Effect of Innovation Capability on Human Capital and Organizational Performance

Abstract

The concept of the production-based economy has moved to the knowledge-based economy where knowledge becomes the new engine of corporate expansion. From the human resource point of view, human capital, being a vital element of intellectual capital, plays a significant role in the case of emerging performance of an organization in this knowledge-based economy. The research intends to explore the relationship between human capital and organizational performance on the listed Islamic Banks under Dhaka Stock Exchange of Bangladesh through mediating effect (innovation capability) and by improvising motivation as moderator. Data were gathered randomly selected from 170 branch managers of six registered Islamic Banks under Dhaka Stock Exchange of Bangladesh. Based on accumulated data, SPSS 25 was applied to obtain a detailed assessment. Structure Equation Model (SEM) was utilized to analyze the reliability and validity measure for the model. SmartPLS 3.2 was employed to evaluate the measurement model and the structural model. Applying SEM, the study discovers that human capital has a substantial influence on organizational performance through innovation capability, whereas the moderating effect of motivation decreases the relationship. The finding of the study advocates that Islamic banks should highlight more on human capital to maintain the performance. The present research contributes to the current literature of human capital practices where there has been a shortage of research works in the perspective of Islamic Banks of Bangladesh.