Assessing Impact of Employee Engagement On Innovation and The Mediating Role of Readiness For Innovation

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Assessing impact of employee engagement on innovation and the mediating

role of readiness for innovation
Article in International Journal of Comparative Management · January 2019

DOI: 10.1504/IJCM.2019.100857
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174 Int. J. Comparative Management, Vol. 2, No. 2, 2019
Assessing impact of employee engagement on

innovation and the mediating role of readiness for
innovation
Tahseen Arshi and Venkoba Rao*

Majan University College,
P.O. Box 710, P.C. 112,
Muscat, Sultanate of Oman
Email: [email protected]
Email: [email protected]
*Corresponding author
Abstract: The causal relationship between employee engagement (EE) and

innovation (INN) has of late received considerable academic attention, but
research attempts to develop integrated model of EE and innovation is still
fragmented. This research contributes to the existing literature by exploring the
mediating role of readiness for innovation (RFI) between EE and INN. Data
collected from 400 firms in the Sultanate of Oman were analysed using
structure equation modelling. The findings indicate that employee engagement
acts as significant predictor of innovation. Further, with the intervention of
readiness of innovation factor, the predictability tends to be higher. Though a
direct and positive relationship between employee engagement and innovation
is established, an analysis of the indirect effects shows that readiness of
innovation mediates this relationship. A comprehensive and an integrated
model of employee engagement and innovation is developed and validated
which advances knowledge in both the fields.
Keywords: employee engagement; readiness for innovation; radical

innovation; incremental innovation; mediation; structure equation modelling.
Reference to this paper should be made as follows: Arshi, T. and Rao, V.

(2019) ‘Assessing impact of employee engagement on innovation and the
mediating role of readiness for innovation’, Int. J. Comparative Management,
Vol. 2, No. 2, pp.174–202.
Biographical notes: Tahseen Arshi works as the Director of Studies at the

Faculty of Business Management, Majan University College, Oman. He
received his doctorate from the University of Bedfordshire, UK and MBA from
University of Wollongong, Australia. He is a certified entrepreneurship
educator specialising in corporate entrepreneurship and innovation and
authored numerous research articles.
Venkoba Rao is Director of Studies (MBA Program) and Professor of

Management at Majan University College, Oman. His research interests focus
on employee engagement, creativity and innovation. He is a certified HR
analytics professional and teaches strategic management to the post graduate
students. His works are published in several national and international journals.
Copyright © 2019 Inderscience Enterprises Ltd.

Assessing impact of employee engagement on innovation 175
1 Introduction
Both employee engagement and innovation are widely researched and burgeoning areas.
Recent insights from Gallup (2017) reveal that there is a close relationship between
employee engagement and innovation which supports Birkinshaw’s (1997) argument that
without engagement, any attempt at innovation is anemic. The relationship between EE
and innovation is further supported by Kumar and Raghavendran (2015), Alfes et al.
(2013) and Langelaan et al. (2006) who argued that employee engagement is one of the
key antecedents to innovation. Engaged employees act as intrapreneurs and promote
innovation within an organisation (Kassa and Raju, 2015). Mirvis and Googins (2018)
reiterate that employees are engaged to act as intrapreneurs in company innovation
contests, in partnerships with external social entrepreneurs, and in pro bono global
service programs, and as members of innovation teams in organisation-wide innovations.
On similar lines, Abraham (2012) explained that employee engagement results in
innovation, along with better customer service, productivity, low staff turnover, dedicated
workforce, great sense of work commitment, willingness to put extra time in the job, and
pride in their work. The findings of their research work which focused on big two
personality factors – neuroticism and extraversion revealed that heightened connection
between employees and their work triggers creativity and innovation. The extent to which
employee engagement implies greater connectedness to an employee’s job role increases
the perception of the job role as including innovative behaviour and enhanced job
performance (Aryee et al., 2012).
Saradha and Patrick (2011) stated that employees make a critical difference when it
comes to innovation, competitiveness, and ultimately business success. This is further
reinforced by the work of Good and Michel (2013) which reveal that employee
ambidexterity and engagement are key drivers of innovation and organisational growth.
The fountainhead of innovation therefore is the employees who “develop, carry, react to,
and modify ideas” (Van de Ven, 1986). Rao (2016) contended that it is employees who
build, promote and breathe life into an innovative organisational culture. Asserting this,
Aaltonen and Heinonen (2016) state that employees have their pivotal role to play when
new working modes and innovations are created and developed. Employees are
considered by organisations as the most important innovation partners followed by
product users and other external entities. Aaltonen and Heinonen (2016) argued that
‘engaged’ employee is far more likely to suggest or develop creative ways to improve
management or business processes. Highlighting the social nature of innovation, De Jong
et al. (2010) stated that organisations that are routinely innovative are intentional about
enabling individuals to engage and connect in ways that trigger and expand ideas. These
studies converge in their support that innovation can be enhanced by fostering a culture
of employee engagement. Amabile (1997) and Berg (2014) thus rightly argued that
organisations should identify, encourage and build on the creative capabilities of their
engaged employees if they want to survive and grow in ever-changing, increasingly
complex marketplaces.
Innovation is another such complex construct that has been the subject of
investigation for some time now. Different types, categories, scale and scope of
innovation have been discussed in the literature. However, an objective and quantitative
operationalisation of innovation has remained a challenge for researchers (Arshi, 2016).
Organisations are still struggling to find what really promote innovation even though a
176 T. Arshi and V. Rao
number of antecedents have been conceptualised and tested. Adding to it, readiness for
innovation (RFI) is one important mediator that has been discussed in innovation
literature. Arshi (2017) explained that innovation has remained an elusive commodity
because organisations are not well prepared for innovation. Readiness for innovation,
therefore prepares an organisation to be innovative by developing its capabilities, systems
and processes for innovation. This supported by Kanter (2010) and Christensen and
Overdorf (2005), who discussed the importance for developing necessary competencies
for innovation. This study therefore, with an objective to bring more clarity on the entire
process of innovation attempts to develop an integrated model that maps EE as
antecedent to innovation, RFI as mediator to innovation and innovation output
operationalised as incremental and radical innovation degree and frequency.
1.1 Research gap

In spite of such prominence, understanding of innovation through employee engagement
in organisations remain relatively disparate and underdeveloped (Rao, 2016; Shuck,
2011). Past researches have not specifically looked at EE factors as an emotional and
psychological process that is critical to promoting innovation (Baer and Frese, 2003).
Although both employee engagement and innovation are substantially researched, there is
little research linking these two broad areas. More so, looking at the impact of employee
engagement on innovation. Developing on this gap, this study attempts to investigate the
direct effect of employee engagement in enabling or inhibiting innovation while
examining the mediating role of readiness for innovation. This study aims to throws light
on how engagement enhances readiness for innovation and develops the organisational
capability to innovate. In doing so, it also addresses why innovation is elusive for many
firms despite their sustained efforts. Based on the research gaps the following research
questions were framed.
1.2 Research questions

The primary aim of this research was to determine the mediating role of readiness for
innovation between employee engagement and innovation. Additionally, an attempt was
made to find which employee engagement factors have the potential to impact innovation
and how innovation can be measured. The research questions are listed below:
RQ1 Which EE factors have the potential to impact innovation in the corporate sector
in Oman?
RQ2 How can innovation are measured within the corporate sector in Oman?
RQ3 How does the readiness for innovation mediate the relationship between
employee engagement and innovation within the corporate sector in Oman?
2 Literature review and hypotheses development
2.1 Employee engagement

Distinct streams of literature have emerged to explain the concept of employee
engagement drawing from the fields of psychology, sociology, management, human
resource management and development and healthcare (Shuck, 2011). An integrative
approach in understanding employee engagement resulted in a number of factors at
personal, work and support level. At personal level, work life balance (WBL) is
considered a key factor driving employee engagement (Joshi and Sodhi, 2011). Alegre
and Pasamar (2017) and James (2011) found that WBL not only engages employees but
also reinforces psychological contract, which in turn supports creativity and innovation.
Rothmann and Baumann (2014) also emphasised positive psychological engagement
leading to higher levels of cognitive capability, which is important for creative processes.
Another personal level factor that is close to WBL is career development opportunities.
Bassot et al. (2014) and McCauley (2013) argued that opportunities for career growth not
only engage employees but provide them with a learning environment leading to higher
probability for innovation. Interestingly, Quantum Workplace (2016) stated that
disengaged employees reported inadequate opportunities for professional development
and growth.
Work related factors include team work, job autonomy and job design. Team work
and co-worker relationship was found to be an important driver of employee engagement
by Anitha (2014). As WBL, team orientation also leads to positive psychological
behaviour (Fay et al., 2015). Rahman et al. (2017) enumerated the benefits of team
diversity that leads to creative idea generation and problem solving. Similarly, Kelley and
Littman (2016) pointed towards the positive role of teams through different stages of
innovation process. Another factor that has been associated with employee engagement at
the work level is job autonomy. Job autonomy provides the freedom to employees to
work with their own discretion and improves task responsibility, which in turn enhances
employee engagement (Shee-Mun et al., 2013). Orth and Volmer (2017); De Spiegelaere
et al. (2014) and Isaksen (2007) concluded that job autonomy leads to enhanced creativity
and potential for innovation. Similar to job autonomy, job content also improves
employee engagement (Bakker and Bal, 2010; Christian et al., 2011). Job content not
only improves employee engagement, but also potential to innovate (Dorenbosch et al.,
2005; Martín et al., 2007).
Support level factors include supervisory and leadership support. Leadership and
supervisory support is also considered to be another key driver of employee engagement
(Li, 2016). Lockwood (2007) was of the view that leaders and supervisors have the power
to engage in employees. Ipek et al. (2012) opined that supervisory support is critical to
employee engagement in the absence of which employee may even consider leaving the
organisation. Mohamed and Ali (2016) argued that supervisory support enhances
employee’s affective commitment to the organisation. Similarly, leadership support and
commitment to individual and organisational development is important characteristic of
employee engagement. One of the most effective leadership style that has been associated
with engaged employees is transformational leadership style (Leon, 2016; Sarros et al.,
2011). Transformational leaders can engage employees through a common purpose and
vision (Perez and Molina, 2017). The conceptualisation of EE construct has been a
challenge and therefore seven second order factors are used to operationalise the
construct and the following hypothesis emerge:
H1 EE is second order construct consisting of 7 (seven) first order factors namely job
autonomy (H1A) job content (H1B), career development (H1C), team orientation
(H1D), work life balance (H1E), supervisory support (H1F) and leadership support
(H1G).
2.2 Innovation
Like employee engagement, innovation is a vast and developing area of research. Proctor
(2014, p.288) defined innovation as “practical application of new inventions into
marketable products and services”. In the face of unprecedented economic, social,
demographic challenges, it is imperative for organisations to prioritise innovation for
their long-term success (Andersen et al., 2014). The absence of innovation in
organisations is a common occurrence, even though organisations profess to be
innovative. Innovation starts with an individual’s creative ideas and when these ideas are
developed into marketable products and services it is generally considered innovation
outputs (Tonnessen, 2005). Chen and Sawhney (2010) are of the opinion that innovation
comes in many forms and hence different stages of innovation should be understood well
by organisations. Gupta (2018) also supported the view that innovation is a process that
comprises antecedents, processes and outcomes. Innovation output is primarily
characterised through new or improved products and services in the market (Rosenbusch
et al., 2011; Tonnessen, 2005). Bessant and Tidd (2011) and Morris and Kuratko (2002)
explained that degree or scale of innovation is applicable to all innovation output
(product, service, process, technological) and hence is an appropriate measure of
innovation. Additionally, employee or organisational innovation also falls into a
continuum between incremental and radical innovation. Incremental innovation is defined
as “a collection of activities that constitute a process intended to achieve performance
improvement” [Jha et al., (1996), p.22]. It is usually associated with improvement of
existing products and services (Bessant, 2005; Goffin and Mitchell, 2010). Radical
innovation is defined as “a successfully exploited radical new product, process, or
concept that significantly transforms the demand and needs of an existing market or
industry, disrupts its former key players and creates whole new business practices or
markets with significant societal impact” [Assink, (2006), p.217]. Further, frequency of
innovation, which is not well developed in the literature, is also considered as a key
innovation output related to degree of innovation (Arshi, 2017). Arshi and Burns (2018)
posited that degree and frequency of innovation are output measures of innovation. Based
on the evidences in the literature on innovation, the following hypothesis is developed:
H2 Innovation is second order construct comprising 2 (two) first order factors namely
radical innovation degree and frequency (H2A) and incremental innovation degree
and frequency (H2B).
2.3 Employee engagement and innovation

Gichohi (2014) contend that employee engagement assumes a critical precursor role to
creativity and innovation at the workplace. They opine that the social exchange theory
(SET) provides theoretical foundation of engagement and creative behaviour of
employees. According to SET, when employees are empowered and trained, they feel a
sense of consideration and an obligation to repay the organisation by showing engaged
behaviour. This engaged behaviour of employees motivates them to perform more than
their duties and results into creativity and innovation in the organisation. Baer and Frese
(2003) further supported this assumption arguing that innovation requires climate for
initiative and psychological safety. This engaged behaviour is elicited through a number
of EE factors, which were also found to be influencing innovation.
The impact of leadership style in innovation is well documented in the literature.
Participative, interactive, charismatic and transformational leadership styles were
primarily linked to different stages and different types of innovation (Kesting et al.,
2015). Jia et al. (2018) pointed that transformational leadership style in particular enable
companies’ openness, external resources acquisition and knowledge development.
Further, Zuraik and Kelly (2019) illustrating Rosing et al.’s (2011) ambidexterity
concept, explained that leaders help to balance exploration and exploitation in order to
facilitate innovation. In addition to leader’s role, the role of supervisors as an antecedent
to innovation has also found some mention in the literature. Lukes and Stephan (2017)
explained that superiors help to take ideas forward, implement them and solve the
dilemmas associated with innovation. Team work is also considered an important
predictor of innovation. Schippers et al. (2015) pointed that team that are reflective are
more innovative, while Rousseau et al. (2013) and Widmann et al. (2016) argued that
team learning, coaching, team goals and commitment act as an important motivator of
innovation. Similarly, Camelo-Ordaz et al. (2006) contend that team vision and the work
team’s characteristics may exert an influence on innovation performance. They further
argued that diverse, cohesive, and autonomous work teams are good facilitators of
innovation. Johnsson (2018) in particular highlighted the importance of facilitator teams
during the innovation journey.
Career development has been linked to innovation indirectly. Researchers such as
Delmas and Pekovic (2018), Fisher and Rohde (2013) and Raasch and von Hippel (2013)
argued that career development is a result of innovation and also acts as an intrinsic
motivator towards employee’s innovative behaviours. Similarly, work life balance is also
linked indirectly to innovation. Towers et al. (2006), Beauregard and Henry (2009) and
Omar and Asif (2016) suggested that advances in technology have given the employees
the freedom to work in a more flexible manner improving innovation potential.
Employees have more time to reflect, incubate and be close to external environments all
of which supports innovation. Job autonomy is another factor that is associated with
impacting innovation. Bysted (2013) and Alpkan et al. (2010) argued that job autonomy
improves empowerment, reduces interference, which helps innovative behaviours among
employees. Similarly, job design also improves innovation. De Spiegelaere et al. (2012),
Holman et al. (2010), Urbach et al. (2010) and Dorenbosch et al. (2005) found that job
design effects the innovation process as well employee innovative behaviours. Audenaert
et al. (2017) argued that job design improves motivation among employees positively
impacting innovation.
Analysing the role of employee engagement as an antecedent to innovation, Hess

(2014) argued that innovation is hard to achieve because of the deep emotional and
psychological processes involved. The research on employee engagement factors refer to
these emotional and psychological factors that are crucial for both creativity and
innovation. Very few researchers have focused on these human factors, particularly
employee engagement in facilitating innovation. Therefore, the following hypothesis is
developed:
H3 EE has a direct and positive effect on innovation.
2.4 Readiness for innovation

In most cases, innovation outputs are difficult to witness because of the lack of
preparedness of the organisation. A number of terminologies have been used in the
literature to explain this phenomenon which includes innovation orientation or
innovativeness. Innovativeness is generally explained in the context of resources and
capabilities required for innovation (Covin and Lumpkin, 2011; Andersén, 2010). Arshi
(2016, 2017) termed it as readiness for innovation and argued that the concept lacks
scholarly attention and is not empirically operationalised. The innovation literature does
consider this impediment and there is some literature that points towards innovativeness
as a stage before innovation output can be achieved. While researchers such as Covin and
Lumpkin (2011) and Andersén (2010) termed it as innovativeness, researchers such as
Siguaw et al. (2006), Simpson et al. (2006) and Stock and Zacharias (2011)
conceptualised it as innovation orientation. Hamel and Breen (2007), Morris and Kuratko
(2002), Morris et al. (2011), Narcizo et al. (2017) and Chen and Sawhney (2010)
supported the proposition that readiness for innovation is essential for innovation output
to occur. This study utilises the emerging concept of readiness for innovation to analyse
organisational preparedness for innovation in the absence of which employee engagement
may not be effective in achieving innovation output. The following hypothesis emerges:
H4 RFI mediates the relationship between EE and innovation.
3 Methodology
Measuring and quantifying broad concepts of employee engagement and innovation is a

real challenge, especially when they are represented by a spectrum of behaviours. In
order to explain the relationship between them, it is appropriate to first test and establish
their relationship. Adopting a realist approach suggested by Fisher (2004), this study
argues that its epistemological and ontological grounding is more associated with
appropriateness of research approaches to the research at hand, rather than fixed research
stances. Houlette et al. (2004) argued that quantitative research approach is more
appropriate for research that adopts a realist positioning and is ontologically objectivist.
Since the focus of study was on operationalisation of constructs and measurement of
relationship, a quantitative research approach was chosen (Bryman and Bell, 2015).
3.1 Questionnaire development and measures

Each country has its own dynamics and hence the suitability of a specific questionnaire
was looked at. A need for questionnaire suitable for Oman, for the purpose of collecting
data from the respondents was felt. In the first phase, an attempt was made to identify the
factors that drive engagement and innovation in Omani corporate sector. The process
started with an astute review of existing literature. Various prominent works of different
researchers and consultants were looked into which provided deep insights to the
concepts. The main focus was to identify factors that drive employee engagement and
innovation. The questionnaire used a Likert-type response as well as Likert scales using a
horizontal format as per the recommendations of Carifio and Perla (2007). The
questionnaire was pilot tested with a small sample of 90 respondents from different
organisations.
From various, previously validated models and survey tools, an exhaustive pool of
38 items depicting seven factors of employee engagement and 12 items of two innovation
factors were finally included in the questionnaire. Readiness for innovation factor
consisted of seven survey items. This item pool was given to two experts, one on
engagement and another on innovation for review. Both the experts possessed
psychometric expertise. They were requested to carefully read each item and rate it as to
how well they believed that it represented the engagement and innovation construct. The
results of expert review led to 4 items being dropped from the initial pool of EE measures
and two items being dropped from initial pool of innovation measures resulting in 34
items for EE and ten items for innovation measures. The final pool of measures
comprising 44 items was included in the questionnaire survey and the research
framework, as shown in Figure 1.
Figure 1 Research model (see online version for colours)
The research model (Figure 1) comprises both reflective and formative measures.
Diamantopoulos and Siguaw (2006) suggested that research models should clearly
specify whether constructs are formatively or reflectively measured. The EE factors and
innovation factors are depicted as reflective measures meaning the measures are
reflection of the constructs. While the relationship between EE and innovation is shown
as formative or causal relationship, RFI is shown as mediating this relationship.
3.2 Data collection

The study employed a cross-sectional survey design and each organisation was
considered a unit of analysis. A total of 590 Omani and MNC organisations operating in
Oman where employee engagement and innovation activities were prevalent were
identified. These organisations are engaged in the business of petroleum,
telecommunication, finance, information technology, and tourism. Participation was
voluntary and participants were informed that their responses would remain anonymous
and confidential.
4 Results
Out of 590 questionnaires that were distributed, 406 were returned. While sorting, only
400 were found to be fit for analysis resulting in a response rate of 68%. Although
Fowler (2002) stated that there is no standard threshold for adequate response rates,
Babbie (1990) is of the opinion that response rate should be ideally greater than 50%.
High response rate was achieved as appropriate steps were taken during survey planning
and implementation steps. Based on the suggestions of Draugalis et al. (2008),
multi-model method and follow-up processes were followed, resulting in a good response
rate. Achieving a higher response contributed to the quality of data as argued by Baruch
and Holtom (2008), who pointed that that higher response rates improves
representativeness of the sample, while Anseel et al. (2010) attributed it to increase in
statistical power. However, Krishnan and Poulose (2016) pointed that high response rate
is not the only criteria for data quality and potential errors may still exist. They suggested
that data from high response rates should be checked for reliability and validity.
Therefore, both reliability and validity checks were performed. A detailed profile of the
respondents is given in Appendix B.
4.1 Reliability
Since the data was collected from different sectors, it was important to test
homoscedasticity as per the recommendations of Hamsici and Martinez (2007).
Homogeneity of variances indicted that the sample across different organisations was
homogeneous (Levene statistic > .05 and single column Tukey HSD) on all descriptive
measures such hierarchical levels and experience. The results showed satisfactory level of
reliability for all factors with a Cronbach’s alpha score > .7 as shown in Table 1.
Table 1 Cronbach’s alpha (α) coefficients for reliability of the factors
Factors Cronbach’s alpha Number of items Total cases

Employee engagement .812 28 400
Readiness for innovation .779 4 400
Innovation .706 8 400
Table 2 EFA results for EE factors
KMO and Bartlett’s test

Kaiser-Meyer-Olkin measure of sampling adequacy. .774
Bartlett’s test of sphericity Approx. chi-square 2,278.911
Df 300
Sig. .000
Pattern matrix
Component
1 2 3 4 5 6 7
JA1 0.74
JA2 0.73
JA3 0.7
JA4 0.71
JC1 0.79
JC2 0.75
JC3 0.73
JC4 0.7
CD1 0.77
CD2 71
CD3 0.74
CD4 0.7
TO1 0.78
TO2 0.75
TO3 0.72
TO4 0.71
WLB1 0.82
WLB2 0.81
WLB3 0.84
WLB3 0.8
WLB4
SS1 0.71
SS2 0.69
SS3 70
SS4 0.71
SL1 0.74
SL2 0.68
SL3 0.71
SL4 0.7
Notes: Extraction method: principal component analysis.
Rotation method: promax with Kaiser normalisation.
Rotation converged in five iterations.
The results of tests of normality conducted through Kolmogorov Smirnov and Shapiro
Wilks showed that the data was derived from a normally distributed sample (>.000).
Multi-collinearity was not detected as VIF values were <.2, as suggested by Tabachnik
and Fidell (2007).
4.2 Validity
In order to test the validity of measures both exploratory factor analysis (EFA) and
confirmatory factor analysis (CFA) was conducted. According to Hair et al. (2010), EFA
helps to establish the validity of measures. Supporting Preedy and Watson (2009), who
argued that CFA is largely to prove theoretical standpoints, Asparouhov and Muthén
(2009) argued that the function of CFA is not just confirmatory to but also explanatory
enhancing the validity of factorial structures.
Table 3 EFA results for innovation factors
KMO and Bartlett’s test

Kaiser-Meyer-Olkin measure of sampling adequacy .802
Bartlett’s test of sphericity Approx. chi-square 3,100.331
df 120
Sig. .000
Pattern matrix
Component
1 2
RIDF1 0.87
RIDF2 0.84
RIDF3 0.79
RIDF4 0.75
IIDF1 0.79
IIDF2 0.78
IIDF3 0.71
IIDF4 0.7
Notes: Extraction method: principal component analysis.
Rotation method: promax with Kaiser normalisation.
Rotation converged in four iterations.
4.3 Exploratory factor analysis

The first step in the data analysis was to determine the factorial structures of both EE and
innovation constructs. Therefore, exploratory factor analysis (EFA) was applied. Oblique
method with promax rotation was utilised in order to ensure that cross-loading are
minimised. Tabachnik and Fidell (2007) and Brown (2009), suggested that oblique
method is one of the most prudent methods and when in doubt, researchers should prefer
oblique methods over orthogonal method. The initial results the pattern matrix showed
that 34 items loaded on to the seven EE factors and ten items loaded on two innovation
factors (Appendix A). However, 6 items cross-loaded on multiple EE factors and 2 items
cross loaded on innovation factors, which were removed from analysis. Therefore, out of
the total of 44 items included in the questionnaire survey, 36 items were found to be valid
and were used in structure equation modelling. A total of 28 items for EE and eight items
for innovation were found to be valid through EFA as shown in Tables 2 and 3.
Threshold levels were accepted as per the recommendations of Tabachnik and Fidell
(2007) (>.40, P < .05, eigenvalues > 1). The Kaiser-Meyer-Olkin (KMO) score of .774
and .802 indicated the usefulness of factor analysis for structure equation modelling tests.
4.4 Confirmatory factor analysis

After removing the items from the scale, the measures were re-tested using confirmatory
factor analysis (CFA) and the results confirmed the validity of measures. CFA is a useful
data analytic technique for data reduction, refining and validating constructs (Hair et al.,
2010) and enhances the representativeness of constructs (Levine, 2005). All the factors
and representative measures validated through EFA were subjected to CFA using
utilising PCA with varimax rotation. Westland (2015) supported the use of CFA after
conducting the EFA tests in order to enhance the validity of measures. The results of the
CFA confirmed the factorial structures both EE and innovation constructs, indicating
28 valid items across seven EE factors and eight valid measures across two innovation
factors. The results of CFA showed that 69.2% of the total variance was explained by EE
factors and 74.6% of the total variance was explained by innovation factors.
4.5 Structure equation modelling

According to both Kline (2011) and Westland (2015) measurement model (MM) and
structural models using structure equation modelling (SEM) should be used to enhance
the validity of constructs and establish causality. The strength of causal relationships was
studied using path diagrams as suggested by Kline (2011). The MM confirmed validity of
28 items for EE factors, four items for RFI factor and eight items for innovation factor
(>.40, p < .001). Validity of the measures was established with all measures satisfactorily
loading on to their factors (>.40), establishing convergent validity, whereas low levels of
co-variances (<.05) between the factors indicated discriminant validity.
Once the factorial structure was confirmed, the direct and mediating relationships
between the predictor and criterion variables, hypothesised in the research model was
tested. Firstly, the model was tested estimating the direct effect of EE on innovation.
Figure 2 shows the results of the complete SEM model testing, estimating the direct
effect of EE on innovation.
The results of complete SEM model indicates that EE has a direct impact on
innovation with a path coefficient value of .86 (P<.000). The threshold level for model fit
indices were decided as per the recommendations of Baumgartner and Hombur, (1996);
Hu and Bentler (1999) and Tabachnick and Fidell (2007). The model fit indices (Figure
2) shows that there is good data fit. Path coefficient values on all paths were >.40 p<.001.
Secondly, to test the mediation effect the relationship between the predictor (EE) and
the criterion variables (INN), the relation between the predictor and the mediator variable
(RFI), and the relation between the mediator and criterion variables were examined
separately as suggested by Baron and Kenny (1986). The mediating variable was entered
in the model and SEM test was conducted estimating the effect of mediator variable on
the EE and innovation. Figure 3 shows the result of the mediating role of RFI between
EE and INN. The model fit indices showed that there is good data fit the model is
acceptable as per the recommendations of Tabachnik and Fidell (2007). Path coefficient
values on all paths were >.40 p<.001.
Figure 2 SEM model testing the direct effect of EE on innovation (see online version for colours)
Note: CMIN/DF: 1.92, CFI: 9.24, GFI: 9.70, AGFI: 9.31, RMSEA: .039.
Figure 3 SEM model testing the mediating effect of RFI on innovation (see online version
for colours)
Note: CMIN/DF: 2.32, CFI: 9.12, GFI: 9.11, AGFI: 8.94, RMSEA: .047.
The results are illustrated through Table 4 which shows the direct effect of EE on
innovation – estimated value of .58 (P < .000), indicating that EE has direct and positive
impact on innovation. The mediator variable estimated values between EE and RFI was
.41 and between RFI and innovation, .21 (P < .005). Though the direct and mediating
paths are both significant, only partial mediation between EE-RFI-innovation was
noticed.
Table 4 Path estimates before and after testing for mediation
Beta estimate S.E. C.R. P-value Result

Innv ← EE .860 0.103 8.441 .000 Significant
After mediator variable (RFI) enters the model
Innv ← EE .580 0.110 5.191 .000 Significant
RFI ← EE .412 0.187 4.012 .000 Significant
Innv ← RFI .210 0.198 2.011 .002 Significant
The findings support the acceptance of Hypotheses 1, 2 3 and 4 positively and

significantly. Table 5 shows the results of hypothesis testing.
Table 5 Hypotheses testing results after data analysis
Hypotheses Path coefficient Significance Status Rationale

H1(A–G) 0.67 p < .000 Accepted Validity of measures established
0.54
0.52
0.77
0.79
0.71
0.69
H2(A–B) 0.81 p < .000 Accepted Validity of measures established
0.62
H3 0.86 p < .000 Accepted Direct effect established
0.58
H4 0.41 p < .005 Accepted Partial mediation established
0.21
Note: P values < 0.05 are considered significant in this study.
5 Discussion
The results of SEM analysis indicate that there is a direct and positive relationship
between employee engagement and innovation. Further, RFI improves the predictive
validity of innovation outcomes.
5.1 Employee engagement and innovation

Results suggested a positive and direct contribution of employee engagement towards
innovation. This supports the findings of earlier studies by Langelaan et al. (2006),
Abraham (2012), Slatten and Mehmetoglu (2011) and Gichohi (2014), who observed that
employee engagement leads to innovation. EE and innovation share a causal relationship

because engaged employees are better equipped to handle the pressures associated with
creativity and innovation. These employees go beyond individual roles to collaborate
with colleagues, make suggestions to improve the organisation and work to improve the
organisation’s innovative potential. Sundaray (2011) explained that engaged employees
are enthusiastic about their work and are often fully immersed in their job resulting in
creativity and innovation. Unsworth (2003) analysed the Amabile et al.’s (1996)
componential theory of creativity, argued that engagement and innovation are both
intentional acts and organisations can improve innovative potential through engaging
employees. Similarly, McEwen (2011) noted that organisations that devote their attention
to employee engagement have seen positive results, particularly innovative behaviour, as
well as allowing them to predict employee turnover intention, employee productivity,
financial performance, customer satisfaction. Employee engagement can be organised
around three levels namely personal, job and support level, which explains the broader
role of EE in enabling a number of organisational output particularly innovation.
5.2 Employee engagement, RFI and innovation

Further, examining the mediating role of RFI, engagement tends to play a bigger role in
generating innovation output. The results show that employee engagement through RFI is
more likely to enhance innovation. The entire spectrum of creative inputs achieved
through employee engagement, the innovation process and systems witnessed through
RFI measures, and innovation output characterised through incremental and radial
innovation degree and frequency is illustrated through Table 6.
At the personal level, organisations which support work-life balance of their
employees are more likely to have engaged employees. This is consistent with research
findings of Joshi and Sodhi (2011) who stated that a supportive work-life culture drives
engagement for both executives and non-executives. Their findings emphasised the
importance of establishing a family-friendly culture that supports balance and synergy
between an employees work life and personal life. The relationship between WBL and
innovation is also supported in the literature through studies conducted by Alegre and
Pasamar (2017) and James (2011). WBL particularly enhances the capability of
employees for innovation as it frees employees from undue work pressure, allows
flexible work timings, which creates positive psychological behaviour. WBL allows
employees to learn and incubate ideas that can be converted into innovation. Therefore,
WBL provides the employees the time and energy for creative processes particularly
ideation and incubation that may lead to innovation outputs. Aleksic et al. (2017)
particularly found that less time pressures due to balanced work life facilitates creativity
among employees, when employees are engaged through work and life balance, they are
not pressurised to meet deadlines and short term productivity goals (Chaterjee, 2016).
Amabile et al. (2002) and Isaksen and Ekvall (2010) have also emphasised the
importance of ‘time for learning’ and balanced workload, so that ideas can incubate and
tested before innovation can occur. This is further substantiated by research from
Rothmann and Baumann (2014) who stated that positive work-home interaction affected
employee engagement via experiences of psychological meaningfulness and
psychological availability. Similarly, professional development opportunities with a focus
on learning enhance employee engagement and play an important role in creative
processes and innovation. Chiva et al. (2014) argued that adaptive learning is particularly
helpful in enhancing capabilities for incremental innovation. Career development was

also found to be influencing innovation (Bassot et al., 2014; McCauley, 2013).
Organisations, which focus on a learning and development culture creates new
opportunities, which are helpful in corporate venturing supported by innovative products
and services.
Table 6 Antecedent, mediator and output measures
Innovation
Factor Employee engagement
Readiness for innovation (mediator) outputs
orientation (antecedent)
(outcome)
Work life balance Corporate venturing opportunities
Personal level
Professional development Employees get time and

opportunities psychological and emotional
factors
strength to engage in creative

activities. Opportunities for
professional development leads to
innovative projects.
Team orientation Open innovation platforms
Diverse teams work on innovative
projects collaboratively both
internally and externally in
association with professional
networks and forums.
Job autonomy Innovation pipeline and a stage gate
Incremental
Job level factors
process
and radical
Employees take control of the innovation
innovation process and have clear degree and
progress paths, without depending frequency
on managerial approval.
Job content Physical and digital prototyping
Ideas and feasibility of products and
services are tested, which reduces
uncertainty in job content. Reduction
in cost and increase in speed to the
market enhances value of job
content.
Supervisory and Knowledge development and idea
Support level
leadership support support

factors
Innovation processes and systems

are facilitated and supported,
enhancing overall readiness for
innovation.
The current study also brings out team orientation as an important determinant of
employee engagement. The findings of Rahman et al. (2017) confirmed the current
finding that the presence of team orientation strengthens relational psychological contract
leading to high levels of engagement. Team work is known to support innovation (Fay et
al., 2015). Therefore, they have called for designing tasks with diverse teams and human
resource can play an important role in such jobs designs and team formation. Perez and
Molina (2017) argued that diverse teams with different ideas can deal with creative
tensions associated with innovation. Many of the measures of RFI is enhanced through
team work. The opportunities for open innovation and crowdsourcing enables teams to
engage with outside world and develop professional relationships, which enhances the
capabilities for innovation (Kazuhir et al., 2014). Howe (2008) suggested that external
teams can create collaborative partnerships with professional forums, venture capitalists,
universities and even customer groups.
Job autonomy, another factor reflective of employee engagement, provides the
freedom and discretion to employees in facets of work method, work schedule and work
criteria as suggested by Gagné and Bhave (2011). The finding is in line with both theory
and empirical results of previous research conducted by Shee-Mun et al. (2013); Bakker
and Demerouti (2008) and De Spiegelaere et al. (2014) who explained that autonomy
improves employee engagement, which in turn leads to innovative work behaviour.
Similar links between job autonomy and innovative behaviour was found by Orth and
Volmer (2017) with additional links to job security, which further enhances innovative
behaviour. Job autonomy was found to be linked to RFI measure of innovation process
and innovation performance (Burcharth et al., 2017). Prominent among them are phase
gate process and monitoring and evaluation of innovation projects. Multiple teams
involving engineers, designers, manufacturing, and marketing, with different expertise,
take the innovation process forward through different feasibility screens (Kelley and
Littman, 2016). These stage gate process and innovation pipeline helps to make decisions
on technical design, business case, risk analysis and resources (Chao et al., 2005; Cooper,
2008).
Both academic and practitioner studies have shown that job content such as task
variety, level of challenge and rigor, significance and feedback had all been positively
related to engagement (Bakker and Bal, 2010; Christian et al., 2011; Kahn, 1990; May
et al., 2004; Saks, 2006; Schaufeli and Bakker, 2004). Employees experience
meaningfulness, responsibility and will have the ability to see the outcome or impact of
their work, when the job content is good and may lead to productive outcomes. The line
manager has a significant role to play in creating an environment where workers can find
their work engaging, through shaping job content, treatment of the role holder, and levels
of trust (Clegg and Spencer, 2010). Job content and job design has an impact on
innovation (Dorenbosch et al., 2005). They argued that job content can harness the
innovative potential of employees. Further, Martín et al. (2007) argued that job design
through which employees have the potential to control job content can lead to innovative
behaviour. Such job content also provides employees to fully use their skills especially
related to creativity and innovation. Job design aids in enhancing the readiness for
innovation as prototype development requires creative potential, flexibility and speed.
Digital prototyping has particularly improved the speed to the market and in absence of
appropriate job design, the speed of development, experimentation and even fast failures
would significantly suffer (Bordegoni and Rizzi, 2011). Goffin and Mitchell (2010)
opined that job design and innovation objectives should be ideally aligned because
traditional job design cannot meet the demands of innovation.
Further, results suggested that leadership and supervisory support sets the tone for
employee engagement in an organisation. Supervisory support can not only engage
employees through emotional support, but also influence innovation through clear vision,
instituting rewards and recognition, providing resources and developing capabilities for
innovation outcomes. Mohamed and Ali (2016) opined that supervisors particularly
provide emotional support to employees particularly in uncertain outcomes associated
with innovation. This study concurs with earlier studies that leaders have a profound
influence and power to serve as catalysts for higher levels of engagement (Lockwood,
2007). Melcrum Research (2015) therefore recommended that leadership should be made
visible and accessible to employees. Sarros et al. (2011) also observed that leadership
style positively influences innovation. Transformational leadership style was particularly
associated with innovation. Leaders determine innovation objectives of the organisation
and guide employee engagement vis-à-vis direction and frequency of innovation (Swaans
et al., 2014). These decisions are taken in the light of environmental determinants, level
of technological development, resource availability and urgency of innovation
requirements. Goffin and Mitchell (2010) argued that such system can enable
organisations to align innovation objectives with business goals and provide employees a
clear vision for innovation.
Transformational leaders have a vision for innovation, which they are able to
effectively communicate, and inspire around it (Denti, 2011; Zacher and Rosing, 2015).
Perez and Molina (2017) opined that leaders drive the mission of innovation across the
organisation. The leadership role in enhancing readiness for innovation was also found to
be valid in this study. Supervisor’s and leader’s support for open innovation is critical to
the success of open innovation models and crowdsourcing strategies (Eseryel, 2014).
Open innovation model, requires changes in business model and high levels of risk taking
benefiting by faster innovation development and reduction in costs. Ahmed and Shepherd
(2010) concluded that leaders clarify uncertainties during the innovation development
process and create trust among employees.
Readiness for innovation was found to be a mediating factor between employee
engagement and innovation outcomes. Drivers of RFI relates to systems and processes
that enhances the readiness for innovation. When these processes and systems are
instituted to facilitate innovation, it provides commitment to innovation objectives and
brings clarity to innovation management and administration. One of the prominent
measures of RFI is corporate venturing. Putting corporate venture units in place keeps
alertness levels high and leads to identification of opportunities for new products and
services (Hajizadeh and Zali, 2016; Hill and Birkinshaw, 2008). Open innovation is
another driver of RFI. Through open innovation, employees are free to engage with
outside forums such as physical and virtual innovation parks for collaborative innovation,
which increases innovation feasibility and drive costs down (Eftekhari and Bogers, 2015;
Salvador et al., 2013). Further Ghezzi et al. (2017) pointed out that through ‘online
communities’ knowledge, technical skills and resources can be shared globally, which
improves innovation development. Ollila and Yström (2016) argued that such
collaboration enables employees to monitor trends and opportunities and exploit changes
in technology.
When innovation process gets rolling, another RFI driver, innovation pipeline and a
stage gate process enhances transparency and momentum to innovation development.
Ideas and innovation proposals by employees usually do not progress to desired levels as
they get lost in myriad layers of management and bureaucratic controls. Bruce and
Birchall (2009) and Gapp and Fisher (2007) argued that this block to innovation
development can be overcome through a stage gate process through which there is a
formal mechanism for ideas to move down the innovation pipeline, which are then
screened, prioritised and organised. When a stage gate process is in place, employees
clearly know how their ideas will reach to fruition. Each stage in the innovation pipeline
can take decisions related to feasibility, risks, and resource allocation (Chao et al., 2005;
Cooper, 2008). Another RFI driver relates to the development of capabilities for physical
and digital prototyping, which allows the employees to practically test the feasibility of
innovative outputs before they are commercialised (Kelley and Littman, 2016).
Bordegoni and Rizzi (2011) argued that digital prototyping reduces development and
innovation costs and improves speed to the market. Research from the Aberdeen Group
showed that companies who used digital prototyping could get to the market 58 days
faster than average and enjoyed 48% lower costs (Aberdeen Group, 2005).
The study supports the argument that innovation is a multi-stage process comprising
innovation inputs and outputs. Radical innovation degree and frequency and incremental
innovation degree and frequency were found to be valid measures of innovation outputs.
In line with the findings of Arshi (2017) and Tidd et al. (2005), radical innovation degree
and frequency was found to be having impact on market, competition and customers
through radically new products and services. On the other hand, incremental innovation
degree and frequency were improvement driven outcomes, which were driven by
customer and supplier feedbacks.
6 Conclusions
The findings contribute to the existing literature on employee engagement and

innovation. Comprehending the dynamics of engagement and innovation, this study
establishes causal effects between employee engagement and innovation, while
establishing the mediating effect of readiness for innovation. A noteworthy finding is of
the high prediction rate of innovation through employee engagement when RFI mediates
it. Innovation is hard to witness because of multiple factors. Primary among them are lack
of creative input and motivation from employees. Organisations with innovation agendas
should engage employees in such a way that provides them the freedom, capabilities and
resources for innovation. Engaged employees along with systems and resources that
enhance readiness for innovation increase the chances for innovation outcomes. RFI
drivers, through the dedicated systems and process, enhance the readiness for innovation
at two levels. Firstly, it enhances believability of employees on organisational
commitment to innovation as against an innovation theatre, where occasional innovation
is witnessed and applauded. Dedication of resources to these systems and processes
brings more sustainability to innovation outputs. Secondly, it enthuses the employees to
develop innovative proposals as they know that their proposal will reach to a logical end.
Organisations can engage its employees and leverage their innovation capabilities leading
to competitive advantage by exploring the drivers identified in this study. These areas are
of strategic relevance to organisations in Omani economy which are going through tough
times due to economic slowdown and depleting oil reserves. The implications of the
findings would result in both employee and employer benefits. The study provides a
meaningful theoretical basis for studying and understanding variables of EE and
innovation constructs. The findings will be of prime importance to academicians and to
practicing managers in designing human capital and innovation strategies.
6.1 Limitations
This study has mainly used quantitative data to derive the findings and conclusions.
Withstanding the limitations of quantitative data, this study could have benefited from a
deeper qualitative analysis and triangulated the data to improve the validity of the
findings. Further, the limitations of higher response rates were recognised and reduced by
multiple statistical tests of reliability and validity.
6.2 Future studies

While generalising the results, it may be noted that the current study used only
cross-sectional data. Future studies will consider longitudinal data for better results.
Although the research model was quite conclusive about the possible relationships,
alternate research model testing the relationship between EE and different forms of
innovation can be explored.
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Appendix A
Validated measures of EE, innovation and RFI
WLB1 There are no pressures to meet deadlines in my organisation

WLB2 My organisation provides me with flexible work timings
WLB3 My organisation is empathetic towards my personal life
WLB4 My identity and values are well aligned with my organisation
CD1 My organisation provides me with opportunities learning and development
CD2 There are opportunities to engage with outside forums
CD3 There are clear career paths and succession planning in my organisation
CD4 There are adequate resources dedicated for career development
TO1 My organisation provides me opportunities to work in cross-functional teams
TO2 Diversity of ideas is respected in a team work setting
TO3 In a team setting, there is collective decision making and responsibility
TO4 In a team setting there are clear team goals, learning commitment, communication
and accountability
JA1 My organisation provides me the freedom to choose how a tasks can be completed
JA2 My organisation provides me the freedom to take decisions
JA3 My organisation protect me against negative task outcomes
JA4 My organisation encourages higher levels of job involvement
JC1 Jobs designed by my organisation has adequate level of rigor
JC2 My job provides me the opportunities to utilise my skills effectively
JC3 My job has clear specifications
JC4 My job is meaningful and provides me with a sense of satisfaction
SS1 My supervisor motivates me to achieve my goals
SS2 My supervisor provides me the required support to achieve my goals
SS3 My contributions are valued by my supervisor
SS4 I feel that I am heard and cared by my supervisor
LS1 There are clear reward and recognition systems in my organisation
LS2 Ideas are recognised and rewarded in my organisation
LS3 There are adequate level of support given by the leaders to achieve my goals
LS4 Leaders clearly communicate their vision of change and development
Validated measures of readiness for innovation
RTI1 There are venture units set up by my organisation

RTI2 There is an innovation pipeline and a stage gate process to take the ideas forward
RTI3 My organisation supports collaborative partnership with professional bodies for
knowledge acquisition and open innovation
RTI4 There are facilities for physical and digital prototyping
Validated measures of innovation
RIDF1 My organisation has launched radically new products/services in last two years
RIDF2 My organisation has created new market segments in last two years
RIDF3 My organisation has reshaped customer behaviour in last two years
RIDF4 My organisation has substantially impacted competition in the last two years
IIDF1 My organisation has made improvements to existing products and services in the last
two years
IIDF2 My organisation takes feedback for improvement from customers and suppliers
IIDF3 My organisation has penetrated the existing markets with modified products and
services in the last two years
IIDF4 My organisation has improved its existing processes in the last two years
Appendix B
Profile of respondents
Item Categories % Item Categories %

Nature of Local 73 Respondents CEO/MD/dean 36
company MNCs 27 profile Directors 29
Industry Agriculture and fishing 08 Senior managers 29
category Health 14 Managers 06
Manufacturing 23 Company Below 100 32
Retail 13 size 100–150 58
Financial and insurance 10 Above 150 10
Real estate 05 Gender Male 89
Education 07 Female 11
Human health 07 Experience Below 5 years 11
Arts and entertainment 06 5–10 years 37
Other service activities 07 10–20 years 52
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Assessing impact of employee engagement on innovation and the mediating

Article in International Journal of Comparative Management · January 2019

Tahseen Arshi Venkoba Rao Danamaraju

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Assessing impact of employee engagement on

Tahseen Arshi and Venkoba Rao*

Abstract: The causal relationship between employee engagement (EE) and

Keywords: employee engagement; readiness for innovation; radical

Reference to this paper should be made as follows: Arshi, T. and Rao, V.

Biographical notes: Tahseen Arshi works as the Director of Studies at the

Venkoba Rao is Director of Studies (MBA Program) and Professor of

Copyright © 2019 Inderscience Enterprises Ltd.

1.1 Research gap

1.2 Research questions

2 Literature review and hypotheses development

2.1 Employee engagement

2.3 Employee engagement and innovation

Analysing the role of employee engagement as an antecedent to innovation, Hess

2.4 Readiness for innovation

Measuring and quantifying broad concepts of employee engagement and innovation is a

3.1 Questionnaire development and measures

3.2 Data collection

Factors Cronbach’s alpha Number of items Total cases

Table 2 EFA results for EE factors

KMO and Bartlett’s test

KMO and Bartlett’s test

4.3 Exploratory factor analysis

4.4 Confirmatory factor analysis

4.5 Structure equation modelling

Beta estimate S.E. C.R. P-value Result

The findings support the acceptance of Hypotheses 1, 2 3 and 4 positively and

Hypotheses Path coefficient Significance Status Rationale

5.1 Employee engagement and innovation

employee engagement leads to innovation. EE and innovation share a causal relationship

5.2 Employee engagement, RFI and innovation

helpful in enhancing capabilities for incremental innovation. Career development was

Professional development Employees get time and

strength to engage in creative

leadership support support

Innovation processes and systems

The findings contribute to the existing literature on employee engagement and

6.2 Future studies

Shuck, B. (2011) ‘Integrative literature review: four emerging perspectives of employee

Validated measures of EE, innovation and RFI

WLB1 There are no pressures to meet deadlines in my organisation

Validated measures of readiness for innovation

RTI1 There are venture units set up by my organisation

Validated measures of innovation

Item Categories % Item Categories %

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