Impact factors of sales employees’ creativity and innovative work behavior in banking industry evidence from vietnam

Abstract This study focuses on the impact of empowering leadership and challenge work environment on both sale employee’s creativity and innovative work behavior in Vietnamese banking in

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Pham Thi Khanh Ngoc

IMPACT FACTORS OF SALES EMPLOYEES’ CREATIVITY AND INNOVATIVE WORK BEHAVIOR IN BANKING INDUSTRY:

ID: 22140030

MASTER OF BUSINESS (Honours)

SUPERVISOR: Dr Pham Ngoc Thuy

Ho Chi Minh City – Year 2016

Acknowledgement

I would like to express my sincere acknowledge to my supervisor, Dr Pham Ngoc Thuy for her insightful guidelines, valuable recommendations, and feedbacks during my research time This research could not be possible without her evaluation in each stage which I spent

My next appreciation also sends to participants of the survey They are colleagues, friends in many banks in HCM city They shared their time to assist me to answer the questionnaire All their contributions have helped me to have the successful study

Abstract

This study focuses on the impact of empowering leadership and challenge work

environment on both sale employee’s creativity and innovative work behavior in

Vietnamese banking industry An empirical test with a sample of 370 sale employees in

15 banks in Ho Chi Minh City by means of structural equation modeling indicates a strong relationship between sale employees’ creativity and innovative work behavior Moreover, the findings indicate that both empowering leadership and a challenge work environment are able to trigger sale employees’ creativity Among this, sale employees’ creativity plays as a mediating variable in the relationship between empowering

leadership, a challenge work behavior, and the employees’ innovative work behavior In general, this study contributes some suggestions for bank managers in finding out the appropriate methods to stimulate employees’ creativity and innovative work behavior in order to aim at a strong and sustainable business performance

Key words

Empowering leadership, challenge work environment, creativity, innovative work behavior, banking industry, Vietnam

TABLE OF CONTENTS

ACKNOWLEDGEMENT

ABSTRACT

TABLE OF CONTENTS

LIST OF FIGURES

LIST OF TABLES

1 INTRODUCTION 6

2 LITERATURE REVIEW AND HYPOTHESIS 9

2.1 Sale employee’s creativity and innovative work behavior 12

2.2 Empowering leadership and employee’s creativity 15

2.3 Challenge work environment and creativity 16

3 METHODOLOGY 18

3.1 Procedure and Sample 18

3.2 Measurement scale 21

4 DATA ANALYSIS AND RESULT 24

4.1 Measure validation 24

4.3 Structural result 31

4.4 Hypothesis testing 32

5 DISCUSSION 34

5.1 Implications for managers 37

5.2 Conclusion 39

5.3 Limitations and directions for future research 40

6 SUPPORT INFORMATION 40

6.1 Findings of preliminary research 40

6.2 Questionnaire in English 44

6.3 Questionnaire in Vietnamese 47

REFERENCES

LIST OF FIGURES

Figure 1: Borrowed research model 11

Figure 2: Proposed research model 11

Figure 3: CFA result 28

Figure 4: SEM result 32

LIST OF TABLES Table 1: Descriptive Statistics of Sample 21

Table 2: Measurement scale 23

Table 3: Means, standard deviations, and standardized CFA loadings of items 30

Table 4: Structural paths in the model 33

Table 5: Findings of preliminary research 41

Table 6: Number of banks, and number of participated sale employees 43

1 Introduction

According to Drucker (1989), any organization pretemits to innovate that will become the ultimate reason for the decline and demise of existing organizations Innovation is critical for all organizational long-term prosperity, particularly in dynamic business environment (Patterson, Kerrin & Gatto-Roissard, 2009) Lin and Liu (2012) concluded that

innovation is a crucial factor that brings the sustainable competitive advantages which organizations can use to deal with such a rapid-change business environment So, what does the business start to innovate from? All innovations both arise from creative ideas of employees – a vital component of organization creativity that is the confirmation from many scholars (Woodman, Sawyer & Griffin, 1993)

Therefore, stimulating the creative ability of employees is one of the decisive factors bring the succeed to an organization (Walton, 2003) Wong and Ladkin (2008) suggested that managers in service organizations should encourage their employees to be more creative Once organization can enhance their employees’ creativity, it can contribute to innovation and assist to the strong organizational survival and competitive advantage West (2002) stated that creativity can be regarded as an important component of

innovative work behavior Although innovative work behavior is conducted by many scholars all over the world, research for this topic is also limited in Vietnam

Innovative work behavior in service jobs is the most important component to positively contribute to service organizations’ performance; bank industry is regarded as an

example It is accepted that procedural innovation contributes to economic development

(Schumpeter, 1934) To reach to innovative work behavior in an organization, it is

necessary for organizations to encourage creativity among employees

As the matter of fact, due to the specific characteristics of banking job, employees often comply with available regulated procedures, principles of government and internal

banking without promoting their active ability and creativity in their job Moreover, the policy that stimulates the innovation among banks has not applied popularly and strictly yet Apparently, a majority employee also passive in working, just only do the delegated tasks and make a change if any requests from supervisors Consequently, employees have not made breakthroughs in their daily job and this influence seriously to banks’

performances Therefore, finding the factors that improve the innovative work behavior

of each employee to improve the quality of human resources is considered as a key

solution for the banking sector to meet the requirements of new development in recent years Subsequently, Edvardsson, Gustafsson, Johnson and Sanden (2000) recommended that the managers should make an environment and practices that are able to trigger creativity and innovation at the individual level Among this, sales employees are

considered as a key labor force of banks in creating revenue

The main decisive human resource of the banking industry is the sales person or credit employees who deal with directly customers to bring the revenue to bank However, workforce meets the development of the banking sector in recent years, but objectively recognized, quality of human resources is still low The vast majority of bank employees still have "gaps" in terms of skills (attitude to work, team work skills, proficiency in

English, ability to communicate) and knowledge (the knowledge of the financial sector, banks in general), as well as the flexibility in daily activities

Therefore, this paper aims to indicate that the sale employee’s creativity is as the vital precondition for innovative work behavior in banking service organizations In order

to understand which factors can lead to sales employee’s creativity and innovative work behavior in banking environment This study will be conducted to examine two factors: empowering leadership and challenge work environment

This study concentrates on examining creativity and innovation from banking sales employees’ perspective This study is limited to and examines the impact of two factors that are able to trigger sales employees’ creativity and innovation at the individual level, namely:

(1) The impact of empowering leadership; and

(2) The impact of a challenge work environment

In order to solve the research problem mentioned previously, this research has the following objectives: examine whether empowering leadership and challenge work environment are linked to sale employee’s creativity, which is turn is linked to sale

employees’ innovative work behavior in Vietnamese banking industry The objective is therefore to describe and explain the relationships between: empowering leadership and challenge work environment; and sale employees’ creativity and innovative work

behavior in Vietnamese banking industry

This paper was conducted in some banks in Ho Chi Minh City The result of the research will be able to use for Viet Nam in general and for further references since Ho Chi Minh City is one of the biggest economic centers of Viet Nam The interviewees will be sales employees who work in credit department and contact directly with customers

In general, this paper will assist human resource managers who are working in banks in decision making, as well as in finding out the appropriate and effective activities

or strategies to maximize employee’s innovation This paper has contributed to

evaluation system of innovative work behavior level in banking industry in Vietnam, especially in dynamic city like Ho Chi Minh City Moreover, the result of this research would be reference source for researchers in banking human resource management

2 Literature review and hypotheses

Although the literature on innovation in banking service is sparse, there seems to some agreement among researchers that using and implementing theories of innovation

developed only on the basis of industry observations are inadequate for studying

innovations in service organizations in general and in banking industry in specifically (Gadrey et al., 1994) Dejer (2004) employed the same concepts and tools that are used for innovation in manufacturing organizations for service innovation Coombs and Miles (2000) suggest three ways of studying service innovation: “an assimilation approach”; “a demarcation approach”; and “a synthesis approach”

The first way treats services as being similar to manufacturing; the second one states that service innovation is clearly various from innovation in manufacturing; and the third one

suggests that service innovation brings to the forefront hitherto neglected elements that are relevant for both manufacturing and service industries The demarcation and

assimilation approaches are dominant in empirically based analyses of Dejer (2004) This study has followed the demarcation approach in order to study the drivers of innovation Since the first reason for this choice is that banking industry is defined as a service sector, which has a totally different foundation from manufacturing (Parasuraman et al., 1985); the second reason relates to my focus on innovation at the individual level Specifically, I

am interested in the drivers to service employees’ innovative behavior within a specific work role, which refers to sale employees’ having a frontline job Consequently, it is reasonable to assume that the demarcation approach has the best potential for

contributing to our understanding of innovative behavior in sale employee in banking service job Following this line of reasoning, it is now to turn to the characteristic of sale employee and the definition of the concept of innovative behavior

According to Slatten, Svensson and Sværi (2011), the empowering leadership and

humorous work climate had the effect on service employees’ creativity and innovative behavior in frontline service jobs, specifically in hospitality (see figure 1) It is quite suitable for the study to examine the factor affecting to sale employee’s creativity and innovative work behavior in the banking industry due to the similar characteristic of two service industries Thus, the study was carried out by borrowing the model of previous study of Slatten, Svensson and Sværi (2011) The figure 1 shows the relationship among research variables of the borrowed study

Figure 1 Borrowed research model

In order to examine this model in the banking industry, challenge work environment was selected to replace the humorous work climate due to the target pressure of banking industry With the new variables, the proposed research model of this study is showed as below (figure 2):

Figure 2 Proposed research model

2.1 Sale employee’s creativity and innovative work behavior

Sales employee is a person who sells a company's products and services For bank, they sell the bank services such as savings, loan, and other products As well as approaching potential customers with the aim of winning new business; sales employees work to maintain good relationships with existing clients, gaining repeat business wherever

possible

It is accepted there are several examples for sale employee’s daily working: Search customers (individuals, households and economic organizations ) has needs: loan or use the services of the bank (savings deposits, deposit paid and the amenities other useful); Contact customers, based on customer needs and the ability to provide services, utilities, banking and give advice to guide the customer to complete the necessary procedures prescribed by the bank; Appraising customers borrowing requirements of reputation, business capability, scale of operations, financial position, business performance, plans business, the ability to repay principal and interest , collateral debt ;Create credit

contracts, mortgage contracts and records related documents; Check using loans as

stipulated by the bank and monitor the repayment of principal and interest under the contract

Sale employee is considered as frontline service employees who always represent for their company to contact with customers They are critical to customers’ evaluations of the service encounter Since they meet lots of customers, they consequently create a new and innovative way to approach a new kind of customer, a new kind of needs in order

more completely to customize or personalize the service offered

Creativity is the prerequisite for an organization’s innovation, effectiveness, and term survival and enables an organization’s adjustment to take advantage of emerging opportunities (Majdar, Oldham and Pratt, 2002) Creativity at the individual employee level is considered to be the first step toward innovation at the organizational level (Amabile, 1988; Woodman et al., 1993) As creativity has been recognized as a key contributor to organizations’ innovation, growth, and competitiveness, researchers in the field of organizational behavior have devoted considerable effort to identifying personal and contextual factors, as well as factors related to employees’ work environment, that promote creativity

long-West and Farr (1989) defined that innovative work behavior (hereafter “IWB”) is known

as the intentional creation, introduction, and application of new ideas within a work role, group or organization, in order to benefit role performance, the group, or the

organization Moreover, Far and Ford (1990) define innovative work behavioras an individual’s behavior that try to reach the initiation and intentional introduction (within a work role, group or organization) of new and useful ideas, processes, products or

procedures In addition, Batteman and Grant (1999) stated that innovative work behavior

is the direct and intention behavior to change something in a way of creating different conditions with the current situation at the time In another definition, innovative work behavior was defined as idea generation and application either as individual tasks, group

or organization by De Jong and Den Hartog (2007)

Similarly, Janssen (2000) stated that innovative work behavior is regarded as employee behavior which create, introduce, and apply new ideas intentionally within a work role, a group, or an organization that are beneficial to performance According to Grant (2000), innovative work behavior is considered as a very crucial factor for the survival of an organization due to its benefit to the organization

Whereas IWB differs from employee creativity which is defined as the production of new and useful ideas concerning products, services, processes and procedures (Amabile, 1988) due to the implementation of ideas of IWB, creativity is confirmed as a crucial factor related to innovation (Amabile, Conti, Coon, Lazenby and Herron, 1996) Creative ideas become the very first step of innovation process when Van de Ven (1986) identified that creativity is the foundation of innovation ideas

Consequently, the perception of creativity and innovation are apparently related Due to the characteristic of banking work role, employees are often passive to do follow by the available procedures They lack of creativity when dealing with customers’ problems Therefore, it is reasonable when this study assume that creativity will helps banking employees to be more innovation in his/ her work behavior when offering a banking service to customer This study supposes a direct link between employees’ creativity and their innovative work behavior in such a banking work environment Accordingly, it is proposed:

H1: Employee’s creativity is positively related to sales employee’s innovative work

behavior in banking industry

2.2 Empowering leadership and employee’s creativity

Although there have not many previous researches for the testing of relationship between empowerment and employees’ creativity, especially in sales banking services,

empowering leadership has been mentioned as a leadership style able to influence

employees’ creativity According to Zhang and Bartol (2010), empowering leadership is considered as a “leadership approach with considerable promise of influencing employee creativity” (p.109)

Empowering allows employees the responsibility and authority needed to act quickly without a long process of command (Hart, James, & Sasser, 1990; Lewis & Gabrielsen, 1998) With the empowerment, employees could control over many situations of the service delivery (Hartline & Ferrell, 1996) Moreover, they can learn the connection between their actions and customer value when they response to dissatisfied customers (Dover, 1999) As the matter of fact, there is substantial evidence that empowerment has

a significant influence on job satisfaction and organizational commitment (Babakus, Yavas, Karatepe & Avci, 2003) Barbakus et al (2003) stated that empowerment is considered as an essential factor related to service excellence Although empowerment has been linked to service excellence, there seems to be not many researches to test the relationship between empowering leadership and creativity Forrester (2000) defined when managers give the freedom and ability to his or her employees to make independent decisions and commitments, this called empowering leadership This definition clearly emphasized employee self- determination or decision-making autonomy, which the

service employee should have

This idea also is supported in the creativity’s literature, which has emphasized the

perception of autonomy and participation in decision-making as crucial factors for

creative objectives among employees (Amabile, Schatzel, Moneta & Kramer, 2004) In this study, empowering leadership is assumed to positively link with employees’

creativity Therefore, the first hypothesis is proposed:

H2 Empowering leadership is positively related to sales employees’ creativity in banking

industry

2.3 Challenge work environment and creativity

It is accepted that work environment has been emphasized as a crucial factor for any organizations (Schneider, 1980) The working environment is a part of the overall system which determines whether work proceeds properly Many researchers confirmed that environment has also been assessed to enhance operations and performance and has had a significant effect on the financial performance of any organization (Ekvall &

Rykhammer, 1998; Schuster, Dunning, Morden, Hagan, Baker & McKay, 1997) Sim and Keon (1997) showed that work environment has been one of important factors in the retention of employees Employees will be more comfortable, will perform better, and will stay on the job longer, the organizations will be more effective when characteristics

of the individual and the work environment are compatible (Kristof, 1996; Ostroff & Rothausen, 1997)

Ekvall (1996) defined that challenge work environment has been one of ten internal

conditions for creative behavior and performance Challenge was described as the degree

to which members of the organization are involved in its daily operations and long term goals In a high challenge work environment, people are intrinsically motivated to make contributions, find joy and meaningfulness in their work, and invest much energy in their daily working After empirically testing ten environment dimensions and their linkages with product innovation between groups of ten organizations, Ekvall (1996) revealed that higher challenge work environment were significantly more innovative than those that reported lower challenge work environment In this study I focus on banking employees’ experiences and perceptions of a challenge work environment in their

organization Specifically, challenge work environment focuses on two aspects The first relates to whether one use challenge to create their effort to create the new things in their job The second aspect relates to whether one’s place of work is characterized by

challenge It is assumed that these two aspects reflect a person’s overall perception of their environment in relation to challenge work environment Ekvall (1996) supported a positive relationship between challenge work environment and creativity when he

suggests that a challenge work environment is strongly encourages people to engage in creative thinking, which leads to innovations Consequently, on the basis of this

discussion, I propose a hypothesis:

H3 A challenge work environment is positively related to sales employees’ creativity in

banking industry

3 Methodology

3.1 Procedure and sample

Ho Chi Minh City was considered as a survey place because it is the most populous city

in Vietnam with the huge number of dynamic labor workforce gathered in this city to work Therefore, Ho Chi Minh City was the most suitable place for us to carry out this research This study consisted of two phases, a pilot study and a main survey, were

undertaken to collect data for testing the proposed model Participants were sales

employees from many bank’s representative such as: Vietinbank, Vietcombank, BIDV, Agribank, ANZ Bank, HSBC, Nam A Bank, Ocean Bank, Sacombank, ACB, OCB, Citibank, Eximbank, Techcombank, VIB …

At the beginning, when approaching a respondent for interview, the interviewer asked the respondent to list three innovative work behaviors that he or she had done during his or her daily working activity After that, in order to easier answer the questionnaire, the interviewer chose the most three innovative work behaviors for respondents to randomly selected to answer the question These are innovative work behaviors in: customer

services; bank policy procedures: documents, financial analysis, and problem solving; finding new and potential customers; and others such as arrange working place, store documents, folders and reports scientifically and systematically

The pilot study was implemented just only preliminary survey The objective of this preliminary survey aimed to make sure that they are suitable for the Vietnamese context Therefore, in the preliminary phase, in-depth interviews will be carried out with

a sample of 15 sale employees during the first week in June 2016 They answered directly

to the interviewer using the open questions like expectation in their job, what they do for

a better job Moreover, I also showed the planned questionnaire to check whether all the participants have the clear understanding on what we prepare to ask in the main

questionnaire later

Hachter (1994) pointed out the minimum sample size is equal or larger 5 time of variables (n>5k) This study has totally 5 constructs with 26 variables so the minimum sample size is: n= 26 x 5 = 130

The main survey was also undertaken with qualitative method by sending

questionnaire form in Google Docs with a convenience sample of 370 sale employees The survey was sent via Google Docs due to its advantages over the other method such as low costs, convenient for both the participants and the interviewers, and easy to access to the sample A total number of 392 questionnaires were delivered to sale employees in 15 banks in Ho Chi Minh City and collect 370 samples after deleting 22 incomplete

responses

In 370 participants, there had 232 (62.7%) sales employees and 138 (37.3%)

relationship managers in surveyed banks Among this, they indicated that customers services is the stage which they had the most innovative work behavior with 140 people (accounted for 37.8%); 130 (35.1%) had the innovation in bank policy procedures such as: documents, financial analysis, and problem solving; 88 (23.8%) had the innovation in finding new and potential customers; and 12 (3.2%) for others

There was a slight difference between female and male sale employees with 178

characteristics of the credit department in bank, it is easy to understand when the number

of male was greater than the number of female There were two age groups in this survey:

181 (49%) sale employees who were from 22 to 30; and 189(51%) sale employees with the age from 31 to over 35

Additionally, the survey result revealed that 29 (7.8%) sale employees having college; 177 (47.8%) sale employees having bachelor degree, and 164 (44.3%) having master degree This showed that the education level more and more develop

Finally, for the experience in their working bank, there were 182 (49.2%)

respondents having 1 to less than 3 year working in banking industry, 188 (50.8%)

respondents having from 3 to over 5 years in banks

The satisfied questionnaires, after screening, were coded and input the raw data in SPSS version 20 Cronbach’s Alpha and Exploratory factor Analysis would evaluate the reliability and validity of measurement scales Then, confirmatory factor analysis (CFA) was performed to identify whether the measurement variables reliably reflected the

hypothesized latent variables A structural equation modeling (SEM) with latent variables via AMOS 20 was tested to determine the adequacy of the constructs of the model and test the hypotheses

Table 1 Descriptive Statistics of Sample

There were four constructs were examined in this study: empowering leadership,

challenge work environment, sale employees’ creativity, and innovative work behavior The structured questionnaire was employed with most of the items having been

developed from different sources in previous studies Moreover, the questionnaire was pre-test On the basis of thorough comments from professor, friends, co-workers, and direct participants in the pre-test, I reworked a few questions for the sake of improving validity and clarity The collected data from pre-test was not used in the subsequent

analysis The source of each construct and their items were as follows:

Empowering leadership was measured by five items rated by sale employees, borrowed from Babakus et al (2003)

Challenge work environment was chosen from ten climate items that affect creativity in organizations of study of Isaksen, Lauer and Ekvall (1999) The items for this construct were developed specifically for Vietnamese context based on the results of the

preliminary pilot study Results from the preliminary pilot study indicate that challenge makes sale employees want to have some innovative things to make their job smoothly For example, a respondent expressed her own opinion about the challenge as follows: “I feel excited with the challenge which the bank creates; I want to win all challenge in my job” So that, the four following items were used: “Challenge is characteristic of banking environment”, “I use challenge as a part of my effort to create new things in my working place”, “I see that the working environment in my bank always changes”, and “I am always required to update knowledge in my bank”

Creativity was measured by seven items scale which adopted and modified from Zhou and George (2001)

Finally, innovative work behavior was measured by ten items using items from Janssen (2000), it showed how often employees perform those innovative work behaviors in their office

All items were seven-point Likert- type scale ranging with 1 = strongly disagree and 7 = strongly agree The questionnaire formed originally in English Later, it was translated into Vietnamese to suit for all units of observations After that, back translation was undertaken to make sure the equivalence of meanings The questionnaire was consisted

of three parts: individual information, main questions, and demographic information

Table 2 Measurement scales

EMPOW2 I am encouraged to handle customer problems by

myself

EMPOW3 I do not have to get management’s approval before

I handle customer problems

EMPOW4 I am allowed to do almost anything to solve

CHAL7 I use challenge as a part of my motivation to create

new things in my working place

CHAL8 I see the working environment in bank X always

CREAT11 I often come up with new and practical ideas to

improve performance

CREAT12 I often suggest new ways to increase quality

CREAT13 I often promote and champion ideas to others

CREAT14 I often develop adequate plans and schedules for

the implementation of new ideas

CREAT15 I often come up with creative solutions to

INNOV18 I often wonder how things can be improved

INNOV19 I often find new approaches to execute tasks

INNOV20 I often mobilize support for innovative ideas

INNOV21 I am important organizational members

enthusiastic for innovative ideas

INNOV22 I often attempt to convince people to support an

innovative idea

INNOV23 I often transform innovative ideas into useful

applications

INNOV24 I often systematically introduce innovative ideas

into work practices

INNOV25 I often contribute to the implementation of new

ideas

INNOV26 I often put effort in the development of new things

4 Data analysis and results

4.1 Measure validation

After data collection was completed, the Statistical Package for Social Sciences (SPSS) and SPSS AMOS 20.0 were used to analyze Firstly, the reliability tests Cronbach’s Alpha and EFA (exploratory factor analysis) were applied to the data of the main survey (n=370) in order to conduct a preliminary test of the validity and reliability of the scales

to measure the construct Secondly, CFA (Confirmatory factor analysis) was conducted Finally, SEM (structural equation modeling) is applied to test the relations between latent, observed variables and hypotheses

Cronbach’s Alpha is the most common tool to measure the internal consistency

reliability This alpha is calculated with an assumption that the scale is unidimentional That is the reason why factor analysis technique is employed to check the

unidimensionality of the scale

Cronbach’s alpha reliability coefficient normally ranges between 0 and 1 The closer alpha coefficient is to 1.0 the greater the internal consistency of the items in the scale The size of alpha is determined by both the number of items in the scale and the mean inter-item correlations It is accepted by provide the following rules: α > 9 (Excellent); α > 8 (Good); α > 7 (Acceptable); α > 6 (Questionable); α > 5(Poor); α <

.5 (Unacceptable) Moreover, the corrected item-total correlation of all these scales also met the criterion of above 0.30

For the first running the Cronbach’s alpha, the results indicated that all Cronbach’s alphas

of the scales were greater than 0.6 (from 0.690 to 0.919); however, the corrected total correlation of 4 items: CREAT12, CREAT14, INNOV22, and INNOV24, were lower than 0.3 Therefore, four items were deleted to run the second time of cronbach’s alphas In the second running, the results were better due to the higher cronbach’s alphas (from 0.8 to 0.932) for four constructs Consequently, these were satisfied the

item-requirement of internal consistency

There are several criteria to test the factorability:

- Sampling adequacy: measured by Kaiser – Meyer – Olkin (KMO) and Bartlett’s test

of Sphericity The factor analysis is considered appropriate when the KMO should be from 0.5 to 1, and the significant of Bartlett‘s test should be smaller than 0.05

- Total Variance Explained need to be more than 50 %

- The Eigen-value of each factor must above 1 to be accepted

- Convergent validity: all items comprising a scale must load highly (> 0.40 or 0.50) on the factor representing the underlying construct

- Discriminant validity: No item load highly (> 0.40 or 0.50) on more than one factor The difference between cross-loading of a certain item need to be more than 0.3

Next, a technique to evaluate interdependence EFA was used In this research, EFA is

applied to test the model with The Kaiser-Meyer-Olkin (KMO) and Bartlett’s test

by using the Principal Axis Factoring with Promax rotation The Barlett result with significant value of Sig = 000 (p<0, 05), the KMO index (0.909) index was quite good, was greater than 0.6 according to Kaiser (1974) indicates the factor analysis is

appropriate The EFA extracted four factors, corresponding with the four constructs used

in the theoretical model

Gerbing and Anderson (1988) insisted that Principal-Axis Factoring is relatively equal in their capacities to extract the correct model and is more commonly reported in social and behavioral science research reports than Principal Components with Varimax rotation These techniques are employed since it was able to explore and eliminate weak relation factors in order to generate common variance explained by least number of variables Principal Axis Factoring is highly recommended for structural equational modeling (SEM) as both of them take the similar manner to produce linear correlations between factors

To ensure the practical significance of EFA, Factor Loading should be equal or higher than 0.5, Total Variance Explained is over 50% (Gerbing &Andension, 1998) In the study, all factor loadings were greater than 0.50 and total variance extracted (64,376%) was greater than 50 percent These EFA results indicate that all the measures of

constructs satisfied the requirements for the factors extracted, factor loadings and total variance extracted

Again, four constructs were previously examined: empowering leadership, challenge

work environment, creativity, and innovative work behavior The scales measuring these constructs were refined via Cronbach’s alpha and EFA using the data set (n = 370)

collected in the main survey Therefore, all measures for factors affecting sale

employees’ creativity and innovative work behavior were satisfied to go the confirmatory factory analysis later

4.2 Confirmatory Factory Analysis (CFA)

Prior to conducting structural equation modeling (SEM), a measurement model was assessed using AMOS 20 The items were subjected to a confirmatory factor analysis (CFA) with a four-factor measurement model using maximum likelihood estimation Confirmatory Factory Analysis is a better method to assess the validity and reliability of measures The goodness-of-fit of CFA is used to further assess the unidimensionality and convergent validity among the constructs

CFA is applied with following indexes: Chi-square, Chi-square/df, Comparative Fit Index (CFI), Tucker & Lewis Index (TLI), Root Mean Square Error Approximation (RMSEA) All factors are reliability for the next analyzing steps if GFI, TLI and CFI are equal or above 0.9 (Bentler & Bonett, 1980); Chi-square/df is equal or lower 2 (Chisquare/df ≤3 can be accepted in some cases) (Carmines & McIver, 1981); and

RMSEA is equal or lower 0.08 (RMSEA ≤ 0.05 is excellent) (Steiger,1990)