The mediating role of innovation in the relationship between organizational culture and organizational performance in Pakistan's banking sector

• Published date: 01 December 2022
• Author: Muhammad Imran,Fadillah Ismail,Imran Arshad,Faheem Zeb,Hasan Zahid
• Date: 01 December 2022
• DOI: http://doi.org/10.1002/pa.2717

RESEARCH ARTICLE

The mediating role of innovation in the relationship between

organizational culture and organizational performance in

Pakistan's banking sector

Muhammad Imran

1

| Fadillah Ismail

1

| Imran Arshad

2

| Faheem Zeb

3

|

Hasan Zahid

4

1

Faculty of Technology Management and

Business, Universiti Tun Hussein Onn

Malaysia, Batu Pahat, Malaysia

2

Department of Business Administration, Salim

Habib University, Karachi, Pakistan

3

Business School, Qingdao University,

Qingdao, Shandong, China

4

Department of Business Administration, Iqra

University, Karachi, Pakistan

Correspondence

Muhammad Imran, Faculty of Technology

Management and Business, Universiti Tun

Hussein Onn Malaysia, Batu Pahat, Johor

86400, Malaysia.

Email: imran29sims@gmail.com

This study explores the mediating role of innovation in the relationship between the

dimensions of organizational culture and organizational performance. The study used

questionnaire data taken from 250 managers of banks in Pakistan. Structural equa-

tion modeling was used to test hypotheses. The results indicate that while the dimen-

sions of organizational culture and innovation have a clear and positive influence on

organizational performance, organizational culture and mission have an insignificant

relationship with organizational performance in the presence of innovation. These

results give organizations valuable insights to compete against environmental

changes by effectively implementing innovations, especially in Pakistan's banking

sector. The findings illustrate that mechanisms to boost an organization's innovative

culture can enable the implementation of innovation, that in turn, can contribute to

superior organizational performance. In extant literature, organizational culture has

been examined as one of the factors that influences organizational performance.

However, there is a lack of empirical studies on the relationship between organiza-

tional culture and organizational performance. Besides, as a factor of organizational

performance, several investigators have considered innovation, but few have studied

organizational innovation as being affected by organizational culture. This study

explores the link between organizational culture, organizational performance and the

role of innovation in this relationship.

KEYWORDS

banking sector, innovation, organizational culture, organizational performance, Pakistan

1|INTRODUCTION

Organizations strive to increase performance, and organizational cul-

ture has been recognized as a crucial factor toward better perfor-

mance (Jacobs et al., 2013; Martinez et al., 2015). Researchers have

highlighted the importance of organizational culture in several factors

related to organizational performance, such as employee job satisfac-

tion (Yiing & Ahmad, 2009); organizational change (Cabrera

et al., 2001; Rashid et al., 2003); productivity (Uddin et al., 2013); and

employee turnover (Habib et al., 2014). Similarly, the last few studies

have shown that innovation positively affects organizational perfor-

mance (Hogan & Coote, 2014; Valdez-Juárez et al., 2016). Innovation

is generally regarded as a competitive tool for organizational perfor-

mance and an imperative means of facilitating the organization's

changing environment (Kostis et al., 2018). Therefore, almost all orga-

nizations strive to promote organizational culture, understand how it

is nurtured and develop organizational innovations. Many researchers

have explored the influence of innovations on different organizational

capabilities in the context of organizational culture (Abdi &

Senin, 2014; Büschgens et al., 2013; Efrat, 2014; Shahzad

Received: 17 February 2021 Revised: 13 June 2021 Accepted: 26 June 2021

DOI: 10.1002/pa.2717

J Public Affairs. 2022;22(Suppl. 1):e2717. wileyonlinelibrary.com/journal/pa © 2021 John Wiley & Sons Ltd. 1of15

https://doi.org/10.1002/pa.2717