., De Vuyst, V., & Ooghe, H. (2001). Corporate Performance and Board Structure in

Belgian Companies. Long Range Planning, 34(3), 383-398.

Eisenberg, T., Sundgren, S., and Wells, M. T. (1998). Larger Board Size and Decreasing Firm

Value in Small Firms. Journal of Financial Economics, 48(1), 35-54.

Erickson, J., Park, Y. W., Reising, J., and Shin, H.-H. (2005). Board Composition and Firm Value

Under Concentrated Ownership: the Canadian Evidence. Pacific-Basin Finance Journal,

13(4), 387-410.

Evans, J., Evans, R., & Loh, S. (2002). Corporate Governance and Declining Firm Performance.

International Journal of Business Studies, 10(1), 1-18.

Fama, E. F., and Jensen, M. C. (1983). Separation of Ownership and Control. Journal of Law and

Economics, 26(2), 301-325.

Feng, Z., Ghosh, C., and Sirmans, C. (2005). How Important is the Board of Directors to REIT

Performance? Journal of Real Estate Portfolio Management, 11(3), 281-293.

Gujarati, D. N., & Porter, D. C. (2009). Basic Econometrics. (5th ed). New York: McGraw-Hill.

Gulzar, M. A., & Wang, Z. (2011). Corporate Governance Characteristics and Earnings

Management; Empirical Evidence from Chinese Listed Firms. International Journal of

Accounting and Financial Reporting, 1(1), 133-151.

Hair, J., Black, W., Babin, B., Anderson, R., & Tatham, R. (2006). Multivariate Data Analysis.

(6th Ed). New Jersey: Pearson Educational International.

Haniffa, R., & Hudaib, M. (2006). Corporate Governance Structure and Performance of Malaysian

Listed Companies. Journal of Business Finance and Accounting, 33(7‐ 8), 1034-1062.

Hashim, H. A., & Devi, S. S. (2008). Board Independence, CEO Duality and Accrual

Management: Malaysian Evidence. Asian Journal of Business and Accounting, 1(1), 27-

46.

Faiza Saleem

14

Heenetigala, K., and Armstrong, A. (2011). The Impact of Corporate Governance on Firm

Performance in An Unstable Economic and Political Environment: Evidence from Sri

Lanka. Available at SSRN: https://ssrn.com/abstract=1971927.

Hermalin, B. E., & Weisbach, M. S. (2003). Boards of Directors As An Endogenously Determined

Institution: A Survey of the Economic Literature. Federal Reserve Bank of New York

Economic Policy Review, 13(2), 7-26.

Iraya, C., Mwangi, M., & Munchoki, G. W. (2015). The Effect of Corporate Governance Practices

on Earnings Management of Companies Listed at the Nairobi Securities Exchange.

European Scientific Journal, 11(1), 169-178.

Jensen, M. (1993). Modern Industrial Revolution, Exit, and the Failure of Internal Control

Systems. Journal of Finance, 48(3), 831-880.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Cost

and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.

Johl, S. K., Kaur, S., & Cooper, B. J. (2015). Board Characteristics and Firm Performance:

Evidence from Malaysian Public Listed Firms. Journal of Economics, Business and

Management, 3(2), 239-243.

Judge, W. Q., Naoumova, I., & Koutzevol, N. (2003). Corporate Governance and Firm

Performance in Russia: An Empirical Study. Journal of World Business, 38(4), 385-396.

Kamardin, H. (2009). The Impact of Corporate Governance and Board Performance on the

Performance of Public Listed Companies in Malaysia.PhD Thesis, Universiti Sains,

Malaysia.

Kamran, K., & Shah, A. (2014). The Impact of Corporate Governance and Ownership Structure on

Earnings Management Practices: Evidence from Listed Companies in Pakistan. The

Lahore Journal of Economics, 19(2), 27-70.

Kent, P., Routledge, J., & Stewart, J. (2010). Innate and Discretionary Accruals Quality and

Corporate Governance. Accounting and Finance, 50(2), 171-195.

Klein, A. (2002). Economic Determinants of Audit Committee Independence. The Accounting

Review, 77(2), 435-452.

Krivogorsky, V. (2006). Ownership, Board Structure, and Performance in Continental Europe. The

International Journal of Accounting, 41(2), 176-197.

Lam, T.-Y., & Lee, S. K. (2012). Family Ownership, Board Committees and Firm Performance:

Evidence from Hong Kong. Corporate Governance: The international journal of

business in society, 12(3), 353-366.

Latif, A., & Abdullah, F. (2015). The Effectiveness of Corporate Governance in Constraining

Earnings Management in Pakistan. The Lahore Journal of Economics, 20(1), 135-155.

Lefort, F., and Urzúa, F. (2008). Board Independence, Firm Performance and Ownership

Concentration: Evidence from Chile. Journal of Business Research, 61(6), 615-622.

The Effect of Board Characteristics as Corporate Governance Attribute on Firm Performance in Pakistan

15

Lipton, M., and Lorsch, J. W. (1992). A Modest Proposal for Improved Corporate Governance.

The Business Lawyer, 48(1), 59-77.

Mak, Y. T., & Kusnadi, Y. (2005). Size Really Matters: Further Evidence on the Negative

Relationship between Board Size and Firm Value. Pacific-Basin Finance Journal, 13(3),

301-318.

Masood, A., & Shah, A. (2014). Corporate Governance and Cash Holdings in Listed Non-

Financial Firms in Pakistan. Business Review, 9(2), 48-73.

Mokhtar, S. M., Sori, Z. M., Hamid, M. A., Abidin, Z. Z., Nasir, A. M., Yaacob, A., & Muhamad,

S. (2009). Corporate Governance Practices and Firms Performance: the Malaysian Case.

Journal of Money, Investment and Banking, 11(1), 45-59.

Nahar Abdullah, S. (2004). Board Composition, CEO Duality and Performance among Malaysian

Listed Companies. Corporate Governance: The International Journal of Business in

Society, 4(4), 47-61.

Nugroho, B. Y., and Eko, P. U. (2012). Board Characteristics and Earning Management. Bisnis

and Birokrasi Journal, 18(1), 1-10.

Ponnu, C. H. (2008). Corporate Governance Structures and The Performance of Malaysian Public

Listed Companies. International Review of Business Research Papers, 4(2), 217-230.

Punch, F. K. (1998). Introduction to Social Research: Quantitative and Qualitative Approaches.

(2nd ed.). Thousand Oaks: SAGE.

Rahman, R. A.., & Haniffa, R. M. (2005). The Effect of Role Duality on Corporate Performance

in Malaysia. Corporate Ownership and Control, 2(2), 40-47.

Rhoades, D. L., Rechner, P. L., & Sundaramurthy, C. (2000). Board Composition and Financial

Performance: A Meta-Analysis of The Influence of Outside Directors. Journal of

Managerial Issues, 12(1), 76-91.

Ronen, J., & Yaari, V. (2008). Earnings Management. US: Springer.

Saleh, A. (2015). Oil & Gas Sector of Pakistan and Sustainable Development. Germeny: Lambert

Academic Publishing.

Sanda, A. U., Mikailu, A. S., & Garba, T. (2010). Corporate Governance Mechanisms and Firms'

Financial Performance in Nigeria. Afro-Asian Journal of Finance and Accounting, 2(1),

22-39.

Schmid, M. M., & Zimmermann, H. (2008). Should Chairman and CEO be Separated? Leadership

Structure and Firm Performance in Switzerland. Schmalenbach Business Review, 60(2),

182-204.

Shabbir, S. S. (2012). The Role of Institutional Shareholders Activism in the Corporate

Governance of Pakistan. Journal of Humanistics and Social Sciences, 1(2), 1-23.

Shah, S. Z. A., Butt, S. A., & Hasan, A. (2009). Corporate Governance and Earnings Management

an Empirical Evidence Form Pakistani Listed Companies. European Journal of Scientific

Research, 26(4), 624-638.

Faiza Saleem

16

Shleifer, A., & Vishny, R. W. (1997). A Survey of Corporate Governance. The Journal of

Finance, 52(2), 737-783.

Shukeri, S. N., Shin, O. W., & Shaari, M. S. (2012). Does Board of Director’s Characteristics

Affect Firm Performance? Evidence from Malaysian Public Listed Companies.

International Business Research, 5(9), 120-127.

Tabassum, N., Kaleem, A., & Nazir, M. S. (2013). Impact of Real Earnings Management on

Subsequent Financial Performance. Middle-East Journal of Scientific Research, 17(4),

551-560.

Tahir, S. H., Muhammad, H. M. S. A. A., & ul Haq, A. (2012). Two-Tier Corporate Governance

Model for Pakistan. European Journal of Business and Management, 4(6), 38-47.

Ujunwa, A. (2012). Board Characteristics and the Financial Performance of Nigerian Quoted

Firms. Corporate Governance: The International Journal of Business in Society, 12(5),

656-674.

Uwuigbe, U., Peter, D. S., & Oyeniyi, A. (2014). The Effects of Corporate Governance

Mechanisms on Earnings Management of Listed Firms in Nigeria. Accounting and

Management Information Systems, 13(1), 159-174.

Vafeas , N. (1999). Board Meeting Frequency and Firm Performance. Journal of Financial

Economics, 53(1), 113-142.

Wan, D., & Ong, C. H. (2005). Board Structure, Process and Performance: Evidence from

Public‐ Listed Companies in Singapore. Corporate Governance: An International

Review, 13(2), 277-290.

Williamson, O. (1988). Corporate Finance and Corporate Governance. Journal of Finance, 43(3),

567-591.

Yermack, D. (1996). Higher Market Valuation of Companies with a Small Board of Directors.

Journal of Financial Economics, 40(2), 185-211.

3G/4G Mobile Network Band Wagon in Pakistan: A Mixed Method Inquiry into Consumer Adoption Attitude

1, 2Lecturer, Air University School of Management, AU Multan Campus: [email protected] 2PhD Scholar, Graduate School of Business, University of Sains Malaysia, Malaysia

[email protected]

University of Wah Journal of Management Sciences

Volume 2, Issue 2, September 2018, pp. 17-35

3G/4G Mobile Network Band Wagon in Pakistan: A Mixed Method Inquiry

into Consumer Adoption Attitude Moin Ahmed Moon1, Amna Farooq2, Ghazanfer Ali Abbasi3

Article History:

Received:

20 Jun, 2018

Revised:

26 Sep, 2018

Accepted:

28 Sep, 2018

ABSTRACT

Purpose: The purpose of this research was twofold; first to explore the basic level

of understanding of 3G/4G and to identify the factors considered most important by

consumers in shaping their adoption attitude. The second purpose was to

investigate the applicability of factors identified by 3G/4G adoption literature in

Pakistan.

Methodology/Design: Two separate studies were designed. In Study 1, nine focus

group interviews were conducted with university students, general consumers and

telecom employees of Islamabad. 9 factors were identifiedon the basis of im-

portance given by respondents. In Study 2, we tested a model based on the previous

literature with 610 mobile phone user of Islamabad.

Findings: Except two all hypothesis were accepted. Findings of both studies sug-

gest essential factors in shaping up 3G/4G adoption attitude.

Implications: Managerial implications, limitations and future research directions

are discussedat the end.

Keywords: Social Influence, Innovation, Image, Price, Perceived-usefulness, Atti-

tude-towards-use

1. Introduction

Mobile services and the latest technology like 3G/4G have become an integral part of

people’s lives worldwide. Steady growth has been seen in 3G/4G adoption throughout the world.

The range of 3G/4G diffusion exists at a different level in various countries. Significant regional

differences exist in 3G/4G subscriber’s number worldwide, about half of 3G/4G subscribers are

found in the Asian region. Therefore, it is quite imperative to study 3G/4G technology acceptance

in Pakistan. Given the importance of the phenomenon, the purpose of this research was twofold,

first to explore the basic level of understanding of 3G/4G and to identify the factors considered

most important by consumers in shaping their adoption attitude and secondly to the applicability

of factors identified by 3G/4G adoption literature using the theoretical basis provided by

Moin Ahmed Moon1, Amna Farooq2, Ghazanfer Ali Abbasi3

18

technology acceptance model, technology acceptance model no 2 and the Unified Theory of

Acceptance and Use of Technology (Davis, 1989; Venkatesh & Davis, 2000).

The current study develops an integrated technology acceptance model for 3G/4G mobile

services, a theoretical framework to describe the social and psychological factors influencing user

attitudes toward the 3G/4G services. By integrating the technology acceptance model and unified

model to represent some unique features of the 3G/4G services under study, to achieve our pur-

poses, we designed two studies. Study 1 is a qualitative inquiry and study 2 is a quantitative inves-

tigation. We first discuss the methods and results of study 1 which is followed by the findings of

study 2.

2. Study 1: Qualitative Study

A qualitative study has several objectives in sequence i.e. ‘to get an understanding of

consumers’ usage patterns and preferences regarding current mobile network’, ‘to get an under-

standing of consumers’ basic level of awareness about 3G/4G mobile technology. ‘Analyzing

important features and functions/utilities of the 3G/4G mobile network within consumer context

in the formation of attitude-towards-use of technology’, and ‘identifying the level of consumers’

willingness to pay against their preferred 3G/4G network functions’. The reason behind conduct-

ing a qualitative study was the consistent criticism of statistical hypothesis testing procedure in

social sciences when it comes to examining a new phenomenon (Moon, Habib,& Attiq, 2015).

3G/4G researches have flourished in previous years in countries that have adopted the 3G/4G

technology. In Pakistan, 3G/4G is scheduled to launch in September (Zaidi, 2014).

Therefore, qualitative exploration of the phenomenon is required in Pakistan. Another

reason to conduct the qualitative study was to use concepts identified in this part as an input in

operationalization and development of research model.

2.1 Research Methodology

Study 1: Qualitative Study

2.1.1 Sample (Study 1):

The target population was potential 3G/4G consumers of Islamabad. We further divided

this population into three subcategories. The first category was composed of students of different

universities of Islamabad. The second category included general consumers. Third category com-

prised of telecom sector employees. Mixed purposeful sampling was employed because it allows

using two sampling techniques at the same time (Moon et al., 2018). For a selection of the sample

in the first phase of data collection, researchers used their personal contacts to gather participants.

In the second and third phase of data collection, normal consumers and telecom employ-

ees were selected through snowball sampling whereas students were selected using convenient

3G/4G Mobile Network Band Wagon in Pakistan: A Mixed Method Inquiry into Consumer Adoption Attitude

19

sampling. 97 individuals participated in this study.Participants of the study consisted of 51 males

and 46 females. Youngsters of age group 30-35 dominated the sample and majority of the sample

had bachelors or higher degree. Only 13 respondents were not doing anything at time of the inter-

views. Other 84 participants were employed, had their business or were students.

2.1.2 Measures (Study 1):

In each focus group interview,fundamental questions about 3G/4G were asked. Ques-

tions included in these sessions were: what is 3G or 4G? What are its expected features? What do

you think of 3G/4G? What may be its potential advantages and disadvantages? What would it do

for you? Moreover, who would influence you to adopt 3G/4G? What feature do you consider most

important that would make up your mind to adopt 3G/4G? All participants in the sample had to

fulfill the criteria of selection i.e. participant must be a mobile phone user (especially

smartphones).

2.1.3 Procedures (Study 1):

We conducted nine focus group interviews in few public and private Universities of Is-

lamabad. Each interview was composed of 9 to 12 participants and lasted for an average of one

hour. Interviews were conductedfrom June 2017 to August 2017. Participants were invited over

lunch in university campus mostly on Saturdays, as it is the holiday In Islamabad. These inter-

views were conducted in three phases.

Table 1: Sample Characteristics (Study 1)

Participants profile Phase 1

N=32

Phase 2

N=32

Phase 3

N=33

Total

N=97

Age

1.20-25 10 7 8 25

2.25-30 13 16 11 40

3.30-35 6 9 8 23

4.35-above 3 0 6 9

Gender 1.Male 21 9 21 51

2.Female 11 23 12 46

Qualification

1. Under bachelors 9 1 3 13

2. Bachelors 5 18 17 40

3. Masters 16 12 11 39

4. Above masters 2 1 2 5

Income

1. Less than 10000 6 10 5 21

2. Less than 20000 12 6 7 25

3. Less than 30000 4 8 7 19

4. Above 30000 10 8 14 32

Occupation 1. Employed 10 9 11 30

Moin Ahmed Moon1, Amna Farooq2, Ghazanfer Ali Abbasi3

20

2. Businessmen 5 7 9 21

3. Students 12 12 9 33

4. Unemployed 5 4 4 13

In the first phase, we conducted three focus group interviews. The first focus group inter-

view was conducted with students, second with general consumers and last was conducted with

telecom employees. This sequence was followed during later two phases.

2.1.4 Ethical Consideration(Study 1)

Respondents were ensured the confidentiality of their responses and all other ethical con-

siderations for research were taken into account during the process of data collection (e.g. Pope,

Ziebland & Mays, 2000)

2.1.5 Results and Analysis (Study 1)

To assure the accuracy of understanding of the concepts, researchers grouped common

responses and assigned relative meaningful names name to the concepts. Then the participants

were asked whether the concept describes their thoughts. After confirming this, we wrote all iden-

tified concepts on board and asked them to rate the concept according to their preferences. If we

compare the findings of the focus group discussions sample category wise (i.e. students, general

consumers and telecom employees), telecom employees were very much informed about the

3G/4G services. Most of them knew what 3G/4G is, what 3G/4G will do and how it will work.

Majority of employees explained the difference between currently available 2G and upcoming 3G

services. The case was oppositeto general consumers and to our amazement with students. None

of the general consumers knew about the 3G/4G at all. Only three students out of 33 knew that 3G

stands for third generation mobile technology and it provides faster speed than 2G services. Then

the researcher briefly introduced 3G concepts to the participants so that the factors that may make

up their intention could be identified. Results revealed that social networking and cost are the

most important aspects. Consumers prioritized the usage of 3G/4G services for the social net-

working purposes. At the same time, consumers are greatly concerned about the potential high

prices of 3G/4G services. Results suggest that lower prices of 3G/4G services would enhance the

possibility of adoption of 3G/4G for a broader range of consumers. Then they perceived high

speed to be influential in developing their intention towards 3G/4G technology.They perceive a

considerable difference among data speeds between 3G and 2G services.

3G/4G Mobile Network Band Wagon in Pakistan: A Mixed Method Inquiry into Consumer Adoption Attitude

21

Table 2: Analysis of Qualitative Study

Sr.

No.

Concepts Identi-

fied

Total

Weights

Phase 1

N=32

Phase 2

N=32

Phase 3

N=33 Average

Weights

FG1 FG2 FG3 FG4 FG5 FG6 FG7 FG8 FG9

1 Entertainment 10 8 10 6 9 10 7 9 9 7 8.3

2 High Speed 10 9 10 10 10 10 9 10 9 10 8.6

3 Social networking 10 10 8 10 10 10 10 10 9 10 9.7

4 Cost 10 10 10 8 8 9 8 10 10 9 9.1

5 High quality 10 7 7 9 8 8 8 7 9 9 8

6 Status symbol 10 8 9 6 9 10 6 8 10 7 8.1

7 Fun for time pass 10 6 9 6 8 9 6 6 7 6 7

8 Informative 10 8 6 9 9 7 7 8 7 10 7.9

9 Something new 10 6 6 6 8 6 7 6 6 7 6.5

Note: average weight= total of all weights /no of focus group interviews

FG= Focus group session

Moin Ahmed Moon1, Amna Farooq2, Ghazanfer Ali Abbasi3

22

Entertainment is another perceived important aspect of 3G/4G services that would enable

the user to stream online listen, watch and download music, video games dramas movies and

sports events. Using 3G/4G services will enhance consumer social status as evident from the re-

sults. Consumers consider using 3G to be essential if their peers family members friends or group

fellows are using it. They argued that they were very much concerned about their self-image and

would prioritize using 3G/4G if it enhances their social standing. Quality of 3G/4G services, in-

formation seeking medium and fun and novelty seeking were other important aspects that were

associated with 3G/4G adoption intention but were not as important as previously discussed as-

pects.

3 Study 2: Quantitative Study

This study aimed at developing ‘3G/4G technology acceptance model’ in consumer con-

text based on previous core technology models such as ‘Technology Acceptance Model (TAM)’

and the ‘Unified Theory of Acceptance and Use of Technology (UTAUT).’

3.1 Conceptual Development

The TAM has gained much respect in the information technology and information sys-

tems study (Davis, 1989). The TAM advised that two variables perceived ease of use and per-

ceived usefulness are two key factors in explaining the use of the system. UTAUT (Venkatesh &

Davis, 2000) has refined the crucial factors and contingencies regarding forecasting of behavioral

intention in the technologyused mainly in organizational contexts. The behavioral intention in

technology usage is influenced by performance expectancy, effort expectancy and social influ-

ence, though technology use is determined by facilitating conditions and behavioral intention.

However, age, gender, experience and voluntariness moderate several relationships in the UTAUT

model.

UTAUT model incorporated TAM constructs, perceived usefulness and ease of use by

insertion of variables i.e. performance expectancy and effort expectancy. Though according to

UTAUT model effort expectancy significantly determine acceptance of information technology

by consumers, apprehensions for ease of use tend to turn non-significant over the prolonged and

persistent use of technology (Marchewka, Liu, & Kostiwa, 2007). Hence, only in prior stages of

new technology usage, perceived ease of use is more relevant and positively affect perceived use-

fulness (Davis, 1989; Davis et al., 1989). However, as compared to TAM studies alone, 70% of

the variance is accounted for by the UTAUT model (Marchewka, Liu,& Kostiwa; 2007). In the

current study, due to its broad application, both acceptance models (i.e. TAM and UTAUT) have

been applied as a theoretical framework.

3G/4G Mobile Network Band Wagon in Pakistan: A Mixed Method Inquiry into Consumer Adoption Attitude

23

3.2 Hypotheses Development

3.2.1 Attitude-towards-Use (ATT)

Attitude is defined as an individual’s favorable or unfavorable propensity towards a

specific phenomenon (Allport, 1964). In this research, we defined attitude as a consumer’s favor-

able or unfavorable propensity towards 3G/4G technology. Attitude has been acknowledged to be

a precursor of consumer behavioral intentions (Garg & Garg, 2013; Moon et al., 2017). As far as

3G/4Gtechnology is concerned, it is merely different from 2G technology regarding its speed and

bandwidth for accessing the wireless network. The majority of the consumers of mobile services

has already been exposed to the 3G/4G mobile phone due to the rapid expansion of smartphones

and have formed attitudes towards the acceptance and usage of 3G/4G technology.

3.2.2 Social Influence (SINF) and Social Norms (SNR)

Social influences are defined as the extent of perception that a person holds vital that

others believe he or she should use new system technology or application. Social influences are

usually categorized into three parts. These include subjective norms, social factors and finally the

image. Subjective norms are an individual’s perceptions about what people who are close to him

think about a specific behavior. Social factors include the peer, group culture and the nature of

relationships that an individual has with others in a particular setting. The image is defined as the

individual’s social image that is resultant of using new system/technology/application (Venkatesh

et al., 2003). It implies that if a person acts in a way that conforms to the norms of his group and

people around, and others approve this behavior around him, then the individual does not only

gain acceptance from the group but also receives social reinforcement (Venkatesh & Davis, 2000).

Social influences were dropped from earlier TAM studies, but numerous studies found it positive-

ly related to the behavior of a consumer in a technology context (Grag & Grag, 2013). As sug-

gested by several of consumer behavior theories (e.g. TRA), social influences play an overwhelm-

ing role in the development of consumer behavior also in technology acceptance and usage behav-

ior (Yang, 2017). Social influences have a positive influence on perceived usefulness and behav-

ioral intentions.

In findings, utilizing the UTAUT2 model, Newby, Nguyen and Waring (2014) remarked

habits as an important influencer of the adoption process. It was found in a study conducted on

chines consumer of mobile social network services that social influences have unique implications

in understanding the technology adoptions behavior of consumers. Various studies found that so-

cial influences have also played a significant role in the formation of intentions to adopt 3G/4G

technology (Moon & Attiq, 2018).

H1: Social norms have a significant positive influence on perceived usefulness.

H2: Social norms have a significant positive influence on perceived ease of use.

H3: Social influence has a significant positive influence on perceived usefulness.

H4: Social influence has a significant positive influence on perceived ease of use.

Moin Ahmed Moon1, Amna Farooq2, Ghazanfer Ali Abbasi3

24

3.2.3 Innovativeness (INN)

The willingness to adopt a new innovative technology is known as innovativeness. It is

also known as the level of interest of an individual related to trying out a new product, service,

thing or concept (Rogers, 1995; Frimpong et al., 2017). Innovation Diffusion theory posits that the

adoption or acceptance of new technology is closely tied to the willingness of trying and accepting

new things (Rogers, 1995). Innovativeness is a trait that signifies the tendency of consumers of

trying out new products (Pagani, 2004) that implies that consumers with high innovativeness will

exhibit more positive technology acceptance behavior (Bartels & Reinders, 2011; Jang & Lee,

2018). In findings of their study, utilizing the Unified Theory of Acceptance and Use of Technol-

ogy (UTAUT2), Moon et al., (2018) classified innovativeness as an essential influencer of the

technology adoption process.

H5: Innovation has a significant positive influence on perceived usefulness.

H6: innovation has a significant positive influence on perceived ease of use.

3.2.4 Image (IMG)

Image is defined as when an individual considers a group’s belief to be significant

regarding execution of specific behavior and its execution can augment the worth of internal

mechanism of organization persistently (Pfeffer, 1982) In technology acceptance context image

refers to the extent of belief of potential adopters to be conferred with additional prestige in the

relevant community by adoption of technology (Moore & Benbasat, 1991). The definition

shows social benefit related to the technology.In prior studies, Image impacts positively perceived

usefulness as concluded by Venkatesh and Davis (2000). Similarly, TAM2 illustrate the positive

and significant impact of subjective norm on the image since individuals consider executing

specific behavior will lean to uplift their status in the social system (Venkatesh & Davis, 2000).

Research conducted by Lu et al. (2005) concluded that social networks and sense of image

considerably influence the perception of usefulness and ease of use towards the adoption of

wireless Internet services via mobile technology WIMT.

H7: Image has a significant positive influence on perceived usefulness.

H8: Image has a significant positive influence on perceived ease of use.

3.2.5 Price (PVL)

Price is considered an essential factor while making technology adoption decisions

(Yang, 2017). We operationalized price as the monetary value that a consumer has to bear for

availing 3G/4G services. Several studies (Yang, 2017) have been conducted to authenticate price

contributions towards 3G/4 Gusage behavior. Research suggests that low prices of 3G/4G services

are likely to attract more consumers to adopt 3G/4G (Lin & Chiu, 2014). In a research conducted

on 3G/4G services, high perception of prices is negatively related to 3G/4Gadoption intension and

discourages consumers to adopt 3G/4 Gtechnology (Yang, 2017). Price is considered as an

3G/4G Mobile Network Band Wagon in Pakistan: A Mixed Method Inquiry into Consumer Adoption Attitude

25

essential determinant of adoption intention specifically in developing countries (Grag & Grag,

2013). Majority of consumers in America and China (Lin & Chiu, 2014) rated price to be a prime

factor in studies analyzing attitudes and intentions towards 3G/4G adoption.

H9: Price has a significant positive influence on Perceived Usefulness.

H10: Price has a significant positive influence on Perceived Ease of Use.

3.2.6 Perceived Usefulness (PUF)

Perceived usefulness is defined as “the degree to which a person believes that using a

particular system would enhance his or her job performance” (Davis, 1989). We define perceived

usefulness as the perception of a consumer that using 3G/4G technology will enhance his/her

communication performance. Perceived usefulness is found to be a powerful predictor of technol-

ogy/ system/ application usage intention and ultimately behavior (Venkatesh & Davis, 2000). Per-

ceived usefulness was found to be a stronginfluencer of attitude and intentions to adopt 3G/4G

technology in different studies (Pagani, 2004; Ntsafack, Kamdjoug & Wamba, 2018).

H11: Attitude-towards-Use has a significant positive influence on perceived usefulness

3.2.7 Perceived ease of use (PES)

Perceived ease of use is defined as “the degree to which a person believes that using a

particular system would be free from effort” (Davis, 1989). In this research, we defined perceived

ease of use as the degree or extent to which consumers perceive the use of 3G/4 Gtechnology as

easy. It is found that if the system/technology/application is perceived easy to use, the consumers

tend to accept or adopt it easily (Al-Ajam & Nor, 2013). In studies conducted using Technology

acceptance model, perceived ease of use was found to have a positive relationship with attitude

and intentions to use the technology (Joseph et al., 2018) whereas it was also found that perceived

ease of use has no direct influence over behavioral intentions to use a technology. Adoption of

3G/4 Gtechnology is found to be influenced by perceived ease of use in different researches

(Yang, 2017).

H12: Attitude-towards-use has a significant positive influence on perceived EU.

Moin Ahmed Moon1, Amna Farooq2, Ghazanfer Ali Abbasi3

26

Figure 1: Theoretical Framework (Study 2)

3.3. Research Methodology

Study 2: Quantitative Study

3.3.1 Sample (Study 2)

The target population was residents of Islamabad. Questionnaires were floated to the

residents of Islamabad for data collection. We received 610 complete questionnaires from the re-

spondents after screening. Out of these 610 respondents, 422 respondents are males (69.2%) and

the remaining 188 respondents are females (30.8%). The mode and standard deviation of respond-

ents’ gender were 2 and 0.46 respectively. For analyzing the normality of data, the study found

skewness and kurtosis is -.83 and -1.31 which are in the range of -2 to +2 (Tabachnick & Fidell,

2007).

Out of 610 respondents 29 (4.8%) were below 20 years, 245 (40.2%) were lies between

20-25 years category, 164 (26.9%) respondents were from 25-30 years, 94 (15.4%) respondents

were 30-35 years, 41 (6.7%) respondents were 35-40 years, 22 (3.6%) respondents were 40-45

years, 13 (2.1%) respondents were 45-50 years, and remaining 2 (0.3%) were above 50 years.

The average score or mean and standard deviation of respondent’s age is 3.00 and 1.33 respective-

ly. (42.6%) respondents were students, 119 (19.5%) respondents were part-time students, and the

remaining 231 (37.9%) respondents were working people.

3G/4G Mobile Network Band Wagon in Pakistan: A Mixed Method Inquiry into Consumer Adoption Attitude

27

3.3.2 Measures (Study 2)

To measure the perceived ease of use, perceived usefulness and attitude-towards-use we

adapted Davis et al. (1989) scale where three items represented each of the constructs. To measure

social norms, three items scale were used (Taylor & Todd, 1995). To measure Image, Moore and

Benbasat (1991) scale was usedand it has four questions.To measure innovations, four items scale

was used. To measure price value, Dodds et al. (1991) scale was usedand it has three items. We

used five-pointLikert scale anchored at 1=strongly disagree and 5= strongly agree.

3.3.3 Procedure (Study 2)

We collected data from residents of Islamabad during November and December 2014.

Respondents were approached on their workplaces and asked for their consent to participate in the

study. Initially, we contacted 1034 respondents out of whom 390 refused to participate. Out of the

644 respondents who showed their consent, 34 did not return the questionnaire. Therefore, 610

respondents constituted the final pool of respondents for study 2.

3.3.4 Ethical Consideration (Study 2)

Respondents were ensuredof the confidentiality of their responses and all other ethical

considerations for research were taken into account during the process of data collection (see

Pope, Ziebland & Mays, 2000)

3.3.5 Results and Analysis (Study 2)

Correlation results showed that all variables are positively correlated with each other.

The value of Cronbach’s alpha of image and social influence variable is 0.60 and 0.65 respective-

ly and all other remaining variables have correlation above 0.74.

3.3.5.1 Structural Equation Modeling (Measurement & Structural Models)

In confirmatory factor analysis, factor loading (FL) and squared multiple correlations

(SMC) was employed to find out the reliability of every item and also find problematical errors

(Fornell & Larcker, 1981).

If FL value below 0.50 and SMC value below 0.20 of any item then this item is dropped.

Latent variables used in CFA are Social Norms (TSNR). Social influence (TSIF), Image (TIMG),

Innovation (TINN), Price value (TPVL), Perceived usefulness (TPUF), Perceived ease of use

(TPES) and Attitude-towards-use (TATT).

Moin Ahmed Moon1, Amna Farooq2, Ghazanfer Ali Abbasi3

28

Model fit showed satisfactory results and measurement model fit demonstrated accepted

fitness in following values of indices. CMIN/DF = 2.07; GFI = 0.93; AGFI = 0.91; CFI = 0.97;

RMSEA = 0.04. As a result, fit of measurement model was found to be excellent.

Figure 2: Measurement Model or CFA (Study 2)

3G/4G Mobile Network Band Wagon in Pakistan: A Mixed Method Inquiry into Consumer Adoption Attitude

29

Table 3: Results of Mean, Standard Deviation, Correlation Analysis

M (S.D) 1. 2. 3. 4. 5. 6. 7. 8.

1. TSNR 2.17 (.81) 0.50

2. TSIF 2.44 (.76) .52** 0.68

3. TINN 1.83 (.74) .48** .47** 0.79

4. TIMG 2.70 (.75) .35** .29** .42** 0.51

5. TPVL 1.95 (.77) .50** .48** .64** .40** 0.87

6. TPUF 2.10 (.79) .58** .56** .63** .39** .58** 0.82

7. TPES 1.99 (.71) .50** .47** .69** .42** .76** .61** 0.75

8. TATT 2.08 (.75) .55** .49** .64** .40** .72** .59** .68** 0.84

** Correlation is significant at the 0.01 level (2-tailed)

Bold values show ‘Square root of AVE’ of all constructs (Average Variance Extracted- AVE)

Moin Ahmed Moon1, Amna Farooq2, Ghazanfer Ali Abbasi3

30

Convergent validity is attained when there are factor loadings more than 0.50 among

items and construct. To establish convergent validity, the current study also identified other core

fit indices such as ‘Coefficient of determination (R²),’ ‘Composite Reliability (CR),’ and ‘Average

Variance Extracted (AVE)’. The AVE values of all variables exceeded the threshold limit of 0.40

except image as recommended by Fornell and Larcker (1981). Composite reliability of all varia-

bles lies between the ranges of 0.70 to 0.91 except image (i.e. 0.57). Similarly, for measurement

of reliability estimates of all variables were also calculated considered such as factor loading of all

variables lies between the ranges of 0.51 to 0.91. The squared multiple correlations (SMCs) of all

items ranged between 0.21 and 0.83.

According to Hair et al. (2013), discriminant validity is measured as the degree to what

extent two related constructs are actually different. With the presence of discriminant validity, this

condition assumes that construct variables exert the greater power of explanation for that construct

than others in the model. For that reason, correlation of a construct with others construct should be

less than the square root of the AVE of that construct (except TSNR).

In the structural model analysis, the value of standardized regression (H1: γ= 0.26, p <

0.01) indicated a significant and positive relationship between social norms (TSNR) and perceived

usefulness (TPUF). Significant and positive relationships were found between social influence

(SINF) and perceived usefulness (TPUF) (H2: γ= 0.31, p < 0.01), social norms (TSNR) and per-

ceived ease of use (TPES) (H3: γ= 0.11, p < 0.01), among innovation (TINN) and perceived use-

fulness (TPUF) (H5: γ= 0.35, p < 0.01), innovation (TINN) and perceived ease of use (TPES ) (H6:

γ= 0.29, p < 0.01), image (TIMG) and perceived ease of use (TPES) (H8: γ= 0.12, p < 0.01), price

value (TPVL) and perceived usefulness (TPUF) (H9: γ= 0.13, p < 0.01), price value (TPVL) and

perceived ease of use (TPES) (H10: γ= 0.66, p < 0.01), perceived usefulness (TPUF) and attitude-

towards-use (TATT) (H11: γ= 0.20, p < 0.01) and perceived ease of use (TPES) and attitude-

towards-use (TATT) (H12: γ= 0.66, p < 0.01). Result indicated insignificant relationship between

social influence (SINF) and perceived ease of use (TPES). (H4: γ= 0.20, p > 0.05) and, image

(TIMG) and perceived usefulness (TPUF) (H7: γ= 0.28, p > 0.05).

3G/4G Mobile Network Band Wagon in Pakistan: A Mixed Method Inquiry into Consumer Adoption Attitude

31

Figure 2: Structural Model (Study 2)

In the structural model analysis, the value of standardized regression (H1: γ= 0.26, p <

0.01) indicated a significant and positive relationship between social norms (TSNR) and perceived

usefulness (TPUF). Significant and positive relationships were found between social influence

(SINF) and perceived usefulness (TPUF) (H2: γ= 0.31, p < 0.01), social norms (TSNR) and per-

ceived ease of use (TPES) (H3: γ= 0.11, p < 0.01), among innovation (TINN) and perceived use-

fulness (TPUF) (H5: γ= 0.35, p < 0.01), innovation (TINN) and perceived ease of use (TPES ) (H6:

γ= 0.29, p < 0.01), image (TIMG) and perceived ease of use (TPES) (H8: γ= 0.12, p < 0.01), price

value (TPVL) and perceived usefulness (TPUF) (H9: γ= 0.13, p < 0.01), price value (TPVL) and

perceived ease of use (TPES) (H10: γ= 0.66, p < 0.01), perceived usefulness (TPUF) and attitude-

Moin Ahmed Moon1, Amna Farooq2, Ghazanfer Ali Abbasi3

32

towards-use (TATT) (H11: γ= 0.20, p < 0.01) and perceived ease of use (TPES) and attitude-

towards-use (TATT) (H12: γ= 0.66, p < 0.01). Result indicated insignificant relationship between

social influence (SINF) and perceived ease of use (TPES). (H4: γ= 0.20, p > 0.05) and, image

(TIMG) and perceived usefulness (TPUF) (H7: γ= 0.28, p > 0.05).

4. Discussion

This study was conducted to test and validate the integrated 3G/4G model based on

TAM, TAM 2 and UTAUT. Data was collected from 610 mobile phone users of Islamabad and

Rawalpindi Pakistan. Majority of the respondents were male youngsters. Results indicated that

perceived usefulness has a significant impact on social norms. This implies that more the social

norms the more is the perceived usefulness of the 3G/4G technology (Yang, 2017). Study result

also showed that social influences positively influence perceived usefulness that signified that a

consumer would perceive 3G/4G technology useful if he/she is influenced by peers, friends or

family etc. Innovation has a positive and significant influence on perceived usefulness. This find-

ing indicated that the more a consumer is innovative the more he/she would perceive 3G/4G tech-

nology useful. This finding is line with the previous studies (Bartels & Reinders, 2011; Newby,

Nguyen & Waring, 2014). The image had no significant impact on perceived usefulness that im-

plied that a consumer’s social image had nothing to do with the usefulness of the 3G/4G technol-

ogy. A significant positive influence between price value and perceived usefulness was found in

this study. Findings lead us to believe that if 3G/4G technology services are more sensibly priced

then the consumer would find them useful (Yang, 2017).

Results of the study illustrated a positive and significant impact of social norms on per-

ceived ease of use. Which means that consumers would find 3G/4G technology easy to use if it is

widely used and accepted by the person who are close to them which is quite interesting finding.

Another interesting finding of this study is that there is no significant impact of social influences

on perceived ease of use. Findings of this study also suggested that the innovative consumers

would find it easy to use 3G/4G technology services because they are always looking to try out

new technologies (Moon, Rasool & Attiq, 2015; Yang, 2017). A positive and significant impact of

image and price value was also found on perceived ease of use in this study. This finding implies

that consumers who are concerned with their social image and observe price and value very keen-

ly are likely to develop a favorable attitude towards 3G/4G technology adoption (Yang, 2017).

The study results suggest that perceived usefulness and ease of use of 3G/4G technology

services significantly and positively affect the attitude towards 3G/4G technology adoption

(Venkatesh & Davis, 2000). The perceptions of ease of use proved to be more influential than

perceptions of usefulness. This finding indicated that the consumers are more concerned with the

easiness of operating and using 3G/4G technology (Yang, 2017) than its functional utility.

3G/4G Mobile Network Band Wagon in Pakistan: A Mixed Method Inquiry into Consumer Adoption Attitude

33

5. Limitations and Recommendations

The first limitation of this study is related to the generalizability of results because data

were collected from two cities of Islamabad and Rawalpindi. Findings may not be generalized to

the whole county or in other technologically less developed countries. Second, we only employ

the technology acceptance model (TAM), future studies can be conducted by applying other ad-

vance models of technology i.e. UTAUT1 and UTAUT2. Third, in this study, we only studied one

technology i.e., 3G/4G mobile technology. Further researches can be conductedon other technolo-

gies i.e. e-learning. Fourth, this type of research can also be conduct in other technologically less

developed countries. Fifth, in this study some predictors,’ i.e., social norms, social influence, in-

novativeness, image, price value and habit are studied to understand the acceptance and adoption

of 3G/4Gtechnology. Future research can use other predictors to enhance the understanding of the

acceptance and adoption of 3G/4Gtechnology. In future studies, researcher may also compare the

responses consumers across demographic and personal characteristics of individual consumers to

gain deeper insights into the adoption behavior.

References:

Al-Ajam, A. & Nor, K. (2013). Influencing factors on behavioral intention to adopt Internet

banking service.World Applied Sciences Journal, 22(11), 65-87

Allport, G. W. (1964). The fruits of eclecticism: Bitter or sweet? ActaPsychologica, 23, 27-44

Bartels, J., & M. J. Reinders. (2011). Consumer innovativeness and its correlates: A propositional

inventory for future research. Journal of Business Research,64(6), 601–9.

Davis, F. D. (1989). Perceived Usefulness, Perceived Ease of Use, and User Acceptance of Infor-

mation Technology, MIS Quarterly,13(3), 319-339.

Fornell, C., & Larcker, D.F., (1981). Evaluating structural equation models with unobservable

variables and measurement error.Journal of Marketing Research,18(1), 39-50.

Frimpong, K., Al-Shuridah, O., Wilson, A., & Sarpong, F. A. A. (2017).Effect of inherent innova-

tiveness and consumer readiness on attitudes to mobile banking. Journal of Financial

Services Marketing, 22(4), 187-201.

Garg, P., & Garg, A. (2013). An empirical study on critical failure factors for enterprise resource

planning implementation in Indian retail sector. Business Process Management Jour-

nal, 19(3), 496-514.

Hair, J. F., Ringle, C. M., & Sarstedt, M. (2013). Partial least squares structural equation model-

ing: Rigorous applications, better results and higher acceptance. Long Range Planning,

46(1-2), 1-12 Jang, S., & Lee, C. (2018). The Impact of Location-Based Service Factors on Usage Intentions for

Technology Acceptance: The Moderating Effect of Innovativeness. Sustainability, 13(2),

76-91.

Moin Ahmed Moon1, Amna Farooq2, Ghazanfer Ali Abbasi3

34

Joseph, J., Sriram, K. V., Rodrigues, L. L., Mathew, A. O., & Gana, K. C. (2018). An empirical

study on customer adoption of mobile payment application in India. International Jour-

nal of Enterprise Network Management, 9(3-4), 363-375.

Lin, T. T., & Chiu, C. (2014).Investigating adopter categories and determinants affecting the

adoption of mobile television in China. China Media Research, 10(3). 102-143

Lu, J., Yao, J. & Yu, C. (2005) Personal innovativeness, social influences and adoption of wire-

less Internet services via mobile technology. The Journal of Strategic Information Sys-

tems, 14, 245-268.

Marchewka, Liu & Kostiwa (2007). An Application of the UTAUT Model for Understanding

Student Perceptions Using Course Management Software, Communications of the IIMA,

7(2), 93-104.

Moon, M. A., & Attiq, S. (2018). Compulsive buying behavior: antecedents, consequences and

prevalence in shopping mall consumers of an emerging economy. Pakistan Journal of

Commerce and Social Sciences, 12(2), 548-570.

Moon, M. A., Habib, M. D., & Attiq, S. (2015). Analyzing the Sustainable Behavioral Intentions:

Role of Norms, Beliefs and Values on Behavioral Intentions. Pakistan Journal of Com-

merce & Social Sciences, 9(2).524-539.

Moon, M. A., Javaid, B., Kiran, M., Awan, H. M., & Farooq, A. (2018).Consumer perceptions of

counterfeit clothing and apparel products attributes. Marketing Intelligence & Planning,

36(7), 794-808.

Moon, M. A., Khalid, M. J., Awan, H. M., Attiq, S., Rasool, H., & Kiran, M. (2017). Consumer's

perceptions of website's utilitarian and hedonic attributes and online purchase intentions:

A cognitive–affective attitude approach. Spanish Journal of Marketing-ESIC, 21(2), 73-

88.

Moon, M. A., Rasool, H., & Attiq, S. (2015). Personality and Irregular Buying Behavior: Adapta-

tion and Validation of Core Self-Evaluation Personality Trait Model in Consumer Impul-

sive and Compulsive Buying Behavior.Journal of Marketing and Consumer Research,

15, 121-131.

Moore, G. C., & Benbasat, I. (1991). Development of an instrument to measure the perceptions of

adopting an information technology innovation.Information Systems Research,2(3), 192-

222.

Newby, M., H. Nguyen, T., & S. Waring, T. (2014). Understanding customer relationship man-

agement technology adoption in small and medium-sized enterprises: An empirical study

in the USA. Journal of Enterprise Information Management, 27(5), 541-560.

Ntsafack, F. W., Kamdjoug, J. R. K., & Wamba, S. F. (2018, March). Exploring Factors Affecting

Mobile Services Adoption by Young Consumers in Cameroon.In World Conference on

Information Systems and Technologies (pp. 46-57).Springer, Cham.

3G/4G Mobile Network Band Wagon in Pakistan: A Mixed Method Inquiry into Consumer Adoption Attitude

35

Pagani, M. (2004).Determinants of adoption of third generation mobile multimedia ser-

vices. Journal of Interactive Marketing, 18(3), 46-59.

Pfeffer, J. (1982). Organizations and Organization Theory. Marshfield, MA: Pitman Publishing.

Pope, C., Ziebland, S., & Mays, N. (2000).Analysing qualitative data. BMJ : British Medical

Journal, 320(7227), 114–116.

Rogers, E., (1995). Diffusion of Innovations, (4thed.), New York. The Free Press

Tabachnick, B. G., & Fidell, L. S. (2007). Using multivariate statistics. Allyn &

Bacon/Pearson Education. Taylor, S., & Todd, P. A. (1995). Understanding information technology usage: A test of compet-

ing models. Information Systems Research, 6(2), 144-176.

Venkatesh, V., & Davis, F. D. (2000). A theoretical extension of the technology acceptance mod-

el: Four longitudinal field studies. Management Science, 46(2), 186-204.

Venkatesh, V., Morris, M. G., Davis, G. B., & Davis, F. D. (2003). User acceptance of infor-

mation technology: Toward a unified view. MIS Quarterly, 27(3), 425-478.

Yang, F. X. (2017). Effects of restaurant satisfaction and knowledge sharing motivation on

eWOM intentions: the moderating role of technology acceptance factors. Journal of

Hospitality & Tourism Research, 41(1), 93-127.

Zaidi, M. "Next-generation license: Govt raises $1.128 billion in spectrum auction". Retrieved 23

April 2014.https://tribune.com.pk/story/699257/spectrum-auction-live-updates/

Impact of Paternalistic Leadership on Project Success through Employee Creativity: Moderating Role of

Supervisor Expectations for Creativity

1MS Scholar, Capital University Science & Technology, Islamabad 2Assistant Professor, Air University School of Management, Air University Islamabad;

[email protected]

University of Wah Journal of Management Sciences

Volume 2, Issue 2, September 2018, pp. 36-56

Impact of Paternalistic Leadership on Project Success through Employee

Creativity: Moderating Role of Supervisor Expectations for Creativity Asif Mehmood Rehmani1, Shabbar Hussain2

Article History:

Received:

28 Jun, 2018

Revised :

29 Sep, 2018

Accepted:

30 Sep, 2018

ABSTRACT

Purpose: The present study was aimed to test the impact of paternalistic leadership

on project success of organization through the mediating mechanism of employee

creativity. Furthermore supervisor expectation for creativity was proposed possible

moderator on the relationship of employee creativity and project success in the IT

industry of Pakistan.

Methodology/Design: In order to test the aforementioned relationship correlation

analysis was performed thorough SPSS. Whereas AMOS was used to establish the

convergent and discriminant validity through CFA, as well as regression analysis

Findings: Result provides paternalistic leadership positively predicts the creativity

of employees. Creativity of employees was also found a significant mediator

between paternalistic leadership and project success. While the moderating effect of

supervisor expectations for creativity was also found.

Implication: The study comes with the conclusive finding that chances of project

success can be improved in IT industry through paternalistic leadership style and its

outcomes in term of employee’s creative behavior.

Key Words: Paternalistic leadership, Creativity, Supervisor expectation of creativity,

Project success, IT, IT in Pakistan

1. Introduction

Projects are considered as temporary organization, which ends after specific time and

beneficiary is parent organization along with stakeholders (Söderlund, 2011). The attracting

outcomes of projects make different industries and sectors to shift their focus towards projects and

its effective management (Winter & Szczepanek, 2008). Different studies have defined project and

its success in numerous ways. Some researchers define project success as completing the project

in-time, budget and with quality (Müller & Turner, 2007). While in others point of view it is a

complex concept with composition of so many attributes (Jugdev & Muller, 2005).

Asif Mehmood Rehmani1, Shabbar Hussain2

37

Even though defining of project success and its review in project management literature,

previous studies found that most of the projects do not achieve their objective and few of them fail

in total (Papke-Shields, Beise & Quan, 2010). Due to these factors, the researchers are trying to

explore reasons of project success and failure and they have identified some, like emotional

intelligence of project manager, team building and team cohesiveness (Rezvani, Chang, &

Wiewiora, 2015) and leadership styles like transformational leadership, authentic leadership etc.

(Aga, Noorderhaven, & Vallejo, 2016) while the role of paternalistic leadership is completely

overlooked in relation to project success. Aycan et al. (2013) have also stated that paternalistic

leadership is completely overlooked because of its low prevalence in the Western context, but

such leaders are extensively found in non-western contexts like Africa, China Middle East and

Asia.

In the study of leadership, a consideration of cultural differences is critical. Research has

found that variables influencing leadership effectiveness differ by culture (Aycan et al., 2013).

Paternalism is an important part of Chinese culture (Mustafa & Lines, 2012), where people of

high status in social structures (e.g., organizations) are obligated to govern, nurse and set an

example for those in lower levels of the hierarchy (DuBois, Hanlon, Koch, Nyatuga, & Kerr,

2015). In exchange for this, homage and deference are paid to these leaders (Mustafa & Lines,

2012), and those in lower levels of the hierarchy offer loyalty and obligation in return (Maslyn &

Uhl-Bien, 2005).

Paternalistic leadership is one of the important leadership styles (Lee, Jang, & Lee,

2018). Previous Research defined that paternalistic leaders are much disciplined, authoritative,

have fatherly benevolence and also their moral standards are high. Three dimensions have been

identified so far: authoritarianism, benevolence and morality (Farh & Cheng, 2000).

Authoritarianism refers to control and authority, whereby employees are subjected to strict

subordination to their leaders without reservation. Benevolence involves holistic and

individualized concern for an employee’s personal and familial satisfaction at workplace and in

their daily life. Morality suggests that leaders behave unselfishly, fulfill obligations, demonstrate

superior integrity and moral character, and act as an example for subordinates (Zhang, Huai, &

Xie, 2015). In return for three aspects of paternalistic leadership, followers are looking forwards

for exhibit obedience, gratitude, identification, and extra role behaviors like innovative behaviors,

voice behaviors and creativity (Tian & Sanchez, 2017).

Leaders are playing a role of hero having some desirable characteristics, employees want

to adopt in their life too. It’s the main reason that leaders are dictating the perceptions, attitudes

and behaviors of their followers in term of creative behaviors at work, so the role of leaders is

either encouraging or discouraging in decide creativity level of employees (Ellen Mathisen,

Einarsen, & Mykletun, 2012, Zhang, Cao & Wang, 2018). Prior organizational researches

articulate that the leaders are one of the most important contextual factors in ensuring the success

of organization (Mahsud, Yukl, & Prussia, 2010). Dedahanov et al. (2016) also found that two of

Impact of Paternalistic Leadership on Project Success through Employee Creativity: Moderating Role of

Supervisor Expectations for Creativity

38

the component benevolence and morality was found significant indicators of fostering employee

creativity at work.

Creativity of employees can bring innovation and new ideas which are rare, valuable and

inimitable. So, such factors provide sustainable competitive advantages to organization, and

sustainability of competitive advantage decides the business leaders of market in this age of

globalization (Simmons & Sower, 2012). Creative ideas of employees are important but its

practical implication becomes easy which employees feel the obligation of successful

implementation of their own work (Dedahanov et al., 2016). Such creative behaviours of

employees effect employees both in term of performance and satisfaction, and the role of

organization to provide flexible environment in order to promote such ideas and behaviours for

forecasting and responding changes in the marketplace. Employee creativity is highly needed in

project based organization, where new ideas generation, its realization and successful

implementations are necessary for successful completion of IT projects (Nasiopoulos, Sakas,

Vlachos, & Mavrogianni, 2015).

Paternalistic leadership was not extensively studied by management science researchers

in past but Pellegrini and Scandara’s (2008) call for studies on paternalistic leadership ignites the

researcher zest to conduct more studies in this domain. The research on Paternalistic leadership is

still in infancy stage but researchers are trying to explore its links with different organizational

concepts like OCB (organizational citizenship behaviour), in role performance, affective trust and

creativity etc. but there is not a single study found on the relationship of Paternalistic leadership

and project success.

Furthermore the interaction of employee perception about supervisor expectation about

creativity and supervisory rated employee creativity is also not found in relation with project

success and its proposed in the present study that employee creativity and supervisor expectations

about creativity will increase the chances of project success on time and within the allocated

budget by satisfying the end users of project.

On the basis of the stated problems, the present study is indented to find answers for

following questions;Q # 1: Is there any relation between paternalistic leadership and employee

creativity?Q # 2: Is there any relation between paternalistic leadership and project success?Q # 3:

Is there any relation between employee creativity and project success?Q # 4: Does there employee

creativity mediates the relationship between paternalistic leadership and project success?Q # 5:

Does supervisor expectation for creativity moderate the relation between employee creativity and

project success?

The present study is proposing several theoretical and practical contributions. Employee

creativity is playing a vital role in success of IT industry. IT industry needs continuous

improvement and high level of innovation for completion of its different project. Though different

types of leadership can foster employee creativity but the paternalistic leadership is not considered

due to its less prevalence in western culture. But paternalistic leadership is found effective in

Asif Mehmood Rehmani1, Shabbar Hussain2

39

collectivist culture with all of its components. As Pellegrini and Scandara (2008) also call for

studies on paternalistic leadership and its components with different organizational variables.

Chen et al., (2014) have studied paternalistic leadership with formal task performance and

deliberate involvement in informal tasks. Wang, Tang, Naumann, and Wang (2017) also suggest

to study paternalistic leadership with supervisory rated creativity of employees and also to study

the paternalistic leadership in collectivist cultures with different organization outcomes. The

present study is response to their call by trying to explore the relationship between components of

paternalistic leadership with project success through employee creativity.

Paternalistic leadership is studied with various organizational outcomes like effective

trust, self-report employee creativity but it is not tested with the project success (DuBois et al.,

2015). The present study attempts to examine the relationship between paternalistic leadership and

project success through employee creativity. The followers of paternalistic leaders believes that

their leader is playing a role like a father by exercising power and authority for protection of their

followers along with high moral values and cares for subordinates (Zhang, Huai, & Xie, 2015). So

such belief increases their psychological safety and they are more likely to involve in innovative

behaviors (Unger, Rank, & Gemünden, 2014) which are helpful for project success. Employee

creativity is much needed in IT industry for exploring new ideas and its successful implementation

(Simmons & Sower, 2012). Furthermore the perceptions of employees about supervisor

expectations for creativity will also increase the chances of successful implementation of projects

with innovation (Soares et al., 2013).

2. Literature Review

2.1 Paternalistic Leadership and Project Success

In past two decades literatures have ventured in the studies of paternalistic leadership.

Recently paternalistic leadership is defined somehow different from the early conceptualization of

paternalism conceptualize by Weber in 1968 that in paternalism the leader have legitimate power

to exercise, paternalism was also studied as a construct of management. The willingness to obey

the order of leader and surrendering personal choices to leader authority are the core elements of

paternalistic leadership (1). Weber conceptualization of paternalism was based on household

system which defined the hierarchy relationship by default.

While Padavic and Earnest (1994) stated that paternalistic leadership are also found

nowadays in organization due to unequal distribution of power and it’s also considered the

cognitive requirement of employees and the outcome of paternalistic leadership are fruitful in long

run. Gelfand, Erez, and Aycan (2007) present in their study that the managers having paternalistic

leadership style care their employees not only on the job also in their daily life for wellbeing of

whole society. In those organizations where paternalistic leadership exists, peoples’ minds are set

to exercise authority for the care and protection of lower level, trust, loyalty and commitment are

expected in response (Aycan, Kanungo, & Sinha, 1999). Paternalistic leader plays their role like

Impact of Paternalistic Leadership on Project Success through Employee Creativity: Moderating Role of

Supervisor Expectations for Creativity

40

parents to guide and protect their subordinates in all courses of action including personal and

professional lives (Gelfand et al., 2007). Just like a father, paternalistic leadership is believed to

use power and authority for the benefit of employees by guiding their attitude and behavior which

facilitate employees on the job and off the job as well. In such environment employees are

comfortable and their tension is relived and employees are more able to perform with their full

competence (Kerfoot & Knights, 1993).

Westwood (1997) articulated while conducting his study in China that paternalistic

leadership are more suitable in collectivistic society because it satisfies the twin requirements of

harmony and compliance of effective leadership. Farh and Cheng (2000) proposed a triadic model

of paternalistic leadership by identifying its three major aspects benevolence, morality and

authoritarianism. These three components of leadership existed before Farah and Cheng (2000)

conceptualization of paternalistic leadership triad. Sinha, Lopez, and McDevitt, (1990) argued that

the benevolence and authority characteristic and paternalistic leadership comes from the

traditional role of father who was protecting, caring, nurturing and supporting those who were

dependent on him but no compromise on discipline. Jackman (1994) combined benevolence and

authoritarian and named it “velvet glove” and later called it paternalism. In the tradition role of

parent it was expected that the parent understand the need and wants of their children and also

dictates their behavior on the standard of ethics and morality.

Though in the Western culture, paternalistic leadership is seen like dictator type

leadership but in non-western context like Pakistan, China, India and Turkey, it is one of the

dominant style of leadership (Chen et al., 2014). In these eastern cultures paternalism of leader

shapes the attitudes and behavior of employees in multiple ways, by extending their support to

their daily life, and making decisions for protection and care of employees. Paternalistic leadership

is found a significant predicator of different positive outcomes in non-western cultures like

commitment to organizational values, trust in leader, job satisfaction, organizational citizenship

behavior, and organization based self-esteem, decreasing turnover, task performance and creativity

(Liao, Widowati, Hu, & Tasman, 2017). All these positive outcomes on part of employees due to

paternalistic style leadership can enhance chances of project success.

2.2. Mediating role of Creativity between Paternalistic leadership and Project success:

Despite a long history of philosophical portrayal of creativity, creativity research as a

scientific domain was not launched until the middle of the 20th century (Sawyer, 2012). The Post

World War II world witnessed the debut of creativity science (Guilford, 1950). Limited by the

cultural norms descending from humanism, the research first started in the domain of psychology

and took its first approach in the field of arts (Sawyer, 2012).Also influenced by Western

philosophy, the research was often found in a pendulum sway between rationalism and

romanticism that caused an unusual variation among creativity conceptions (Sawyer, 2012).

Asif Mehmood Rehmani1, Shabbar Hussain2

41

In the 1990s, the emergence of cognitive neuroscience among other significant

developments across the field of human knowledge brought creativity research into an

interdisciplinary and application-orientated focus (Sawyer, 2012). With personality and behavior

psychology collaborating with biology, neuroscience, and computer science (e.g., artificial

intelligence studies, etc.), creativity research is in its prime (Anderson, Potočnik, & Zhou, 2014).

The first challenge the modern creativity research encountered was, and continues to be,

the difficulty of defining the concept (Morris & Leung, 2010). The complexity of the nature of

creativity led to an interdisciplinary and multifaceted effort of research and analysis which

resulted in various conceptualizations of creativity. The following section will dissect the concept

of creativity from the major approaches of research in the literature.

Creativity research was first evaluated through the lens of psychology (Sawyer, 2012).

Various forms of research have been done to better understand the personal traits of creative

individuals. Some research included historiometric analyses in which life-long creators and

individuals who had done significant creative work were assessed and analyzed in quantitative

methodology (Simonton, 1984). Other researchers conducted longitudinal bibliographic studies in

which exceptional individuals’ were followed over years as to the development of their creativity

(Chen, Eberly, Chiang, Farh, & Cheng, 2014). Finally, there came into the literature some case

studies with implementation of experimental measurements of creativity (Gruber & Davis, 1988).

Those types of research attempted to validate the independence of creativity from intelligence, as

typically measured by IQ tests and to provide evidence of the existence of divergent thinking in

creativity, ultimately resulting in the creation of several prominent models of creativity

(Csikszentmihalyi & Sawyer, 2014). However, this kind of research paradigm limits its focus on

individuals who are thought to have an extraordinary creative potential or capability (Yoshida,

Sendjaya, Hirst, & Cooper, 2014). Research in this paradigm often found its application to a

limited population (e.g., in gifted education where a small proportion of children who are assessed

to be talented) (Esquivel & Nahari, 2000); other external factors that could influence individual

creativity development are often omitted in the personality psychology paradigm (Yoshida at al.,

2014).

Creativity is considered as an individual property from the psychological perspective;

while in reality, creativity occurred under certain socio-cultural circumstances. The socio-cultural

environment fostering or inhibiting creative performances are thus under discussion. An

indispensable part of the process models of creativity is the application of creative ideas in the real

world, whether it is Press in the 4-P model, implementation planning and solution monitoring, or

elaboration in contrast with ideation (Gino & Ariely, 2012). Thus, the sociocultural approach to

creativity studies emerged in the literature as researchers argued creativity was not just a mental

process (Yoshida et al., 2014).

Furthermore, creative employees are found to be very efficient in solving different

problems. They have creative skills for solving different problems in new ways and divergent

Impact of Paternalistic Leadership on Project Success through Employee Creativity: Moderating Role of

Supervisor Expectations for Creativity

42

ways of thinking is very effective technique in solving different problems (Kaufman, Plucker, &

Baer, 2008). Divergent thinking employees include fluency, originality, flexibility and elaboration

(Fu, Li & Si, 2013). Previous researchers have found a significant relationship of creativity with

task performance which ultimately contributes to organizational performance. On the base of

previous studies it can be postulated that creativity of employees will open the new ways for

solving problems in different information technology projects and then will also helps in

successful execution of these ideas in projects (Im & Workman, 2004). So, creativity of

employees is very handy in success of projects;

2.3 Supervisor expectations for creativity as moderator

The employee creativity has been considered as one of the essential ingredients for

organizational success in order to prosper in this constantly changing environment, forecasting the

upcoming challenges, and developing new ways to deal with workplace situations. Confirming the

importance of creativity at work, (Barsh, 2008) concluded that large number of managers have

accepted that the creativity plays a vital role in success of all types of organizations. Creativity has

been defined in numerous ways, somewhere it is mixed with innovation, but creativity can be

defined as that goods and services, new ways of presenting businesses and doing work, and

management techniques that are unique and valuable for organizations (Brown, 2012).

Different creativity models have presented different antecedents for employee creativity,

social environment of the organization is also considered one of the important elements in

promoting employee creativity (Madjar, Oldham, & Pratt, 2002). Previous researchers have

identified that role of supervisor is one of the most important factor in promoting creativity of

employees (Qu, Janssen, & Shi, 2015). Creativity of employees is complex mechanism and

supervisor is the source that can help employees at multi-level to deal with complexities,

uncertainties and non-linearity. Amabile (1988) also stated that supervisor expectations from

employees regarding creativity work like a spark in igniting the creativity of employees. The

phenomena through which expectations leads to enhancement in performance, is called as

Pygmalion effect (Eden, 1984).

Merton (1948), initial work on self-fulfilling prophecy unfolds the interactional

demonstration of this phenomenon, called as Pygmalion effect. In Pygmalion effect, the

expectation of someone else about performance of individual increases its actual performance.

However, all managers accept its importance, but limited studies have been conducted to unfurl its

true outcomes (Qu, Janssen, & Shi, 2015). McNatt (2000) also stressed on conducting more

studies on this handful management techniques. Traditionally, it was also considered as important

as now, Sutton and Woodman (1989) have suggested that Pygmalion effect will be more effective

in highly uncertain environment, where creativity is not easy to be revealed (Amabile, 1988).

Hence, it can be concluded that Pygmalion effect is based interpersonal expectations and mutual

obligations, which results in enhancing performance or creativity. So, the Pygmalion effect can

Asif Mehmood Rehmani1, Shabbar Hussain2

43

provide a conceptual framework along with paternalistic leadership to promote employees’

creativity. It is believed that leadership is the one of the major source behind employees’ creativity

at work, different researchers have explored that links to guide the way of practitioners in

enhancing creative practices at workplace (Gu et al., 2015).

Perception about high expectations for creativity along with strong moral values of

supervisor, benevolent and directing behavior of supervisor increases the employee motivation,

because they asses that supervisor is providing enough resources to promote their personal

resources about creativity, which ultimately results in high creativity of employees at work

(Tierney & Farmer, 2011). Previous studies have provided sufficient support to prove that

supervisor expectation for creativity increase employees’ creativity at work along with

paternalistic leadership, which is also proven to increase creative behavior at work (Wang, Tang,

Naumann& Wang, 2017). It is interesting to test the joint effect of paternalistic leadership and

supervisor expectations for employee creativity on fostering employees’ creativity.

2.5 Hypotheses Development

H1: There is positive relationship between paternalistic leadership and creativity of employees.

H2: There is positive relationship between paternalistic leadership and project success.

H3: There is positive relationship between creativity of employees and project success.

H4: Creativity of employees plays a mediating role between paternalistic leadership and project

success.

H5: Supervisor expectation for employee creativity moderates the relationship between creativity

of employees and project success.

Figure 1: Theoretical Framework

Paternalistic

Leadership

Employee

Creativity

Project

Success

Supervisor

Expectation of

Employee

Creativity

Impact of Paternalistic Leadership on Project Success through Employee Creativity: Moderating Role of

Supervisor Expectations for Creativity

44

3. Research Methodology

3.1 Population and Sample

The present study is quantitative in nature. A survey questionnaire, based on well-

established scales is developed to collect the data. The context of this study was Pakistan.

Populations from where the data was collected were different and well renowned private software

houses from major cites of Pakistan like Islamabad/Rawalpindi, Lahore and Karachi. Data is

collected by using convenient sampling technique during the period of April 2017 to June 2017.

During data collection, management of different software houses was contacted through personal

contacts, physical visits, phone calls and emails by researcher. Only 217 valid responses were

received and included in the study.

3.2 Measures

Paternalistic leadership is measured by using 13 item adopted scale developed by

(Pellegrini & Scandura, 2006). Thirteen items scale developed by Zhou and George (2001) was

used for the supervisors to assess the level of creativity at work among their employees. A three-

item scale was used to assess employee’s perception regarding how much creativity is being

expected from his work, developed by Tierney and Farmer (2004). A 14-item scale was used to

assess project success, adopted from Aga, Noorderhaven, and Vallejo (2016).

Table 1: Instrumentation Sources, Items & Reliabilities

Variable Source No. of

Items Reliability

Paternalistic Leadership Pellegrini&Scandura (2006) 13 .97

Employee Creativity Zhou & George (2001) 13 .95

Supervisor Expectation of

Employee Creativity Tierney& Farmer (2004) 3 .87

Project Success Aga, Noorderhaven, &Vallejo (2016) 14 .94

3.3 Procedure

A series of data analyses tools were used to analyze the data collected to address research

questions and objectives. Data was analyzed through SPSS to find and treat missing values. The

ANOVA and reliability test were performed through SPSS. Then validity and reliability were

tested by conducting CFA through AMOS. To test the model fitness, competing model and path

analysis through structure equation modeling (SEM) were performed by AMOS. Correlation

between demographics and all other variables were calculated through SPSS.

Asif Mehmood Rehmani1, Shabbar Hussain2

45

4 Results

4.1 Sample Characteristics

Among 217 valid responses, 86.2% were male supervisors and 13.8% were female

supervisors, the 78% supervisors age was between 18 and 41 years, 49.3% supervisor were

educated to bachelor level, 50.7% supervisors had 18 years education, 6.5% supervisors have

average experience of 1 to 5 years, while 59.9% have experience 6 to 10 years. From 217

respondents, 79.3% employees were male and 20.7% were female, the 93% employees age was

between 18 and 33 years, 34.1% employees were educated to bachelor level, 60.8% supervisors

had 16 years education, 67.7% employees have average experience of 1 to 5 years and 30% have

experience 6 to 10 years.

Table 2. Demographic Variables Profile

Demographic Category Frequency Mean (S.D) Skewness Kurtosis

Gender Male 172 1.21

.41 0.12 -1.99

Female 45

Age

(In years)

26-30 56 1.81

.54 0.33 -0.66 31-35 147

36-40 14

Education

Bachelor 74 3.71

.56 -0.09 -0.93 Masters 132

MS/MPhil 11

Job Experience

1-5 147 1.35

.52 5-10 65

10-15 5

4.2 Descriptive Statistics

This table gives the descriptive statistics of the variables under study. All four variables

of this study were measured in values from 1 to 5. The independent variable i.e. paternalistic

leadership has a mean of 3.34 and a standard deviation of 0.76. The dependent variable (Project

success) shows a mean and standard deviation values of 3.24 and .72 respectively. The mediator of

this study, employee creativity turned up a mean of 3.44 and a standard deviation of .74 whereas

the moderator of the study, supervisor expectation of creativity has these values as 3.41 and .90

respectively.

Impact of Paternalistic Leadership on Project Success through Employee Creativity: Moderating Role of Supervisor Expectations for Creativity

46

Table 4: Competing different models with hypothesized 4 factor measurement model

Model χ² Df χ² / Df ∆ χ²a ∆Df CFI IFI TLI RMSEA

Hypothesized Measurement Model (4 Factor

Model) 955.21 772 1.127 0.97 0.97 0.97 0.03

Alternate Model 1: Combined "Paternalistic

leadership and Supervisor Expectations of

Employee Creativity" (3 Factor Model)

1206.28 775 1.556 251.07 3 0.94 0.94 0.94 0.05

Alternate Model 2: Combined "Project success

and Paternalistic leadership"

(3 Factor Model)

2728.838 775 3.52 1773.62 3 0.76 0.76 0.74 0.10

Alternate Model 3: Combined "Project success

and creativity " and then the combination of

"Paternalistic leadership and supervisor

expectation of creativity" (2 Factor Model)

2955.60 777 3.80 2000.39 5 0.73 0.73 0.71 0.11

Alternate Model 4: “All items Combined " (1

Factor Model) 4886.56 778 6.28 3931.35 7 0.49 0.49 0.46 0.15

Note: n=217; Values are differences of each of the alternative measurement models with the hypothesized model.

***p<.001

Table 3: Descriptive Statistics

Variable Sample Size Minimum Maximum Mean Std. Deviation

Paternalistic Leadership 217 1.54 4.69 3.34 .76

Employee Creativity 217 1.38 4.85 3.44 .74

Project Success 217 1.36 4.79 3.24 .72

Supervisor Expectation of

Employee Creativity 217 1.00 5.00 3.41 .90

Asif Mehmood Rehmani1, Shabbar Hussain2

47

Figure 2: Measurement Model

Impact of Paternalistic Leadership on Project Success through Employee Creativity: Moderating Role of

Supervisor Expectations for Creativity

4.3 Confirmatory Factor Analysis and Competing Models

Confirmatory Factory Analyses (CFA) of all four constructs including Paternalistic

leadership, Employee Creativity, Project success and Supervisor Expectation of Employee

Creativity was performed to check the fitness of Hypothesized 4 factor model before testing

directing and mediating relation. According to Table 4.2 representation, 4-factor model was fit

with (χ² = 955.21, df = 722, χ² / Df = 1.12 p < .000; CFI = .97, IFI = .97, TLI = .97, RMSEA=

.03). Alternately, 3-factor model by combining Paternalistic leadership and Supervisor expectation

of employee creativity was less fit (χ² = 1206.28, df = 725, χ² / Df = 1.55 p < .000; CFI = .95, IFI

= .95, TLI = .95, RMSEA= .05) with respect to 4 factor model. Change in chi-square was 251.07.

Change in degree of freedom was recorded 3. Change in CFI, IFI, TLI and RMSEA were 0.03,

0.03, 0.03 and 0.02. Table 4.2 show another 3-factor alternate model, combining Paternalistic

leadership and project success comparison with four factor model also found less fit with values

(χ² = 2728.83, df = 725, χ² / Df = 3.52 p < .000; CFI = .75, IFI = .75, TLI = .75, RMSEA= .10)

and the change in chi-square and degree of freedom were 773.62 and 3 respectively. Model three

represents the comparison of 4 factor model with 2-factor model by combining project success

with creativity and supervisor expectation of employee creativity with paternalistic leadership

shows the less fit of 2-factor model with values (χ² = 4886.56, df = 778, χ² / Df = 3.80 p < .000;

CFI = .73, IFI = .73, TLI = .71, RMSEA= .11). The change in chi-square value and degree of

freedom were 2000.39 and 5.By combining all items with one variable and created 1 factor model

and then comparing the values show less fit of 1factor model. Fourth model created by combining

all four variables and comparison with four-factor model show the worse fit (χ² = 2955.60, df =

777, χ² / Df = 3.80 p < .000; CFI = .73, IFI = .73, TLI = .71, RMSEA= .11). To improve the

reliability of results, there were two items of paternalistic leadership dropped because they were

loading below .04.

4.4 Correlation analysis

Paternalistic leadership (PL) was found significantly correlated with Employee Creativity

(EC) (r=.421**, p=.000). Paternalistic leadership (PL) was also found significantly correlated with

Supervisor Expectation of Employee Creativity (SEC) and Project Success (PS) (r=.522**,

p=.000), (r=.541**, p=.000). Results shows significant correlation exist between Employee

Creativity and Supervisor Expectation of Employee Creativity (SEC) (r=.274**, p=.000) and also

between Project Success (PS) and Employee Creativity (EC) (r=.469**, p=.000) respectively. The

correlation of Project Success (PS) was found significant with Supervisor Expectation of

Employee Creativity (r=.316**, p=.000).

Impact of Paternalistic Leadership on Project Success through Employee Creativity: Moderating Role of

Supervisor Expectations for Creativity

49

Table 7: Standardized Indirect Path Coefficients of the Hypothesized Model

Indirect Paths BC 95% CI

Indirect Effect Lower

Limit

Upper

Limit

P

PL Creativity Project Success .123 .065 .200 .000

Note: n=217; Bootstrap Sample Size=2000, BC 95% CI= Bootstrap Confidence Intervals

*p<.05, **p<.01,***p<.00

4.5 Structural Model Results

Results for structural model are depicted in Table 6. Hypothesized 4 factor model is

already establishes the best fit (χ² = 955.21, df = 722, χ²/df = 1.12 p < .000; CFI = .97, IFI =

.97,TLI = .97, RMSEA= .03). For hypothesis 1, paternalistic leadership has a positive and

significant impact on employee (β = .421, p<.000) in support of hypothesis. The results for

paternalistic leadership and project success showed a significant and positive impact of

paternalistic leadership on project success (β = .417, p<.000) supporting hypothesis 2. For

hypothesis 3, results depicted a positive impact if creativity of employees on project success (β =

.541, p<.000), in favor of hypothesis. For hypothesis 4, indirect effect direct effect and upper and

Table 5: Correlation Analysis

# Variable 1 2 3 4

1 Paternalistic Leadership 1

2 Employee Creativity .421** 1

3 Supervisor expectation of creativity .541** .469** 1

4 Project success .522** .274** .316** 1

**p<.01

Table 6: Standardized Direct Path Coefficients of the Hypothesized Model

Direct Paths Estimate SE CR p

Paternalistic leader Project success .417 .05 6.97 .000

Paternalistic leadership Creativity .421 .06 6.82 .000

Creativity Project success .541 .05 9.45 .000

SECE Project success .316 .04 4.89 .000

CR * SEC Project success .204 .03 3.51 .029

Asif Mehmood Rehmani1, Shabbar Hussain2

50

lower limit is in support of a proposition that creativity of employees plays a mediating role

between paternalistic leadership and project success. To test the moderating role of supervisor

expectations interaction term is created. The results are in support of a proposition that supervisor

expectation for employee creativity moderates the relationship between creativity of employees

and project success.

Dependent Variable: Project Success

PL: Creativity of Employees & SEC: Supervisor Expectation of Creativity

4.6 Mod Graph

Mod graph was also calculated check the direction of moderator i.e supervisor

expectation for creativity on the relationship of employee creativity and project success. It was

proposed that the positive relationship between employee’s creativity and project success would

enhance when supervisor expectations for creativity is high. Mod graph also reflects that when the

supervisor expectations for creativity is low the relationship between employee creativity and

project success is positive. But the slope is not steeper, while in case of high expectations of

supervisor about employee creativity the relationship between employee creativity and project

success is also high, the slope of the line is steeper than low moderator value.

0

0.5

1

1.5

2

2.5

3

3.5

4

Low PL High PL

Dep

end

ent

vari

ab

le Low SEC

High SEC

Impact of Paternalistic Leadership on Project Success through Employee Creativity: Moderating Role of

Supervisor Expectations for Creativity

51

Figure 3: Structural Model

Table 8: Hypothesis Results Summary

H1: There is a positive relationship between paternalistic leadership and creativity of employees.

(Accepted)

H2: There is positive relationship between paternalistic leadership and project success. (Accepted)

H3: There is positive relationship between creativity of employees and project success. (Accepted)

H4: Creativity of employees plays a mediating role between paternalistic leadership and project success.

(Accepted)

H5: Supervisor expectation for employee creativity moderates the relationship between creativity of

employees and project success. (Accepted)

5 Discussion

This study was conducted to identify the impact of paternalistic leadership on project

success of organization through the through employee creativity in the IT industry of Pakistan.

the results are in support of a significant and positive impact of paternalistic leadership on

project success of organization through the through employee creativity. Results of the study are

consistent with previous literature like DuBois et al. (2015); Gelfand, Erez, and Aycan (2007)

and Chen et al. (2014). Furthermore, results are also in favor of moderating role of supervisor

expectations for creativity between employee creativity and project success of organization.

From the results, it can be concluded that paternalistic leadership positively predicts the project

success in organization. Leadership role in organization cannot be underestimated because they

play a major role in shaping the behavior of employees and overall organizational climate

(Zhang, Huai, & Xie, 2015). Among the leadership styles, paternalistic leadership style has its

own importance. The leaders having paternalistic leadership style treat their subordinates like his

children. Various factors contribute to project success for project-based organizations and

employs are a valuable resource which can ensure success of projects. Paternalistic leaders can

Paternalistic

leadership

Employee

Creativity

Project Success

Supervisor

expectation of

creativity

.204

***

.421**

*

.541***

Asif Mehmood Rehmani1, Shabbar Hussain2

52

play a very important role in organization to support, takes care and shows authority to their sub-

ordinates for getting maximum output from them. Due to supervisor’s high moral values, this

support remains in favor of project and organization. When both supervisor and subordinates

support each other, they perform very well, and their good performance automatically leads the

project towards success.

The results regarding the mediation of creativity between Paternalistic leadership and

project success of organization are in support of the propositions. The results are consistent with

previous literature like Fu, Li, and Si (2013); Yoshida et al., (2014) and Csikszentmihalyi and

Sawyer (2014). Due to high moral values of paternalistic leaders, employees also learn from their

bosses and their ethical and moral standards improve. As, it has also established in the previous

literature that ethical leadership promotes creativity of employees due to which employee display

creative work behaviors (Duan, Liu, & Che, 2018). Paternalistic leaders also found to enhance the

creativity of employees through morality and the reciprocal obligation of employees helps in

promoting and reciprocating the morality of leaders in form creative and extra role behavior at

work. Creativity brings innovation and new methods of performing task, which is effective and

efficient in IT, project based organization. So the creativity of employees plays a role of positive

and significant bridge between paternalistic leadership and project success.

The results also established that supervisor expectation enhanced employee creativity

while interacting with paternalistic leadership. The results are in favor of previous literature like

Qu, Janssen, and Shi (2015) and Gu et al. (2015). Self-fulfilling prophecy or Pygmalion effect is

found one of the less costly and effective tool in hands of leaders. Employees in the organization

behave in the fashion, which is acceptable and encouraged by others, and a supervisor expectation

is more effective in shaping the behavior of employees. If Supervisor expectations for creativity of

employees is communicated then it will ensure the creative performance of employees, because

the employee will feel motivated and will be encouraged to engage in such type of behavior,

which is beneficial for the organization. And employees will also feel courageous to involve in

challenging task which will ultimately results in the pleasure of supervisor and also performance

of organization. And creative performances are highly desirable in IT industries which are

engaged in different projects and these performances are positively linked to success of projects.

The current study tried to overcome and remove existing flaws in all aspects but still it

has some limitations that must be considered and applied in future. The present study was cross

sectional in nature and collected data form a single source that are employee, future studies should

consider multisource data at multi time periods in order to find robust results. The present study

also takes paternalistic leadership, as composite variable, future studies should consider different

dimension of paternalistic leadership individually with project success. Present study is focused on

paternalistic leadership, which is popular due to its cultural importance but present study has not

considered any of the cultural dimension, future studies should consider the cultural dimensions

along with paternalistic leadership and project success. Present study was conducted in IT industry

and data was collected from software houses, which question the generalizability of the study.

Impact of Paternalistic Leadership on Project Success through Employee Creativity: Moderating Role of

Supervisor Expectations for Creativity

53

Future researcher should collect data from multiple industries in order to find out the effect of

paternalistic leadership in different sectors.

REFERENCES

Aga, D. A., Noorderhaven, N., & Vallejo, B. (2016). Transformational leadership and project

success: The mediating role of team-building. International Journal of Project

Management, 34(5), 806-818.

Amabile, T. M. (1988). A model of creativity and innovation in organizations. Research in

Organizational Behavior, 10(1), 123-167.

Anderson, N., Potočnik, K., & Zhou, J. (2014). Innovation and creativity in organizations: A state-

of-the-science review, prospective commentary, and guiding framework. Journal of

Management, 40(5), 1297-1333.

Aycan, Z., Kanungo, R. N., & Sinha, J. B. (1999). Organizational culture and human resource

management practices: The model of culture fit. Journal of Cross-Cultural

Psychology, 30(4), 501-526.

Aycan, Z., Schyns, B., Sun, J. M., Felfe, J., & Saher, N. (2013). Convergence and divergence of

paternalistic leadership: A cross-cultural investigation of prototypes. Journal of

International Business Studies, 44(9), 962-969.

Barsh, J. (2008). Innovative management: a conversation with Gary Hamel and Lowell

Bryan. McKinsey Quarterly, 1, 24-29.

Chen, X. P., Eberly, M. B., Chiang, T. J., Farh, J. L., & Cheng, B. S. (2014). Affective trust in

Chinese leaders: Linking paternalistic leadership to employee performance. Journal of

Management, 40(3), 796-819.

Csikszentmihalyi, M., & Sawyer, K. (2014). Creative insight: The social dimension of a solitary

moment. In The Systems Model of Creativity (pp. 73-98).Springer, Dordrecht.

Brown, D. C. (2012). Creativity, surprise & design: an introduction and investigation. In DS 73-1

Proceedings of the 2nd International Conference on Design Creativity Volume 1.

Dedahanov, A. T., Lee, D. H., Rhee, J., & Yoon, J. (2016). Entrepreneur’s paternalistic leadership

style and creativity: The mediating role of employee voice. Management Decision, 54(9),

2310-2324.

Yoshida, D. T., Sendjaya, S., Hirst, G., & Cooper, B. (2014). Does servant leadership foster

creativity and innovation? A multi-level mediation study of identification and

prototypicality. Journal of Business Research, 67(7), 1395-1404.

DuBois, M., Koch, J., Hanlon, J., Nyatuga, B., & Kerr, N. (2015). Leadership Styles of Effective

Project Managers: Techniques and Traits to Lead High Performance Teams. Journal of

Economic Development, Management, IT, Finance & Marketing, 7(1).30-46.

Duan, S., Liu, Z., & Che, H. (2018). Mediating influences of ethical leadership on employee

creativity. Social Behavior and Personality: An International Journal, 46(2), 323-337.

Eden, D. (1984). Self-fulfilling prophecy as a management tool: Harnessing Pygmalion. Academy

of Management Review, 9(1), 64-73.

Asif Mehmood Rehmani1, Shabbar Hussain2

54

Ellen Mathisen, G., Einarsen, S., & Mykletun, R. (2012). Creative leaders promote creative

organizations. International Journal of Manpower, 33(4), 367-382.

Esquivel, G. B., & Nahari, S. G. (2000). Culturally diverse gifted students: A historical

perspective. Creativity and Giftedness in Culturally Diverse Students, 29-43.

Farh, J. L., & Cheng, B. S. (2000).A cultural analysis of paternalistic leadership in Chinese

organizations. In Management and Organizations in the Chinese Context, 13, 84-127.

Gelfand, M. J., Erez, M., & Aycan, Z. (2007).Cross-cultural organizational behavior. Annu. Rev.

Psychol., 58, 479-514.

Gino, F., & Ariely, D. (2012). The dark side of creativity: original thinkers can be more

dishonest. Journal of Personality and Social Psychology, 102(3), 445-459.

Gruber, H. E., & Davis, S. N. (1988). 10 Inching our way up Mount Olympus: the evolving-

systems approach to creative thinking. The Nature of Creativity: Contemporary

Psychological Perspectives, 243-270.

Gu, J., Strauss, C., Bond, R., & Cavanagh, K. (2015). How do mindfulness-based cognitive

therapy and mindfulness-based stress reduction improve mental health and wellbeing? A

systematic review and meta-analysis of mediation studies. Clinical Psychology

Review, 37, 1-12.

Guilford, J. P. (1950). Creativity.American Psicologist, 5, 444-454.

Im, S., & Workman Jr, J. P. (2004).Market orientation, creativity, and new product performance in

high-technology firms. Journal of Marketing, 68(2), 114-132.

Jackman, M. R. (1994). The velvet glove: Paternalism and conflict in gender, class, and race

relations. Univ of California Press.

Jugdev, K., & Müller, R. (2005).A retrospective look at our evolving understanding of project

success. Project Management Journal, 36(4), 19-31.

Kaufman, J. C., Plucker, J. A., & Baer, J. (2008).Essentials of psychological assessment

series. Essentials of creativity assessment. Hoboken, NJ, US: John Wiley & Sons Inc..

Kerfoot, D., & Knights, D. (1993). Management, masculinity and manipulation: From paternalism

to corporate strategy in financial services in Britain. Journal of Management

Studies, 30(4), 659-677.

Lee, J. Y., Jang, S. H., & Lee, S. Y. (2018). Paternalistic leadership and knowledge sharing with

outsiders in emerging economies: Based on social exchange relations within the China

context. Personnel Review. 47(5), 1094-1115.

Liao, S. H., Widowati, R., Hu, D. C., & Tasman, L. (2017).The mediating effect of psychological

contract in the relationships between paternalistic leadership and turnover intention for

foreign workers in Taiwan. Asia Pacific Management Review, 22(2), 80-87.

Madjar, N., Oldham, G. R., & Pratt, M. G. (2002). There's no place like home? The contributions

of work and nonwork creativity support to employees' creative performance. Academy of

Management Journal, 45(4), 757-767.

Impact of Paternalistic Leadership on Project Success through Employee Creativity: Moderating Role of

Supervisor Expectations for Creativity

55

Mahsud, R., Yukl, G., & Prussia, G. (2010). Leader empathy, ethical leadership, and relations-

oriented behaviors as antecedents of leader-member exchange quality. Journal of

Managerial Psychology, 25(6), 561-577.

Maslyn, J. M., & Uhl-Bien, M. (2005).LMX differentiation. Global Organizing Designs, 3, 73-98.

McNatt, D. B. (2000). Ancient Pygmalion joins contemporary management: A meta-analysis of

the result. Journal of Applied Psychology, 85(2), 314-322.

Merton, R. K. (1948). The self-fulfilling prophecy. The Antioch Review, 8(2), 193-210.

Morris, M. W., & Leung, K. (2010). Creativity east and west: Perspectives and

parallels. Management and Organization Review, 6(3), 313-327.

Müller, R., & Turner, R. (2007).The influence of project managers on project success criteria and

project success by type of project. European Management Journal, 25(4), 298-309.

Mustafa, G., & Lines, R. (2012). Paternalism as a predictor of leadership behaviors: A bi-level

analysis. Eurasian Business Review, 2(1), 63-92.

Nasiopoulos, D. K., Sakas, D. P., Vlachos, D. S., & Mavrogianni, A. (2015, February). Simulation

of generation of new ideas for new product development and IT services. In AIP

conference proceedings (Vol. 1644, No. 1, pp. 60-68).AIP.

Padavic, I., & Earnest, W. R. (1994).Paternalism as a component of managerial strategy. The

Social Science Journal, 31(4), 389-405.

Papke-Shields, K. E., Beise, C., & Quan, J. (2010). Do project managers practice what they

preach, and does it matter to project success? International Journal of Project

Management, 28(7), 650-662.

Pellegrini, E. K., & Scandura, T. A. (2006). Leader–member exchange (LMX), paternalism, and

delegation in the Turkish business culture: An empirical investigation. Journal of

International Business Studies, 37(2), 264-279.

Pellegrini, E. K., & Scandura, T. A. (2008). Paternalistic leadership: A review and agenda for

future research. Journal of Management, 34(3), 566-593.

Qu, R., Janssen, O., & Shi, K. (2015). Transformational leadership and follower creativity: The

mediating role of follower relational identification and the moderating role of leader

creativity expectations. The Leadership Quarterly, 26(2), 286-299.

Rezvani, A., Chang, A., & Wiewiora, A. (2015, December). Emotional intelligence, work attitudes

and project success: An examination among project managers in complex projects. Paper

Presented at the Australian and Newzealand Academy of Management.

Sawyer, K. (2012).Extending sociocultural theory to group creativity. Vocations and

Learning, 5(1), 59-75.

Simmons, A. L., & Sower, V. E. (2012).Leadership sagacity and its relationship with individual

creative performance and innovation. European Journal of Innovation

Management, 15(3), 298-309.

Simonton, D. K. (1984).Artistic creativity and interpersonal relationships across and within

generations. Journal of Personality and Social Psychology, 46(6), 1273-1286.

Asif Mehmood Rehmani1, Shabbar Hussain2

56

Sinha, A. A., Lopez, M. T., & McDevitt, H. O. (1990). Autoimmune diseases: the failure of self

tolerance. Science, 248(4961), 1380-1388.

Soares, F. O., Sepúlveda, M. J., Monteiro, S., Lima, R. M., & Dinis-Carvalho, J. (2013). An

integrated project of entrepreneurship and innovation in engineering

education. Mechatronics, 23(8), 987-996.

Söderlund, J. (2011). Pluralism in project management: navigating the crossroads of specialization

and fragmentation. International Journal of Management Reviews, 13(2), 153-176.

Sutton, C. D., & Woodman, R. W. (1989). Pygmalion goes to work: The effects of supervisor

expectations in a retail setting. Journal of Applied Psychology, 74(6), 943-950.

Tian, Q., & Sanchez, J. I. (2017). Does paternalistic leadership promote innovative behavior? The

interaction between authoritarianism and benevolence. Journal of Applied Social

Psychology, 47(5), 235-246.

Tierney, P., & Farmer, S. M. (2004).The Pygmalion process and employee creativity. Journal of

Management, 30(3), 413-432.

Tierney, P., & Farmer, S. M. (2011).Creative self-efficacy development and creative performance

over time. Journal of Applied Psychology, 96(2), 277-293.

Unger, B. N., Rank, J., & Gemünden, H. G. (2014). Corporate innovation culture and dimensions

of project portfolio success: The moderating role of national culture. Project

Management Journal, 45(6), 38-57.

Wang, Y., Tang, C., Naumann, S. E., & Wang, Y. (2017). Paternalistic leadership and employee

creativity: A mediated moderation model. Journal of Management & Organization, 1-20.

Doi:10.1017/jmo.2017.8.

Weber, M. (1968).The nature of charismatic authority and its routinization. Max Weber: On

charisma and institution building. Chicago, IL: University of Chicago Press. (Original

work published 1922).

Westwood, R. (1997). Harmony and patriarchy: The cultural basis for paternalistic headship

among the overseas Chinese. Organization Studies, 18(3), 445-480.

Winter, M., & Szczepanek, T. (2008). Projects and programmes as value creation processes: A

new perspective and some practical implications. International Journal of Project

Management, 26(1), 95-103.

Fu, X., Li, Y., & Si, Y. (2013). The impact of paternalistic leadership on innovation: an integrated

model. Nankai Business Review International, 4(1), 9-24.

Zhang, Y., Huai, M. Y., & Xie, Y. H. (2015). Paternalistic leadership and employee voice in

China: A dual process model. The Leadership Quarterly, 26(1), 25-36.

Zhang, L., Cao, T., & Wang, Y. (2018). The mediation role of leadership styles in integrated

project collaboration: An emotional intelligence perspective. International Journal of

Project Management, 36(2), 317-330.

Zhou, J., & George, J. M. (2001). When job dissatisfaction leads to creativity: Encouraging the

expression of voice. Academy of Management Journal, 44(4), 682-696.

Theories and Factors Followed for Setting Dividend Policy: Empirical Evidence from Pakistani

Banks

1, 2Assistant Professor, University of Gujrat, Gujrat, Email:[email protected] 2Lecturer, Faculty of Management Sciences, SZABIST Dubai. [email protected]

University of Wah Journal of Management Sciences

Volume 2, Issue 2, September 2018, pp. 57-72

Theories and Factors Followed for Setting Dividend Policy: Empirical

Evidence from Pakistani Banks Nasir Nadeem1, Adnan Bashir2, Sumaira Gulzar3

Article History:

Received:

19 Jun, 2018

Revised:

25 Aug, 2018

Accepted:

28 Sep, 2018

ABSTRACT

Purpose: The main purpose of this study is to examine dividend theories and factors

followed by banks in Pakistan for setting dividend policy from 2005 to 2015.

Methodology/Design: Panel regression is used on annual data to check the impact of

different factors on dividend policy of 24 Pakistani banks.

Findings: The results of study reveal that banks in Pakistan follow the dividend

smoothing hypothesis, life cycle theory, signaling theory and pecking order theory

while setting dividend policies. The results also highlight that profitability; investment

opportunities, last year dividend, growth and loan deposit ratio have significant

influence on dividend policy of Pakistani banks.

Implications: In the light of these results, it is recommended that management of

banks needs to look into these factors while formulating dividend policy of their

respective banks. By catering these factors they are in a position to set optimal

dividend policy which not only fulfills banks’ growth and investment needs, but also

satisfy investors’ need of return.

Limitations: This study uses only listed commercial banks of Pakistan. All other i.e.

specialized banks are excluded in this study.

Keywords: Dividend policy, banking sector, Pakistan Stock Exchange (PSX), Bank

Specific Actors, Macroeconomic Factor,

1. Introduction

Every successful business earns profit. Now a question arises that how much of this profit

should be distributed to shareholders in the form of dividend and how much should be retained in

business for future needs. This decision is guided by dividend policy. There are two main schools

of thoughts regarding the impact of dividend policy on firm value. First advocates the irrelevance

of dividend and second supports the relevance of dividend. Miller and Modigliani (1961)

explained that dividend policy has no impact on the value of firm in the perfect capital market. But

afterwards a lot of researchers opposed this dividend irrelevance theory, and stated that a large

number of factors cause capital market imperfect i.e. taxes, agency cost, transaction cost, etc.

Nasir Nadeem1, Adnan Bashir2, Sumaira Gulzar3

58

(Lintner, 1956; Gordon, 1959; Walter, 1963; Black, 1976; Jensen & Meckling, 1976; John &

Williams, 1985; Myers & Majluf, 1984; DeAngelo & DeAngelo, 2007). Even though a lot of

research in this area has been conducted, but still phenomena are not clear. Brealey and Myers

(2003) showed the dividend phenomenon among the top 10 unresolved issues in corporate

finance. Black (1976) explained this puzzle in following words, “The harder we look at the

dividend policy picture, the more it seems like puzzle, with pieces that just don’t fit together”(p.

8). Dividend policy influences financing and investing decisions of firm. When a cash dividend is

distributed among shareholders, it effects on liquidity of firm. Dividend payments decrease

retained earnings for investments and cause need for external financing. So, it influences on

capital structure and cost of capital of firm. Dividend payout also positively influence market price

of stock (Watson & Head 2004). Therefore dividend policy should be set in such a manner that

fulfills shareholders as well as firm’s needs. According to Khan and Khan (2007), during the third

Phase of financial sector reforms (2002- 2004) the focus of the State Bank of Pakistan (SBP) was

on the consolidation and improvement in the structure process of the banking sector. Banks were

encouraged to make independent subsidiaries to work as mutual funds, asset management

companies, venture capital, foreign exchange companies, etc.

The special focus was given to Automation and Prudential Regulations. Banking audit,

monitoring and corporate governance is given due importance and is taken great care. There is an

empirical gap in literature in the aftermath of these reforms in banking sector of Pakistan. So the

purpose of this study is toexamine dividend theories and factors followed by banks in Pakistan for

setting dividend policy from 2005 to 2015. The study provides different variables which have an

impact on dividend policy of banking sector of Pakistan. It also checks which dividend payment

theories are applicable on the Pakistani banking sector. Although, determinants of dividend policy

of Pakistani banking sector is scrutinized by number of researchers (i.e. Gul, Mughal, Bukhari, &

Shabir, 2012; Imran, Usman, & Nishat, 2013; Zameer, Rasool, Iqbal, & Arshad, 2013; Khan et al.

(2017).

However, this paper makes its contribution in several ways. First it uses some variables

which are not previously used for Pakistani banking sector e.g. total deposits to total assets ratio

and GDP growth rate are variables used by Misra (2015) on Indian banking sector, Loan deposit

ratio is used by Olowe and Moyosore (2014) on the Nigerian banking sector, Fahim et al. (2015)

on financial sector of Pakistan, Ahmed (2015) on UAE banking sector and last variable

Investment opportunities as independent variable is used by Ahmed and Javaid (2008), Hussain

and Usman (2013) on corporate sector of Pakistan. Secondly, this study provides updated results

by using the latest data of banks from 2005 to 2015 in the aftermath of third phase of financial

reforms. Finally, to the best of our knowledge, we have not found any research conducted which

specifically focuses on application of different dividend polices on the banks of Pakistan. So,

results are compared with existing dividend theories to check which theories are applicable to the

banking sector of Pakistan.The study is designed to fulfill the following two objectives; (1). To

Theories and Factors Followed for Setting Dividend Policy: Empirical Evidence from Pakistani Banks

59

investigate the dividend payment theories followed by Pakistani banks for setting dividend policy.

(2). To find the determinants/ factors affecting the dividend policy of Pakistani banks.

2 Literature Review

2.1 Dividend Theories

Past literature on dividend policy fails to reach at identical conclusion regarding dividend

payment and still it remains puzzle. Miller and Modigliani (1961) considered dividend policy

irrelevant in determining firm value in perfect capital market but they said value is affected from

its earning power and underlying risk. But afterwards, researchers opposed this argument by

stating that in real world, lot of imperfections exists i.e. taxes, transaction cost, agency cost, etc.

which effect firm value.

Lintner (1956) and Gordon (1959) explained “bird in hand” theory by stating that

investors prefer current amount of dividends which is certain than future capital gain which is

uncertain. Elton and Gruber (1970) enlightened the clientele and tax effect on dividend. They said

that investors in high tax range desire more on capital gain than investors in low tax range. Firms

paying high dividends should attract investor of low tax range than firms paying low dividends.

Black (1976) also described that in a market where dividend is taxed more than capital gain

corporations avoids to pay dividend for maximizing their expected after tax return. Jacob and

Michaely (2017) concluded that dividend taxation impact dividend policy.

Dividend serves as signal of firm’s performance. John and Williams (1985), Below and

Johson (1996), Al-Shattarat, Atmeh, and Al-Shattarat (2013) explained that corporate insider have

private information which they used for dividend announcement and thus impact on share prices.

It is observed that announcement of increase in dividend results to increase in shareholder’s wealth

(Azquith & Mullins, 1983). Management of companies acts as agent of shareholders. Conflict of

interest of both parties is common dilemma. This conflict of interest give rise to agency cost i.e.

cost incurred in monitoring management and manager’s risk aversion (Baker, 2009). This cost can

be reduced by paying dividend to shareholders (Rozeff, 1982). Myers and Majluf (1984) presented

pecking order theory by stating that firm should prefer internal source of funds for financing its

profitable investment projects.

DeAngelo and DeAngelo (2007) provide the concept of life cycle of business. This

theory was in line with Lintner (1956), Myers and Majluf (1984), Fama and French (2001). He

stated that a firm young in age and have more investment opportunities retain more earnings than

distributing it to shareholders. On the other hand, mature firms with stable earnings and having

sufficient free cash flow distribute high dividends.

2.2 Determinants of Dividend Policy

Dividend policy affects firm value. Setting of optimal dividend policy increases

shareholder’s as well as firm value. In literature, large numbers of factors are provided which

Nasir Nadeem1, Adnan Bashir2, Sumaira Gulzar3

60

should be considered by management while setting dividend policy. Debate relating to

determinants of dividend policy boosted up from work of Lintner (1956) when he took the

interview of 28 managers in USA and identified that current earnings (profitability) and last year

dividend are most important determinants for USA firms. The findings of Lintner (1956) were

echoed by many researchers i.e. (Pruitt & Gitman, 1991; Baker & Powell, 2000; Baker, Powell, &

Veit, 2002). Misra (2015) explored determinants of Indian banking sector. She included bank

specific factors and also macroeconomic factors for this purpose. She concluded that total deposits

to total assets and return on asset have negative impact on dividend payout while growth rate of

real GDP positively affect dividend policy.

Rozeff (1982) searched out data of USA firms and found that as a firm have more growth

opportunities, it pays low dividend. Similarly Fama and French (2001), Amidu and Abor (2006),

Gill et al. (2010), Al-Kuwari (2010), Imran (2011), Maladjian and Khoury (2014) found negative

relationship and stated that rise in growth opportunities leads to fall in dividend payout of firm.

Olowe and Moyosore (2014) searched on data of Nigerian banking sector to find determinants of

dividend payout covering the period from 2006 to 2008. After pooled regression analysis they

concluded that profitability have positive impact on dividend payout but found negative

relationship with revenue growth, loan deposit ratio, retained earnings. Ahmed and Javid (2008)

conducted study on 320 non-financial firms listed on Karachi stock exchange during 2001-06 for

identifying determinants of dividend policy. They noted that negative relationship exists between

leverage, investment opportunities and dividend payments. Imran (2011) explored positive impact

of growth in sales, last period dividend and profitability on dividend policy while cash flows

showed negative association with it in Pakistani corporate sector. Gul et al. (2012) observed that

banks listed on Karachi stock exchange keep in mind the factors i.e. growth, firm size,

profitability, leverage and firm risk when they have to decide regarding dividend

payments.Alzomaia and Khadhiri (2013) investigated the determinants of dividend policy of Saudi

Arabia firms and listed profitability, firm size and last year dividend as main factors. Imran et al.

(2013) analyzed financial record of Pakistani banks and found positive influence of profitability,

last year dividend on dividend policy and negative relationship is observed with liquidity. Yousaf

and Ismail (2016) said that earnings, investment opportunities and debt are major factors in

deciding dividend payout ratio for Malaysian companies.

Khan et al. (2017) analyzed the Pakistani banking sector by using date from 2008 to

2014. Finding favors firm size as important variable for dividend policy. Al-Najjar1 and

Kilincarslan (2018) studied the reports of 264 firms listed on ISE in turkey from 2003 to 2012.

They summarized that more profitable, mature, and larger firms pay more dividend while firms

with high growth and debt pay less dividend. Gohar and Alam (2018) found last year dividend and

leverage as determinants of dividend policy of firms listed on PSX.

Theories and Factors Followed for Setting Dividend Policy: Empirical Evidence from Pakistani Banks

61

2.3 Hypotheses Development

Following research hypotheses are developed which are based on our research question.

H1: There is a positive relationship between profitability and dividend payout.

H2: There is a negative relationship between total deposits to total assets ratio and dividend

payout.

H3: There is a negative relationship between growth and dividend payout.

H4: There is a negative relationship between loan deposit ratio and dividend payout.

H5: There is a negative relationship between investment opportunities and dividend payout.

H6: There is a negative relationship between leverage and dividend payout.

H7: There is a positive relationship between last year dividend and dividend payout.

H8: There is a positive relationship between GDP growth rate and dividend payout.

3 Research Methodology

3.1 Sample Design and Data Collection

All commercial banks listed on Pakistan Stock Exchange (PSX) during the 2005-2015 are

included in study. Bank specific data is taken from audited annual reports of the respective banks

from their official websites, Pakistan Stock Exchange (PSE), State Bank of Pakistan (SBP) while

macroeconomic data is taken from Pakistan Bureau of Statistics (PBS).The banks included in

study are Allied Bank Limited (ABL), Askari Bank Limited , AL Habib, Alfalah, The Bank of

Punjab (BOP), BankIslami Pakistan, Habib Bank Limited (HBL), Faysal Bank Limited, Habib

Metropolitan Bank Limited, Jahangir Siddiqi Bank (JS), Meezan Bank Limited, National Bank of

Pakistan (NBP), Samba Bank, Silk Bank, Standard Chartered (Pakistan) Bank, Muslim

Commercial Bank Limited (MCB), Bank of Khyber (BOK), United Bank Limited (UBL),

ArifHabib Bank, National Investment Bank (NIB), Mybank, Pakistan Industrial Credit and

Investment Corporation (PICIC), KASB Bank and Atlas bank limited.

3.2 Measurement of Variables

Dividend payout ratio as dependent is measured ascash dividend / Net Profit after tax

(Gill et al., 2010). This shows how much of profit is distributed as dividend among shareholders.

Profit is the main source for distribution of dividend and proxy return on assets is measured as Net

Profit after tax / Total Assets (Amidu & Abor, 2006). Positive relationship is expected (Lintner,

1956). Total deposits to total assets ratio (TDTA) shows portion of deposits and other liabilities of

business and this portion impact negatively on dividend payments (Misra, 2015). Growth

opportunities available to firm also impact on retention and distribution of profit, measured as

growth in interest and non-interest income / last year interest and non-interest income, the negative

relationship is expected (Maladjian & Khoury, 2014). Loan deposit ratio (LDR) effects firm’s

liquidity and ability to pay dividend (Olowe & Moyosore, 2014) and measures as total loan and

Nasir Nadeem1, Adnan Bashir2, Sumaira Gulzar3

62

advances/ total deposits (Fahim et al., 2015). Negative association is expected with loan deposit

ratio (Kinfe, 2011).

Investment opportunities as explanatory variable measured as accumulated Retained

earnings to total assets and negative relationship is expected (Ahmed & Javid, 2008). Leverage is

measured as total debt/ total equity (Zameer et al., 2013) and negative relationship is expected

(Rozeff, 1982). Last year dividend (LYD) is considered and proved most important factor in

literature and last year dividend per share is used in study. Positive relationship of last year

dividend is expected with dividend payout (Lintner, 1956). In last GDP growth rate is used for

measuring impact of macroeconomic factor on dividend policy and positive sign of association is

expected (Misra, 2015). Summary of variables used, their measurement and expected sign is

summarized in table 1 as under:

3.3 Model Specification

By applying panel data regression model in this study, following formula is generated.

DPRit=β0+ β1 PROF.it+ β2 TDTA it + β3 GROWTH it + β4 LDR it + β5 IO it + β6 LEVERAGE it + β7

LYD it + β8 GDP + εit

Table 1: Summary of Measures

Variable Name Definitions Expectation

Dividend Payout Ratio Cash Dividend / Net Profit after tax

Profitability (ROA) Net Profit after tax / Total Assets Positive

Total Deposits to Total Assets Total Deposits divided by Total Assets Negative

Growth (current year income – Last year income) / Last

year income Negative

Loan to Deposit Ratio Total Loans and Advances / Total Deposits Negative

Investment Opportunities Accumulated Retained Earnings / Total Assets Negative

Leverage Total Debt / Total Equity Negative

Last Year Dividend Lagged dividend payment per share Positive

GDP growth rate Growth rate of GDP Positive

4 Results and Discussion

Data used for study is analysed through descriptive statistics and panel multiple

regression with random effect in order to check the relationship between dependent and

independent variables. Descriptive statistics are provided in table 2.

Theories and Factors Followed for Setting Dividend Policy: Empirical Evidence from Pakistani Banks

63

Table 2: Summary of Descriptive Statistics

*Values rounded off to four decimal places

Table 2 indicates that each variable has 210 observations during the analysis period.

Table shows that dividend payout ratio (DPR) of banks listed on PSX pays on average 19.88% of

their earnings as cash dividend. Return on asset (ROA) used as proxy for profitability shows that

banks generate return 0.42% this ratio explains that banks are not efficiently utilizing their assets

for generating revenue.

Average of Total Deposits to Total Assets (TDTA) ratio is 74%. Growth in revenue

(Growth) and Loan Deposit Ratio (LDR) have mean 26.83% and 61.56% respectively. Average

value of Investment Opportunities (IO) is -1.05% and of leverage is 87.47%. Last year dividend

(LYD) is paid on average Rs.1.73 per share with deviation of Rs. 2.95 per share and GDP variable

shows that Pakistan’s economy is growing at rate of 4.16% on average during last 11 years (2005-

15).

4.1 Assumptions of Regression Model

In order to check impact of independent variables on dependent variable, regression test

is run.

Variables Obs. Mean Std. Dev. Minimum Maximum

DPR 210 0.1988 0.2565 0.0000 0.8875

Profitability (ROA) 210 0.0042 0.0207 -0.0774 0.0399

TDTA 210 0.7368 0.1217 0.2114 0.9326

Growth 210 0.2683 0.3414 -0.2416 1.738

LDR 210 0.6156 0.1545 0.3108 1.097

IO 210 -0.0105 0.0653 -0.2799 0.0653

Leverage 210 0.8747 0.1271 0.0000 0.9842

LYD 210 1.7325 2.956 0.0000 14.00

GDP

Growth rate 210 0.0416 0.0197 0.0036 0.0896

Nasir Nadeem1, Adnan Bashir2, Sumaira Gulzar3

64

Table 3:VIF Test Results

Variable VIF Tolerance

ROA 1.80 0.5550

IO 2.07 0.4819

TDTA 2.71 0.3694

Leverage 2.39 0.4175

LYD 1.40 0.7144

Growth 1.51 0.6619

LDR 1.38 0.7231

GDP 1.41 0.6987

Mean VIF 1.84

Application of regression test requires different assumptions which need to be fulfilled.

Multicollinearity, autocorrelation, homoscedasticity and linearity/ normality of residuals are

important assumptions which are tested. For multicollinearity assumption, Variance inflation

factor (VIF) is run and results are presented in Table 3. Mean VIF value 1.84 is less than standard

point 10 (Wooldridge, 2008). So, there is no problem of multicollinearity.Wooldridge test (2002)

is used for checking the autocorrelation. Following results (Table 4) rejects Ho which shows

presence of autocorrelation.

Table 4: Wooldridge Test Results

Ho: no first-order autocorrelation

F( 1, 21) 39.37

Prob. > F 0.0000

Breush pagan test is conducted for checking homoscedasticity. Under mentioned result

(Table 5) indicates rejection of Ho. So heteroskedasticity is present in data.

Table 5: Breush Pagan Test Results

Ho: Constant variance

chi2(1) 13.84

Prob. > chi2 0.0002

Linearity is checked by through plot of residuals values and predicted values. Following

PP plot (Figure 1) shows that there is no problem of linearity in data.

Theories and Factors Followed for Setting Dividend Policy: Empirical Evidence from Pakistani Banks

65

Figure 1: PP Plot of residuals and predicted values

Problem of heteroskedasticity and autocorrelation in data is solved by using special

command (VCE Robust) at the end of regression command which is available in STATA version

11.

4.2 Selection of Regression Model

There are different models available for panel data which are used for regression. The

most popular models are fixed effect models, random effect model and pooled effect model. First

of all, Breusch and Pagan Lagrangian multiplier test (LM test) is run for selection between pooled

or random effect models. The test result (Table 6) rejects the Ho of the selection of pooled effect

model.

Table 6: LM Test Results

Ho=Pooled effect model is appropriated

chi2(1) 15.51

Prob. > chi2 0.0001

LM test results favor the use of random effect model. Now, hausman specification test is

run for selection between fixed effect and random effect. Following results (Table 7) fail to reject

Ho. Which clarifies that Random effect is most suitable for analysis.

0.00

0.25

0.50

0.75

1.00

Nor

mal

F[(r

-m)/s

]

0.00 0.25 0.50 0.75 1.00Empirical P[i] = i/(N+1)

Nasir Nadeem1, Adnan Bashir2, Sumaira Gulzar3

66

Table 7: Hausman Specification Test Result

Ho=Random effect model is appropriated

chi2(8) 10.07

Prob.>chi2 0.2601

4.3 Regression Results

Regression results are reported in Table 8. According to results of this study profitability

has a positive significant relationship with dividend pay-out and supported to life cycle theory

which explains that mature firms with more profit can pay more dividends. Firms with high profits

used it as signaling device for future performance. This result supports to dividend smoothing

hypothesis of Lintner (1956).

The result is supported by past researchers i.e. Amidu and Abor (2006), Imran (2011),

Arif and Akbar (2013). But disagree with the finding of Maladjian and Khoury (2014), Misra

(2015), Ofori-Sasu et al. (2017) which found negative association with dividend payout. Total

deposits to total assets ratio has a negative and insignificant association with dividend payout. This

means that any change in this ratio has no impact on dividend payout. Growth in interest and non-

interest income is found to have a negative and significant relationship with dividend payout ratio.

Life cycle theory states that young firms have more growth opportunities but normally less

profitable.

Table 8: Regression Model Results with Random Effect

*, **, ***

Significant at the 1%, 5%, and 10% levels

Independent variables Dependent variable = DPR

Coefficient Std. Err. p-value

Profitability (ROA) 1.14 0.63 0.07***

TDTA -0.16 0.12 0.20

Growth -0.07 0.03 0.01**

LDR -0.30 0.12 0.01**

IO 0.38 0.20 0.06***

Leverage 0.07 0.09 0.41

LYD 0.05 0.01 0.00*

GDP growth rate 0.40 0.41 0.34

Constant 0.38 0.11 0.00

No. of Observations 210

N0. Of Groups 24

Wald Chi (8) 72.12

Prob.>chi2 0.000

R-Square 0.5229

Theories and Factors Followed for Setting Dividend Policy: Empirical Evidence from Pakistani Banks

67

The result is supported by past researchers i.e. Amidu and Abor (2006), Imran (2011),

Arif and Akbar (2013). But disagree with the finding of Maladjian and Khoury (2014), Misra

(2015), Ofori-Sasu et al. (2017) which found negative association with dividend payout. Total

deposits to total assets ratio has a negative and insignificant association with dividend payout. This

means that any change in this ratio has no impact on dividend payout. Growth in interest and non-

interest income is found to have a negative and significant relationship with dividend payout ratio.

Life cycle theory states that young firms have more growth opportunities but normally less

profitable. So these firms retain cash with them in order to finance favourable growth

opportunities (Ross et al., 2011). Young firms should prefer to retain earnings in order to finance

its growth opportunities (Myers & Majluf, 1984) because external source of finance is costly than

internally generated funds (Rozeff, 1982). This negative relationship is in agreement with Rozeff

(1982), Amidu and Abor (2006), Gill et al. (2010), Al-Kuwari (2010), Maladjian and Khoury

(2014). But study findings are contradictory with the results of Naceur et al. (2006), Gul et al.

(2012).

5. Discussion

The loan to deposit ratio has a negative and significant impact on dividend payout. It

explains that as an increase in loan deposit ratio results in decrease in dividend payments. Olowe

and Moyosore (2014) pointed out that high loan to deposit ratio reduces liquidity position of banks

especially in form of cash. So it is not in a position to pay high dividend. It is argued that more

deposits funds are used in lendings and less are retained for paying dividends. Result of this

variable is same as found by Olowe and Moyosore (2014), Kinfe (2011). But result is conflicting

with Fahim et al. (2015). The result for investment opportunities shows positive significant

influence on dividend payout but this relationship was not expected. Positive relationship explains

that as more profitable investment opportunities are available such that business earns more profit

by investing in these projects which results high dividend payments.

Kim and Jang (2010) said that firms having more investment opportunities pay high

dividend in order to invite new investors. He also stated that firm pay high dividend also for

enhancing goodwill of business. Same phenomenon is explained by signaling theory. Positive

relationship between investment opportunities and dividend policy is proved by Aivazian et al.

(2003), Kim and Jang (2010), Yousaf and Ismail (2016). But this result is contradicted with the

findings of Ahmed and Javid (2008), Hussain and Usman (2013). Insignificant association

between leverage and dividend payout is found in regression result and also got unexpected sign.

It means that debt financing has no impact on dividend payments. Study conducted on Pakistan’s

banking sector by Zameer et al. (2013) and Khan et al. (2017) also concluded that leverage has no

relationship with dividend payout of Pakistani banking sector. But finding of study with regard to

leverage is disagreeing with findings of scholars such as Rozeff (1982) and John and Muthusamy

(2010) because these scholars found significant negative impact of leverage. Positive significant

Nasir Nadeem1, Adnan Bashir2, Sumaira Gulzar3

68

result clears that Pakistani banks pay more attention to previous dividend payment because they

wants to maintain stability in dividend payment. Lintner (1956) provided that managers try to keep

dividend stable and increase only when they are sure to maintain it and mangers also avoid from

dividend cuts. Because any change in dividend is treated as signal for future performance of firm.

Result of last year dividend is supported by Lintner (1956), Pruitt and Gitman (1991), Baker and

Powell (2000), Baker et al. (2002), Ahmed and Javid (2008). But Yousaf and Ismail (2016) proved

no relationship between lagged dividend and dividend payout. The macroeconomic factor such as

GDP growth shows positive but insignificant relationship with dividend payout. This means that

GDP growth of the Pakistan does not effect on dividend payment decision of banks. Yukun Yao

(2014) found positive and Misra (2015) and Ofori-Sasu (2017) found negative but significant

impact of this variable on dividend payout.

The purpose of the study is to find determinants of dividend policy and also to check that

which dividend policies are followed by banking sector of Pakistan while setting dividend policy.

Results of this study show that profitability has positive impact on dividend supporting life cycle

theory and signaling theory. Negative significant impact of growth on dividend payout depicts that

young firms have more growth opportunities and retain funds for financing this growth instead of

paying dividends. This association supports the life cycle theory and Pecking order theory but

contradicts with agency theory. Loan deposit ratio has a negative correlation with dividend payout.

It indicates that when banks grant more loans, it reduces liquidity of banks which results in

payment of low dividend. The variable ‘Investment Opportunities’ shows positive impact on

dividend payout. This means that by investing in profitable projects, profits of banks increase

which lead to rise in dividend payments. The last year dividend has significant positive association

with dividend payout. It shows that for paying dividend in current period, Pakistani banks focus on

previous dividend payments. So they maintain stability in dividend payout. This supports to

dividend smoothing hypothesis. Regression results show that Total Deposits to Total Assets ratio,

leverage and GDP growth rate has no significant relationship with dividend payout. Management

of banks can use results of this study for setting optimal dividend policy which not only fulfills

banks’ growth and investment needs but also satisfy investors’ need of return.

References

Ahmed, H., & Javid, A. Y. (2008).Dynamics and determinants of dividend policy in Pakistan.

Evidence from Karachi stock exchange non-financial listed firms. MPRA, 25, 148-171.

Ahmed, I. E. (2015).Liquidity, Profitability and the Dividends Payout Policy. World Review of

Business Research, 5(2), 73-85.

Aivazian, V., Booth, L., & Cleary, S. (2003). Do emerging market firms follow different dividend

policies from US firms?. Journal of Financial research, 26(3), 371-387.

Theories and Factors Followed for Setting Dividend Policy: Empirical Evidence from Pakistani Banks

69

Al-Kuwari, D. (2010). To Pay or Not to Pay: Using Emerging Panel Data to Identify Factors

Influencing Corporate Dividend Payout Decisions. International Research Journal of

Finance and Economics.42, 19-36.

Al-Najjar, B., & Kilincarslan, E. (2017).Revisiting Firm-Specific Determinants of Dividend

Policy: Evidence from Turkey. Economic Issues.23, 3-34.

Al-Shattarat, W. K., Atmeh, M. A., & Al-Shattarat, B. K. (2013). Dividend Signalling Hypothesis

In Emerging Markets: More Empirical Evidence. Journal of Applied Business

Research, 29(2), 461.

Alzomaia, T. S., & Al-Khadhir, A. (2013). Determination of Dividend Policy: The Evidence from

Saudi Arabia. International Journal of Business and Social Science, 4(1), 181-192.

Amidu, M., & Abor.J. (2006).Determinants of dividend payout ratios in Ghana.The Journal of

Risk Finance, 7(2), 136-145.

Arif, A., & Akbar F. (2013). Determinants of dividend policy: A sectoral analysis from Pakistan.

International Journal of Business and Behavioural Sciences,3(9), 16-33.

Azquith, P., & Mullins, D. W. (1983). The impact of initiating dividend payments on

shareholder’s wealth.Journal of business, 56(1), 77-96.

Baker, H. K. (2009). Dividends and dividend policy (1sted.). Hoboken, Canada: John Wiley &

Sons, Inc.

Baker, H. K., & Powell, G. E. (2000). Determinants of corporate dividend policy: a survey of

NYSE firms. Financial Practice and Education, 10, 29-40..

Baker, H. K., & Weigand, R. (2015). Corporate dividend policy revisited. Managerial

Finance, 41(2), 126-144.

Baker, H. K., Powell, G. E., & Veit, E. T. (2002).Revisiting Managerial Perspectives on Dividend

Policy.Journal of Economics and Finance, 26(3), 267-283.

Banerjee, S. (2016). Determinants of Dividend Policy for Selected Information Technology

Companies in India: An Empirical Analysis. Parikalpana: KIIT Journal of

Management, 12(1), 152-157.

Below, S. D., & Johnson, K. H. (1996).An analysis of shareholder reaction to dividend

announcements in bull and bear markets. Journal of Financial and Strategic Decisions,

9(3), 15-26.

Black, F. (1976). The dividend puzzle. The Journal of Portfolio Management, 2(2), 5-8.

Brealey, R. A. & Meyers, S. C. (2003).Principles of Corporate Finance (7thed.). New York: The

McGraw Hill Companies.

DeAngelo, H., & DeAngelo, L. (2007). Payout Policy Pedagogy: What Matters and Why.

European Financial Management, 13(1), 11-27.

DSpace Repository Commercial Banks Annual Reports (2016, July 10). Retrieved from

http://121.52.153.178:8080/xmlui/handle/ 123456789/6973

Nasir Nadeem1, Adnan Bashir2, Sumaira Gulzar3

70

Elton, E. J., & Gruber, M. J. (1970).Marginal stockholder tax rates and the clientele effect. The

Review of Economics and Statistics, 68-74.

Fahim, L., Kashif, M., Khurshid, & Tahir, H. (2015). Determinants of Dividend Payout: Evidence

from Financial Sector of Pakistan. Journal of Poverty, Investment and Development, 17,

5-16.

Fama, E. F., & French, K. R. (2001). Disappearing Dividends: Changing Firm Characteristics or

Lower Propensity to Pay? Journal of Financial Economics,60(1), 3-43.

Financial Statement Analysis of Financial Sector (2016, July 10). Retrieved from

http://www.sbp.org.pk/departments/stats/FSA-2011-15.pdf

Financial Statement Analysis of Financial Sector (2016, July 11). Retrieved from

http://www.sbp.org.pk/departments/stats/FSA-2006-09(F).pdf

GDP growth rates (2016, July 3). Retrieved from

http://www.pbs.gov.pk/sites/default/files//tables/Table-6.pdf

Gill, A., Biger, N., & Tibrewala, R. (2010). Determinants of dividend payout ratios: evidence from

United States. The Open Business Journal, 3(1), 8-14.

Gohar, R., & Alam, M. S. (2018). Determinants and Behavior of Dividend Policy in Pakistani

Listed Companies. Journal of Finance and Investment Analysis, 7(3), 1-9.

Gordon, M. J. (1959). Dividends, earnings and stock prices. Review of Economics and Statistics,

41(2), 99-105.

Gul, S., Mughal, S., Bukhari, S. A., & Shabir, N. (2012). The Determinants of Corporate Dividend

Policy: An Investigation of Pakistani Banking Industry. European Journal of Business

and Management,4(12), 1-5.

Hussain, M., & Usman, M. (2013).Investment Opportunities and Dividend Yield- (Evidence from

KSE).International Journal of Multidisciplinary Sciences and Engineering, 4(11), 12-16.

Imran, K. (2011). Determinants of Dividend Payout Policy: A Case of Pakistan Engineering

Sector. The Romanian Economic Journal, 14(41), 47-60.

Imran, k., Usman, M., & Nishat, M. (2013). Banks dividend policy: evidence from Pakistan.

Economic Modelling,32, 88-90.

Jacob, M., & Michaely, R. (2017). Taxation and dividend policy: The muting effect of agency

issues and shareholder conflicts. The Review of Financial Studies, 30(9), 3176-3222.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behaviour, Agency

Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.

John, K., & Williams, J. (1985). Dividends, Dilution, and Taxes: A Signalling Equilibrium. The

Journal of Finance, 40(4), 1053-1070.

Khan, M., & Khan, S. (2007). Financial Sector Restructuring in Pakistan. Lahore Journal of

Economics, 12(Special Edition), 98-125.

Theories and Factors Followed for Setting Dividend Policy: Empirical Evidence from Pakistani Banks

71

Khan, Y., Ali, L., Batool, S., & Ali, A. (2017). Growth & Profitability of Private Commercial

Banks: Major Indicator of Its Dividend Policy. American Journal of Operations

Management and Information Systems, 2(4), 92-96.

Kim, J., & Jang, S. (2010). Dividend behavior of lodging firms: Heckman’s two-step approach.

International Journal of Hospitality Management, 29(3), 413–420.

Kinfe, T. (2011).Determinants of Dividend payout: An Empirical Study on Bank Industry in

Ethiopia. School of Business and Public Administration, Addis Ababa University,

Ethiopia.

Lee, S.W. (2009). Determinants of dividend policy in Korean banking industry.Banks and Bank

Systems, 4(1), 67-71.

Lintner, J. (1956). Distribution of Incomes of Corporations among Dividends, Retained Earnings,

and Taxes. American Economic Review, 46(2), 97-113.

Maladjian, C., & Khoury, R. E. (2014). Determinants of the Dividend Policy: An Empirical Study

on the Lebanese Listed Banks. International Journal of Economics and Finance, 6(4),

240-256.

Miller, M. H., & Modigliani, F. (1961).Dividend Policy, Growth, and the Valuation of Shares.

Journal of Business,34(4), 411–433.

Misra, S. D. (2015). Determinants of dividend policy: a study of the Indian banking

sector. International Journal of Indian Culture and Business Management, 11(4), 440-

456.

Myers, M., & Bacon, F. (2004).The determinants of corporate dividend policy. Academy of

Accounting and Financial Studies Journal, 8(3), 17-28.

Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms

have information that investors do not have. Journal of Financial Economics, 13(2), 187-

221.

Naceur, S. B., Goaied, M., & Belanesw, A. (2006).On the Determinants and Dynamics of

Dividend Policy. International Review of Finance, 6(1–2), 1–23.

Ofori‐Sasu, D., Abor, J. Y., & Osei, A. K. (2017). Dividend policy and shareholders’ value:

evidence from listed companies in Ghana. African Development Review, 29(2), 293-304.

Olowe, R. A., & Moyosore, L. S. (2014).Determinants of Dividend Payout in the Nigerian

Banking Industry. Proceedings of 9th Annual London Business Research Conference,

Imperial College, London, UK.

Pakistan Stock Exchange Limited [PK] (2016, July 10). Banks Annual Reports Retrieved from

https://www.psx.com.pk/

Pangemanan, S. S., & Oratmangun, N. K. S. (2015).The Characteristics of Dividend Payers from

Banking Sectors in Indonesia. Research Journal of Finance and Accounting, 6(6), 248-

252.

Nasir Nadeem1, Adnan Bashir2, Sumaira Gulzar3

72

Pruitt, S. W., & Gitman, L.J. (1991).The interactions between investment, financing, and dividend

decisions of major US firms. The financial Review, 26(3), 409-430.

Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2011).Fundamentals of Corporate Finance

(10thed.).New York: The McGraw-Hill Companies, Inc.

Rozeff , M. S. (1982). Growth, Beta and Agency Costs as Determinants of Dividend Payout

Ratios. Journal of Financial Research, 5(3), 249-259.

Walter, J. E., (1963). Dividend Policy: It’s Influence on the Value of the Enterprise. The Journal

of Finance, 18(2), 280-291.

Watson, D., & Head, A. (2004).Corporate Finance: Principles & Practice (3rded.). Harlow,

England: Pearson Education Limited.

Wooldridge, J. M. (2008). Introductory Econometrics (4thed.). Mason: Western Cengage Learning.

Yao, Y. (2014). Determinants of Dividend Policy, International Evidence: 1990 to

2010.Newcastle Business School, University of Newcastle, Newcastle.

Yousaf, Y., & Ismail, S. (2016). Determinants of dividend policy of listed companies in Malaysia.

Emerald group publication limited, Review of International Business and Strategy, 26(1),

1-20.

Zameer, H., Rasool, S., Iqbal, S., & Arshad, U. (2013). Determinants of dividend policy: a case of

banking sector in Pakistan. Middle East Journal of Scientific Research,18(13), 410-424.

Impact of Transformational leadership on Project Success: Mediating role of Team-Building and Moderating

Role of Human Resource Management Practices

1MS Scholar, Faculty of Management Sciences, SZABIST Islamabad: [email protected] 2Assistant Professor, Faculty of Management Sciences, SZABIST, Islamabad.

University of Wah Journal of Management Sciences

Volume 2, Issue 2, September 2018, pp. 73-90

Impact of Transformational leadership on Project Success: Mediating role of

Team-Building and Moderating Role of Human Resource Management

Practices Khurram Yazdani1, Fuad Bashir2

Article History:

Received:

13 Jun, 2018

Revised:

24 Sep, 2018

Accepted:

30 Sep, 2018

ABSTRACT

Purpose: This study was conducted to empirically examine the relationship between

the transformational leadership and project success with mediating role of team

building and moderating effect of HRM Practices.

Methodology/Design: 184 responses from top and middle management employees of

project based public and private organizations available in Rawalpindi/Islamabad were

collected and analysis was performed. Structure Equation Modelling was used to test

the relationship between the variables.

Findings: On the basis of facts and figures derived from the received responses, it was

evident that a significant model was developed. The results were generally supportive

to the developed hypotheses.

Implication: Another prime objective of this research was to test the concept in

Pakistani context with a perspective that may be this research work contributes for the

performance improvement of project-based departments/organizations.

Keywords: Transformational Leadership (TL), Project Success (PS), Team Building

(TB), HRM Practices (HRMP).

1. Introduction Project based government departments/organizations and project based private sector

organizations play a backbone role in the progress and growth of any state. In the case of Pakistan,

government/ project based private sector organizations are investing a large volume of finances in

terms of salaries and perks of employees working in these organizations. In return, performance of

these departments/organizations is declining day by day. These offices are not delivering the

desired results to government and as well as general public. As an initial finding, the lack was

observed in applying management practices and tactics in these departments.

A very low level of motivation was observed among the government employees due to

the factors of job security and their salaries and perks. This research is planned to consider

transformational leadership and its effect on project success with mediation of team building and

moderation of human resource management practices. The overall research was focused on project

success of the project based government departments/organizations and project based private

Khurram Yazdani1, Fuad Bashir2

74

organizations. This research has also observed the factors which are playing a declining role in the

performance of these organizations. Even though the impact of transformational leadership on

project success is supported empirically, less is known regarding the mechanism that explains this

result. To state this area of interest, we suggest the mediating role of team-building as a probable

enlightenment of the connection between transformational style of leadership (TL) and project

success (PS). The research suggests that team-building partly mediates the association between

transformational leadership and project success (Aga et al., 2016).

Literature review also enhanced the concept that team-building mediates the relationship

between transformational leadership and project success. Same is the case with the literature

available on the moderating role of human resource management practices between the association

of team-building and project success. The research work will be a value addition to the most

recent research work (Aga et al., 2016). The literature review also depicts the positive effect of

human resource management practices on team Building to gain project success.

As identified and explored by Ika et al. (2012) and Nauman et al. (2010) that critical

success factors (CSFs) are a noteworthy aspect of research while examining the available project

management literature. Area of interest regarding understudy variables, the literature has enhanced

our knowledge on factors crucially prompting success of projects. Whereas, the most significant

CSFs recognized is the leadership style of the leader or manager such as the transformational

leadership (Anantatmula, 2010; Lindgren & Packendorff, 2009; Riaz et al., 2013; Yang et al.,

2010).

As explained by Aga, Noorderhaven, and Vallejo (2016), while the impact of

transformational leadership on project success is pragmatically maintained in different researches,

yet less is known about the mechanisms that explains the resulted effect. In order to report this

issue, a mediating role of team-building (TB) as a possible clarification of the association between

transformational leadership (TL) and project success (PS) can be proposed. Grounded on a field

survey of 200 development project managers in the Ethiopian Non-Governmental Organization

(NGO) sector, the outcomes of their study specify that team-building partially mediates the effect

of transformational leadership on project success. As described by Popaitoon and Siengthai

(2014), though the effect of transformational leadership (TL) on project success (PS) is practically

reinforced in different studies yet less is known about the mechanisms that explain the caused

affect. In order to report this issue, a mediating role of team-building (TB) as a possible

enlightenment of the association between transformational leadership (TL) and project success

(PS) can be projected. Founded on a survey of 200 project manager of development sector in the

Ethiopian Non-Governmental Organization (NGO) sector, the findings of their learning show that

team-building (TB) moderately mediates the impact of transformational leadership (TL) on project

success (PS).

Failure or non-compliance of minimum desired outcomes from the projects administered

by the government departments/organizations and project based private sector organizations is

increasing day by day and this decline in the performance of these departments/organizations is

affecting performance of the government offices and as well as damaging for the economy of the

country. Government departments/project based private organizations are spending a lot in terms

of salaries and perks but these offices are not delivering the desired outcomes. Public sector

departments/organizations dealing with projects are of major concern for Government of Pakistan.

Impact of Transformational leadership on Project Success: Mediating role of Team-Building and Moderating

Role of Human Resource Management Practices

75

Decline in the success ratio of these projects is alarming for the government. Initial observation

states that project success is gradually declining due to lack of applying human resource

management practices and tactics in these departments. Whereas, on the other end increase in

project success of project based private sector organizations can also contribute a lot in the

economic growth of any country. Failures of these projects are also damaging the economy of the

country and interest of foreign investors/donors.

Success is very important to be achieved in every field of life the same is the case with

government/private project based organizations where success is measured in terms of their every

project. This research is aimed to explore the factors which can improve the success ratio of the

project based government departments/organizations and project based private organizations.

Overall objective of this study is to explore the way outs/practices/measures to improve Project

Success. This research has the below mentioned key research Questions: (1). Does

transformational leadership have significant positive association with project success? (2). Does

transformational leadership positively influence project team building? (3). Do team building

practices positively influence project success? (4). Does team building mediate the relationship

between transformational leadership and project success? (5). Does HRM practices have

moderation impact on the affiliation between team building and project success or not?

2. Literature Review

2.1 Transformational Leadership and Project Success: There are four opinions that explaining the highlighted character of the project manager'

style of management that incurred on team-building practices as mentioned under by

transformational leadership and team-building as per McDonough (2000):

1. It is in notice that effective project leaders to define and manage task for their team by

allowing team to perform under the definition.

2. Project leaders exposed the transformational style of the leadership in which team

members are empowered to take decisions, have liberty to discuss and explore new

problem solving criteria to perform tasks.

3. Making the realistic judgements, effective leadership style is to make your team

empowered to share facts and awareness within team or added associated group intact

with the project. Devising communication architecture through which information

regarding the project can be share among the members involved in the project.

4. Project leadership expands the team vision by improving the positive attitude which

ultimately accomplish project success.

Sohmen (2013) classified that leader may provide the favourable working environment

which enables the team fellows to flourish their efforts toward the ultimate goal and achieved

project target. In order to persuade team-building, effective leadership is clearly authoritative that

effective leadership is essential part of high-performing with the right competences (Burke et al.,

2006). A project team can be enthused by the project manager’s transformational leadership

conduct. By such inspirations a project team accomplishes beyond their anticipations (Klein et al.,

2009). The net motivation to accomplish the project needs persistency by empowering team

members beyond individual contribution. (Burke et al., 2006; Sohmen, 2013).

Khurram Yazdani1, Fuad Bashir2

76

The performance of leadership is a basic for the people working in teams; and is stated to

be the most investigated aspect of human behaviour (Dulewicz & Higgs, 2005). While leadership

has also been the topic of much study in project management writings, its role in playing a part to

project achievement or failure lasts to incite discussion. Many other scholars have also been

exploring the effect of the manager's leadership on the performance of organizations. Previous

studies suggest an association between the manager's leadership style and effective performance in

business. Though the relationships between leadership behaviour and performance in business

have received more consideration, still the studies conducted on the leadership style of project

managers and its input to project success are inadequate. Morris (1988) stated that poor leadership

is a reason of failure during creation, build-up, and close-out phases. Kendra and Taplin (2004)

mentioned that the leadership and individual features of the project managers are allied with

project success factors. Based on previous studies many project managers do not identify

themselves or their leadership style as a contributor to project success (Turner & Muller, 2005). In

short, a large content of literature has endeavoured to identify project success factors. However,

prior studies have overlooked the project managers or their leadership styles as project success

factors.

Chen, Kirkman, Kanfer, Allen, and Rosen (2007) has explored managers are expected to

perform a leading role and inspire employees as a group instead of specific key persons, especially

in the team-based hierarchical systems. Zaccaro, Rittman, and Marks (2001) has stated that teams

that perform well are faced with various challenges, including streamlining each task into a joint

effort, organizing resources, supporting and trusting each other, and synchronizing transmission of

data and achieving goals. However, according to the scholars, even then leadership research has

seen unwanted academic and observed differences that occur between the stages of investigation

(Bliese, Halverson, & Schriesheim, 2002). Highlighted by Casimir, Waldman, Bartran, and Yang

(2006) in their research, one concept that is strictly linked to anticipation of individuals and is

vastly debated is the concept of transformational leadership which remains highly studied to this

age.

However, little effect of research analysing has been seen at both personal and group

levels other than some exclusion (e.g., Wang & Howell, 2010). Transformational leadership also

has an effect at the team level of study in contribution to the effects at a personal level. An

agreement at a lower level unit to make sure there is another form of agreement at a higher level

forms the based on the direct consensus model. This assumes that that transformational leadership

(a) included personal focus along with group base and (b) as a participative style of leadership, it

pays to mental model union in team members (Dionne, Sayama, Hao, & Bush, 2010).

2.2. Project Success

According to Cannon et al. (2010) the buyer’s long-term relationship depends upon the

buyer’s trust of a supplier and the supplier’s performance. It was identified that the relative effects

of trust and performance on long-term orientation are balanced by culture – particularly the

individualism/collectivism dimension. Speculations were tested on data from two individualist and

two collectivist cultures. Pullman et al. (2001), explains, dealing with multicultural customer

segments, unique performance challenges are experienced in developing the appropriate service

strategy. They propose a way for modelling the priority of different cultural segments, evaluating

Impact of Transformational leadership on Project Success: Mediating role of Team-Building and Moderating

Role of Human Resource Management Practices

77

the differences between the segments and determining the appropriate service strategy for service

providers who carry out multi-national projects. The success of the project and the output of the

project manager is frequently discussed, and is rarely agreed upon (Pinto & Slevin, 1988). The

success factors which are critical help in assessing the project success.

During the decade of 1980 in the field of research focus of attention diverted towards

‘project success factors’. Different theorists / scholars / authors identified features like,

“functionality (performance), project management (schedule, on budget), commercial success,

termination efficiency, and clients’ satisfaction” as factors that affect success of given projects.

Though researchers like Baker, Murphy, Fisher, Cleland, and King (1988); Morris, (1988); Pinto

and Slevin (1988) have pointed out many factors contributing success yet, no one has clearly

referred to one of the basic important factor i.e. the leadership characteristics of project managers

and their influence on success.

Andersen et al. (1987) examined the hazards that may prevent project success and

increase the chances of failure. To him the main focus should be laid on the way a project is

planned, organized, and controlled. Whereas to Baker et al. (1988) the ‘perceived’ success in any

of the project can be attained by achieving factors like attaining the project’s technical

specification and getting a high level of satisfaction from the client, the users, and the project

team. Both these writers have emphasized planning but have ignored an important factor,

leadership which as a key factor in ‘maximizing potential project successes.

Pinto and Slevin (1988) conducted a study of project success and identified ten factors for

success. They laid emphases on the need for communication channels which to them is an

extremely important factor. Along with this an adequate problem-solving ability is also required.

The researchers still not considered project manager leadership or even management skills as

success factors in this study. However, they have indirectly touched upon the fact by mentioning

the absence of project management characteristics such as inadequate project manager’s

administration, human skills, and influencing skills as factors strongly contributing to the failure

of projects.

Later Turner (1999) devised a strategy for the successful implementation of projects.

After taking inspiration from Morris (1988) and Morris and Hough (1987) he presented ‘seven

forces model’. Its main components include ‘public’ force; representing people on the project and

their management, leadership, teamwork, and industrial relations. He is the one who has initially

recognized the role of leadership as an important contributor in the success of any project. In his

view it is an important part of project strategy (approach) which in turn leads to successful project

implementation. In contrast, in 2001 Cooke-Davies stated that despite well-known research results

and decades of individual and collective experiences of project management, projects’ results

continue to disappoint stakeholders. In order t improve the situation to him more attention should

be laid on cost, time, and quality while studying project success and identified related success

factors. While defining the success factors he did not mention the people / clients’ side of project

management and mainly concentrated on factors like the project manager’s competence and

leadership ability.

In a similar manner Lee-Kelley and Loong (2003) laid focus on management side only

and suggested that there is a substantial relationship between the project manager’s awareness of

project success and his / her own behavior. To them inner-confidence and self-belief are the

Khurram Yazdani1, Fuad Bashir2

78

character qualities which chiefly play a significant part in the project manager’s aptitude to deliver

a project successfully.

Jugdev and Müller in 2005 after reviewing the given literature on project success which

discussed pitfalls and suggested remedies concluded that four conditions are necessary for a

project’s success: (1). Criteria should be agreed with shareholders to measure the success before

and during the project. (2). A collaborative working relationship should be maintained between

project owner/sponsor and manager. (3). Project manager should be authorized to deal flexibly

with unanticipated situations. (4). Stakeholder/sponsor/shareholder should concentrate in the

performance of the project. Out of these works Turner and Müller (2005) has successfully and

aptly reviewed the contribution of the project manager’s competence and leadership style to

project success.

2.3. Team Building

Cohen and Bailey (1997) explained that project teams of individuals from different areas

in any organization are combined to perform complicated and focused tasks and activities of

diverse nature. Team is an impermanent set of people which is formed to perform specific and

time bound activity. As the activity is completed, the team is scattered. The team of a project has a

limited time span. Bryman et al. (1987) have pointed out that short term nature of a team and time

bound activities of team members are the main difference that differentiate their work from other

groups.

Thomas et al., (2008) had done a wide range of research in project management. They

explained (a) the worth of a dedicated and effectual project team, (b) suggested processes for

making committed and successful teams and (3) the requirement for ongoing vigorous and

dynamic team building in life cycle of project as people go often. Team in a project shows the

recent and future requirement of a team. It can also be acknowledged that a common recognition

of procedures involved in constructing an effectual team in literature of project management. To

build a team is a time taking process. It is necessary to build team as soon as possible in early

stages of a project. Whetten and Cameron (2005) explained the famous process of team building

consists of a) forming ,b) norming, c) storming and d) performing.

Some features in various organizations included work teams, management teams, and

cross-functional teams (Katzenbach & Smith, 1992). Discussions have been done on the benefits

and flaws of using consultation teams over the recent years (Lampman & Dimeo, 1989; Todryk,

1990), and their use are becoming popular now a day. Inter organizational projects team remains

less popular even to this date. This consists of representatives from the owner, designer, and/or

constructor organizations that have a major role in giving outcome of the projects. Greater focus

has been implemented on discussing the intra organizational project team - Consisting of members

from one organization, either the owner, designer, or constructor organization. This team has a

direct effect on the improving the organization’s efficiency to perform and in return also effects

the projects efficiency.

2.4 Relationship between Team Building and Project Success

Previous studies on team building overlooked the performance and preference to outcome

measures, despite it may be essential part of team-building (Salas et al., 1999). The term team-

building remains undefined as according to requirement of the project (LePine et al., 2008).

Impact of Transformational leadership on Project Success: Mediating role of Team-Building and Moderating

Role of Human Resource Management Practices

79

Problem lies in vague where the effect of team building on performance is not properly defined

(Salas et al., 1999). For example, recent studies (Scott-Young & Samson, 2008; Zwikael & Unger-

Aviram, 2010) have started to observe the effects of team-building, but they use broad scopes of

HRM functions like training, pay and rewards, coordination, and empowerment, without focusing

on the four well-established components of team-building (Salas et al., 1999).

2.5. Mediating Role of Team Building

Transformational leadership helps create formal continuing mechanisms that stimulate

two-way communication and the exchange of information within the project team (Piccolo &

Colquitt, 2006). This could clearly affect project success. Additionally, Yang et al. (2011)

underscore that transformational leadership can achieve project success by supplementing the

benefits of team-building practices. Components of team-building such as goal setting, role

interpretation, interpersonal associations, and problem solving practices are applied to improve

project team performance and have a positive influence on project success (Klein et al., 2009). As

specified by Eisenbeiss, van Knippenberg, and Boerner (2008), success of a project comes when

team members come to an agreement on project goals and approaches to goal attainment.

2.6. Human Resource Management Practices

Research on SHRM suggests that HR applications can increase firm productivity when

they are in line with one another to supervise employees in a way that leads to their comparison

(Delery & Doty, 1996). Further, the relevance of a set of HR practices may depend on the skills

that a firm is trying to develop. HR application can make value for a firm when the individual

practices are for the advance development of resources and skills (Wright et al., 2001). It is

significant that the employee skills developed through HR practices will not be easy to supersede

because these practices and policies are firm-specific, socially complex, and target oriented (Lado

& Wilson, 1994). These practices even if tried to be re-engineered it would not only take more

time but shall also would not get same results (Wright et al., 2001). Thus, we can claim that a

system of HR practices strengthens more durability of the competitive created through TMT

networks. Thus, it is significant to demonstrate a set of HR practices that firms can use to

systematically develop and manage TMT networks. The outcome of a required behaviour (that is,

the development of strategic networks) is a function of ability, motivation, and opportunity (Locke

& Latham, 1990). To extract required behaviours from employees, including top managers, firms

must provide feedback and incentives that reinforce the required behaviours (Locke & Latham,

1990). Performance appraisals and compensation are the primary HR practices firms use to extract

and augment required behaviours (Latham, 1981). Thus, it is important to pick a set of HR

practices that firms can use in a systematic manner to deliver and control TMT networks. The

performance of a required behaviour (that is, the development of strategic networks) is a function

of capacity, motivation, and plausibility (Locke & Latham, 1990). To extract required behaviours

from employees, including top managers, firms must provide feedback and incentives that

reinforce the required behaviours (Locke & Latham, 1990). Performance appraisals and

compensation are the primary HR practices firms use to extract and reinforce required behaviours

(Latham, 1981).

Khurram Yazdani1, Fuad Bashir2

80

2.6.1. HRM Practices and Project Success

Generally, projects are about different individuals, funding and equipment. There are so

many descriptions involved however researchers have a point of view that projects are generally

comprised of matrix based structure based upon the limitation of being economical, on time,

quality of service, composite and connected processes. In terms of project accomplishment and

trend, projects are dealt being technically rather than behaviourally. There is behaviour of

managing the project because of mechanical approached which is based on getting the desired

results (timelines, within budget and quality of product). There are various lists and designs are

presented in terms of project critical achievement factors, as an example one of the model says

that a project success is based on four-dimensional pillars which are efficiency, impact, success

and efficiency. The insight of different groups such as stakeholders, management, customers and

employees should be considered as vital components as everyone will look at the project from its

own prospective. Morley observed that managing a project is based on a triangle comprised of

schedule, cost and performance is convenient to analyse the accomplishment and flop of a project.

In addition to this rule of thumb it is an idea that the risk involved and conflict resolving in a

project by the project steak holders can also be evaluated for measuring a project analysis,

however risk is directly proportional to technical performance, which is directly linked to budget

and calendar. As of now, the vital most conclusion on critical evaluation of a project achievement

is carried out by Pinto and Slevin (1988). They presented an infrastructure and pointed out 10 key

components and their research said ‘‘are project application critical success factors of importance

over project. Recession research unfolded that different components were part of the success in

four steps. Further elaborating, during the conceptual stage agenda and input (from client) are the

variable which are likely to be success factors, however during finish stage, practical targets,

project agenda and customer briefings are given 60% weightage to success of project. The staff’s

factor is the only factor which is unusually predictive in measuring a project success as a life cycle

stage.

Companies’ situation is severe as they must ensure energetic environment at the

workplaces to retain the staff, accomplishments graph is measured in terms of infrastructure and

environment, however the governing bodies cannot overlook the facts that effects their

performance. Researchers are agreed to this fact that hiring skilled and energetic people is one of

the most critical factors of organization accomplishments. Human Resource Management (HRM)

is updating frequently and playing its part dynamically. Every project needs attention of all the

peoples involved in it, with in the cost and strong technicalities, however there are so many scale

to quantify it but according to almost all the researchers a project faces the steps of budget

limitation, calendar, quality and structure. Many professionals and analyst count performance,

efficiency and success has one same meaning. Organizational theory reports this miss conception

being noticed several times.

H1: Transformational Leadership positively influences Project Success.

H2: Transformational Leadership positively influences Project Team Building.

H3: Team Building practices positively influences Project Success.

H4: Team Building mediates the relationship between Transformational Leadership and project

success.

Impact of Transformational leadership on Project Success: Mediating role of Team-Building and Moderating

Role of Human Resource Management Practices

81

H5: HRM practices moderates the association between team building and project success.

Figure 1: Research Framework

3. Methodology This study is explanatory in nature as the purposes of the research were to examine the

causal relationship among study variables. Cross sectional data was collected by using self-

administered questionnaire adopted from existing literature. Convenience sampling technique was

used. The sample size of our study was 184 employees which involves top and middle

management of private companies (dealing with projects) and top and middle management

government officers working in different government departments/organizations (which are

dealing with projects) located in Rawalpindi/Islamabad. The analysis on data has been conducted

by using structural equation modelling through Smart PLS 3.

3.1. Instruments

The instrument used for the data collection is a structured instrument that includes

structured and close-ended questions. The instrument has two different sections. First section is

encompassing of the demographics such as organization, gender, age and education and second

portion is included of the questions. Each question was an item to measure responses of the

respondents regarding different variables. The five likert scale is used. Measurement scales for

measuring transformational leadership, team building and project success were adopted from Aga,

Noorderhaven, and Vallejo (2016) measurement scales for measuring HRM practices was adopted

from Popaitoon and Siengthai (2014).

4. Results 4.1. Descriptive Statistics

In this section demographic analysis was done by using SPSS. First demographic analysis

was made regarding gender of the respondents. Results depict that out of 184 respondents, 97 were

male and 87 were female. This also illustrate that 52.7% were male and 47.3% were female. This

analysis also shows that most respondents were male.

Khurram Yazdani1, Fuad Bashir2

82

Table 1: Demographic Profile

Demographic Variables Codes Frequency % of Total Sample

Gender Male 97 52.7

Female 87 47.3

Age

21-30 56 30.4

31-40 92 50.0

Above 40 36 19.6

Education

Bachelor 32 17.4

Masters 90 48.9

MPhil/PhD 62 33.7

Organization Type Public 109 59.2

Private 75 40.8

Second demographic analysis was made regarding age of the respondents. Results show

that 92 of the respondents were lying in the age bracket of 31-40 years and percentage of this age

bracket is 50% in the respondents. On the other hand, 56 respondents belong from the age bracket

of 20-30 years having a percentage of 30.4 %. Whereas, only 36 respondents belong from the age

bracket of above 40 years having a percentage of 19.6%.Further result depicts that 90 of the

respondents were having Master’s degree and their percentage was 48.9% among the respondents.

62 respondents were possessing M.Phil./PhD degree. Only 32 respondents were possessing

Bachelor’s degree holding a percentage of 17.4 %.A very important demographic analysis was

made which also relates with the main theme of this research regarding professional association of

the respondents (Public Sector/Private Sector) so that both sectors could be analyzed properly.

This table illustrates that 109 of the respondents were from private sector which holds 59.2 % of

the total respondents and 75 of the respondents were from public sector which holds 40.8% of the

entire respondents. Results were presented in Table 1.

4.2. Partial Least Squares Structural Equation Modeling (PLS-SEM)

The proposed rotational paths and measures were examined through Partial Least Squares

Structural Equation Modelling (PLS-SEM). PLS-SEM is comprised of two basic steps

measurement model and structural model as suggested by Hair et al. (2012). The PLS-SEM

algorithm provides the maximized percentage of explained variance, proportion of explained

variance and path coefficients.

4.2.1. Measurement Model

In this study internal consistency reliability, convergent validity, and discriminant

validity were examined to evaluate the measurement model (Figure 2). Table 2 depicts the

Cronbach’s Alpha, Average Variance Extracted and Composite Reliability of the variables under

study. Cronbach’s Alpha values of all the variables are above 0.6 which are acceptable and it

means that the instruments which are used are consistent and reliable.

Impact of Transformational leadership on Project Success: Mediating role of Team-Building and Moderating

Role of Human Resource Management Practices

83

Table 2: Construct Reliability and Validity before Moderation

Cronbach's

Alpha

Composite

Reliability (CR)

Average Variance

Extracted (AVE)

HRM Practices 0.684 0.863 0.759

Project Success 0.696 0.814 0.523

Team Building 0.657 0.814 0.594

Transformational Leadership 0.757 0.859 0.671

Composite Reliability of all the instruments is above 0.7 which is acceptable. Average

Variance Extracted is also greater than the minimum defined limit of 0.5 which tells us that our

measurement model is valid and reliable. In the view of above mentioned values, reliability and

validity is confirmed.

Table 3: Discriminant Validity before Moderation

Av

era

ge

Va

ria

nce

Ex

tra

cted

(AV

E)

HR

M

Pra

ctic

es

Pro

ject

Su

cces

s

Tea

m

Bu

ild

ing

Tra

nsf

orm

ati

on

al

Lea

der

ship

HRM Practices 0.759 0.871

Project Success 0.523 0.472 0.723

Team Building 0.594 0.534 0.574 0.771

Transformational

Leadership 0.671

0.407 0.422 0.505 0.819

The discriminant validity was examined by using Fornell–Larcker criteria. The Fornell–

Larcker (1981) establishes discriminant validity by comparing square root of AVE for each latent

variable and correlation among latent variables. The results depicted in Table 3 are in support of

discriminant validity of study variables.

4.2.2 Structural model

The satisfactory valuation of measurement model is an indication to proceed towards the

evaluation of structural model. Results regarding structural model are depicted in Table 9. From

the results it can be observed that transformational leadership has a significant and positive impact

on project success (β = .115, p< .01), supporting hypothesis 1. Results depicted a significant and

positive impact of transformational leadership on team building (β = .505, p< .01), supporting

hypothesis 2. Furthermore, results showed a significant and positive impact of team building on

project success (β = .353, p< .01). To test the moderating effect of HRM practices, first principal

component analysis was employed to form the possible factors of HRM practices. From the results

Khurram Yazdani1, Fuad Bashir2

84

principal component analysis all the 14 items of HRM practices were loaded on two factors. Two

computed factors by transforming the concerned items were used to test the moderation of HRM

practices. The results in Table 4 were in support of moderating effect of HRM practices between

team Building and project Success.

4.2.2.1 Mediation Analysis

To test the mediating effect direct and indirect effects were calculated after bootstrapping

and mediation. With the help of the calculated values of direct and indirect effects VAF was

calculated which implies that 57.89%. This value is greater than 20% and less than 80% which

means that partial mediation exists on the combined data collected from public and private

organizations.

Impact of Transformational leadership on Project Success: Mediating role of Team-Building and Moderating Role of Human Resource

Management Practices

85

Table 4: Structural model

Ori

gin

al

Sa

mp

le (

O)

Sa

mp

le

Mea

n (

M)

Sta

nd

ard

Dev

iati

on

(ST

DE

V)

T S

tati

stic

s

(|O

/ST

DE

V

|)

P V

alu

es

Sta

tus

Transformational Leadership Project Success 0.293 0.295 0.074 3.943 0.000 Supported

Transformational Leadership Team Building 0.505 0.509 0.069 7.292 0.000 Supported

Team Building Project Success 0.352 0.352 0.074 4.770 0.000 Supported

HRM Practices Project Success 0.147 0.154 0.067 2.195 0.029 Supported

HRMP Moderation Project Success -0.188 -0.180 0.050 3.730 0.000 Supported

Table 5: Mediation Analysis

Path Coefficients Value of Path Coefficients VAF Status

Direct .144 .198/.342=.5789

57.89%, Which is < 80%

Means Partial Mediation

Supported Indirect .198

Total Effect .342

Khurram Yazdani1, Fuad Bashir2

86

5. Discussion In the current study the relationship between transformational, project success, with the

mediating effect of team building, and moderating effect of HRM practices was tested. The results

are consistent with the literature like Aga et al. (2016) and Popaitoon and Siengthai (2014). In this

regard the study proved that the transformational leadership has a significantly positive impact on

project susses along with the noteworthy mediating role of team building, and significant

moderating effect of HRM practices while analysing the combined data. The results regarding the

positive impact of transformational leadership and project success elaborated the importance of

leadership style in project success. Specifically, a project manager with transformational

leadership style inspires and stimulated his team members towards a comprehensive

conceptualization of project success characterized by stakeholder satisfaction, effectiveness and

efficiency. The findings of the study provide empirical support for the call by Turner and Müller

(2005), who highlighted the necessary to examine the role of project managers' leadership styles.

The results of the study are also in support of a positive impact of team building on

project success. These findings are consistent with previous literature like Klein et al. (2009).

From the results it can be comprehend that combined set of team-building interventions for

instance problem-solving, interpersonal relations, role-clarification, and project goal-setting are

resulted in highly committed and empowered project teams. The leadership style of managers and

classic team-building practices are more likely to improve problem-solving skills, interpersonal

communication, roles and responsibilities and defining project goals that in turn influence project

success. The results of this study are also in support of partial mediation of team-building between

transformational leadership style and project success. These results are consistent with the findings

of Aga et al. (2016). Furthermore the results are also in support of significant moderation of HRM

practices between the relationship of team building and project performance.

The present study provides a significant contribution in project management literature by

integrating team-building model with leadership theory. The empirical results are in support of

partial intervention between the association of project success and transformational leadership.

This study also contributes in project team development theory by validating the team-building as

an independent construct that leads towards the team performance. Some of the researchers like

Wang and Howell (2010) operationalize team building as dimension of transformational

leadership. Getting reflections from the pervious studies like Klein et al. (2009) and Aga et al.

(2016) this study establish the validity of team-building as an independent construct.

There are some limitations that should be considered before generalizing the results of

the study. First the results of the study are based on subjective ratings. However, the adopted

measures are well established and used by a number of studies like Pinto, Slevin, and English

(2009) and Suprapto, Bakker, and Mooi (2015) to measure the construct of project success.

Future studies should consider some objective measures to have more comprehensives

results. Furthermore, the findings are based on cross-sectional data which make the causal

interference arguable. Longitudinal studies may provide better results regarding the relationship

between transformational leadership and project success over the period of time. Third, the data is

collected by using single method of data collection which may cause the concern for common

method bias. Future research studies may use multiple data collection methods from different

concerned data sources to minimize the concerns for common method bias. Furthermore, future

Impact of Transformational leadership on Project Success: Mediating role of Team-Building and Moderating

Role of Human Resource Management Practices

87

studies should consider on diverse nature of projects along with the heterogeneous nature (i.e.,

project team members, project duration, and project type) for better insight.

References Aga, D. A., Noorderhaven, N., & Vallejo, B. (2016). Transformational leadership and project

success: The mediating role of team-building. International Journal of Project

Management, 34(5), 806-818.

Anantatmula, V. S. (2010). Project manager leadership role in improving project performance.

Engineering Management Journal, 22(1), 13-22.

Andersen, E. S., Grude, K. V., & Haug, T. (1987). Goal directed project management. Kogan Page

Publishers.

Baker, B. N., Murphy, D. C., Fisher, D., Cleland, D. I., & King, W. R. (1988).Project

management handbook. New York: Van Nostrand Reinhold.

Bliese, P. D., Halverson, R. R., & Schriesheim, C. A. (2002). Benchmarking multilevel methods

in leadership: The articles, the model, and the data set. The Leadership Quarterly, 13(1),

3-14.

Bryman, A., Bresnen, M., Beardsworth, A. D., Ford, J., & Keil, E. T. (1987). The concept of the

temporary system: the case of the construction project. Research in the Sociology of

Organizations, 5, 253-283.

Burke, C. S., Stagl, K. C., Klein, C., Goodwin, G. F., Salas, E., & Halpin, S. M. (2006). What type

of leadership behaviors are functional in teams? A meta-analysis. The Leadership

Quarterly, 17(3), 288-307.

Cannon, J. P., Doney, P. M., Mullen, M. R., & Petersen, K. J. (2010).Building long-term

orientation in buyer–supplier relationships: The moderating role of culture. Journal of

Operations Management, 28(6), 506-521.

Casimir, G., Waldman, D. A., Bartram, T., & Yang, S. (2006). Trust and the relationship between

leadership and follower performance: Opening the black box in Australia and China.

Journal of Leadership & Organizational Studies, 12(3), 68-84.

Chen, G., Kirkman, B. L., Kanfer, R., Allen, D., & Rosen, B. (2007).A multilevel study of

leadership, empowerment, and performance in teams. Journal of Applied Psychology,

92(2), 331-346.

Cohen, S. G., & Bailey, D. E. (1997). What makes teams work: Group effectiveness research from

the shop floor to the executive suite. Journal of Management, 23(3), 239-290.

Delery, J. E., & Doty, D. H. (1996). Modes of theorizing in strategic human resource

management: Tests of universalistic, contingency, and configurational performance

predictions. Academy of Management Journal, 39(4), 802-835.

Dionne, S. D., Sayama, H., Hao, C., & Bush, B. J. (2010). The role of leadership in shared mental

model convergence and team performance improvement: An agent-based computational

model. The Leadership Quarterly, 21(6), 1035-1049.

Dulewicz, V., & Higgs, M. (2005).Assessing leadership styles and organisational context. Journal

of Managerial Psychology, 20(2), 105-123.

Khurram Yazdani1, Fuad Bashir2

88

Eisenbeiss, S. A., van Knippenberg, D., & Boerner, S. (2008). Transformational leadership and

team innovation: Integrating team climate principles. Journal of Applied Psychology,

93(6), 1438--1488.

Fornell, C., & Larcker, D. F. (1981). Structural equation models with unobservable variables and

measurement error: Algebra and statistics. Journal of Marketing Research, 18(3) 382-

388.

Hair, J. F., Sarstedt, M., Ringle, C. M., & Mena, J. A. (2012). An assessment of the use of partial

least squares structural equation modeling in marketing research. Journal of the Academy

of Marketing Science, 40(3), 414-433.

Ika, L. A., Diallo, A., & Thuillier, D. (2012). Critical success factors for World Bank projects: An

empirical investigation. International Journal of Project Management, 30(1), 105-116.

Jugdev, K., & Müller, R. (2005).A retrospective look at our evolving understanding of project

success. Project Management Journal, 36(4), 19-31.

Katzenbach, J. R., & Smith, D. K. (1992). Why teams matter. The McKinsey Quarterly, (3), 3-28.

Kendra, K., & Taplin, L. J. (2004). Project success: A cultural framework. Project Management

Journal, 35(1), 30-45.

Klein, C., Diaz Granados, D., Salas, E., Le, H., Burke, C. S., Lyons, R., & Goodwin, G. F. (2009).

Does team building work? Small Group Research, 40(2), 181-222.

Lado, A. A., & Wilson, M. C. (1994). Human resource systems and sustained competitive

advantage: A competency-based perspective. Academy of Management Review, 19(4),

699-727.

Lampman, R. J., & Dimeo, B. S. (1989).Team collaboration like playing ball. J. Real Estate Dev,

5(1), 56-62.

Latham, G. P. (1981). Increasing productivity through performance appraisal. Prentice Hall.

Lee-Kelley, L., & Kin Leong, L. (2003). Turner's five-functions of project-based management and

situational leadership in IT services projects. International Journal of Project

Management, 21(8), 583-591.

LePine, J. A., Piccolo, R. F., Jackson, C. L., Mathieu, J. E., & Saul, J. R. (2008). A meta‐ analysis

of teamwork processes: tests of a multidimensional model and relationships with team

effectiveness criteria. Personnel Psychology, 61(2), 273-307.

Lindgren, M., & Packendorff, J. (2009). Project leadership revisited: Towards distributed

leadership perspectives in project research. International Journal of Project Organisation

and Management, 1(3), 285-308.

Locke, E. A., & Latham, G. P. (1990).A theory of goal setting & task performance. Prentice-Hall,

Inc.

McDonough III, E. F. (2000). Investigation of factors contributing to the success of

cross‐ functional teams. Journal of Product Innovation Management: An International

Publication of the Product Development & Management Association, 17(3), 221-235.

Morris, P.W. G. (1988). Managing project interfaces. In D. I. Cleland & W. R. King (Eds.),

Project Management Handbook, (2nd ed.).

Morris, P. W., & Hough, G. H. (1987). The anatomy of major projects: A study of the reality of

project management. Chichester, UK: John Wiley and Sons.

Impact of Transformational leadership on Project Success: Mediating role of Team-Building and Moderating

Role of Human Resource Management Practices

89

Nauman, S., Khan, A. M., & Ehsan, N. (2010). Patterns of empowerment and leadership style in

project environment. International Journal of Project Management, 28(7), 638-649.

Piccolo, R. F., & Colquitt, J. A. (2006). Transformational leadership and job behaviors: The

mediating role of core job characteristics. Academy of Management Journal, 49(2), 327-

340.

Pinto, J. K., Slevin, D. P., & English, B. (2009). Trust in projects: An empirical assessment of

owner/contractor relationships. International Journal of Project Management, 27(6),

638-648.

Pinto, J. K., & Slevin, D. P. (1988). Critical success factors in effective project implementation.

Project Management Handbook, 479, 167-190.

Popaitoon, S., & Siengthai, S. (2014). The moderating effect of human resource management

practices on the relationship between knowledge absorptive capacity and project

performance in project-oriented companies. International Journal of Project

Management, 32(6), 908-920.

Pullman, M. E., Verma, R., & Goodale, J. C. (2001).Service design and operations strategy

formulation in multicultural markets. Journal of Operations Management, 19(2), 239-

254.

Riaz, A., Tahir, M. M., & Noor, A. (2013). Leadership is vital for project managers to achieve

project efficacy. Research Journal of Recent Sciences, 2(6), 99-102.

Salas, E., Rozell, D., Mullen, B., & Driskell, J. E. (1999). The effect of team building on

performance: An Integration. Small Group Research, 30(3), 309-329.

Scott-Young, C., & Samson, D. (2008). Project success and project team management: Evidence

from capital projects in the process industries. Journal of Operations Management, 26(6),

749-766.

Söderlund, J. (2011). Pluralism in project management: navigating the crossroads of specialization

and fragmentation. International Journal of Management Reviews, 13(2), 153-176.

Sohmen, V. S. (2013). Leadership and teamwork: Two sides of the same coin. Journal of

Information Technology & Economic Development, 4(2) 1-18.

Suprapto, M., Bakker, H. L., & Mooi, H. G. (2015). Relational factors in owner–contractor

collaboration: The mediating role of team-working. International Journal of Project

Management, 33(6), 1347-1363.

Todryk, L. (1990). The project manager as team builder: Creating an effective team. Project

Management Institute.

Turner, J. R. (1999). Handbook of project-based management. McGraw-Hill Professional

Publishing.

Turner, J. R., & Müller, R. (2005). The project manager's leadership style as a success factor on

projects: A literature review. Project Management Journal, 36(2), 49-61.

Wang, X. H. F., & Howell, J. M. (2010).Exploring the dual-level effects of transformational

leadership on followers. Journal of Applied Psychology, 95(6), 1134-1144.

Whetten, D. A., & Cameron, K. S. (2005). Developing Management Skills, (6th ed.), Prentice Hall.

Wright, P. M., Dunford, B. B., & Snell, S. A. (2001). Human resources and the resource based

view of the firm. Journal of Management, 27(6), 701-721.

Khurram Yazdani1, Fuad Bashir2

90

Yang, L. R., Huang, C. F., & Wu, K. S. (2011).The association among project manager's

leadership style, teamwork and project success. International Journal of Project

Management, 29(3), 258-267.

Zaccaro, S. J., Rittman, A. L., & Marks, M. A. (2001).Team leadership. The Leadership

Quarterly, 12(4), 451-483.

Zwikael, O., & Unger-Aviram, E. (2010). HRM in project groups: The effect of project duration

on team development effectiveness. International Journal of Project Management, 28(5),

413-421.

Impact of Store Environmental Characteristics on Customers’ Impulse Buying Behavior: Mediating Effect of

Customers’ Positive Emotional Responses

1MS Scholar, Faculty of Management Sciences, IIU Islamabad. Email:[email protected] 2Assistant Professor, Faculty of Management Sciences, University of Wah, Wah Cantt. Pakistan 3PhD Scholar, School of Management & Economics. Beijing Institute of Technology China.

[email protected]

University of Wah Journal of Management Sciences

Volume 2, Issue 2, September 2018, pp. 91-105

Impact of Store Environmental Characteristics on Customers’ Impulse

Buying Behavior: Mediating effect of Customers’ Positive Emotional

Responses Aneela Yaqoob1, Saman Attiq2, Nasir Mehmood3

Article History:

Received:

28 Jun, 2018

Revised:

27 Sep, 2018

Accepted:

29 Sep, 2018

ABSTRACT

Purpose: This research attempts to investigate the effect of store environmental

characteristics and customers’ positive emotional responses on customers’

impulsive buying behavior.

Methodology/Design: Data is obtained by structured questionnaire from customers

of apparel stores of Rawalpindi and Islamabad. Convenience sampling technique is

used for taking sample. Data is examined for the acceptance or rejection of the

developed hypotheses by SPSS.

Findings: The current research has established direct and indirect relations among

store environmental characteristics, customers’’ positive emotional responses a5d

impulsive buying behavior of customers. But only ambient characteristics of store

environment have indirect effect on impulse buying behavior.

Implications: This research is expected to provide a better understanding of the

variables that influence impulsive buying behavior. It also delivers important

implications for the marketers and retailers. Current research also delivers the

limitations and suggests recommendations for future studies.Limitations: This study

uses only listed commercial banks of Pakistan. All other i.e. specialized banks are

excluded in this study.

Keywords: Impulsive buying behavior, Store environmental characteristics,

customers’ positive emotional responses.

1. Introduction

Buying impulsively is a prevailing phenomenon across the world. The retailers and

marketers are working to appeal the buyers to increase impulse purchases. For this objective, diverse

companies are struggling and conducting research on how to increase in impulse behavior of the

customers for achieving competitive edge. The review of literature has presented that impulse

buying behavior has been argued and discovered widely during the past sixty four years,

consequently the emphases of impulse buying behavior research has arisen from the collaboration

Aneela Yaqoob1, Saman Attiq2, Nasir Mehmood3

92

of several social, psychological, situational, environmental, and individual factors (Chang, Eckman,

& Yan, 2011).The environmental characteristics, individual characteristics, and customers’

circumstances (situational factors) may be the causes of the customers’ impulse buying behavior

(Beatty & Ferrell, 1998). Scholars have suggested that customers’ impulse buying behavior may be

a self-identity seeking behavior (Dittmar & Bond, 2010). Customers buy the products to reflect their

self-image, or it may boost their self-image by turning them into what they “want to be” a better self

(Dittmar & Drury, 2000).

Several studies have been done on customers’ impulse buying behavior. A number of

future recommendations are given by earlier studies (Lunardo & Roux, 2015; Chang, Yan, &

Eckman, 2014) in the arena of customers’ impulse buying behavior. It has been suggested to

pinpoint external factors and internal factors with the view to label whether they impact impulse

buying behavior. The influences of store environments on customers’ behavior such as money spent

and browsing in the retail store have been studied extensively (e.g. Tai & Fung, 1997); however,

researchers (Chang, Yan, & Eckman,2014; Jani & Han,2013; Mohan, Sivakumaran, & Sharma,

2013) have called for further investigations to understand the effect of store environmental

characteristics on impulse buying behaviors.

Customers’ impulse buying behavior is a quick inspiring and hedonically merged buying

behavior in which the haste decision of customers’ impulse buying avoids any rational, schedule

observation of selections (Kacen & Lee, 2002). Customers’ impulse buying can also assist the

purpose of customers’ pleasure (Hausmann, 2000). Satisfying material longings makes customers

contented. Longing can be defined as ‘urges to gain pleasure’ to satisfy a want or need related in

consumer behavior (Ramanathan & Menon, 2006). Earlier studies have described the emotional

implications that emerge from customers’ impulse buying behavior (Sayre& Horne, 1996).

Customers are constantly subjected to different cues in the retail store environment that can

influence impulse buying (Shalom & Gendel-Guterman, 2012). Store environment such as light and

music have an effect on positive emotions of customers, which further effect on customers’ impulse

buying behavior (Mohan et al., 2013). This research is intended to examine store environment (i.e.

ambient, design, and social characteristics) affect customers’ emotions, which further influence

impulse buying behavior. Keeping in mind the above mentioned propositions, it is essential to

identify and understand the decision path of customers’ impulse buying and to test the mutual impact

of internal and external effects on customers’ impulse buying behavior. Current research suggests a

framework to understand the way the outer elements excite inner elements in the making of impulse

buying behavior. By studying the current literature, it is established that no study could be found on

the link between store environment and impulse buying behavior with mediating role of customers’

positive emotional responses and with precise focus on ready to wear clothing outlets and stores in

Pakistan.

The current research has the purpose to examine whether store environmental

characteristics and customers’ positive emotional responses affect impulse buying behavior. More

Impact of Store Environmental Characteristics on Customers’ Impulse Buying Behavior: Mediating Effect of

Customers’ Positive Emotional Responses

93

specifically, the purpose of the study is: to add to an enhanced understanding of direct effect between

three cores variables i.e. store environmental characteristics, customers’ positive emotional

responses and impulse buying behavior of customers. Another objective is to analyze indirect effects

of characteristics of store environment on impulsive buying behavior through customers’ positive

emotional responses. The current study will focus on apparel purchases since apparel purchasing

are sensual experiential items with definite symbolic significances and are bought because of

buyers’ emotional preferences (Park, Kim, & Forney, 2006). Second, shopping for non-food goods

such as clothing is a scope for self-expression par distinction (Das, 2014). So, these are some of

other causes to conduct research in the clothing context by revised Stimulus-Organism-Response

(S-O-R) model (Mehrabian & Russell, 1974).

2. Literature Review

The review of literature tests relations among store environmental characteristics (i.e.

ambient, design, and social characteristics), customers’ positive emotional responses and impulsive

buying behavior.

2.1 Store Environmental Characteristics

Three groups of store environment that were classified by Baker (2002) are useful for the

current research. Baker (2002) offered a typology for categorizing store environmental signs into

three sets built on the experiences that create customer’s responses. For the first cue (ambient)

comprising non visual elements like music, temperature and lighting. For the second cue (design)

which comprises visual elements, such as store layout, fitting room signage, merchandise display,

fixtures and color scheme. For the third cue (social), it comprises persons who are in the buying

environment like salesperson and other customer. The environment of store has an influence on

customer’s insights about service quality, products and pleasure at the retail outlet (Sharma &

Stfford, 2000). Several characteristics of store environment combine to denote three factors ambient,

design and social those play an important role in influencing customer’s emotions and probability

of purchasing (Turley & Milliman, 2000). Kotler (1973) familiarized the concept of atmospherics

for the first time. He defined the store atmosphere such as “the effort to design buying environments

to produce specific emotional effects in the buyer that enhance purchase opportunity.”

Aneela Yaqoob1, Saman Attiq2, Nasir Mehmood3

94

2.1.1 Ambient Characteristics and Customers’ Positive Emotional Responses

Ambient comprises the settings of non-visual nature in the retail store environment like

light and scent (Baker et al., 1994).For example, light may affect the image of store as well as

inspection of goods, d’ Astous (2000) mentioned ambient factor as ‘contextual conditions that exist

under the level of our immediate awareness. It includes scent, sound, cleanliness, humidity,

brightness, ventilation and temperature etc. It is demonstrated from the studies of restaurants and

supermarkets that the tempo and volume of music can affect customer’s emotions and as a result

interval of stay, shopping pace and amount spent (Turley & Milliman, 2000). Lighting designer

noticed that lighting can affect how customers experience the space and light is an important element

for the retail designer that can create a positive store experience.

2.1.2 Design Characteristics and Customers’ Positive Emotional Responses

Design Characteristics consist of two elements (i.e. physical and visual) of store

environment which include the architecture, material, color and style that may differentiate it from

one retailer to another retailer (Baker et al., 1994).The structures of store environment like physical

appeal and features of store (window displays, sign clutters) may affect the customers’

insightrelating to product quality (Ailawadi & Keller, 2004).The finest design characteristics of the

environment of store may have a positive effect on the customers’ positive emotional responses.

Positive responses arise if the store makes it easy for the purchasers to find the merchandise they

are looking for, by providing appropriate signage and logical store layout (Spies et al., 1997).

2.1.3 Social Characteristics and Customers’ Positive Emotional Responses

Social characteristics may comprise customer types, confidentiality, behavior and the

staff’s look and appearance (Turley & Milliman, 2000).These characteristics of the store

environment denote to the characteristics caused by other shoppers or sales assistants. Chang, Yan,

and Molly (2011) presented the bearing of social characteristics on customer’s positive emotional

33responses. Often, subtle aspects in the personnel’s behavior lead to positive feelings, for example

being easily available and a smile for customers. Even in brief and mundane encounters, the sales

persons cause positive effect (Mattila & Enz, 2002).

2.2 Customers’ Positive Emotional Responses and Impulse buying behavior

State of emotions is a judgment whether an object is attractive, pleasant, valuable,

preferable or likeable (Russell & Snodgrass, 1987). The extent to which an individual may feel

enthusiastic, attentive, and active can be characterized by positive affect (Beatty & Ferrell, 1998).

A customer’s emotional state has an effect on customer’s impulse buying behavior. Customer’s

positive emotions like enthusiasm have positive effect on customers’ impulse buying behavior

(Chung et al., 2014). Some examiners have found the influence of arousal and pleasure on making

impulse buying (Babin & Attaway, 2000).Theoretical and empirical indications have shown that the

Impact of Store Environmental Characteristics on Customers’ Impulse Buying Behavior: Mediating Effect of

Customers’ Positive Emotional Responses

95

effective and emotional state is the driver for customers’ impulse buying behavior(Strack &

Deutsch,2003).

2.3 Mediating Effect of Customers’ Positive Emotional Responses

Related work demonstrates the significant impact of store environmental characteristics on

customers’ positive emotional responses as well as the significant effects of customers’ positive

emotional responses on impulsive buying behavior (Chung et al., 2014; Talukdar & Lindsey, 2013).

It is argued that the characteristics of store environment have a significant effect on customers’

positive emotional responses, and in turn, those customers’ positive emotional responses have effect

on impulsive buying behavior. As stated by Mohan et al. (2013), store environment like light and

music (ambient characteristics) have influence on positive emotions of customers, as a result,

influence customers’ impulse buying behavior. Another study displays that the ambient/design

features in a retail store can activate customers’ positive emotions, which lead to customers’ impulse

buying behavior (Chang et al., 2011).

Researchers have established in their explanations that occasionally the contact between

customers and salesmen may change into their friendships, comprise affection, provision of social

nature and gift giving. This type of association is helpful to support the marketing purposes like

contentment of customers, loyalty and impulse behavior from customers (Hu & Jasper, 2006).If

characteristics of store environment(i.e. ambient, design and social) exert significant effects on

positive emotional responses of customers and customers’ positive emotional responses (organism)

has significant impacts on impulsive buying behavior(response).

2.4 Theoretical Framework and Hypotheses

Stimulus–Organism–Response Model (Mehrabian & Russell, 1974) and social cognitive

theory (Bandura, 1986; Rotter, 1954; 1966) provide the base for the development of theoretical

framework of this study. In this research, store environmental characteristics denote stimulus,

customers’ positive emotional responses denote organism and customers’ impulsive buying

behavior denote response as per the S-O-R model.

Aneela Yaqoob1, Saman Attiq2, Nasir Mehmood3

96

Fig.1: Proposed S-O-R Framework of Impulsive Buying Behavior

H1: There is a positive impact of ambient characteristics on customers’ positive emotional

responses.

H2: There is a positive impact of design characteristics on customers’ positive emotional responses.

H3: There is a positive impact of social characteristics on customers’ positive emotional responses.

H4: There is a positive impact of customers’ positive emotional response on customers’ impulsive

buying behavior.

H5: Customers’ positive emotional responses act as a mediator between ambient characteristics and

customers’ impulsive buying behavior.

H6: Customers’ positive emotional responses act as a mediator between design characteristics and

customers’ impulsive buying behavior.

H7: Customers’ positive emotional responses act as a mediator between social characteristics and

customers’ impulsive buying behavior.

3. Research Methodology

Population of the study is customers visiting and making purchases at famous ready-to-

wear clothes outlets in Rawalpindi and Islamabad (Pakistan). Apparel stores are chosen, by

following Lin and Liang (2011) to confirm that service environments and emotional state would be

related to the customers’ purchasing experience. Method of mall-intercept survey is used for data

collection following Mohan and Sharma (2013). 410 final questionnaires are included in study. Male

customers are dominated the sample as 214 (52.2%) and female customers are 196 (47.8%). Most

Impact of Store Environmental Characteristics on Customers’ Impulse Buying Behavior: Mediating Effect of

Customers’ Positive Emotional Responses

97

customers’ lie in 30-40 years age category as 159 (38.8%). 227 (55.4%) customers have 14-18 years

qualification. 105 (25.6%) customers have less than Rs. 20,000 income.

Table 1: Descriptive of Sample Respondents

Demographic

Variables Code Frequency Percentage Mean/S.D

Gender Male 214 52.2

0.48/0.50 Female 196 47.8

Age

(in years)

Under 20 40 9.8

2.58/0.50

21-30 157 38.3

31-40 159 38.8

41-50 46 11.2

51-60 4 1.0

Over 61 4 1.0

Qualification

(in years)

Under 10 20 4.9

2.79/0.74 10-14 104 25.4

14-18 227 55.4

Over 18 59 14.4

Income

(In thousands)

Under 20 105 25.6

2.87/

1.47

20-30 81 19.8

30-40 62 15.1

40-50 88 21.5

Over

50 74 18.0

3.1 Measures

This study has three store environment characteristics i.e. design, ambient, and social. To

measure these store environment characteristics, Kumar and Kim (2014) scales are used. Design,

ambient, and social scales have 9, 5, and 5 items respectively .Value of Cronbach’s Alpha of these

measures are 0.87, 0.79 and 0.76 respectively. Customers’ positive emotion response scale is

adopted from Chang, Yan, and Eckman (2014) and it consists of 7 items with Cronbach’s Alpha of

0.90. To measure impulsive buying behavior, Chang, Yan, and Eckman (2014) scale is adopted with

3 items and having Cronbach’s Alpha of 0.77. Responses are taken on 5 point Likert scale ranging

from ‘Strongly Disagree’ (1) to ‘Strongly agree’ (5).

Aneela Yaqoob1, Saman Attiq2, Nasir Mehmood3

98

3.2 Procedure

For data analyses, descriptive analysis of all variables i.e. demographic and study variables

is performed through SPSS 21. On the other-side, for inferential analysis, structural equation

modeling technique is applied with the help of AMOS 22.0. Through SEM, measurement model

validation and structural model fitness is checked for hypotheses testing.

4. Results

Descriptive analysis is executed to study the mean and standard deviation of variables.

Mean and standard deviation of MIBB are 3.49 and 0.94 respectively. Descriptive of other variables

are presented in following Table 3. Skewness and kurtosis are also found to check normality of data

and results of Skewness and Kurtosis are in acceptable range i.e. -2 to +2 that represent data is

normal. Correlation analysis is accomplished to check association between variables. Results have

shown that variables have significant positive association with each other at p<0.01. Design

characteristic (MDC) has strong positive and significant association with social characteristic

(MSC) i.e. r= 0.69, p<0.01. In same way, social characteristic (MSC) has weak positive and

significant association with impulsive buying behavior (MIBB) i.e. r= 0.24, p<0.01.

Table 2: Correlation Analysis

1 2 3 4 5 Mean S.D. Skewness Kurtosis

1. MDC 1 3.81 0.68 -0.62 0.83

2. MAC .51** 1 3.57 0.86 -0.50 0.15

3. MSC .69** .50* 1 3.90 0.76 -0.95 1.15

4. MCPER .64** 42** .49** 1 3.65 0.84 -0.61 0.30

5. MIBB .36** .29** .24** .47** 1 3.49 0.94 -0.70 0.41

**.Correlation is significant at the 0.01 level (2-tailed)

4.1 Structural Equation Modeling

4.1.1 Testing of Measurement Model

Confirmatory factor analysis is executed for measurement model. To check reliability of

each item, factor loading (FL) and squared multiple correlation (SMC) are calculated. Items having

FL less than 0.50 and SMC below 0.20 are eliminated (Hu & Bentler, 1999). First latent variable is

design characteristic with 9 items. Three items are dropped due to low FL and SMC values. These

values of incorporated items are ranged from 0.62-0.72 and 0.38-0.51 respectively. Second latent

variable is ambient characteristic with 5 items. Two items are dropped due to low FL and SMC

values. FL and SMC values of incorporated items range from 0.75-0.89 and 0.56-0.80 respectively.

Impact of Store Environmental Characteristics on Customers’ Impulse Buying Behavior: Mediating Effect of

Customers’ Positive Emotional Responses

99

Third latent variable is social characteristic with 5 items. Two items are dropped due to low FL and

SMC values. FL and SMC values of incorporated items are ranged from 0.69-0.77 and 0.47-0.59

respectively. Fourth latent variable is customer positive emotional responses with 7 items. FL and

SMC values are ranged from 0.70-0.80 and 0.48-0.64 respectively. And fifth latent variable is

impulsive buying behavior with 3 items. FL and SMC values are ranged from 0.64-0.78 and 0.41-

0.61 respectively. Finally, measurement model has five latent variables with 29 observed variables.

Figure 2: The Measurement Model

Aneela Yaqoob1, Saman Attiq2, Nasir Mehmood3

100

4.1.2 Structural Model Testing

Structural model is developed based on conceptual model with four exogenous variables

i.e. design characteristic, ambient characteristic, social characteristic and two endogenous variables

i.e. ‘positive emotional responses’ of customers and ‘impulsive buying behavior’ of customers.

Demographic variables i.e. gender, age, qualification, and income are taken as control variables.

4.2 Results and Analysis of Hypotheses Testing

As first two hypotheses state the positive impact of ambient characteristic (MAC) and

design characteristic (MDC) on customers’ positive emotional responses (MCPER). Results show

that both characteristics have positive impact on MCPER with standardized regression weight 0.14

(p<0.00) and 0.55 (p<0.00) respectively. Third hypothesis states that social characteristic (MSC)

has positive impact on customers’ positive emotional responses (MCPER). Results show that MSC

have no significant impact on MCPER as p>0.05. The fourth hypothesis exhibits the positive impact

of customers’ positive emotional responses (MCPER) on impulsive buying behavior (MIBB) of

customers. Results show that MCPER has a positive and significant impact on MIBB with

standardized regression weight 0.42 (p<0.00).To check mediating effect of customers’ positive

emotional responses, mediation analysis is executed by using 10,000 bootstrapping through 95%

bias-corrected two tailed significance (BC) through AMOS. Indirect effect is calculated with 5000

bootstrapping at 95% bias-corrected two tailed significance (BC). Thus, indirect effect from ambient

characteristic and impulsive buying behavior through customers’ positive emotional responses is

significant with standardized indirect effect of 0.05 and standard error of 0.02 at two tailed

Significance (BC) of 0.01. In simple words, customers’ positive emotional responses act as mediator

between ambient characteristic and impulsive buying behavior. So, result presented that mediation

exist. Finally, there is no mediation between DC-IBB and SC-IBB (remaining two hypotheses i.e.

H6 & H7).

Figure 3: Structural Model

Impact of Store Environmental Characteristics on Customers’ Impulse Buying Behavior: Mediating Effect of

Customers’ Positive Emotional Responses

101

Model fitness indices are also checked for structural model testing. Results showed good

model fitness i.e. CMIN/DF= 1.550/p=0.18, RMR=0.02, GFI= 0.99, AGFI= 0.97, CFI= 0.99, and

RMSEA= 0.03.

5. Discussion

H1, H2, and H3: predicted the effect of store environment (i.e. ambient, design & social

characteristics) on positive emotional responses of customers. Results show that there is a positive

impact of ambient and design on positive emotional responses of customers while social

characteristics have no positive effect on positive emotional responses of customers. The results

supported the past literature (Chang, Yan & Eckman, 2014; Kim & Kim, 2012) that store

environmental characteristics may significantly impact on customers’ positive emotional responses.

The current study has supported the direct impact of store environment (i.e. characteristics) on

customers0 positive emotional responses. For example, consumers who experienced that the retail

store is sparkling are more joyful and happy. This result adds in knowledge to the understanding of

retailers’ parts. The retailers who provide a relaxing, clean and exciting store environment more

likely appeal customers and make them joyful and satisfied with their shopping experiences.

H4: predicted that customers’ positive emotional responses affect customers’ impulsive

buying behavior. The outcomes of the current study supported the literature (e.g. Park, Kim, &

Forney, 2006; Chang, Yan, & Eckman, 2014) that the customers who have more positive emotional

responses are more impulsive in their purchasing behavior. The customers who are more excited,

happy, attentive, delighted and stimulated are more involved in buying that is not scheduled. The

result of the current research has maintained the related previous literature that customers’ buying

behavior is not always planned (Rook & Gardner, 1993) and their reactions may be the causes for

their impulsive buying behavior.

According to the results and analyses of H5, H6, and H7 regarding the characteristics of

store environment–customers’ positive emotional responses –customers’ impulse buying behavior,

the current research has established a direct and indirect relations among store environmental

characteristics, customers’ positive emotional responses and impulsive buying behavior of

customers. But only ambient characteristics of store environment have indirect effect on IBB. The

results of the current study are in line with literature (Mattila & Wirtz, 2008; Chang et al., 2011)

that support the mediating effects of customers’ positive emotional responses. The outcomes of the

current research enlarge to a better consideration of the direct and indirect impact of store

environmental characteristics on impulsive buying behavior through customers’ positive emotional

responses in context of apparel (Kim, 2005).

The input of the current study is to suggest and assess a model that denotes potential

relations between store environmental characteristics and impulsive buying behavior of customers.

Numerous prior research studies have paid attention to some of the associations mentioned here, the

distinctive contribution of the current study is to look at the body of literature in a way that brings

Aneela Yaqoob1, Saman Attiq2, Nasir Mehmood3

102

together store environmental characteristics, customers’ positive emotional responses and

customers’ impulsive buying behavior in natural and non-contrived settings and to assess an

acceptable research model. A profound perception at these associations helps test the role played by

store environmental characteristics in affecting impulse buying behavior of customers in a store

environment. Mainly, the outcomes focus on the following three important relations: (1) store

environmental characteristics positively affects customers positive emotional responses (2)

customers positive emotional responses positively affect impulsive buying behavior of the

customers (3) customers positive emotional responses mediate the role of store environmental

characteristics on impulsive buying behavior of customers.

5.1 Theoretical and Practical Implications

Important theoretical implications result from the current study. First, this study contributes

to the understanding of customers’ impulse buying behavior by applying the S-O-R model and by

including three factors of store environmental characteristics, mediating effects of consumers’

positive emotional responses. These results hope to enable other researchers to use this model in

other settings of buying behaviors. Secondly, most of the previous studies (e.g. Baker et al., 2002;

Massara & Pelloso, 2006) checked the relationships of store through experiments; this research is

based on a field study approach and data is collected in the non-contrived settings. According to

Kerlinger and Lee(2000), data collected in field survey has more external validity than the

experimental approach where the attention is on internal validity. The results of the current study

also deliver some practical implications for apparel industry. Remarkable interior, sparkling

environment and attractive designs may create affirmative emotions among customers and increase

more impulse buying, which may increase sales. Marketers and retailers are working consistently to

find better ways to attract the customers. Therefore, this study would be helpful to the retailers and

marketers in a way to focus on the customers’ positive emotional responses in detail for developing

the strategies regarding environment of the stores.

5.2 Limitations and Future Recommendations

The results of the current study may not be generalizable for many reasons. First, this study

is a store interrupt research and there are limits to control internal and external aspects. Each aspect

of the retail store environment may come in interrelate with one another and affect customers. The

influences of those interacted factors are beyond the focus of this research. Second, because of

limitation of time, cross-sectional method is employed to examine the effect of several factors on

impulsive buying behavior of customers. Third, main limitation of this research is the use of non-

probability convenience sampling technique that confines the generalization of the results.

It would be interesting to examine the relations of customers’ positive emotional responses

and impulsive buying in stores of other cities with diverse retail offerings and store environmental

characteristics.For instance, impulsive buying behavior of electronics and jewelry merchandises can

Impact of Store Environmental Characteristics on Customers’ Impulse Buying Behavior: Mediating Effect of

Customers’ Positive Emotional Responses

103

be further investigated and matched with the results of this research. Many other factors that

influence impulsive buying exist, however, only a few aspects are checked in the current research.

As shown by the regression analyses, some factors that are related to individual characteristics such

as self-classification and self-evaluation as well as some situational characteristics such as location

of the stores can moderate the relations between store retail environmental characteristics and

positive emotional responses of customers or directly affect customers’ impulsive buying behaviors.

It is suggested that future research may use a method of longitudinal research. Additionally, future

research can use other sampling techniques to expand the generalization of the results.

References:

Ailawadi, K. L., & Keller, K. L. (2004).Understanding retail branding: conceptual insights and

research priorities. Journal of retailing, 80(4), 331-342.

Babin, B. J., & Attaway, J. S. (2000). Atmospheric affect as a tool for creating value and gaining

share of customer. Journal of Business Research, 49(2), 91-99.

Baker, J., Grewal, D., & Parasuraman, A. (1994).The influence of store environment on quality

inferences and store image. Journal of the Academy of Marketing Science, 22(4), 328-339.

Baker, J., Parasuraman, A., Grewal, D., & Voss, G. B. (2002). The influence of multiple store

environment cues on perceived merchandise value and patronage intentions. Journal of

marketing, 66(2), 120-141.

Bandura, A. (1986). Social foundations of thought and action: A social cognitive theory. Englewood

Cliffs, NJ: Prentice-Hall.

Beatty, S. E., & Ferrell, M. E. (1998). Impulse buying: Modeling its precursors. Journal of

Retailing, 74(2), 169-191.

Chang, H. J., Eckman, M., & Yan, R. N. (2011). Application of the Stimulus-Organism-Response

model to the retail environment: the role of hedonic motivation in impulse buying

behavior. The International Review of Retail, Distribution and Consumer Research, 21(3),

233-249.

Chung, N., Koo, C., & Kim, J. K. (2014).Extrinsic and intrinsic motivation for using a booth

recommender system service on exhibition attendees’ unplanned visit behavior. Computers

in Human Behavior, 30, 59-68.

Das, G. (2014). Store personality and consumer store choice behaviour: an empirical

examination. Marketing Intelligence & Planning, 32(3), 375-394.

d'Astous, A. (2000).Irritating aspects of the shopping environment. Journal of Business

Research, 49(2), 149-156.

Dittmar, H., & Bond, R. (2010). I want it and I want it now: Using a temporal discounting paradigm

to examine predictors of consumer impulsivity. British Journal of Psychology, 101(4), 751-

776.

Aneela Yaqoob1, Saman Attiq2, Nasir Mehmood3

104

Dittmar, H., & Drury, J. (2000).Self-image–is it in the bag? A qualitative comparison between

“ordinary” and “excessive” consumers. Journal of Economic Psychology, 21(2), 109-142.

Hausman, A. (2000). A multi-method investigation of consumer motivations in impulse buying

behavior. Journal of Consumer Marketing, 17(5), 403-426.

Hu, H., & Jasper, C. R. (2006).Social cues in the store environment and their impact on store

image. International Journal of Retail & Distribution Management, 34(1), 25-48.

Jani, D., & Han, H. (2013). Personality, social comparison, consumption emotions, satisfaction, and

behavioral intentions: How do these and other factors relate in a hotel

setting?. International Journal of Contemporary Hospitality Management, 25(7), 970-993.

Joo Park, E., Young Kim, E., & Cardona Forney, J. (2006).A structural model of fashion-oriented

impulse buying behavior. Journal of Fashion Marketing and Management: An

International Journal, 10(4), 433-446.

Jung Chang, H., Yan, R. N., & Eckman, M. (2014).Moderating effects of situational characteristics

on impulse buying. International Journal of Retail & Distribution Management, 42(4),

298-314..

Kacen, J. J., & Lee, J. A. (2002).The influence of culture on consumer impulsive buying

behavior. Journal of Consumer Psychology, 12(2), 163-176.

Kerlinger, F. N., & Lee, H. B. (2000). Foundations of Behavioral Research, Fort Worth, TX:

Harcourt College.

Kim, H. S. (2005). Consumer profiles of apparel product involvement and values. Journal of

Fashion Marketing and Management: An International Journal, 9(2), 207-220.

Kim, J. E., & Kim, J. (2012). Human factors in retail environments: a review. International Journal

of Retail & Distribution Management, 40(11), 818-841.

Kotler, P. (1973). Atmospherics as a marketing tool. Journal of Retailing, 49(4), 48-64.

Kumar, A., & Kim, Y. K. (2014). The store-as-a-brand strategy: The effect of store environment on

customer responses. Journal of Retailing and Consumer Services, 21(5), 685-695.

Levy, S., & Gendel-Guterman, H. (2012). Does advertising matter to store brand purchase intention?

A conceptual framework. Journal of Product & Brand Management, 21(2), 89-97.

Lin, J. S. C., & Liang, H. Y. (2011).The influence of service environments on customer emotion

and service outcomes. Managing Service Quality: An International Journal, 21(4), 350-

372.

Lunardo, R., & Roux, D. (2015).In-store arousal and consumers’ inferences of manipulative intent

in the store environment. European Journal of Marketing, 49(5/6), 646-667.

Massara, F., & Pelloso, G. (2006).Investigating the consumer–environment interaction through

image modelling technologies. Int. Rev. of Retail, Distribution and Consumer

Research, 16(5), 519-531.

Mattila, A. S., & Enz, C. A. (2002). The role of emotions in service encounters. Journal of Service

Research, 4(4), 268-277.

Impact of Store Environmental Characteristics on Customers’ Impulse Buying Behavior: Mediating Effect of

Customers’ Positive Emotional Responses

105

Mattila, A. S., & Wirtz, J. (2008).The role of store environmental stimulation and social factors on

impulse purchasing. Journal of Services Marketing, 22(7), 562-567.

Mehrabian, A., & Russell, J. A. (1974).An approach to environmental psychology. Cambridge, MA:

The MIT Press.

Mohan, G., Sivakumaran, B., & Sharma, P. (2013).Impact of store environment on impulse buying

behavior. European Journal of Marketing, 47(10), 1711-1732.

Ramanathan, S., & Menon, G. (2006).Time-varying effects of chronic hedonic goals on impulsive

behavior. Journal of Marketing Research, 43(4), 628-641.

Rook, D. W., & Gardner, M. P. (1993). In the mood: Impulse buying’s affective

antecedents. Research in Consumer Behavior, 6(7), 1-28.

Rotter, J. B. (1966). Generalized expectancies for internal versus external control of

reinforcement. Psychological Monographs: General and Applied, 80(1), 1-20.

Rotter, J. B. (1954).Social learning and clinical psychology. Englewood Cliffs, NJ: Prentice-Hall.

Russell, J. A., & Snodgrass, J. (1987).Emotion and the environment. Handbook of Environmental

Psychology, 1(1), 245-81.

Sayre, S., & Horne, D. (1996). I shop, therefore I am: The role of possessions for self

definition. Advances in Consumer Research, 23, 323-328.

Sharma, A., & Stafford, T. F. (2000). The Effect of Retail Atmospherics on Customers' Perceptions

of Salespeople and Customer Persuasion:: An Empirical Investigation. Journal of Business

Research, 49(2), 183-191.

Spies, K., Hesse, F., & Loesch, K. (1997).Store atmosphere, mood and purchasing

behavior. International Journal of Research in Marketing, 14(1), 1-17.

Strack, F., & Deutsch, R. (2003). The two sides of social behavior: Modern classics and overlooked

gems on the interplay of automatic and controlled processes. Psychological Inquiry, 14(3-

4), 209-215.

Tai, S. H., & Fung, A. M. (1997).Application of an environmental psychology model to in-store

buying behaviour. The International Review of Retail, Distribution and Consumer

Research, 7(4), 311-337.

Talukdar, D., & Lindsey, C. (2013). To buy or not to buy: Consumers' demand response patterns

for healthy versus unhealthy food. Journal of Marketing, 77(2), 124-138.

Turley, L. W., & Milliman, R. E. (2000). Atmospheric effects on shopping behavior: a review of

the experimental evidence. Journal of Business Research, 49(2), 193-211.

University of Wah Journal of Management Sciences

ISSN (Print): 2521-5876 & ISSN (Online): 2523-0417

Author’s Guidelines

General Guidelines:

Kindly email the complete paper at “[email protected]

Comments or questions can be asked on the same address. However, due to large number of

research articles received for each issue of the journal, it may take time to reply to each author.

On submitting your paper to the Journal you agree to the copyrights of the Journal.

Currently, the journal is only accepting empirical papers.

The authors are required to follow the following instructions for formatting their papers, failing

which the paper will not be accepted for formal review process.

The journal only accepts papers with three or less number of authors. Unless a valid

justification is provided for including more than three authors, any paper with more than

four authors may be rejected. The Editor-in-Chief and Editor(s) may allow more than

three authors in case the research paper justifies it. However, no author will be added to

the list of authors once the research paper is received by UWJMS editor.

Similarly, the order of the authorship will not be changed once the paper is received to

the journal. It is the responsibility of the corresponding author to include the names of all

authors at the time of submission. It is also the responsibility of the corresponding author

to acknowledge all sources of funds, if any.

Paper Length Completed research papers are limited to maximum of 4,000-8,000 words

in length, including the title, abstract page, all tables, figures and references. The editor

reserves the right to edit the part, or content of a paper.

The paper layout should strictly follow APA format of writing. All tables, figures,

equations etc. should be in APA format. Any deficiency in APA format may result is the

rejection of the paper for any processing.

The research paper may be dropped from the review process at the initial screening phase if is not

according to the prescribed format.

It is the responsibility of the corresponding author to ensure that the research paper submitted to

UWJMS is not submitted to any other conference or journal.