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Predicting overall Staffs’ Creativity and Innovative Work Behavior in Banking Ho Thanh Tri FaME, Tomas Bata University in Zlin, Czech Republic based at Industrial University of Ho Chi Minh City, Vietnam. hothanhtri@gmail.com Vo Thi Nga FaME, Tomas Bata University in Zlin, Czech Republic based at Hoa Sen University of Ho Chi Minh City, Vietnam. ngavongoc789@gmail.com Juraj Sipko FaME, Tomas Bata University in Zlin, Czech Republic jurajsipko@gmail.com Abstract. This study focuses on the impact of empowering leadership and challenges work environment on both sale employee’s creativity and innovative work behavior in the Vietnamese banking industry. An empirical test, a structural equation model comprising a sample of 319 sale employees in 15 banks, indicates a strong relationship between sales staff creativity and innovative work behavior. Moreover, the findings indicate that both an empowering leadership and a challenging work environment can trigger sale employees’ creativity. Finally, innovative work behavior has a positive impact on innovative output. In general, this study contributes with some suggestions for bank managers to identify appropriate methods in order to stimulate the creativity and innovative work behavior of employees with the objective of achieving strong and sustainable business performance. Keywords: employee’s creativity, empowering leadership, challenging work environment, innovative work behavior, innovative output, Vietnamese banking industry Introduction According to Drucker (1993) any organization refusing to innovate will see its decline culminating in its downfall. Innovation is essential for long - term organizational prosperity. This is especially true in dynamic markets (Patterson et al., 2009). Lin and Liu (2012) concluded that innovation was a crucial factor that could bring sustainable competitive advantages which could be used to deal business environment in rapid change. Thus, how does a business begin to innovate? Many scholars confirmed that innovations come from the creative ideas of employees – a vital factor of organizational creativity (Woodman et al., 1993). Therefore, stimulating the creative ability of employees is one of the decisive factors bringing success to an organization (Walton, 2003). West (2002) stated that creativity can be regarded as an important factor for innovative work behavior. Although innovative work DOI: 10.2478/mmcks-2019-0013 Unauthenticated Download Date | 1/3/20 5:50 PM MMCKS 189 behavior is a popular topic for research among scholars all over the world, research resources on this topic are still limited in Vietnam. Innovative work behavior of people working in the service industry is the key factor that positively contributes to the performance of service businesses. The banking industry is a prime example. Schumpeter (1968) suggested that the creative process contributes to the economic development. It is necessary for organizations to encourage creativity among employees in order to promote innovative work behavior. As a matter of fact, due to specific characteristics of banking jobs, employees are often required to comply with the existing regulations and procedures of banks instead of promoting their ability and creativity. Moreover, policies that stimulate innovations have not been broadly and strictly applied among banks. Apparently, most employees are still passive as they only perform assigned tasks and make a change if their supervisors ask them to do so. Consequently, employees do not make headway in doing tasks on a daily basis, and this has a serious impact on the performance of banks. Therefore, finding factors that improve the innovative work behavior of each employee and enhance the quality of human resources has been considered as a critical solution for the banking sector to meet the requirements of new development in recent years. Particularly, sales employees are considered as a key labor force of banks in creating revenue. The sales staff of the banking industry are required to deal directly with customers in order to bring revenue to the bank (Minh et al., 2013). The quality of human resources complying with the development of the banking sector in Vietnam is still low. The majority of bank employees still lack skills, such as English proficiency, interpersonal skills, teamwork, communication skills, knowledge of the existing financial and banking sector as well as the flexibility in daily activities (Nham & Phan, 2015). Therefore, this paper aims to demonstrate that the service employee creativity is the vital precondition for innovative work behavior in organizational banking services. In order to understand which factors can influence sales employee’s creativity and innovative work behavior in the banking environment, this study examines two factors: empowering leadership and challenging work environment. The authors focus on an individual level of creativity and innovation, analyzing them from a banking sales employees’ perspective. This study examines only the impact of two factors that can trigger sales employees’ creativity and innovation at the individual level, namely: (1) The empowering leadership; and (2) challenging work environment. The objective of this research is to identify factors that affect creativity and innovative work behavior of sales employees in the Vietnamese banking industry, and to measure the degree of their impact. Theoretical background and hypothesis development Although the literature concerning innovation in the banking service is sparse, researchers seem to agree on the fact that the observation on the use and implementation of theories about the innovation of industry are inadequate to study innovations in service businesses, in general, and in the banking industry in particular (Gadrev et al., 1995). Drejer (2004) adopted the same concepts and tools that are used to study innovations. Coombs and Miles (2000) suggested three ways of studying service innovation including “an assimilation approach”; “a demarcation approach”; and “a synthesis approach.” The first approach treats service innovation similarly to manufacturing innovation; on the hand, the second one stated Vol. 14, No. 2, Summer, pp. 188-202, ISSN 2069–8887| Management & Marketing. Challenges for the Knowledge Society Unauthenticated Download Date | 1/3/20 5:50 PM MMCKS 190 that service innovation is different from manufacturing innovation; and the third one suggested that service innovation brought to the forefront hitherto neglected elements of innovation that were relevant for both manufacturing and service industries. The demarcation and assimilation approaches are dominant in the empirically based analyses of Drejer (2004). This study uses the demarcation approach to examine the drivers of innovation There are two reasons for the selection of the demarcation approach: firstly, the banking sector, which is part of the service one, is very different from the manufacturing sector, and, secondly, this study focuses on innovation at the individual level. Epecifically, the authors are interested in drivers of innovation of frontline employees. As a result, the authors believe that the demarcation approach may be best used to contribute to a deeper understanding of the innovative behavior and innovation output for those who work in banking sales jobs. The hypotheses are developed taking into account of the characteristics of banking jobs. Empowering leadership and sale employee’s creativity Although there has been little research testing the relationship between empowerment and creativity of banks’ sales employees, empowering leadership was suggested as a style of leadership that can affect the creativity of service employees. According to Zhang (2010), empowering leadership is considered as a “leadership approach with the considerable promise of influencing employee creativity”. Empowering grants employees the responsibility and authority they need to act quickly without a long command chain (Hart et al., 1990; Lewis & Gabrielsen, 1998). Empowerment enables employees to gain control over the service delivery (Hartline & Ferrell, 1996). Moreover, they can learn the link between their actions and customer values when they respond to unhappy customers (Dover, 1999). As a matter of fact, there is considerable evidence that empowerment has a significant influence on job satisfaction and organizational commitment (Babakus, Yavas, Karatepe & Avci, 2003). Babakus et al. (2003) stated that empowerment is considered as an essential factor related to service excellence. Forrester (2000) stated that empowering leadership is a leadership style in which employees perceive their managers as someone who provides employees with freedom and ability to make independent decisions and commitments. This definition clearly emphasized that service employees should be granted self-determination or decision-making autonomy. Throughout the creativity literature, the perception of autonomy and participation in decision-making processes are considered vital factors for creative objectives among employees (Amabile et al., 2004). In this study, it is hypothesized that empowering leadership is positively linked with employees' creativity. Hypothesis 1a: Empowering leadership is positively related to sales employees’ creativity in the banking industry. Challenge work environment and employee’s creativity It is generally recognized that the work environment is a crucial factor for service businesses (Schneider, 1980). The working environment is part of the system that ensures that work proceeds properly. Many researchers confirmed that working environment is seen as a way to improve operational and financial performance of any organization (Ekvall & Ryhammar, 1998; Schuster et al., 1997). Sims and Keon (1997) showed that working environment plays a key role in the retention of employees. Employees will be more comfortable, perform Vol. 14, No. 2, Summer, pp. 188-202, ISSN 2069–8887| Management & Marketing. Challenges for the Knowledge Society Unauthenticated Download Date | 1/3/20 5:50 PM MMCKS 191 better, and stay in the job longer if they find out that individual characteristics and the work environment are compatible, increasing the productivity and efficiency of the organization (Kristof, 1996; Ostroff & Rothausen, 1997). Ekvall (1996) defined that a challenging work environment is one of ten internal conditions for creative behavior and performance highly correlated with 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 challenging work environment, people are intrinsically motivated to make contributions, find joy and meaningfulness in their work, and spend more energy in their daily tasks. After empirically testing the ten dimensions of environmentand their linkages with product innovation between groups of ten organizations, Ekvall (1996) revealed that employees working in highly challenging work environment were found to be more innovative than those who working in a different environment. In this study, the authors focus on banking employees’ experiences and perceptions of a challenging work environment in their organizations. Therefore, the challenging work environment is characterized by two aspects. First of all, employees must be motivated to become innovative by being challenged in the workplace. Secondly, the workplace must be characterized by a high degree of challenge. Isaksen et al. (1999) suggested that there is a positive relationship between challenging work environment and employees’ creativity as a challenging work environment strongly encourages them to engage in creative thinking which leads to innovations. Consequently, this study proposes a hypothesis that, to some degree, a challenging work environment is positively correlated to sales employees’ creativity in the banking industry. Hypothesis 1b: A challenging work environment is positively related to sales employees’ creativity in the banking industry. Sale employee’s creativity and innovative work behavior Far (1990) defined innovative work behavior as an individual’s behavior towards reach initiation and intentional introduction (within a work role, group or organization) of new and useful ideas, processes, products or procedures. Similarly, Janssen (2000) stated that innovative work behavior is regarded as an employee who intentionally creates, introduces and applies new ideas that benefit performance within a work role, a group, or an organization. Whereas innovative work behavior differs from employee creativity, which is defined as the production of new and useful ideas concerning products, services, processes, and procedures (Amabile et al., 1996), creativity is confirmed as a crucial factor related to innovation due to the implementation of ideas of innovative work behavior (Amabile & Pratt, 2016). Van de Ven (1986) defined creativity as the foundation of innovative ideas, suggesting that creative ideas become the very first step in the innovation process. Consequently, creativity seems to be connected to innovation. As a result of the characteristics of banking jobs, employees are often passive as they must follow procedures available in that environment and they lack creativity when dealing with customers’ problems. This study proposes that creativity helps banking employees to be more innovative in their work behaviors when offering services to customers. Moreover, this study hypothesizes that there is a direct link between employees’ creativity and their innovative work behavior. Hypothesis 2: Employee’s creativity is positively related to sales employee’s innovative work behavior in the banking industry. Vol. 14, No. 2, Summer, pp. 188-202, ISSN 2069–8887| Management & Marketing. Challenges for the Knowledge Society Unauthenticated Download Date | 1/3/20 5:50 PM MMCKS 192 Innovative work behavior and innovative output Once the tasks delegated to employees are fully concentrated on innovation, many measures of innovative output may exist. According to De Jong and Den Hartog (2007), the innovative output is used more often in analyzing the measures of innovation work behavior. This study follows the approach of West (2002), using employees’ self-ratings of innovative output. Many innovative outputs may arise from an innovative work behavior, for instance, new ideas for available products or services or new products and services being developed. Therefore, the third hypothesis is anticipated: Hypothesis 3: Innovative work behavior is positively related to innovative output. On the basis of the literature review analysis, Figure 1 shows the relationships among research variables. Empowering leadership H1a+ Sales employee’s creativity Challenging work environment H2+ Innovative work behavior H3+ Innovative output H1b+ Figure 1: Research model Source: Authors’ own research Methodology Procedure and sample Ho Chi Minh City was chosen as survey place since it is the most populous city in Vietnam with a huge number of dynamic labor workforce. Therefore, Ho Chi Minh City is the most suitable location for authors to carry out their research. This paper consists of two phases, a pilot study and the main survey, which were undertaken to collect data for testing the proposed model. Participants were sales employees selected from representatives of many banks such as Vietinbank, Vietcombank, Agribank, ANZ Bank, HSBC, Nam A Bank, Ocean Bank, Sacombank, ACB and OCB. These represented the five kinds of banks in Vietnam, namely state-owned banks, joint stock commercial banks, joint-venture banks, wholly foreign-owned banks, and foreign bank branches. Pilot survey The pilot study was conducted using a qualitative survey. The purpose of the qualitative survey is to fit the context of Vietnam. In-depth interviews were carried out in the first week of June 2018 with 12 sales employees of Vietinbank and Vietcombank. Employees answered open questions made directly by interviewers about their job expectations and what they would do to improve their jobs. Meanwhile, the authors showed this questionnaire to all participants in order to check if they understand it clearly. Vol. 14, No. 2, Summer, pp. 188-202, ISSN 2069–8887| Management & Marketing. Challenges for the Knowledge Society Unauthenticated Download Date | 1/3/20 5:50 PM MMCKS 193 Sample size There are five factors with 23 items in the questionnaire of this study. Moreover, the main survey was delivered using qualitative questionnaires containing the same set of questions in Google Docs. The survey was created using Google forms and sent to a group of participants in order to gather information from respondents. Answers of respondents were saved to a Google Sheets spreadsheet. The use Google forms allowed interviewers to collect information from the surveys more easily and to reduce costs. 325 out of 350 participants responded, thus the response rate of the survey was 92%. After handling missing data, the appropriate feedbacks were 319. Therefore, the final data were obtained from 319 valid responses. Sample characteristics As mentioned above, the data were collected from a sample of 325 responses. After filtering, only 319 of them were valid and could be used to proceed with the analysis. Table 1 summarizes the main characteristics of the sample. Table 1: Sample characteristics (N = 319) Profile Gender Education level Experience Working position Characteristics Male Female Bachelor Master upwards From 2 to under 5 years From 5 to under 7 years From 7 to under 10 years Over 10 years Sales employees Relationship Manager Frequency (%) 176 55.2 143 44.8 164 51.4 155 48.6 30 9.4 166 52.0 110 34.5 13 4.1 193 60.5 126 39.5 Source: Authors’ own research Statistical method This study used The Statistical Package for the Social Sciences (SPSS) version 20 and SmartPLS version 3.0 for research purpose. The analysis process was implemented as follow: Step 1: Testing the convergent validity of the model. According to Hair et al. (2018), Cronbach Alpha, factor loadings, composite reliability (CR) and average variance extracted (AVE) are the most common approaches. Step 2: Testing the structural model and hypotheses. In order to conduct the analysis, the authors used the structural equation modeling by performing partial least squares (PLS). Ali et al. (2018) indicated that PLS is a technique for estimating path coefficients in structural models. PLS algorithms identified the significance levels of the loadings, weights and path coefficients, then by bootstrapping (5000 re-sample), they determined the relationship as well as the significance levels of each the proposed hypotheses. Measure The five factors examined in this study were empowering leadership, challenge work environment, sales employees’ creativity, innovative work behavior and innovative output. The scale of this study are similar to the scales and theories used in many previous studies. The questionnaire structure was formulated considering items taken from different Vol. 14, No. 2, Summer, pp. 188-202, ISSN 2069–8887| Management & Marketing. Challenges for the Knowledge Society Unauthenticated Download Date | 1/3/20 5:50 PM MMCKS 194 literature sources. Empowering leadership was measured by four items which were rated by sale employees and borrowed from (Babakus et al., 2003) and modified using the results of the pilot study. Challenging work environment was assessed by ten creative climate dimensions in organizations which were adopted from a study of (Isaksen et al., 1999). The items were developed and customized by the results of the pilot study to fit Vietnam’s context. Results from the pilot study indicate that challenges encourage innovation in sales employees and, consequently, ensure that the work flows smoothly. Creativity was measured by five items taken and modified from (Zhou and George, 2001). Innovative work behavior was measured using items from (Janssen, 2000), showing how often employees adopted those innovative work behaviors in their office. Finally, innovative output was measured by items borrowed from (West, 2002) who believed that if employees assumed innovative work behavior they would create innovative output. The questionnaire was written originally in English and later translated into Vietnamese to fit all units of observations. To ensure the equivalency of the translated questionnaire, the questionnaire was back translated was done. A questionnaire, consisting of three parts, i.e. personal information, main questions, and demographic information was designed. All items were based on the five-point Likert- type scale ranging from 1 = strongly disagree to 5 = strongly agree. Empirical results and discussion Measurement model First, reliability and convergent validity of the measurement model were tested. According to Hair et al. (2018), Cronbach Alpha, factor loadings, composite reliability (CR) and average variance extracted (AVE) are the most common approaches. Additionally, Hair et al. (2018) indicated that items having a low Cronbach alpha < = 0.60 and a factor loading < 0.40 had to be eliminated. As shown in Table 2, the coefficient of Cronbach Alpha and all item loadings achieve the expected results. CR values depict the degree shared by a set of latent construct indicators in their measurement, while AVE values measure the variance captured by a construct related to the amount of difference due to measurement error (Hair et al., 2018). Based on the result of the research of Hair et al. (2018), the CR values should be equal to or greater than 0.7 while AVE should be higher than 0.5. Table 2. Validity and reliability of the constructs Constructs and items Empowering leadership (EL) Empowered to solve customer problems Encouraged to handle customer problems Not have to get management’s approval Control the customer problems Challenge work environment (CWE) Challenge is characteristic of the banking environment A part of the motivation to create new things The working environment always change in bank Required to update the knowledge Sales employees’ creativity (SEC) Achieve the proposed revenue’s goals Loadings Cronbach alpha 0.798 AVE CR 0.622 0.868 0.753 0.577 0.845 0.827 0.593 0.879 0.766 0.742 0.672 0.672 0.758 0.698 0.678 0.568 0.790 Vol. 14, No. 2, Summer, pp. 188-202, ISSN 2069–8887| Management & Marketing. Challenges for the Knowledge Society Unauthenticated Download Date | 1/3/20 5:50 PM MMCKS 195 Improve performance New methods Promote and champion ideas to others Develop adequate plans and schedules Innovative work behavior (IWB) Create new ideas for difficult issues Search out new working methods Support for innovative ideas. Enthusiastic for innovative ideas. Transform innovative ideas into useful applications Evaluate the utility of innovative ideas Innovative output (IO) Make suggestions to improve current services Acquire new knowledge Contribute to the development of new services Acquire new groups of customers 0.768 0.733 0.583 0.504 0.800 0.510 0.860 0.797 0.620 0.867 0.788 0.757 0.747 0.606 0.593 0.551 0.821 0.780 0.545 0.610 Source: Authors’ own research The following step is presented in Table 3 that shows the discriminant validity through the square root of each AVE. This result reveals that the AVE value is higher than the related inter-construct correlations. That indicates adequate discriminant validity for all of the reflective constructs. Table 3: Discriminant validity Empowering leadership Challenge work environment Sales employees’ creativity Innovative work behavior Innovative output EL 0.78 0.49 0.45 0.49 0.56 CWE 0.75 0.59 0.48 0.41 SEC IWB IO 0.76 0.58 0.71 0.46 0.52 0.78 Source: Authors’ own research Structural model In this part, the authors used SmartPLS version 3.0 to test the structural model and hypotheses. According to Chin et al. (2008), a bootstrapping procedure with 5,000 iterations was performed on multiple processors in order to test the statistical significance of the path coefficients. Figure 2 shows the results of the hypotheses testing. R-squared, also called coefficient of determination, is the measure of fitness of the proposed model to the observed data. Regarding model validity, Chin et al. (2008) focused on R-square values of 0.67, 0.33 or 0.19 for classifying the endogenous latent variables respectively as substantial, moderate or weak. Accordingly, sales employees’ creativity (R2 = 0.385), innovative work behavior (R2 = 0.341), and innovative output (R2 = 0.271) can be described as substantial. Vol. 14, No. 2, Summer, pp. 188-202, ISSN 2069–8887| Management & Marketing. Challenges for the Knowledge Society Unauthenticated Download Date | 1/3/20 5:50 PM MMCKS 196 Figure 2: Structural model Source: Authors’ own research Finally, Table 4 presents the complete results of the structural model and hypotheses testing presented in this study. The analytical results indicate that empowering leadership and challenging work environment influence positively and significantly the creativity factor, thereby affecting the innovative work behavior as well as the innovative output of sale employees in the banking industry today. These results contribute to the acceptance of all the proposed hypotheses. Table 4: Structural estimates (Hypothesis testing) Hypothesis H1a: EL  SEC H1b: CWE  SEC H2: SEC  IWB H3: IWB  IO Beta 0.46 0.64 0.52 0.55 t-value 8.93 12.85 12.53 10.75 Decision Supported Supported Supported Supported Source: Authors’ own research Discussion In general, this study contributes to many studies related to innovation in the banking industry. From the model abovementioned, the authors are reasonably confident that there is a good chance of a strong relationship among empowering leadership, challenging work environment and sales employees’ creativity. Moreover, the findings support the hypothesis of creativity as a stimulator for innovation (Amabile et al., 1996). Understanding innovative work behavior is crucial in the scenario of individual innovation projects. A research model on the impact of empowering leadership and challenging work environment on sales employees’ creativity and innovative work behavior was introduced. Mumford and Gustafson (1988) referred to employees’ creativity to produce new ideas. The findings supported the idea of (Amabile et al., 1996; West, 2002) that there is a direct link between employees’ creativity and innovative work behavior from the perspective of sales employees in banks, confirming the importance of creativity for innovation. Slåtten et al. (2011) and Zhang (2010) suggested that leadership styles influence employee creativity. This study confirms that there is a strong relationship between empowering leadership and employees’ creativity (with β = 0.46) and it gives support to the leader-member exchange theory (LMX) (Graen & Uhl-Bien, 1995). Consistently with the findings of Schneider (1980) it demonstrates that the work environment plays a vital role in Vol. 14, No. 2, Summer, pp. 188-202, ISSN 2069–8887| Management & Marketing. Challenges for the Knowledge Society Unauthenticated Download Date | 1/3/20 5:50 PM MMCKS 197 service businesses. The findings reveal that a challenging working environment enhances creativity in employees. Every sector has to change to adapt to the ups and downs of the economy. In Vietnam, it must be said that in recent years, the financial and banking sector has a considerable attraction in society; There was a "boom" in the banking and finance sector due to the huge social demand; There were career choices with the majority wanting to do banking; Resonance with the demand is the number of banks and branches, transaction locations are everywhere, demand for resources for the banking industry is quite large (Minh, Long, & Hung, 2013; Nham & Phan, 2015). However, there is a fact that when entering the industry. Then realized, the profession of Credit Officer (the common name of credit officers: approaching customers, appraising and deciding to lend: credit management) has too much pressure. It can be listed as follow: (1) Time pressure: Time, which is fast, timely but must ensure the requirement of accuracy. Moreover, time pressure is interpreted as taking advantage of the most suitable opportunities for each stage of economic development because its cycle has a significant impact on credit activity. However, this type of pressure is difficult to assess, and is even harder to collect, analyze, and evaluate information to make the right investment decisions. (2) The revenue target pressure is related to one of the drivers of most banks, namely assigning credit growth which is also the biggest burden of sale employees and banks in general. It becomes even more challenging when considering the number of operating banks, credit institutions, and credit market shares that exist today. (3) Pressure concerns the ability of making accurate judgment forecasts about results and responsibilities for the implementation of loan decisions. Succeeding in credit depends on many factors, e.g. economic stability, business environment, credit policy, management capacity, etc, in this light, the abilities and responsibilities of credit officers are very important. This pressure is related to the quality of credit, as it results from the demonstration of credit manager’s professional ability in managing directly the entire amount of capital, from the first investment until the end of the contract. (4) Pressure on customer identification: Credit development depends on the customers as both the bank and its sales employees follow policies to attract those kinds of customers with financial health, production and whose businesses have stable output, loans on time, etc. However, the perception of a good customer is influenced even by other factors such as the impact of each period of economic development, economic policies, state management mechanism, etc. These are objective and direct factors that affect borrowers and lenders. Conclusion, implications and limitations Conclusion and implications for managers This study is completely consistent with the actual situation in the current bank in Ho Chi Minh City - Vietnam, for the following reasons. Unlike previous years, the current staff of banks is represented by a fairly young age group with high qualification (researchers, people under the age of 35 accounted for 74.9% with those with a university level or greater for 92.2%). This is the necessary condition, the premise of creativity and innovation. However, the biggest problems in the creative activities of sale employees are critical thinking and actual creativity experience. Therefore, critical thinking for creativity is the most important factor affecting the improved behavior of employees at work. Vol. 14, No. 2, Summer, pp. 188-202, ISSN 2069–8887| Management & Marketing. Challenges for the Knowledge Society Unauthenticated Download Date | 1/3/20 5:50 PM