A CSR perspective to foster employee creativity in the banking sector: The role of work engagement and psychological safety

Abstract

The entire service sector has acknowledged the importance of employee creativity. However, the underlying mechanism due to which employees are engaged in creativity has been relatively unexplored. Moreover, where the banking service sector in advanced countries has realized the potential role of employee creativity for a bank's success, the same was not fully realized in the context of a developing country, especially in Pakistan. Against this backdrop, the current study is an effort to explore the underlying mechanism of employee creativity as an outcome of corporate social responsibility (CSR) with the mediating effects of work engagement (WE) and psychological safety (PS) in the banking sector of Pakistan. Data were collected (n = 483) from banking employees through a self-administered questionnaire, which used the paper and pencil method. The hypotheses of the current survey were validated by employing structural equation modeling (SEM) in AMOS software. The results confirmed that employee creativity, as an outcome of CSR, was significantly influenced by the CSR orientation of a bank. Furthermore, PS and WE produced a significant mediation effect (41%) between the relationship of CSR and employee creativity. The findings of the current study are helpful to the banking sector of Pakistan in understanding the CSR-employee creativity mechanism, which is of utmost importance from the standpoint of competition.

Introduction

The business world in the current era, characterized by stiff competition, rapid change, and short product life cycles, has posed several challenges to contemporary organizations to remain competitive. Corporations need to take different steps in order to retain their competitive position in the market (Putra et al., 2020). Moreover, the current business world is transforming from a digital society to a knowledge-based society, which makes the corporate environment more complex and diverse than ever before (Andersen, 2020). The inability of a corporation to respond efficiently to the dynamic business environment paves the way to its downfall (Yitzhak, 2017) because knowledge is regarded as a core business value in a knowledge-based business environment (Allee, 2002), which requires organizations to be continuously involved in developing creative ideas in order to create a higher level of business value. Thus, contemporary corporations are searching for different ways to be creative in order to surpass their rivals (Saqib and Satar, 2021). As a result, due to the mounting importance of creativity, modern organizations are embracing their employees as a source that can bring meaningful innovation to an organization through their creative ideas. Perhaps this is why the surge in the current literature on employee creativity is evident in recent studies (Ivcevic et al., 2021; Liu et al., 2020). Various global businesses, such as 3 M, W.L. Gore, and Google, encourage their employees to engage in creative tasks at the workplace. Google is a relevant case because it encourages its employees to spend 20% of their working hours engaging in creative thinking. The results of Google's 20%-time project have been incredible. The organization was able to introduce Gmail, which was internally developed by an employee (Mccracken, 2014). The international player 3 M is another case in this regard, which was able to develop post-it notes as a result of employee creativity. Thus, the current surge in the relevant literature on employee creativity is not without a logic. Therefore, creative individuals who can bring meaningful new ideas are demanded by every organization. From an organizational context, to encounter an uncertain environment and gain a sustainable competitive advantage, an organization expects its employees to perform their formal job obligations and volunteer themselves to engage in different extra roles, such as being creative (Kremer et al., 2019).

Although various scholars recognize the importance of employee creativity for organizational success, a careful exploration of the preceding literature reveals that employee creativity was more focused from an organizational perspective in most of the past studies, such as the importance of employee creativity to spur organizational performance (Ismail et al., 2021; Scarmozzino and Corvello, 2017) or to foster organizational competitiveness (Nasifoglu Elidemir, Ozturen and Bayighomog, 2020; Teodorescu et al., 2015). There is no denying in acknowledging the importance of employee creativity from an organizational perspective. However, it is more important to understand the underlying mechanism that encourages employees to be creative at the workplace (Miao and Cao, 2019). Looking at employee creativity from an organizational context can only realize the outcomes of employee creativity; however, if the mechanism due to which employees are engaged in creativity is known, organizations can learn to be creative through their employees and outperform their rivals. Nevertheless, this perspective regarding the understanding of why employees are engaged in creativity is still in its formative stages, which implies the importance to conduct more research in this area (Guo et al., 2021). Therefore, an important objective of the current analysis is to uncover the underlying mechanism of employee creativity in an organization.

In recent decades, corporate social responsibility (CSR) has emerged as a strong business imperative. The horizon of CSR is very broad, which is still evolving even in 2021. The mainstream literature in the CSR field is dominated by two specific organizational contexts: organizational performance and organization reputation. In this regard, the field is still dominated to date by the organizational performance context, especially the financial performance (Huang and Lien, 2012; Loosemore and Lim, 2017; Singh and Misra, 2021). Similarly, a plethora of reputational studies has also used CSR to spur the reputation of an organization (Mohiuddin, 2017; Sotorrío and Sánchez, 2008; Ullah et al., 2020). However, another perspective of CSR has emerged during the past decade that is gaining significant attention, which is to influence the formal behavior of employees through CSR (Chatzopoulou et al.2021; Sobhani et al., 2021). Yet, another perspective that has recently entered into the lexicon of CSR, which is emphasized here as well, is to realize the potential of CSR to explain the underlying mechanism due to which employees' extra-role behavior is influenced. Bateman and Organ (1983) defined extra-roles as an informal behavior that does not fall under formal job obligations. These extra-roles, including employee pro-environmental behavior, and employee creativity, are considered critical for overall organizational success. However, as stated previously, the field of CSR was dominated by the popular view of financial performance. An enhanced financial performance not only empowers an organization in decision making, it also makes it appealing in the eye of creditors (Jain et al., 2017). Given that the concern for finance will remain a prime objective of every business, it seems logical that the bulk of the literature considered this view of CSR. Perhaps, this is the reason that the underlying mechanism of employee creativity as a result of CSR in conjunction with the other popular views of CSR was less considered previously. Although this perspective of CSR is receiving attention from recent scholars (Ahmad et al., 2019), it requires more research to reach a consensus. Therefore, another objective of the current task is to investigate the mechanism of employee creativity as an outcome of CSR, which remained an understudied area.

The studies related to employee behavior have recently highlighted the importance of mediators in order to explain the complex relationship between CSR and employee creativity. Individual behavior is a complex phenomenon that is better explained in the presence of certain mediators (Glavas, 2016; Tong et al., 2019). Prior studies have acknowledged the mediating role of work engagement (Aboramadan, 2020; Kyoung Park et al., 2014) and psychological safety (Gu et al., 2013; Sun and Huang, 2019); however, previous studies did not consider their potential mediating effect between CSR and employee creativity relationship in a unified model. Hence, this study also aims to investigate this potential effect. Altogether, the critical research question of the current work is to see whether an organization's CSR can influence employees' sense-making to foster their creativity through work engagement and psychological safety. Further, the current work also intends to investigate if, based upon social identity theory, the sense-making of employees in response to its social engagement can lead employees to show a positive behavior. As employees feel proud being a member of a socially responsible organization, they are expected to maintain the positive reputation of their organization, which ultimately thrives their creative potential.

The proposed framework of the current research is to be tested in the banking sector of Pakistan. The authors believe that this sector is relevant to achieving the objectives of the current research for the following specific reasons. Firstly, the banking sector adheres to strict laws imposed by a regulatory body, the State Bank of Pakistan (SBP), to serve their clients in a standardized manner. Thus, different players in this sector offer their clients the same kind of standard products/services, which specify the homogenized nature of this sector (Ahmad et al., 2021; Raza et al., 2020). This poses a real challenge to a bank: how to differentiate itself from the rest of the crowd due to this homogeneity? Procedural innovations in this sector are prone to be easily imitated by rivals, which ultimately leads all the players towards competitive convergence. However, the innovation in this sector brought by the employees, as a result of their creativity, is hard to imitate by their rivals, as this kind of innovation is idiosyncratic with its details. This view is also evident in the seminal work of Takeuchi and Shibata (2006), who argued that creativity is hard to imitate, which is invented as a result of the tacit knowledge of employees. Thus, the relevance of employee creativity for this sector is critical. Secondly, the banking sector of Pakistan, which is similar to other regions of the world, is generally assumed to be a risk-averse sector, implying that creativity on the part of employees hardly finds a place in this sector. The authors propose that the converse is true because, without innovation and creativity, this sector is unlikely to sustain its long-run progress. Furthermore, the authors like to refer to the neo-Schumpeterian economics perspective of Freeman (1982), which places creativity and innovation at the heart of every economic activity. Therefore, the current study will be helpful banking sector of Pakistan to embrace creativity, especially employee creativity, as a new normal. Although some big banks of the world have encouraged their employees to be engaged in creative tasks, the situation in Pakistan in this regard has not improved significantly. Therefore, the findings of this study may be helpful for this sector to understand that employee creativity, as an antecedent of CSR, can provide a bank with a solid base of competitive advantage.

The current study intends to enrich the preceding literature in different ways. First, the current study is one of those studies in the CSR domain that assumes it as a potential motivator for keeping the employees engaged in different extra-roles, including creativity. The authors have already explained that the field has been dominated from an organizational perspective for many decades, whereas the perspective of the employees in CSR has recently emerged (Lu et al., 2020; Raza et al., 2021b). More specifically, much is not known about employee creativity as an outcome of CSR. Buttressing this, Vlachos et al. (2017) posited that it is known that CSR can influence employees' behavior, but little is known how it affects. Second, the current study adds to the third-party justice literature (Rupp, 2011) from a CSR viewpoint by contending how the interface between CSR and the employees’ perceptions ultimately influence their own behavioral intentions. In line with the view of Glavas (2016), when employees see fair treatment of an organization for others, they can assume a similar case for themselves too, this perception of fair treatment may be helpful in inducing their creative potential. Third, the current study takes a different position by emphasizing that understanding the underlying mechanism that motivates employees to get engaged in creative tasks is worthwhile, whereas a plethora of the past studies investigated employee creativity in order to spur organizational outcomes (Ismail et al., 2021; Scarmozzino and Corvello, 2017). Fourth, the current study introduces two mediating constructs, such as work engagement and psychological safety to explain the underlying mechanism of employee creativity as an antecedent of CSR. This is in line with the call of Wang et al. (2015), who argued that to better understand the exchange CSR relation between employees and employer, mediating mechanisms are required. Lastly, the current study significantly contributes to the banking literature, especially from the context of a developing country (Pakistan) by proposing employee creativity as a new normal for this sector. Given that, the banking sector in the country operates under a tightly monitored system, very little room remains for employees to show their creative potential (Shah et al., 2021). Therefore, it will be worthwhile to investigate whether the creative potential of employees can be fostered by the CSR engagement of a bank.

The rest of the current study is divided into four parts. Section 2 deals with the underlying theory and the related literature in order to propose different hypotheses, followed by a methodology section, dealing with the sampling process and population, and includes an instrument-related discussion. Next, the authors present the results and analysis, in which the major statistical tests to validate the hypotheses were performed. Finally, a discussion of the implications of the results for theory and practice is offered.