This chapter describes the main findings of the research. It is divided into two sections. The first section pertains to the results of the pilot test. The second presents results of the main investigation.
Pilot Test Results
The structural model was tested by computing path coefficients. Because PLS does not require normally distributed data, it is evaluated with R2 calculations for dependent latent variables (Cohen, 1988). A bootstrapping procedure using 40 random resampling of the original data was performed to evaluate the statistical significance of each path coefficient.
Table 5.1 shows path coefficients along with T values.
Table 5.1
PLS Path Analysis Results.
Path Hypothesis β-path Adj.
t-value
Sig. Direction Result of Hypothesis
OTIC H1 .775 11.323 *** + Rejected
ICBP H2 .733 11.915 *** + Rejected
BPSuC H3 .788 16.215 *** + Rejected
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H1
· Competence 0.876*** (25.00)
· Openness/honesty 0.924*** (27.87)
· Concern for employees 0.848*** (16.18)
· Reliability 0.911*** (25.64)
· Financial performance 0.949*** (74.45) Organizational Trust
· Excellent and distinctive culture and value system Employee 0.846*** (7.64)
· Employees with key knowledge
· Employees learning and update speed
Environment 0.924*** (39.9)
· Adapt to environmental capacity
· Good working environment
· Good relationships of costumers, suppliers and partners Survival and Competitiveness
0.708***
(16.215)
Intellectual Capital
· Human Capital (Employee) 0.787*** (6.09)
· Organizational Capital (Organization) 0.516***
(10.80)
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Figure 5.1 shows the results of the structural model. The results suggest organizational trust has a positive, highly significant effect on intellectual capital with a R2 of .775 and t=11.323; intellectual capital has a positive, highly significant effect on business performance with a R2 of .733 and t=11.915. Business performance has a positive, highly significant effect on an organization’s survival and competitiveness with and R2 of .708 and t=16.215. Because the values for R2 are above .67 results obtained can be regarded as very good. All paths show a high significance indicating a high correlation among organizational trust, intellectual capital, business performance and the survival and competitiveness of a company, therefore hypotheses 1, 2 and 3 are rejected.
Results for Intellectual Capital
The six constructs that form intellectual capital were also evaluated to understand the nature of their relationships. Using the average of the questions, Cronbach’s alpha, internal consistency and R2 were used to assess each construct. The Cronbach’s alpha value for innovation capital and process capital is .554, for customer capital and structural capital, .589 and for human capital and organizational capital .705. Table 5.2 reports the measurement model results and table 5.3 reports the factor loadings.
Table 5.2
In order to assess the structural model, a bootstrapping procedure using 40 random re-sampling of the original data was performed to evaluate the statistical significance of each path coefficient. Table 5.4 shows path coefficients along with t-values.
Constructs Number of items Cronbach’s Alpha Internal consistency R²
InnC/PC 6 .554 .811 -
CC/SC 6 .589 .811 .413
HC/OC 6 .705 .871 .490
54 Table 5.4
Path Analysis Results Using Average.
Path Hypothesis β-path Adj.
t-value
Sig. Direction Result of Hypothesis
CC/SCHC/OC H6,H7 .700 7.757 *** + Rejected
InC/PCCC/SC H4,H5 .643 3.575 *** + Rejected
Although the model reflects a strong path correlation between the elements of IC, not all Cronbach’s alpha values conform to the .70 criterion established by Nunnally (1978) therefore the data was analyzed once again, this time, using the questions individually. Table 5.5 presents the Cronbach’s alpha values, internal consistency and R2 of this model.
Table 5.5
Measurement Model Results Using Individual Questions
Table 5.6
Path Analysis Results Using Individual Questions
Constructs Number of items Cronbach’s Alpha Internal consistency R²
CC 3 .500 .798 -
IC 6 .807 .862 .619
InC 3 .860 .914 -
PC 3 .706 .762 -
SC 3 .737 .849 .537
Path Hypothesis β-path Adj.
t-value
Sig. Direction Result of Hypothesis
InCSC H4 .216 3.036 *** + Rejected
PCSC H5 .036 0.850 + Accepted
CCIC H6 .583 0.203 + Accepted
SCIC H7 .772 6.423 *** + Rejected
55
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Figure 5.2 shows the results of the structural model for intellectual capital. The results suggest innovation capital has a positive, highly significant effect on structural capital with a parameterof .216 and t=3.036; structural capital has a positive, highly significant effect on intellectual capital which for the purpose of this analysis contains human capital and organizational capital with a R2 of .772 and t= 6.423. On the other hand, process capital appears to have no significant effect on structure capital while customer capital seems to have no effect on intellectual capital. Based on the results obtained, hypotheses 4 and 7 are rejected while hypothesis 5 and 6 are accepted.
Results of Main Study
The structural model was once again tested by computing path coefficients. A bootstrapping procedure using 10 random re-sampling of the original data was performed to evaluate the statistical significance of each path coefficient. Table 5.7 shows path coefficients along with T values.
Table 5.7
PLS Path Analysis Results
Path Hypothesis β-path Adj.
t-value
Sig. Direction Result of Hypothesis
OTIC H1 .856 10.113 *** + Rejected
ICBP H2 .811 4.025 *** + Rejected
BPSuC H3 .844 4.411 *** + Rejected
57
H1
· Competence 0.833*** (4.675)
· Openness/honesty 0.927*** (4.330)
· Concern for employees 0.865*** (4.223)
· Reliability 0.901*** (4.444)
· Financial performance 0.954*** (9.734) Organizational Trust
· Excellent and distinctive culture and value system Employee 0.939*** (9.976)
· Employees with key knowledge
· Employees learning and update speed
Environment 0.948*** (10.804)
· Adapt to environmental capacity
· Good working environment
· Good relationships of costumers, suppliers and partners Survival and Competitiveness
0.844***
(4.411)
Intellectual Capital
· Human Capital 0.876*** (5.032)
· Organizational Capital 0.870*** (6.588)
R2=0.732
R2=0.658
R2=0.713
Figure 5.3. Structural Model
Note. * p < .1. **p <.05. *** p <.001.
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Figure 5.3 shows the results of the structural model from the sample data. Results suggest organizational trust has a positive, highly significant effect on intellectual capital with a R2 of .856 and t=10.113; intellectual capital has a positive, highly significant effect on business performance with a R2 of .811 and t=4.025. Finally business performance has a positive, highly significant effect on an organization’s survival and competitiveness with and R2 of .844 and t=4.411. Because the values for R2 are above 0.67, results obtained can be regarded as very good. All paths show a high significance indicating a high correlation among organizational trust, intellectual capital, business performance and the survival and competitiveness of a company, therefore hypotheses 1, 2 and 3 are rejected.
Intellectual Capital
The six constructs that form intellectual capital were once again evaluated; this time using the data obtained from 254 employees in order understand the nature of the relationships among constructs. Using individual questions, Cronbach’s alpha, internal consistency and R2 were used to assess each construct. The Cronbach’s alpha values for all constructs were above .80, meeting the criterion suggested by Nunnally (1978) as acceptable for explanatory research. Results suggest the model has a substantial explanatory power considering Chin’s (1998) proposed values where R2 of IC=.693 and SC=.669. Internal consistency was measured through the factor loading. The criterion of .50 recommended by Hulland (1999) was adopted for the retention of factors. The majority of the values were above the stated criterion, with the exception of item HC3 (loading=.431). However the question “Our company turnover rate is lower than that of others in the industry” was retained considering there are only 3 questions per construct. Table 5.8 reports the measurement model results and table 5.9 reports the factor loadings
Table 5.8
Measurement Model Results
Constructs Number of items Cronbach’s Alpha Internal consistency R²
CC 3 .843 .905 -
IC 6 .837 .882 .693
InnC 3 .903 .939 -
PC 3 .861 .914 -
SC 3 .900 .937 .669
59 Table 5.9
Factor Loading of IC Constructs
In order to assess the structural model for intellectual capital, a bootstrapping procedure using 30 random re-sampling of the original data was performed to evaluate the statistical significance of each path coefficient. The table below shows path coefficients along with t-values.
Table 5.10
Path Coefficients for IC
Item Loading Item Loading Item Loading
HC1 .852 CC1 .831 InnC1 .913
HC2 .784 CC2 .885 InnC2 .909
HC3 .431 CC3 .900 InnC3 .924
OC1 .778 SC1 .884 PC1 .864
OC2 .776 SC2 .929 PC2 .903
OC3 .808 SC3 .926 PC3 .883
Path Hypothesis β-path Adj.
t-value
Sig. Direction Results of Hypothesis
InnCSC H4 .544 2.606 *** + Rejected
PCSC H5 .351 1.667 * + Rejected
CCIC H6 .536 2.739 *** + Rejected
SCIC H7 .353 1.805 * + Rejected
60 Figure 5.4. Intellectual Capital Structural Model
Note. * p < .1. **p <.05. *** p <.001.
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Figure 5.4 shows the results of the structural model for intellectual capital. Results suggest innovation capital has a positive, highly significant effect on structural capital with a parameter of .544 and t=2.606. Customer capital also seems to have a positive, highly significant correlation to intellectual capital, which for the purpose of this analysis contains human capital and organizational capital with a parameter of .536 where t=2.739. Process capital appears to have a positive, significant effect on structure capital with a parameter of .353 where t=1.805 and finally, structure capital seems to have a positive, significant effect on intellectual capital. Based on the results obtained, hypotheses 4, 5, 6 and 7 have been rejected.
PLS Findings Discussion
Results obtained suggest several important aspects. First, the highest path coefficient in the TIP Model is between organizational trust and intellectual capital (β-path=0.775). The dominance of this path in the overall model implies organizational trust is the key factor to intellectual capital, business performance and survival and competitiveness. The more employees perceive trust exists between co-workers and superiors, the more they will be willing to share their knowledge. A strong trust culture also encourages collaboration and enables the development of new forms of associations which inevitably lead to innovation and the creation of new knowledge. This, according to the results will then make a positive contribution to business performance and survival and competitiveness. The dominant factor of organizational trust that affects intellectual capital is openness and honesty. This suggests one of the best ways to nurture a trust based culture is to make openness and honesty key values of the organization. The other factors that affect intellectual capital in descending order are: reliability, identification, concern for employees and competence.
Second, results suggest intellectual capital is positively and significantly associated with business performance. Intellectual capital is multidimensional; therefore the various elements contribute to business performance in different ways. Further analyses were done to better understand these relationships. Results show innovation capital and process capital have a significant and positive effect on structure capital. However the significance of innovation capital is greater, suggesting innovation capital makes a greater contribution to the organization’s structure capital, making it the dominant factor. When assessing the effect customer capital and structure capital have on intellectual capital, results again reflect both
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relationships are positive and significant. Nevertheless customer capital is the dominant power that affects intellectual capital.
Third, there is a positive and highly significant relationship between business performance and survival and competitiveness. This means the larger the percentage of total market shares and the better the organization uses its assets to generate revenue the better the organization will be able to survive and compete in the market. For business performance, results show the significance of market leadership is greater than that of financial performance. Suggesting being a leader in the market is more important than financial performance in order to respond to changes in the market.
Finally, of the nine factors that make up survival and competitiveness, results show the significance of organization factors is greater than that of employee and environmental factors. This indicates it is the organization itself, and not its employees or its environment that makes a larger contribution to survival and competitiveness.
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CHAPTER VI CONCLUSIONS AND RECOMMENDATIONS
The final chapter of this investigation is divided into two sections. The first section offers the conclusions that can be drawn from the research as well as recommendations to the organization. The second section provides suggestions for future research that can be undertaken by investigators interested in this topic.
Research Conclusions
The importance of trust in the process of knowledge sharing has always been implicit.
Little attempts have been made to measure the total effect trust has on intellectual capital.
Therefore, the main objective of this research was to create a model that integrated organizational trust, intellectual capital, business performance and survival and competitiveness in order to have a better understanding of the relationship between these variables. The purpose was fulfilled with the development of the TIP model. The high validity and reliability measures obtained suggest the TIP model is an adequate tool that can be used to measure how a company’s intangible assets (organizational trust and intellectual capital) affect its tangible assets (business performance and survival and competitiveness).
Banco Ficohsa served as this investigation’s case study to assess the relationship between the variables. The results obtained suggest the following important findings.
First, organizational trust has a very significant and positive influence on intellectual capital. Organizational trust is the key factor to intellectual capital, performance and survival and competitiveness. In other words, according to the findings, a strong trust culture facilitates knowledge sharing, a key factor for effective intellectual capital management. In turn, intellectual capital will result in a positive contribution to the organization’s business performance and hence aid in its survival and competitiveness.
Second, intellectual capital has a very significant and positive effect on business performance. Results reflect the significant contribution intangible assets make on performance. Findings imply that if the company focuses its efforts on unlocking its intellectual capital it will gain a competitive lead that will transform into higher business performance.
It is very difficult for an organization to thrive in all intellectual capital dimensions.
Hence from a practical point of view and based on the results of this investigation, managers who are forced to make trade-off decisions should focus on the two critical factors to
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business performance which are innovation capital and customer capital. The relationship these factors have on business performance is clear considering the company makes a profit when products and services that meet customer’s needs are developed. Customer needs are successfully met when the organization fully understands, values and considers customers as an asset. Customer needs are then considered a priority and help guide innovation. The better new products and/or services meet consumer needs the more these products will be accepted and purchased, consequently improving the organizations performance.
Third, business performance significantly and positively affects survival and competitiveness. The results of this investigation suggest being a dominant leader of the market is the most important factor in business performance. Having a strong market leadership will enable the organization to successfully meet challenges imposed by changes in the market.
Finally, the most important factor in determining an organization’s survival and competitiveness are organization factors. Organization factors include innovation capability, flexible organizational structure, being a dynamic organization and finally, having an excellent and distinctive culture and value system.
Research Recommendations
Research Limitations
As the investigation was concluded, the research limitations were once again assessed. This was done primarily to report limitations faced by the researcher during the research process that were previously not accounted for; but also to provide useful information for future studies. Although the sample of this study only includes employees of Ficohsa Financial Institution, the research findings can be applied to similar contexts, even outside the financial industry, though it should be limited. Nevertheless, results can be used as reference for future research. With regards to the questionnaire, item HC3 had a low factor loading but retained due to the number of questions per construct in this specific section. In order to overcome this limitation, part II of the questionnaire should be revised to include more questions per construct and avoid having to retain items with low factor loadings.
65 Recommendations for Ficohsa Financial Institution
Based on the knowledge gained from this investigation, the following recommendations are made for this particular case study.
a) Concerning organizational trust: If the organization wishes to continue establishing relationships based on trust with and among its employees it should focus on employee voice and providing them with adequate information related to the criterion on which their performance is evaluate. After employee performance is evaluated, results should be promptly and thoroughly discussed along with constructive feedback that will allow employees to improve their performance. It is also important employees receive information regarding how job-related problems are resolved, the organization’s long-term strategy, and the strategic decisions made by top management that have a direct effect on their jobs.
b) Concerning intellectual capital: In order to improve its structure capital the organization may want to focus on the key factors that enable innovation within the organization which in descending order are; the management style which support and encourages innovation, the open-minded culture that supports the development of ideas and the sharing of these ideas within the organization. Another approach that would enhance the structure capital would be improving process capital. This could be done by concentrating resources on bettering the key factors that affect process capital which in descending order are: the knowledge management software (KMS) used in by the organization, the adequacy of the hardware that supports the KMS and finally taking full advantage of the information and communications technology available to facilitate the transfer of information through the company. The organization may also wish to focus on its customer capital by aiming on the key factors that affect it. In descending order these factors are; a high value-added customer service, the circulation of customer feedback and comments that enables employees to have a better understanding of customer needs and finally, customer satisfaction. The company may also wish to improve its structural capital. This can be achieved by working on the structure capital key factors, which in descending order are: regular updates of the knowledge management system that provides the employee with real-time information, a knowledge management system that meet the employee needs and lastly, a knowledge management system that will improve the employee’s job performance.
c) Concerning business performance: it is important the company focuses its resources in being a dominant force in the market. This entails dominating customer loyalty, distribution coverage, image, perceived value and price.
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d) Concerning survival and competitiveness: The organization should continue to focus on its innovation capability, having a flexible organizational structure, being dynamic and establishing and distinctive culture and value system. It can also look to improve the retention of employees with key knowledge, employee learning, its environmental adaptability, nourishing a good working environment and finally establishing good relationships with customers, suppliers and partners.
Recommendations for Future Research
Based on the limitations of the study, the following recommendations are given for future research. First, this investigation is contextually bound. It is delimited to one geographical area: Honduras, and to a single financial institution: Banco Ficohsa. It is possible the observed relationships are dependent of this context. Therefore, the study can be replicated in another country and in another company. Also, it is important to mention the framework could also be tested in other industries.
Second, it was the intent of the research to gather numerical data in order to employ a quantitative method approach to understand the relationship between the variables. A qualitative approach could be adopted. One of the disadvantages of using a quantitative method is the limited amount of data that can be obtained through surveys. Interviews on the other hand, would allow the researcher to obtain more in-depth information about the “how”
and “why” of the relationship between the variables.
Third, this research looked at the organization as a whole, making no differentiation among organizational levels. Bachmann (2006) suggests “bracketing trust by studying trust below or above” (p.243). It would be informative to conduct a multilevel empirical analysis in order to determine if the relationship between variables varies within the different levels.
If so, researchers can identify the elements that account for those difference and study the mediating effect they have on the variables.
Finally, this particular study used Partial Least Square (PLS) to analyze the data obtained.
Future researchers might choose to use other statistical analysis procedures. For example, the TIP model could further be assessed using Structure Equation Modeling (SEM).
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REFERENCES
Anastasi, A. (1988). Psychological testing. New York: Macmillan. Retrieved from:
http://psychology.about.com/od/findex/g/face-validity.htm
Atkinson, A. A. (1998). Strategic performance measurement and incentive compensation,
Atkinson, A. A. (1998). Strategic performance measurement and incentive compensation,