Linking Human Capital and Organisational Innovative Capabilities of Financial Institutions: Evidence from a Developing Country of South Asia

Abstract

Organisational collective knowledge plays an important role in innovation and also provides a competitive advantage. Human Capital (HC) is the sum total of intelligence found in individual human beings and consists of individual’s learning and education, experience and expertise, and personal creativity and innovation. Researchers believed that only innovative organisations are going to survive in future in the knowledge-economy. The present research is aimed to study the impact of HC on Innovative Capability (IC) of a financial institution. This impact is empirically tested through a cross-sectional survey in which randomly selected 170 participants of a commercial bank verified the four proposed hypotheses. The findings endorsed four aspects of the study. First, HC was influenced by bank officers’ skills/competence, knowledge, abilities, personal mastery and their transformational leadership role. Second, IC of the bank has been found influenced by support for innovation available to bank officers, bank officers’ innovative behaviour, and tolerance for difference available to them. Third, the bank officers’ leadership role, personal mastery, and their abilities were significant and positively related to bank’s IC, whereas, bank officers’ knowledge was significant but negatively related to bank’s IC. Finally, the fourth finding of the study suggested that bank’s collective HC is having a positive relationship with bank’s IC. The study would help managers to identify important HC elements suitable for financial organisations that could have an impact on its IC.