Psychological Capital: A Positive Resource for ...

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Psychological Capital: A Positive Resource for Employee Innovative Behaviour towards Public Sector Performance KKNP Rathnayake, Chen Zhixia College of Public Administration, Huazhong University of Science and Technology, Wuhan, Hubei, P.R. China (E-mail: [email protected], [email protected])

Abstract:This paper extended the boundaries of positive organizational behavior to public sector organizations. Specifically, the relevance of psychological capital (PsyCap), composed of the positive psychological resources of hope, efficacy, resilience and optimism, was conceptualized in support with public sector reforms. On the basis of extant literature review and arguments grounded in the resource-based theory, and broaden-and-build theory, this study identified psychological capital as a positive resource for employee innovative behavior especially towards public sector performance through effective reforms. Addressing the research gap of limited studies at multiple levels of analysis, a theoretical model was derived, in which PsyCap can lead to innovative behavior of employees towards organizational performance through authentic leadership in a public environment that was perceived by disappointed reforms, resistance to change, power abuse, laziness and despair. Our study extended these theories to South Asian context (i.e., Sri Lanka), thereby providing external validity to the findings of research in Western contexts. Key words : Psychological Capital, Employee Innovative Behavior, Authentic Leadership, Public Sector Performance

1 Introduction Today’s workplace of business as well as public is changing at a much faster and more dramatic pace than ever. Therefore, in order to sustain and gain a competitive advantage in such an environment, firms must be innovative (McAdam & Keogh, 2004). Particularly, employee innovative behaviors (e.g., developing, adopting, and implementing new ideas for products and work methods) are important resources that make an organization successful in dynamic environments (Yuan & Woodman, 2010).

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New ideas to the public sector are introduced through reforms. During the last few decades, the public sector around the world has been explored to major reform proposals and significant modification in government norms, structures, and behaviors (Pollitt & Bouckaert, 2011). Therefore, public administrative scholars and practitioners found to be busy analyzing, evaluating, and even proposing reforms (Aberbach & Christensen, 2014). Thus, the results have not been ended up with increased performance as expected. Moreover, they were highly criticized for their incapability of defining public issues, proposing appropriate solutions, and failures in implementations. In contrast, many reform studies suggest that leaders (political and administrative) in public sector more often control hierarchically reform processes due to their exclusive formal participation rights (Christensen & Lægreid, 2001; Pollitt & Bouckaert, 2011). In such a context, it becomes essential even for public sector organizations to maintain strategic human resources to be successful in the reform process as well as authentic leadership to have an impact on the follower’s performance. Sources of sustainable advantage for organizational positive change were wellexplained by the resource-based theory of the firm (Acedo, Barroso, & Galan, 2006; Newbert, 2007). This theory proved the positive relationship between strategic resources (i.e. those that are valuable, rare and difficult to imitate or substitute) and organizational performance (Crook, Ketchen, Combs, & Todd, 2008). Thus, it is essential to manage and recognize the human, social and psychological capital to do best for such an innovative change within the organization (Luthans & Youssef, 2004). Nevertheless, Luthans et al. (2008) and Avey et al. (2009) discussed the importance of psychological and attitudinal strengths of individuals than other strategic resources. As a result, a new movement of positive psychology emerged which became concerned with what is right with people and building on that instead of trying to just fix what is wrong with people (Luthans and Youssef, 2004). Consequently, the positive organizational scholarship (POS) and positive organizational behaviour (POB) movements which can be applied to the workplace positivity were emerged. Similarly, a positive, genuine, transparent, ethical form of leadership, broadly termed authentic leadership (AL), is now recognized as a positive approach to organizational leadership that can help meet today’s challenges (Avolio & Gardner, 2005; Avolio, Gardner,

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Walumbwa, Luthans, & May, 2004; George, 2003; Luthans & Avolio, 2003; Walumbwa, Avolio, Gardner, Wernsing, & Peterson, 2008). More importantly, authentic leaders develop and influence their followers by energizing them with positive psychological states, which are conducive to their performance (Gardner & Schermerhorn, 2004) which could provide better solutions to inherent issues of resistance to change, lower productivity, power abuse and despair in public sector organizations. On the basis of extant literature review and arguments grounded in the resourcebased theory, and broaden-and-build theory, this study identifies psychological capital as a positive resource for employee innovative behavior especially towards public sector performance through effective reforms. Our study extends these theories to South Asian context (i.e., Sri Lanka), thereby providing external validity to the findings of research in Western contexts.

2 Psychological Capital: Core Construct and Study Hypotheses Positive psychological capital is a higher-order core construct which is composed of four components: efficacy, hope, resilience, and optimism. PsyCap is more directly concerned with ‘who you are’ and more importantly ‘who you are becoming’ (Luthans, Avey, et al., 2006). PsyCap can be defined as “an individual’s positive psychological state of development that is characterized by: (1) having confidence (self-efficacy) to take on and put in the necessary effort to succeed at challenging tasks; (2) making a positive attribution (optimism) about succeeding now and in the future; (3) persevering toward goals and, when necessary, redirecting paths to goals (hope) in order to succeed; and (4) when beset by problems and adversity, sustaining and bouncing back and even beyond (resilience) to attain success (Luthans, Youssef, et al., 2007). PsyCap is statelike and open to change and development as compared with largely fixed traits such as personality (Luthans, Avey, & Patera, 2008; Luthans, Youssef, et al., 2007). Many studies have found that the relationship between PsyCap and employee attitudes, behavior and performance at individual levels of analysis (Avey, Luthans, & Youssef, 2010). Addressing this research gap of limited studies at multiple levels of analysis, our study examines those cross-level interactions where the strength of the relationships among individual-level predictor (employee PsyCap), team-level

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predictor (authentic leadership) and outcome criterion differ as a function of individual-level (employee innovative behavior) and organizational/industry level (organizational performance).

3 Psychological Capital, Innovative Behavior and Organizational Performance Limited studies investigated the relationship between hope and creativity (Rego, Machado, Leal, & Cunha, 2009). Rego, Sousa, Marques, and Cunha (2012) examined the relationship between optimism and creativity. Similarly, Tierney and Farmer (2002) also found the relationship between efficacy and creative performance. Research suggests that the positive psychological resources of efficacy, hope, resilience, and optimism have the potential to improve innovative behaviors of employees in the workplace (Abbas & Raja, 2015). Hope is “a positive motivational state that is based on an interactively derived sense of successful (1) agency (goal-directed energy) and (2) pathways (planning to meet goals)” (Snyder et al., 1996). Individuals with greater hope are able to conceive of many strategies to reach their goals and proactively develop alternative plans in case the original one does not work (Snyder, 1994). This ability leads for them to actively work on creative ideas for solving problems, and they regard problems and opportunities from different angles (Zhou & George, 2003). In addition, high hope individuals tend to be independent thinkers (Luthans, Youssef, et al., 2007). Hopeful employees “tend to be creative and resourceful, even with tight budgets” (Luthans, Youssef, et al., 2007). Optimism is a generalized positive expectancy (Carver et al., 2009) and a positive explanatory style of attributing positive events to personal (internal), permanent (stable) and pervasive (global) causes and negative events to external, temporary and situational ones (Seligman, 1998). Optimistic leaders pursue new and creative approaches towards problem solving (Peterson, Walumbwa, Byron & Myrowitz, 2008). Optimists are essential to introduce changes to a system as they always prefer to have positive expectations about results without being resistant to them (Avey et al., 2008). Self-Efficacy, or confidence, is “one’s belief about his or her ability to mobilize the motivation, cognitive resources, and courses of action necessary to execute a specific action within a given context” (Stajkovic and Luthans, 1998b). Grounded in social cognitive theory, efficacy motivates the selection of challenging goals, and mobilizes the cognitive mechanisms

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of symbolizing, forethought, observation, self-regulation and self-reflection toward goal pursuit (Bandura, 1997, 2012). Efficacious individuals are inventive, resourceful (Bandura & Cervone, 1986), and creative (Tierney & Farmer, 2002) and those individuals to be more likely to generate and apply innovative ideas in their workplace (Abbas & Raja, 2015). Resilience is “the developable capacity to rebound or bounce back from adversity, conflict, and failure, or even positive events, progress, and increased responsibility” (Luthans, 2002a). Resilience is a very important psychological resource, because repeated failure can prevent us from moving forward (Hsu et al., 2014). Resilience can help organizations and their members survive, overcome, learn from and grow through challenges (Youssef and Luthans, 2005). Moreover, resilient leaders are likely to encourage themselves and even their subordinates to take risks and exhibit innovative behaviors (Peterson et al., 2008). Although not addressed by Avey, Reichard, et al.’s (2011) meta-analysis, PsyCap has also been found to influence employees’ creative performance, problem solving and innovation at the individual-level. For example, Sweetman, Luthans, Avey and Luthans (2010) and Rego et al. (2012c) found that PsyCap was positively related to creative performance, and Luthans, Youssef, and Rawski (2011) found that PsyCap was positively related to problem-solving performance and reported innovation. Also excluded from Avey, Reichard, et al.’s (2011) meta-analysis is the relationship between PsyCap and performance at the team and organizational-levels of analysis. For example, by using an experimental design with engineers, Walumbwa, Peterson, Avolio and Hartnell (2010) found that leader PsyCap was positively related to follower PsyCap, which in turn was positively related to follower performance. According to broaden-and-build theory, positive emotions share the capacity to broaden people’s momentary thought-action repositories and widen the array of thoughts and actions that come to their minds (Bakker & Demerouti, 2008; Fredrickson, 2001), thereby increasing the potential for the demonstration of innovative behaviors such as sharing creative ideas and providing suggestions for improvements at work (Avey, Luthans, & Youssef, 2010; Avey, Reichard, et al., 2011). Research on PsyCap suggests that PsyCap contributes to positive emotions. The broadened inventory of positive psychological resources such as hope, efficacy, optimism, and resilience may be helpful in problem solving and enhancing creativity

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since employees with a positive mindset are more creative (Luthans et al., 2011; Rego, Sousa, and Marques, 2012). Moreover, innovative behaviour of these employees may lead to positive change in organizations (increased performance). Similarly, innovative behavior of employees mediates the relationship between employee PsyCap and organizational performance. Therefore, we propose the following hypotheses: H1: Employee psychological capital is positively related to employee innovative behavior. H2: Employee innovative behavior mediates the relationship between employee psychological capital and organizational performance. H3: Employee innovative behavior is positively related to organizational performance.

4 Moderating Role by Authentic Leadership Organizations need leaders today to challenge the status quo, create visions of the future, and inspire organizational members to want to achieve the visions (Robbins & Judge, 2013). In contrast, previous research on leadership demonstrated that corruptive and unethical leaders negatively influence on employee attitudes, behavior and performance. In the public administration practitioner literature, many researchers observed that public sector employees greatly suffer from despair, apathy, anxiety, poor job satisfaction, less productivity, less innovativeness and less efficiency due to its ineffective leadership. In such a context, authentic leadership plays an important role as it’s a promising way to think about ethics and trust in leadership because it focuses on the moral aspects of being a leader (Robbins & Judge, 2013). The primary quality produced by authentic leadership, therefore, is trust (Robbins & Judge, 2013). Previous research found that authentic leaders can influence follower performance (Lord & Brown, 2004). According to Avolio et al. (2004), the behaviors of authentic leaders are viewed by followers as being guided by high moral standards and characterized by fairness, honesty, and integrity in dealing with followers. As a result, followers get motivated to exhibit positive behaviors and have a sense of self-worth and obligation to reciprocate (Illies et al., 2005; Yukl, 2002). Similarly, George (2003) observed that authentic leaders motivate followers by means of modeling and transferring a deep sense of responsibility to deliver positive outcomes over an

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extended period. Although a great deal of research has focused on examining the relationship between PsyCap and workplace outcomes, there has been comparatively limited research on the factors that may moderate such a relationship (Newman et al., 2014) especially by authentic leadership. Wang et al (2014) also found that the relationship between authentic leadership and followers’ job performance through leader–member exchange was stronger for those low in PsyCap. Research found that more participative or authentic styles of leadership might facilitate the deployment of PsyCap by individuals. For example, even though employees or teams report high levels of PsyCap, leadership may be needed to channel this in the right way to guide the behaviors that yield superior outcomes (Newman et al., 2014). As such, although we expect participative or authentic styles of leadership to accentuate the positive relationship between PsyCap and desired outcomes, other more authoritarian style of leadership may constrain the deployment of individual-level PsyCap. Drawing from this theoretical, empirical, and practical literature, we derive the following hypothesis: H4. Authentic leadership will moderate the relationship between employee psychological capital and their innovative behavior such that the psychological capital will be more positively related to employee innovative behavior when authentic leadership exists. Considering all the four hypotheses, the theoretical model shown in Figure 1can be constructed for the study.

Employee Psychologic al Capital

H2 H1

Employee Innovative Behaviour

H3

H4 Authentic Leadership

Figure 1 Conceptual model of the study

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Organizational Performance (Public Sector)

5 Conclusion Policy makers should seriously consider the use of effective reforms today than ever. More importantly, the reforms will have little impact if the conditions under which they are implemented do not support the introduction of these reforms (such as leadership, the strong institutional culture, high degree of professionalism of employees, and support from the Ministries). Empirical research also suggests that superficial knowledge and insufficient understanding of human beings cause the failure of an organization to mobilize its human recourses. Thus, fierce and dynamic today’s global economy calls for different positive psychological resources within each employee (i.e. PsyCap) and an authentic leadership to create a trustful environment. Empirically it was proven that PsyCap and authentic leadership can influence employee work performance, increasing positive workplace behaviors while decreasing negative behaviors and improving trust. Accordingly, this conceptual paper will be set out to review and explore the impact of positive PsyCap and authentic leadership on employee innovative behavior and public sector organizational performance in Sri Lanka. The concepts and constructs discussed in this study will have practical implications for the development of human resources and authentic leadership style especially in public sector organizations. In conclusion, by combining PsyCap and leadership, this study is to be found the relationship between organizational performance and employees’ innovative behavior contingent on employees’ PsyCap.

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