Ijirpdf Jan 2011

The Indian Journal of Industrial Relations
A REVIEW OF ECONOMIC &

SOCIAL DEVELOPMENT
Vol. 46
Lead Article on
Multi-nationlas & Industrial

No. 3
Relations in India
January 2011
Ratna Sen
SRC
SHRI RAM CENTRE
Vol. 46 No. 3 January 2011
FOR IR & HR
A Review of Economic & Social Development
The Indian Journal of Industrial

Previous Special Issues
Relations: A Review of Economic &
Social Development (IJIR) is devoted to
dissemination of knowledge for effective Affirmative Action (Oct. 08)
management of human resources and Guest Editor: Lord Meghnad Desai
harmonious industrial relations. A quarterly
in English, the journal enjoys high Corporate Social Responsibility
academic reputation in India and (Jan. 09)
elsewhere and is widely subscribed by Guest Editor: Mritunjay Athreya
government institutions, universities and
private sector organizations. A refereed The Global Indian Firm (July 09)
journal, its readership consists of Guest Editor: Tarun Khanna
academia, policy makers, practicing
managers and student community.
International Industrial Relations
(April 10)
Salient Features Guest Editor: Tayo Fashoyin
In to its 46th year of uninterrupted
l
publication and up to date.
l
Listed in EBSCO, GALE/ CENGAGE
Learning, JSTOR, Proquest/ CSA
Data Bases
Editorial Committee
l
Research based articles & commu- Abad Ahmed
nications from eminent persons
Andre Bateille
l
Reviews of latest titles from India and
elsewhere Baldev R. Sharma
l
Theme based special issue program Ishwar Dayal
with eminent persons as Guest Editors
J.S. Sodhi
IJIR online: www.irhrjournal.com
Meghnad Desai
Disclaimer N.R. Seth
The views expressed here are of the
authors and not of the publisher. While Rama J. Joshi
care has been taken to ensure the Tayo Fashoyin
authenticity of the materials published,
the publisher accepts no responsibility for V.R. Panchmukhi
their accuracy. Vinay Bharat Ram
Shri Ram Centre
All rights reserved. No part of this
publication may be reproduced in any Editor
form or by any means, without written
N.K. Nair
permission of the publisher.
Regd. No. 10631/65

Notes for Contributors Subscription Rates

(With effect from January 1, 2010)
Manuscripts for publication should be
typed in double space, only on one side of

the paper and sent in duplicate to the PERIOD INDIA FOREIGN ($)
Editor. The Journal prefers to accept soft (Rs.) (Air Mail)
copies including through e-mail:
ijir04@yahoo.in Single copy 250 30
Each manuscript should be accompanied
by a declaration by the author that the One Year 1000 100

paper has neither been published nor
submitted for publication elsewhere. Three Years 2500 275
Footnotes, typed in double-space, should
Five Years 4000 375

be numbered serially and placed at the end
of the text. Reference to literature cited
should be carried within the text in
brackets. Reference list, to be placed after All correspondence on subscription, change
footnotes, should be listed alphabetically of address and non-receipt of copies, etc.
by author and chronogically for each should be addressed to A.C. Mishra, Asstt.
author. It should be kept as brief as Manager (Admn.), Shri Ram Centre for
possible. Industrial Relations Human Resources,
Contributors are advised to be brief in
Economic & Social Development.
introducing the subject and devote most of 4, Safdar Hashmi Marg, New Delhi-110001
the paper to the principal theme. The Ph: 011-43213100
Journal prefers papers based on original Fax: 011-23352410
data and fresh theoretical insights. E-mail: ijir04@yahoo.in
References to previous work should be src@srcirhr.com
made economically. The Journal does not Website:www.srcirhr.com
publish survey of literature comprising Please quote your Annual Subscription (A.S.)
lengthy bibliographical references. Number in all your correspondence.
Authors should take care to ensure the
accuracy of data and references. Subscription may be sent through Bank Draft
Authors should always indicate, either in
in favour of Shri Ram Centre For Industrial
the text or in an enclosed memorandum, Relations & Human Resources.
the time and place of empirical
investigation, the context in which it was
done, sponsors if any, and also an outline
of the methods used. Published by I.D. Bharadwaj for Shri Ram
Centre for Industrial Relations, Human
Manuscripts are accepted for publication
Resources, Economic & Social Development
on the understanding that they are subject 4, Safdar Hashmi Marg, New Delhi-110001.
to editorial revisions. Proofs will not be Graphic layout and production by M/S
sent to the authors. Professional Media House, Shop No. 28, B-
Authors will receive one specimen copy of
Block, Central Market, Dilshad Garden, Delhi-
the issue free of charge. 110 095.
ISSN No. 0019-5286

Announces
a special (April 2011) issue on
Beyond GDP
Guest Editor to the Issue
Gyrgy Szll
Professor Emeritus,
University of Osnabrueck, Germany
Contributors to the issue include:
K.V. Kamath, ICICI Bank, Mumbai
Zhuming Zhao, Nanjing University, China
Frederich Furstenberg, Bonn University, Germany
Wolf Gaertner, University of Osnabrueck, Germany
N. Balasubramanian, Indian Institute of Management, Bangalore
Sudipto Mundle, National Institute Public Finance & Policy, New Delhi
Ashwini Deshpande, Delhi School of Economics, Delhi
Udo E. Simonis, Science Centre, Berlin, Germany
Pulin Nayak, Delhi School of Economics, Delhi
Woosik Moon, EU-Korea Centre, Seoul
Contact : A.C. Mishra, Asst. Manager (Admn.)

Shri Ram Centre for Industrial Relations,
Human Resources, Economic & Social Development
4 Safdar Hashmi Marg, New Delhi 110001
Phone 011-43213100 Fax : 23352410
E-mail: src@srcirhr.com, Website: www.srcirhr.com
VOLUME 46 NUMBER 3 JANUARY 2011
Contents
Articles
Multinationals & Industrial Relations in India Ratna Sen 367
Trade Unions in Malaysia:Perspectives of Employers Raduan Che Rose, 384

& Employees of Unionized Companies Naresh Kumar &Nagiah Ramasamy
Labour Cost &Foreign Direct Investment- Yu-Cheng Lai & 396

Evidence from India Santanu Sarkar
Unionism as Collective Action: Revisiting M. V. Anuradha 412

Klandermans Theory
Jobless Growth:A District-Level Analysis of B. S. Prakash & 423

Tamil Nadu 2001-05 A. Balu
Efficiency of Indias Intermediate Goods Industries M. Manonmani & 435

in the Liberalized Regime M. Ramya
Role of Organization Structure in Innovation in Yamini Prakash Sahay & 450

the Bulk-Drug Industry Meenakshi Gupta
Psychological Climate as an Antecedent of Soumendu Biswas 465

Job Satisfaction & Job Involvement
Divergent Leadership Styles Practiced by Vimal Babu 478

Global Managers in India
Induction Age, Training Duration & Job Performance N.K. Natarajan & 491
on Organizational Commitment & Job Satisfaction Dinesh Nagar
Predictability of Job-Satisfaction: An Analysis Anshuman Bhattacharya 498

from Age Perspective
VOLUME 46 NUMBER 3 JANUARY 2011
Employer Brand Image as Predictor of Employee Pushpendra Priyadarshi 510

Satisfaction, Affective Commitment & Turnover
Communication
Towards Realist Constructivism: Implications Alok Kumar 523
for Teaching & Training
Book Review
From Jugaad To Systematic Innovation:
The Challenge For India P.C. Bansal 536
Rishikesh T. Krishnan
Marketing To Rural Consumers:

Understanding & Tapping The Rural Market Potential M.S. Ramanujam 538
Sanal Kumar Velayudhan & Guda Sridhar
IJIR announces the release of its back volumes (1965 onwards) in JSTOR
Archive as part of the Arts & Science IX Collection.
To view the journal online please visit:
http://www.jstor.org/action/showPublication?journalCode=indijindurela
IJIR online www.irhrjournal.com
SHRI RAM CENTRE

FOR INDUSTRIAL RELATIONS AND HUMAN RESOURCES,
ECONOMIC & SOCIAL DEVELOPMENT
4, Safdar Hashmi Marg, New Delhi-110 001
Phone: 011-43213100 Fax: 011-23352410
E-mail: ijir04@yahoo.in, src@srcirhr.com
Website: www.srcirhr.com
Multinationals & Industrial Relations in India
Ratna Sen
The first decade of the 21 st cen- Introduction

tury witnessed a series of con-
flicts in renowned transnationals Multinational companies (MNCs), at
as well as their ancillaries in In- the forefront of globalization, have grown
dia. Although nearly all these to almost 80,000 worldwide employing 55
corporations have been charac- million people (UNCTAD 2008). Al-
terized by excellent technical ca- though the recent worldwide financial
pabilities, reached great heights crisis slowed the pace of growth, it is un-
in efficiency, and attained excel- likely to stall the process, facilitated by
lence in several areas, they are the developments in information, commu-
facing serious problems in their nication and transportation technologies
relations with their employees and (Stanton et al 2009). Convergence theo-
unions (where present), especially rists suggest that the logic of technology
as worldwide recession tightened and markets are superseding varying
its grip on the businesses. These national cultures towards universally ap-
conflicts indicate considerable plicable best practice managerial tech-
similarities in the issues leading niques, for example, the implementation
to conflicts as well as manage- of a range of specific employment prac-
ment responses to them and raise tices identified with so-called High-Per-
several questions about their un- formance Work Systems. Divergence
derstanding of the industrial law, thesis argues that management systems
culture and practices in India and will continue to reflect the footprint of
other countries. There are also their national institutional environment.
dissimilarities and unique fea- McGraw and Harley (Hayden 2009)
tures among them. This paper pre- concluded that in Australia there is a
sents an analysis of the common pronounced divergence in the HR prac-
and uncommon patterns. tices of overseas workplaces when com-
pared with locals. We need therefore
to look at what is happening in India in
recent years in industrial relations prac-
Ratna Sen is Professor (Retired), Indian Institute of tices in MNCs and try to fit these into a
Social Welfare & Business Management, Kolkata
pattern.
E-mail: ratnasen46@yahoo.com
The Indian Journal of Industrial Relations, Vol. 46, No. 3, January 2011 367
Ratna Sen
denly became cost conscious and de-

The last few years have seen a manded higher productivity without bo-
sharp surge in worker protests in nuses (constituting 30-40% of pay). Dif-
multinational companies across ferences in pay between workers who
India. got small annual increases in salary and
managers who got much greater in-
The last few years have seen a sharp creases also caused a grouse. Other is-
surge in worker protests in multinational sues involved absorption of contract
companies across India. In Tamil Nadu, labour, trade union recognition, inter-
workers at Hyundai, MRF, and Nokia union rivalry.
went on protest strikes. It is not just blue
collar workers who have been aggres- The situation is not peculiar to India.
sively asserting their rights or protesting In China, the strikes, stoppages and sui-
and striking. In the private Indian owned cides afflicting foreign factories on
sector, pilots of Indias biggest airlines Chinas coast in recent years, have
like Jet Airways (some foreign shaken the populist image of the countrys
shareholding) went on strike on separate workers as docile, diligent and dirt cheap
occasions during 2009. Engineers and (The Economist July- August 2010). Dis-
other employees of Air India (government putes in the first half of 2009 were 30%
owned) went on strike for 3 days in May higher than the previous year s.
2010. In Pune, multinational companies Guangdong had 36 strikes between May
such as Cummins Generator Technolo- 25th and July 12th 2010. The new labour
gies, Cummins India, Bosche Chassis law introduced in Jan 2008 gave work-
Systems, Brembo India, lost periods of ers more contractual rights. Honda work-
work ranging from 20 to 85 days. Other ers, better educated and trained than
companies affected included Pricol in usual, complained that workers wages
Coimbatore. Gurgaon and Manesar near were disproportionately lower than that
Delhi, the home of the automobile indus- of the Japanese managers. A component
try, have seen large scale unrest not only maker (gears in Atsumitec) got workers
in the large multinationals but in many of to return from strike only with a pay hike
the subsidiaries. The death of a worker of 47%.
on 19th October 2009 at Rico Auto and in-
juries to 30 others, led to a major backlash Honda
from the firms striking workers and the
All India Trade Union Congress (AITUC) The problems in the auto-belt in
(The Economic Times 21/10/09). Haryana date much earlier, from 2005 in
fact. On 25 th July 2005, about 300 to 700
Although not coordinated or for the workers of Honda Motorcycles and
same reasons, some are related to the Scooters India (HMSI) were reported
downturn. For instance, many companies injured in a clash with Haryana police.
which had paid overtime and incentives About 3000 workers were protesting a
for several years of frenzied growth sud- lockout of their factory and the dismissal
368 The Indian Journal of Industrial Relations, Vol. 46, No. 3, January 2011
of some colleagues. Trouble broke out dent, Production, who kicked one worker
when the workers, staging a protest and pushed off the turban of another.
march, were confronted by police. On Although he had to apologise and was
being held back, the workers injured a sent back to Japan, these led the work-
deputy superintendent of police and set ers to get together and make a list of 50
fire to the SDMs vehicle. This acted as demands for substantially higher wages,
a trigger for the police to unleash mas- allowances and facilities. The manage-
sive retaliatory violence. Incensed ment offered Rs 3000 increase per month
Haryana policemen went berserk and per worker. The workers refused to ac-
thrashed the agitating workers. Chief cept the offer and started to set up a
minister Bhupinder Singh Hooda ordered union. The management tried to discour-
an inquiry into the police action, although age and suppress the process. Workers
it was termed by Gurgaon deputy com- were called individually and advised
missioner, as operations conducted against joining the union. The company
within the boundaries of law (Sen 2010). then lobbied with the Haryana Govern-
ment not to allow unionisation and the
registrar actually turned their application
The workers were almost always
down. As the workers agitation contin-
in fear of management because
ued the management took the extreme
they had to sign movement sheets
step of dismissing several activists. Pro-
for visits to the toilet or for drink-
duction was affected substantially. The
ing water, accept shift choice with-
movement picked up strength and a man-
out change, receive threats of ter-
ager was gheraoed and even man-
mination in case of less than ex-
handled. Production was halted for 30
pected performance, and stay back
minutes.
each day to complete the produc-
tion target.
The incident was followed by further
worker demonstrations, visits by MPs to
Interestingly, HMSI took the stance the injured workers in hospital, a flash
of injured innocence, saying it had noth- strike by the local Bar Association, and
ing to do with the unfortunate incident support from unions of public sector
which had taken place outside the fac- banks and the public works department.
tory. But the workers were almost al- However, in 4 days, the workers of HMSI
ways in fear of management because reached an agreement with the manage-
they had to sign movement sheets for ment in the presence of Haryana Chief
visits to the toilet or for drinking water, Minister who, congratulated the workers
accept shift choice without change, re- and said, The episode was politically-
ceive threats of termination in case of motivated. .We will ensure congenial
less than expected performance, and stay environment in the industry. The pact
back each day to complete the produc- stated that the striking workers would
tion target. The last straw proved to be resume duty and not make any new de-
the behaviour of a Japanese Vice-Presi- mand for one year. The labour union
Ratna Sen
would remain. Workers would get full researcher (Saini 2005). HMSI suffered
salary for May and June, though after problems later as well and the union be-
June 27, the principle of no work, no came affiliated to the AITUC.
pay, instituted by the Supreme Court,
would be implemented. Injured workers, Hondas Chinese factory near Shang-
not able to resume work immediately, hai, suffered a strike on 7 th June 2010,
would be given paid leave. The 50-odd less than a week after it settled an ear-
suspended workers would be reinstated lier dispute by offering a 24% pay rise
along with the four dismissed union lead- (The Economist, June 12 18, 2010).
ers, though the company could transfer
them to any department, except manu- Maruti Suzuki India
facturing. The dismissed employees
would also give a separate assurance Maruti-Suzuki workers went on strike
letter to the management, and an un- first on 12 th October 2000 when nearly
dertaking that they would not engage in 4,700 employees of Maruti Suzuki
any act of indiscipline, before joining duty. (MSIL), formerly Maruti Udyog Limited
boycotted work, protesting the
companys demand for an undertaking
The pact stated that the striking
from them (Sen 2010). Daily output was
workers would resume duty and
cut by 86% as the company forbade en-
not make any new demand for one
try to workers not signing the undertak-
year. The labour union would re-
ing. The MU Employees Union treasurer
main.
said that signing it would have meant los-
ing their fundamental rights. It was also
In April 2004, HMSI had set up a a protest against the managements de-
Works Committee under the ID Act with cision to link bonus and incentives to pro-
15 workers and 5 managers in addition ductivity and efficiency. The primary
to the Canteen, Transport, Health and concern of the management was that
Sports Committees. But all worker mem- production should not stop on account of
bers were nominated by the manage- the agitation. Workers from suppliers
ment. The company magazine covered were roped in to do the work and along
its own achievements and activities and with supervisors and managers, Maruti
included employee awards on quality, got the plant started within a weeks time.
safety, training programmes, safe driv- There was also indirect (political) pres-
ing of two-wheelers. There was no col- sure from the BJP Government on the
umn for employee letters or expression. Union and the issue came up for discus-
The only employee-related news con- sion in Parliament. The management
cerned marriages, births, deaths. In No- meanwhile agreed to drop insistence on
vember 2004 the company announced individual workers to furnish a good con-
gifts of Rs 600 for Diwali and this ap- duct undertaking, but sought certain safe-
peared to be the starting point of the un- guards, and stipulated that the law would
rest and later agitations, according to one take its own course in regard to disci-
plinary action. The deadlock continued the company. They also dangled the car-
for 90 days. Finally on 9 th January 2001, rot of other investments by several Japa-
the strike broke on the managements nese companies in Haryana because of
terms. The Union had to accept the new its progressive industrial policy.
terms on production linked incentives and
bonus. The face saver was that no un- In August, 2005, the Maruti Udyog
dertaking had to be given. However, the Employees Union (MUEU) sought the
2000-01 confrontation did not die down Prime Minister Dr Manmohan Singhs
or get resolved. intervention to resolve several issues with
Suzuki management since the Suzuki
management had summarily dismissed 24
The strike broke on the
Union activists without holding any en-
managements terms. The Union
quiry, another 36 after ex-parte enquiry,
had to accept the new terms on
and 32 more for not signing the improper
production linked incentives and
and illegal undertakings imposed by the
bonus.
management. Twenty-six were charge-
sheeted and compelled to take VRS,
Post 1991, Maruti had initially lost its while hundreds of other employees also
dominant 85% market share in India to took VRS, not exactly voluntary. The
new competitors like Hyundai, Daewoo Union also alleged that Maruti Udyog had
and Tata Motors. But it groped back to replaced over 2000 permanent employ-
over 50% share in a few years by intro- ees with contract workers, following the
ducing new models regularly. The com- October 2000 dispute. The PM met them
pany was held up as a model employer, on 3 rd August and voiced apprehension
paying high wages and using several in taking up the issue, as the echo of the
Japanese management techniques for labour trouble at Hondas facility had
integrating employees into the production barely died down.
process. Several initiatives to improve
production and shop floor working A Maruti spokesperson said the
through cost cutting were also launched. companys Union (formed by ex-employ-
In 2002, Suzuki took its shareholding to ees of the company) had long since been
54.2%, and the government exited the de-recognised and therefore was not rep-
venture entirely by March 2004. The resentative of the workers. The work-
company operationalised another plant men had been notified that only those
and diesel engine production centre in workers could enter the factory who gave
Manesar, Haryana. The Indian MD was an undertaking in writing that they would
replaced by a Japanese MD. Suzuki not indulge in any activity which adversely
Motors Corporation decided to expand affected the production and discipline and
production capacity of its plant in that workmen who do not give the un-
Gurgaon from the existing 4.5 to 6.0 lakh dertaking would be deemed to be on ille-
units and thanked Chief Minister gal strike. In terms of the contract of
Chautala for all the support extended to employment the workmen are duty-
Ratna Sen
bound to adhere to norms of discipline scuttled the production process. The tim-
and give normal output. Suzuki, which ing of the strike synchronized with a con-
had already increased production from tinuous market decline for the Automo-
5,50,000 in 2005-06 to nearly 8,00,000 in bile Industry. On December 5, 2008, the
2008-09, decided to step up capacity fur- Labour Department, vide its Order un-
ther to one million per annum by 2009, der section 10 (3) of Industrial Disputes
earmarking Rs 9000 crores investment Act 1947 prohibited the strike by MBLU
for 2008-2011. Exports had also risen sig- and ordered all striking employees to re-
nificantly (The Economic Times 5/5/09). port for work immediately. A fresh Memo-
randum of Settlement was signed, the
Bosche indefinite lock out was lifted and work-
men associates were allowed to return
The Bosche Group, India, manufac- to their duties with effect from 21.1.2009.
tures world-class hydraulic brake sys-
tems for 2- wheelers, 3-wheelers, pas- Established in 1982, Robert Bosch
senger cars, utility vehicles, light com- India Chassis Systems Ltd (RBIC), Pune,
mercial vehicles and agriculture tractors. is a wholly owned subsidiary (stake of
The corporate office is located at Pune, 95.87%) of the Bosch Group in India,
and various modern manufacturing plants employing about 2020 personnel (Bosche
at Chakan, Jalgaon, Manesar (Haryana) website). The Union was established af-
and Sitarganj, Uttarkhand. The group ter Bosch Chassis Systems took over the
employs about 15,817 countrywide and plant in 2006. On July 18th, 2009, work-
registered consolidated sales of Rs. ers at this plant went on strike demand-
50,087 million in 2005-06 (Bosche ing pay rise as agreed to earlier and equal
Website). The company claims that its pay for equal work. Precariously em-
regular employees are paid above aver- ployed workers such as trainees and
age salaries. However, this does not ap- non-permanent employees earned only 25
pear to stem the tide of strikes at its vari- - 30 % of regular wages. The strike was
ous units in India. led by Bosch Chassis Systems Kamgar
Sanghatana (BCSKS) and supported by
The Mico Bosch Labour Union the International Metalworkers Federa-
(MBLU), Jaipur Plant, went on an indefi- tion affiliates in the region (IMF website),
nite strike from November 10, 2008, despite a 3-year agreement signed on
(Bosche Press Release, 21/1/09), even November 3, 2007, giving average wage
though a four year wage agreement with rise of around 60 per cent and stipulated
the Union was valid till 31.05.09. After rises for each year. At that time Bosch
repeated appeals by the management had informed the Union that the two
failed to end the strike, management wheeler brake unit was being handed over
raised a dispute with the Rajastan Labour to Brembo, an Italian company, and that
Department and claimed that the Union 50 workers were to be transferred to the
resorted to violent means to prevent new company. The workers had protested
movement of vehicles to the plant and and signed an agreement with Bosch and
Brembo, only after a clause was included Press Release March, 2010). During the
stating that, in the event of closure or 14 sessions of negotiations, the company
relocation of Brembo, the transferred offered revision of wages equal to what
workers would be re-employed by Bosch. was offered in the last negotiations, sub-
stantial improvements in hospitalization
After Brembo failed to implement facilities and transfer of around 45 indi-
wage rises in 2008 and 2009 and Bosch rect workmen to direct production areas,
in 2009, and the Unions General Secre- without reaching conclusion. MKS-N
tary was suspended, the Union served a resorted to a Go Slow and subsequent
notice of stoppage of work. But instead Tool Down from Feb. 2010 which con-
of negotiating with the Union, company tinued till 6.3.2010. Revenue loss for the
management lodged a complaint against plant was claimed at Rs. 60.4 million in
the Union with the local Industrial Tribu- the month of February, 2010.
nal, which, however ruled that the strike
was not illegal. The IMF Regional Rep-
The company offered revision of
resentative felt that The success of the
wages equal to what was offered in
struggle will have far reaching benefits
the last negotiations, substantial
(on) wages, working and service condi-
improvements in hospitalization
tions of precarious workers and trainees,
facilities and transfer of around 45
for Bosch and the Pune region and
indirect workmen to direct produc-
strengthen the efforts of unions to tackle
tion areas, without reaching con-
the widespread use of precarious work-
clusion.
ers by the companies (IMF 2009).
On March 8, 2010, Bosch Limited, Management requested its managers

Bangalore declared a Lock Out at its and officers to man the assembly lines
Naganathapura Plant. The decision was for three Sundays, in order to partially
taken (ostensibly for safety) because make up the shortfall in production and
workmen associates of the plant resorted claimed that office bearers of MKS-N
to physical intimidation of managers and physically intimidated and threatened the
officers of the plant during their agita- managers when they were entering of-
tion. After the wage settlement had ex- fice. Thereafter the MKS-N declared a
pired in Dec. 2008, a new Charter of Tool Down from 8.3.2010 onwards.
Demands was submitted by the recog-
nized Union of the plant, Mico Karmikara Cummins
Sangha Naganathapura (MKS-N), on
29.07.2009, demanding substantial in- Cummins India Limited (CIL) is a 51
crease in wages, enhanced medical fa- percent subsidiary of Cummins Inc. USA,
cilities for family members etc. The av- the worlds largest independent diesel
erage cost to company (CTC) of a work- engine designer and manufacturer. Set up
man associate at the plant was claimed in 1962 in India, it is a leading manufac-
to be about Rs. 37,000 p.m (Bosche turer of diesel engines with a range from
Ratna Sen
205 hp to 2365 hp, serving the power KCEU that the workers would not re-
generation, industrial and automotive sort to any violent measures and main-
markets and those for gas and dual fuel tain a secure work environment on the
engines. The companys values include company premises. Workers did not give
integrity, innovation, delivering superior the undertaking, since Union leaders said
results, corporate responsibility, diversity, this was an unfair demand, which would
and global involvement (Cummins India make the Union teeth-less. However,
Website). This is in contrast with the talks between the Union Committee and
labour relations practices. the management continued on 17th. There
was a complete lock-out the next day and
The company informed BSE that the the KCEU approached the Labour Com-
production associates at the companys missioner on 19th, requesting his interven-
Kothrud plant in Pune had started an tion to solve the issue.
agitation demanding re-opening of a six
month old wage agreement, signed un- But the stalemate continued since no
der conciliation. The workers had held a one from the company turned up for the
massive demonstration outside the meeting. The company confirmed that
Dahanukar Colony facility on September they were not very keen to restart op-
14, 2009 bringing all operations of the erations unless the Union Committee
company to a standstill and thereafter signed the undertaking (Business Stan-
resorted to an illegal strike from Septem- dard, 16 th Sept 2010). The company
ber 15. Other plants continued to be op- claimed that the Labour Commissioner
erational (Business Standard, 16 th Sept had directed the workers to join work
2010). The company vice president said and that an enquiry would be conducted
a tripartite agreement had been signed, against the 11 Union Committee mem-
mentioning details about wages, incen- bers for resorting to violence during the
tives and so on but that members of the strike. They would remain suspended.
Union Committee had been violating the The Union said they had assured the
agreement by refusing to perform on the Labour Commissioner that the workers
shop floor. On Sept 16th the management would continue the agitation without cre-
issued suspension notices to the 11-mem- ating any violent situation. The strike
ber Committee of the Kirloskar Cummins continued for more than two months and
Employees Union (KCEU). The work- it was only on 20th November that work-
ers refused to accept the notices and ers resumed regular duties. Cummins
staged a dharna. The treasurer of the India duly informed BSE about this.
Union, claimed that the company had not Shares of the company had declined
paid incentives of around Rs 12,000 for 0.87% (Reuters, Fri Nov 20, 2009).
the last three months to any of its work-
ers, and that the 11 office bearers of the Nokia
Union had been working without salary
for the last two months. The management Nokia India workers, at its plant in
sought a written undertaking from the the Telecom Special Economic Zone
(SEZ) in Sriperumbudur, Tamil Nadu, hoped that the matter would be resolved
went on strike on 20th Jan, 2010, after 35 quickly. The Nokia campus houses its
employees were suspended. The follow- assembly plant and also their suppliers
ing day another 20 employees were sus- Foxconn, Wintek, Salcomp, Laird and
pended according to Nokia India Employ- Perlos. This plant can churn out around
ees Progressive Union (NIEPU) (IANS 500,000 mobile phones a day and has the
website). This strike too was part of a highest productivity among all Nokia plants
series starting in 2009. The Nokia Union across the world (IANS website). Nokia
is an affiliate of the Labour Progressive has about 8,000 staff at the facility, includ-
Front (LPF), labour wing of the ruling ing around 3,700 permanent workers
DMK Party. According to the Union, the (some went on strike), around 2,000 train-
immediate cause of the strike was the ees and 1,000 contract workers. The to-
transfer of an employee from one job to tal number of workers in the SEZ, includ-
another. A Union official observed that ing that of the suppliers is about 30,000.
the human resource manager was curt
and threatened employees with suspen- Production at Nokias factory was hit
sion orders. The protests spiralled and again after workers began another strike
Nokia suspended 35 employees, defend- on 13th July 2010 demanding higher pay
ing the move by saying that Every com- (Business Standard, 14 th July 2010).
pany has certain codes and values, the Nokia did not comment on the strike or
violation of which cannot be brooked, report production loss, but said in a state-
and accusing the suspended employees ment that a long-term wage settlement
of acts of serious misconduct (IANS was being discussed and that the wage
website). About 1,200 staff joined the deal offered was among the highest in
strike although the NIEPU claimed that the region in similar industries. The strike
about 2,000 staff went on strike (Times was called off late on 15th night, follow-
of India, 10 th February, 2009). ing tripartite talks. The Nokia manage-
ment revoked the suspension of 60 work-
ers. The Union agreed to the terms after
The immediate cause of the strike
TN Labour Minister, TM Anbarasan (Fi-
was the transfer of an employee
nancial Express, Jan 22, 2010). How-
from one job to another.
ever, some employees were still not ready
on the ground that the wages offered
Nokia raised a dispute with the were too low. Nokia had said in April that
Labour Department the next day. But the mobile handset production at the India
employees refused to end their agitation plant had crossed 350 million handsets
despite being asked by the Labour over its four years of operations (Eco-
Commissioners office to resume duty. nomic Times Bureau, 15 Jul, 2010]
The Commissioners advisory included
also directions to the management to sort A research centre (SOMO) felt that
out the row by January 25th. Nokia said the unionization of Nokia has been a re-
it was talking with its workforce and markable event in the mobile manufac-
Ratna Sen
2009, at Hyundai Motors India Ltds

Research, based on extensive in- [HMIL] Sriperumbudur in Tamil Nadu,
terviews, indicates that decent ended after management and employees
employment is still an elusive con- reached a settlement when the manage-
cept in mobile manufacturing. ment agreed to recall some of the sus-
pended workers. The work boycott, re-
turing industry. Nokias workforce in sulting in a fall of 4-5% in daily produc-
South India had formed a union after a tion at the plant, was called off on the
resoundingly successful strike in August fourth day of a hunger strike by some
2009. The attempt to improve employ- workers at the Office of the Labour Com-
ment conditions in the leading company missioner in Chennai. A Hyundai spokes-
in the mobile phone market globally and man said that a settlement had been
nationally, would have tremendous impli- reached and the management would re-
cations for industrial relations within the call 20 of the 75 suspended workers. The
whole industry employing around 4.4 mil- Union is affiliated to the Centre of In-
lion people (primarily manufacturing) at dian Trade Unions (CITU) in Chennai,
present and expected to rise to 27.8 mil- which backed the strike (libcom.org)
lion in 2020. The research, based on ex-
tensive interviews, indicates that decent One of the main demands that the
employment is still an elusive concept in management recognise the Employees
mobile manufacturing. The research in- Union, had not been conceded, accord-
cluded 100 Nokia workers of all kinds ing to the president of CITU Tamil Nadu
and collaboration with Penn arm. He said that the company used to
Thozilalargal Sangham (PTS) (Women give increments every three years. The
Workers Organisation), which is active previous wage structure ended on March
in the area (100 women from Nokia are 31, 2009, and the new one was to come
members), and with Corporate Account- into force on April 1. The demands in-
ability Desk (CAD), Chennai, an activist cluded an increase in the minimum wage,
group researching corporates. Precari- which was Rs 8,000, and explanations for
ous employment in the form of tempo- dismissing 65 workers and suspending
rary, contract, probationary and appren- another 34 (libcom.org).
tice jobs, appeared to be the norm.
But the Chennai plant was closed
Precarious employment in the again for a few days in July 2009, after
form of temporary, contract, pro- another stand-off with the Union over
bationary and apprentice jobs, ap- recognition and reinstatement of work-
peared to be the norm. ers. A fresh agreement was signed on
28th July with the Union through the in-
tervention of the state Labour Minister,
Hyundai T.N. Anbrarasan (Economic Times, 29/
7/09). Even though a wage agreement
A 17-day strike starting 20th April was signed on 23 rd July (de facto recog-
nition) it was not accepted by many of cember 2009 January 2010, in regions
the workers and agitations continued. affected by long term high levels of un-
Management conceded the Unions re- employment, ranging from 10 to 17%.
quest to bring 9 workers who had been The common aspect was also the acute
transferred outside Chennai, back to the reaction of the bosses, either sacking
city by the end of 2009. However, they activists or threatening dismissal and le-
would not be returned to the main plant gal charges. (libcom.org).
but to the subsidiaries. Also out of the 80
workers dismissed earlier on disciplinary Mitsubishi Chemicals
grounds, a maximum of 20 would be re-
instated. The company also revoked the MCC PTA India Corporation Private
punitive actions taken over the last two Ltd (MCPI), a subsidiary of Mitsusbishi
years against members of the Union in Chemicals Corporation (MCC), one of
the form of wage cuts, withholding of the worlds top ten chemical companies,
bonus, gifts, gold coin etc. The State was established in 1997 in Haldia, West
Government acted tough also, since the Bengal. Construction was completed
management had reneged on several of quickly and production started in April
its commitments made earlier. 2000 with a capacity of 350,000 tonnes
per annum. Expansion with an investment
The Hyundai Motor India is the of Rs 1665 crores led to a second plant
groups largest overseas production base (capacity 8 lakh tonnes) being commis-
and is fully owned by the parent group. sioned in mid-2009 and the total capac-
The integrated unit at Irungattukottai, 30 ity increased to 11.5 lakh tones at Haldia,
kilometers from Chennai was built in with an expected turnover of $ 900 mil-
record time with an initial investment of lion by end-2010 (Times of India, 10 th
more than Rs. 2500 crores. Incorporated Feb 2009].
in May 1996, it can roll out 120,000 cars
and 130,000 engine transmission units per As part of the core-periphery
annum, with almost 85% localized con- model (Das 2006) of Japanese manage-
tent, to be increased further. The first ment, the regular skilled employees and
pilot Santro was ready in a record-break- the unskilled non-regular employees
ing 17 months with 70% localized con- formed two distinct groups. The latter
tent. Hyundai brought in 14 Korean com- were unionized (common practice in most
panies and helped them set up base in large enterprises in the local area) and
India for sourcing components. The total agreements (with earned and sick leave,
vendor base consists of 60 companies festival holidays, annual bonus, statutory
located at the plant site itself HRA and retrenchment benefits) were
(livemint.com) signed with them, although they earn
much less than regular workers. Eleven
Incidentally, the companys main elected operators representatives (one
Czech plant and the ancillaries, faced a member for every 20 operators) meet
series of wildcat work stoppages in De- managers formally in a Department Rep-
Ratna Sen
resentatives Committee for raising em- Mitsubishi gates, disrupting work

ployment issues. But when it came to through the day and causing extreme
unionization, MCPI tried to build and worry to its Japanese management. The
sustain a strong, manager-driven corpo- GM (HR) said: not a single employee
rate culture and such strategies that help could enter the premises. Around noon,
to build cooperative relations with the some of the workers associated with the
employees and avoid unionisation or production division were allowed entry.
union substitution. Apparently, there Because of that, there was some work
was an attempt at unionisation but failed in the processing unit... but there was
due to lack of support according to man- little or no work in the loading, unload-
agement (Das 2006). ing and despatch sections. There was no
one to man the canteen and the guards
too, joined the Cease-Work (http://
MCPI tried to build and sustain a
www.ilovekolkata.in).
strong, manager-driven corporate
culture and such strategies that
At Haldia Petrochemicals next door,
help to build cooperative relations
CITU had demanded a 300 per cent hike
with the employees and avoid
for contract workers and gained a 100%
unionisation or union substitution
increase in wages after a major strike
earlier. The siege at Mitsubishi was lifted
Despite this strategy, there has been late on 8th following the managements
simmering tension among the MCPI written assurance to look into their de-
unions following the victories of the mands. Work resumed from the night
Trinamool Congress in Panchayat and shift.
Lok Sabha elections during 2008 and
2009. The Nationalist Contractors Union It is interesting that MCPI did not
(contract workers of Mitsubishi, owing hesitate in setting up one of its largest
allegiance to Mamata Banerjees union plants abroad, in West Bengal, knowing
wing, INTTUC) raised several issues its long history of militant unionism and
relating to the contract workers pay leftist government. Obviously it relied on
discrepancies with permanent workers, its strategy of centralization of decisions
non-lucrative incentive schemes, reduc- and the manning of all key posts by
tion in bonus, etc. Agitations before the Japanese managers from its main estab-
gates were followed by dharnas, and a lishments. In line with its competitive
reported whole night gherao of the HR strategy, its main objective in HR has
head. The CITU Union did not protest. been to formulate, develop and maintain
Work was disrupted again at the plant unique work culture in tune with harmo-
on 7 th December 2009, demanding per- nious industrial relations with commit-
manent jobs for 150 casual workers and ted employees involved in world class
a raise for the rest. Mitsubishi has about manufacturing. Work practices include
513 permanent employees and around Total Quality Management (TQM), Just-
600 casual staff. The Union blocked the in-Time(JIT), Kaizen and 5S and Total
Productive Maintenance (TPM, cover- agency fee. But contract workmen were
ing the entire life of all equipments) not restricted to unskilled jobs. For ex-
(Das 2006). ample in the Instrumentation Department,
3 skilled technicians were under a con-
tractor. These and other skilled contrac-
It relied on its strategy of central-
tors workmen, like crane operators and
ization of decisions and the man-
welders got about 50% more wages than
ning of all key posts by Japanese
the lowest category workers (housekeep-
managers from its main establish-
ing, gardener, office boy) (Das 2006).
ments.
Conclusion
In MCPI, educated, highly skilled
employees enjoy regular terms of em- One finds several indications of con-
ployment and are recruited through strin- vergence in MNC operations in India.
gent selection procedures. Relations with However, although technical excellence
them are based on skill or knowledge is demonstrated in these companies, there
based pay, elaborate communication and cannot be conclusions about best prac-
complaint procedure, and team work. tices since many of the managerial ac-
More than half of them are in the officer tions have led to poor employee relations.
category and even the receptionist is The converging trends are:
designated as Executive-Secretary.
There are no clerical workers. The re- 1. The location of strikes and unrest
maining are operators (selected from lo- have shifted to newer industrial ar-
cal ITIs, science colleges and polytech- eas like Gurgaon, Manesar, Pune,
nics) classified into five categories with Jaipur, Chennai, Bangalore, away
the basic pay of the highest category from the traditional hotbeds of union
being double that of the basic pay of the militancy like Bengal or Ahmedabad,
lowest category. In general, wage lev- as well as to fast-growing, modern
els are much higher than locally pre- industries like automobiles, auto an-
vailing rates but are not linked to senior- cillaries, telecom equipment, etc.
ity or bargained annually. In addition all away from traditional industries or
of them go through extensive training, areas of veteran unionism.
ranging from work practices to fire fight-
ing. In 2002-03 all unskilled and non-core Many of them are in fact related
jobs in MCPI were done by 388 contrac- to the issue of union recognition
tor workers (only 313 permanent em- or managerial aversion towards
ployees including 106 executives). Even unions.
though Contractors workmen got double
the statutory rates, their wages were 2. Some of the unrest is related to the
lower by 40% than the lowest wage in recession of 2007-08, but several
the regular category. Contractors got 8- started much earlier and have con-
12% of the total workers wages as tinued even after the recession has
Ratna Sen
eased significantly. Many of them different types of employment con-

are in fact related to the issue of tracts exist even in Japan including
union recognition or managerial aver- non-regular employees part-time
sion towards unions. In the mobile and temporary workers engaged di-
phone industry, SOMO contends that rectly by the company and contract
the overall policy of the companies workers who are registered with a
seems to be the strategy of creating third party. The non-regulars are
a reserve army of cheap labour in growing in proportion crossing one
the area, available whenever required third of total employment in 1997.
and vulnerable to retrenchment at
4. A lot of the problems relate to mana-
will. The insistence on hiring a very
gerial styles summary suspensions
young workforce, mostly women,
and dismissals, pay cuts, intolerance
preference for workers who are re-
for any interference in their own pro-
cruited from far-off towns and vil-
duction plans, insistence on written
lages over local youth, intolerance of
undertakings of good conduct - and
any attempts to form associations or
a poor understanding of industrial
unions, and keeping wages at a sub-
relations in South Asia and their po-
sistence level, all point to this ap-
litical linkages. There are several
proach. An earlier report quoting
examples of pseudo-participative sys-
workers in mobile companies stated,
tems where committees are formed
There are no trade unions in any of
but workers have little or no influ-
the factories of the workers we
ence on decision-making. Several
met. (and that) managers report-
Indian companies use Japanese
edly said that there is no need for
managerial and work practices like
unions (SOMO :Corporate Geogra-
teamwork, total employee involve-
phy 2009). Among managements the
ment, Kaizen, 5-S, suggestion sys-
perception is that outsiders are cre-
tems and rewards, among which are
ating trouble for political reasons.
Jayashree textiles, Ingersol-Rand,
Alstom Power, Infar India and
Labour flexibility is a dominant
Hindustan Unilever. But in all of
concern for management in all the
these, unions are involved in the
cases, and has led to increasing
schemes and in their introduction.
use of non-regular workers.
5. Workers are resorting to violence and
3. Many are related to global competi- are hitting back at management over
tion, and manpower utilization tech- perceived injustices. Management
niques consistent with high tech pro- also have amply demonstrated insen-
ductivity and production. Labour flex- sitivity to workers sentiments and
ibility is a dominant concern for man- perceptions. This is particularly true
agement in all the cases, and has led of the Haryana cases, but also indi-
to increasing use of non-regular cated in others. About the unions in-
workers. Das (2006) reminds that volved it can be concluded that, al-
though the left unions (AITUC, of investment, are areas where mul-
CITU) are active in several cases, tinationals have shown considerable
regional unions affiliated to ruling alacrity.
groups are equally active. While
Some of these cases also indicate
some degree of political adventurism
some degree of divergence as well. While
has contributed to union muscle-flex-
Marutis confrontation with its workers
ing, the MNCs do not appear to have
over the issue of production and remu-
learnt that this is part of the Indian
neration changes was triggered by the
IR scenario.
competition created by globalization, the
manner in which it dealt with the prob-
Management also have amply dem-
lem indicated very close resemblance
onstrated insensitivity to workers
with Hondas handling of its union. Its
sentiments and perceptions.
strategy was characterized by:
6. Although Collective Bargaining is - close links with the industry-friendly

being used, it is often failing to re- state government
solve prickly issues and workers are
demanding reopening of negotiations - ability to read the central
within 6 months to one year. governments favourable stance, re-
gardless of the political affiliation
7. There is also a demonstrated inabil- (neither NDA nor UPA governments
ity on the part of the multinationals intervened on behalf of the workers)
(except MCPI) to handle conflicts bi-
laterally and they are taking recourse - introducing changes in the employ-
to the state Industrial Relations ma- ment structure (from permanent to
chinery or government ministers. contract)
The MNCs are taking advantage of - de-recognition of the union
states support for industrialization
and suppression of unions, as in These characteristics ensure that
Haryana. But such recourse is also employment and work practices are
inviting politicization. Interestingly, more similar to the host country than that
while the multinationals have not al- found in joint ventures or in the operat-
ways exhibited sensitivity to Indian ing country. In terms of international hu-
labour concerns they have not been man resource strategies this is a good
backward in taking advantage of the example of the global vs local issue in
adversities in the Indian labour mar- managing subsidiaries. This may hold true
ket. For instance, the use of contract of other Japanese companies operating in
and casual labour, the payment of sig- India as well (328 as of June 2006).
nificantly lower wages for some sec-
tions of labour, the proneness of state MCPIs union avoidance strategy
governments to overlook many as- has been fine-tuned for the location it is
pects of labour rights in the interests in and till now appears to have been rea-
Ratna Sen
sonably successful. However, there ap- Hayden, Annette (2009), Internationalization

pear to be chinks in its armour, and the and HR Restructuring in MNCs Unpack-
ing the Concept of Convergence, Post
fact that this has not been replicated in doctoral Research Fellow, CRIMT,
other MNCs across India, indicates the Universit de Montral, Paper presented
delicacy of the strategy. at the 15 th World Congress of International
Industrial Relations Association, Sydney,
Nokia had tried to avoid unions August
Hindu-Business Line, (21/10/09), Labour Unrest

The Haryana Governments solici- at Gurgaon-Manesar Auto-parts Units
tousness for industries concerns has also Continue, [Federation of Automobile Deal-
ers Association]
provoked unions to enlarge company dis-
putes into industry-wide movements. w w w. i l o v e k o l k a t a . i n / i n d e x . p h p / N e w s /
Trinamool-stalls-Mitsubishi.html accessed
on 14/12/2010
References
International Metalworkers Federation website,
Bosche website, http://www.boschindia.com and http://www.imfmetal.org, accessed on 12 th
Businessmapsofindia.com (accessed on Oct 2010
12 th Oct 2010)
IMF, http://www.imfmetal.org, Interview of
Bosche Press release, http:// Sudarshan Rao, on Aug 06, 2009 by Anita
www.boschindia.com,9 March, 2010 (ac- Gardner
cessed on 12 th October 2010)
IANS, http://www.ians.in, accessed on 9 th Nov,
Bosche Press Release (21/1/09), http:// 2010
www.boschindia.com, (accessed on 12 th
October, 2010) libcom.org, accessed on 11 th Oct, 2010.
Business Standard (2010), 14th July (accessed on livemint.com, [accessed on 11th Oct, 2010]
10 th Nov. 2010) Reuters (2009), http://in.reuters.com, Fri Nov 20,
Business Standard (2009), Strike at Cummins accessed on 9 th Nov. 2010
Pune Plant, September 16 SOMO, http://somo.nl, (Centre for Research on
Cummins India Website, http:// Multinational Corporations), (accessed on
www.cumminsindia.com (accessed on 12th 11th Oct, 2010).
October, 2010) SOMO, http://somo.nl, Corporate Geography,
Das, Subesh (2006): Japanese Multinationals in Labour Conditions and Environmental Stan-
India, extracted from unpublished paper dards in the Mobile Phone Industry in In-
by ex-Labour Secretary , West Bengal Gov- dia, September 2009
ernment Stanton, Pauline , Burgess, John, Lewer, John &
Economic Times Bureau (2010), Nokia Workers McDonnell, Anthony (2009) Exploring
on Strike after talks fail, 15 Jul. (accessed Employment Relations Practices of MNCs
on 10th Nov. 2010) in Australia, Paper presented at the 15th
World Congress of International Industrial
Financial Express (2010), Updated: Nokia Strike Relations Association, Sydney, August
: Stalemate continues, Jan 22 accessed on
10 th Nov. 2010 Sen, Ratna (2010), Industrial Relations: Text and
Cases, Macmillan India
Saini, Debi, S. (2005), HMSI, Vision,MDI, Oct- The Economic Times (5/5/09), Suzuki raises
Dec Maruti stake, fuels talks of full control
The Economist (2010), The Next China, July The Economic Times (29/7/09), Hyundai Mo-
31st-6th August tors employee strike enters 2nd day
The Economist (2010), June 12th 18 th, When The Times of India, 10th Feb 2009
China Runs out of Workers
United Nations Conference on Trade and Devel-
The Economic Times, New Delhi (21/10/09), Stir opment Report, 2008
Brings Gurgaon Auto Belt to a Halt
Raduan Che Rose, Naresh Kumar & Nagiah Ramasamy
Trade Unions in Malaysia:Perspectives of Employers &

Employees of Unionized Companies
This paper examines the views of em- Trade Unions in Malaysia

ployees and employers from unionised
companies on trade unions in Penin- Trade unions have traditionally
sular Malaysia. A majority of non- been regarded as important instru-
union members perceived that employ- ments for protecting workers inter-
ers do not display a positive attitude ests at workplace. However, the
towards the unions at workplace. The decline in union density worldwide
role of the individual rather than the in recent times seems to signify a
collective aspirations of employees is weakening of their influence
clearly emphasised by employers. The (Aminuddin 2008, Bramble 2001,
high level of employers opposition to Benson & Zhu 2008, Heery 2002).
unionisation is clearly an indicator of Membership decline, structural
its role in the erosion of collective rep- changes in employment, manage-
resentation, leading to the diminution ment practices, membership partici-
of union organising efforts. The highly pation and democracy, the legisla-
competitive and dynamic globalized tive framework, and the political in-
business environment has been the key fluence of unions have been under
driver in employers attitudes towards scrutiny in the developed countries
trade unions. Trade unions need to (Waddington & Whitson 1993). In
review their organising strategies, as addition, trade unions are con-
well as their internal procedures and fronted by economic factors, gen-
processes. Trade unions should go erally beyond their control, such as
beyond their traditional roles and en- threat of capital flight, and overseas
gage in activities strategic to their competition. The Malaysian trade
communities and employers. union movement is in such a pre-
dicament and it can be argued that
the movement is faced with a num-
ber of challenges from changing
Raduan Che Rose & Naresh Kumar are from the Faculty labour market structure and neo-lib-
of Economics & Management, Universiti Putra Malaysia.
E-mail: naresh@putra.upm.edu.my. Nagiah Ramasamy eral policies. Todd and Peetz (2001)
is from the Sunway University College, Malaysia argue that overall Malaysias indus-
Trade Unions in Malaysia: Perspectives of Employers & Employees of Unionized Companies
trial relations remain firmly within the Trade union density in Malaysia was
control rather than the commitment 9.35% in 1990 (Ministry of Human Re-
framework.The state interventions resources 1991), dropped to 9.24% in 1995
mains pervasive, managerial control in and 7.87% in 2000 (Department of Trade
the workplace continues to dominate and Union Affairs 2003, Department of Sta-
labours ability to bargain collectively tistics 2006). Despite a slight increase to
remains restricted. The provisions in leg- 8.5% in 2002, density has seen an over-
islations such as the Trade Unions Act all decline in the subsequent years, to
1959 and the Industrial Relations Act 7.7% in 2006 and to 7.45 per cent in 2008.
1967 have made it very difficult for Average membership per trade union
workers to organise themselves. dipped from 1,401.3 in 1995 to 1,317.4 a
decade later. The slide in the average
The state interventions remains members per union continued from 1,296
pervasive, managerial control in in 2006, to 1,248.9 in 2008. While abso-
the workplace continues to domi- lute union membership has continued to
nate and labours ability to bargain increase over the years, the average
collectively remains restricted. membership per union has continued to
decline, which points to the trade union
Industrial relations practices (includ- movement having many unions with small
ing employment practices) in Malaysia membership size. One would wonder at
have changed and continue to evolve this point whether trade unions are a nec-
since the general unionism from the essary institution. Josey (1958: 89) con-
1920s to the defeat of the Communist cluded that without strong trade unions,
trade union movement in 1947-48, and Malaya is almost certain either to go com-
industrial unionism from 1948 until the munist or else degenerate into some form
eighties when it now faces the pros- of authoritarianism. Even if one does not
pect of being replaced by enterprise agree entirely with Joseys views, short
unionism. Various amendments to the leg- span of history has indeed shown that
islation linked to employment and indus- trade unions have played an important
trial relations, and industrialization strat- role in industrial harmony. However,
egies since the post-Independence years questions have been raised, ever so of-
(1957 and beyond) have had a marked ten, on their relevance by employers as
effect upon the activities of the employ- the literature have revealed.
ers and the trade unions. This has ne-
cessitated a careful examination of the There have been research works on
extent of change in industrial relations in the Malaysian labour movement (e.g.
Malaysia. Attention has focused on two Anantaraman 1997, Arudsothy 1988,
areas: first, the decline in the strength of Bhopal 2001, Jomo 1995, Kuruvilla 1995,
organised labour as evidenced by a vari- Parasuraman 2004), but most of the stud-
ety of statistics and second, the driving ies have taken on a qualitative approach,
forces for this change. with limited primary research to support
the assertions. Empirical studies on the
Malaysian trade unions, and in particular being active in dealing with members
the perceptions of employers in unionised concerns, organising meetings, produc-
companies are lacking despite its impor- ing publicity material and recruiting new
tance to current debate on trade members. The substitution strategy, on
unionisation. Thus we examined the prob- the other hand, seeks to make the
lems and issues, and reasons for the de- organisation an issue-free company.
cline in trade unions movement in Penin- The employer attempts to convince work-
sular Malaysia. ers that the union is redundant, and that
there are no contentious issues, and even
Debate on Trade Unionism if these should arise they can be easily
resolved to the satisfaction of both the
According to Hyman (1989:12), em- parties. In doing so, the employer is be-
ployers create internal mechanisms for ing seen to resolve grievances. Employ-
the purpose of challenging workers col- ers also attempt to establish independent
lective identification with unions. Fewer and non-union related mechanisms for
employers consider the need to use union resolving grievances and giving expres-
to mediate their dealings with employees, sion to employees voice (Gall & McKay
reflecting an antipathy to unions (Gilbert 2001).
1993). Similarly, Kelly (1996) argued that
there is a growing readiness on the part In Malaysia, Aminuddin (2003) and
of employers to bypass trade unions and Ramasamy and Rowley (2008) declare
reduce the range of issues over which that employer opposition to unionisation
they have influence. Gall and McKay is common and the state is reluctant to
(2001) suggests that employers may use challenge such opposition. They explain
suppression strategy or the substitution that employers tactics have included in-
strategy to make the organisation union- definitely delaying union recognition ap-
free. Employers using the suppression plications, victimising or promoting activ-
strategy create an atmosphere of fear ists to remove them from the shop-floor
and through intimidation they aim to sabo- and forming company-sponsored in-house
tage or put an end to existing or expected unions. The problem of union recognition,
attempts at union organisation and re- or rather the lack of it, by employers has
quests for union recognition or at the least, been a long-standing one, with unionists
prevent unions from getting to a critical accusing employers of intentionally de-
mass. Actions such as sackings, dismiss- laying recognition of unions while using
als and redundancies seek to try to pre- allegedly unfair practices to dampen
vent or stop union office bearers from unionism in the workplace (The Star
1996). Sometimes, employers delay union
recognition by challenging the right of
Employers may use suppression particular unions to represent their em-
strategy or the substitution strat- ployees. Such delays undermine the
egy to make the organisation unions standing and effectiveness; hav-
union-free. ing recruited the members, they remain
unable to represent them until accorded dency, adds Bhopal (2001). Management
official recognition. The sustained oppo- generally does not welcome the interven-
sition of many employers to unions con- tions that unions impose on decision-mak-
tinues to undercut trade unionism in Ma- ing discretion and authority.
laysia, argue Jomo and Todd (1994: 35).
Union recognition, according to Gall and The presence of labour unions in the
McKay (2001: 94), is a highly sensitive workplace has both good and bad points
issue because it provides the potential for as far as business and society are con-
collective organisation to infringe upon cerned. Union leaders often accuse cor-
managerial prerogative in order to defend porate heads and management of
and advance workers terms and condi- overemphasising profits, return on eq-
tions of employment. They add that uity and earnings per share at the ex-
union recognition is particularly relevant pense of the welfare and dignity of em-
where managerial values are increasingly ployees. Those on the management side
becoming non-union. believe that unions are bent on destroy-
ing free competition and enterprise.
Dependency theory argues that Neither statement is entirely accurate,
multinational companies in search although both contain some element of
of low labour costs and weak labour truth (Leap 1995). Savant (1990: 12)
organisation lead to the suppres- emphasised that closures, sickness,
sion of trade unionism owing to the lockouts and layoffs are more on ac-
dependent states relative power- count of mismanagement, internal dis-
less vis--vis multinationals. putes of the management, unhealthy
competition and questionable practices
Many employers ignore workers in- indulged in by the management. Ac-
terest and practice a biased personnel cording to Rajasekaran (2002), the Sec-
policy and in doing so be inclined to retary General of MTUC, there are in-
breach the labour laws (Aminuddin creasing anti-union activities by major
2003). Dependency theory argues that corporations. They are demanding for
multinational companies in search of low the removal of legal safeguards that pro-
labour costs and weak labour vide employment security to workers on
organisation lead to the suppression of the ground that removal of these safe-
trade unionism owing to the dependent guards is essential to face the increas-
states relative powerless vis--vis mul- ing global competition. There is also
tinationals. This situation is reinforced by mounting pressure on the government to
inter-state competition to provide an at- weaken collective bargaining on wages
tractive site for inward investments and working conditions, to limit wage
(Bhopal 2001). In the development de- adjustments, to remove the tradition of
cades of Malaysia, the states accommo- paying annual bonus and to legalise dis-
dation of multinational, particularly anti- criminatory practices against foreign
union, American corporations has further workers. Workers have to be protected
exposed the implications of state depen- from unscrupulous employers, states
Aminuddin (2003). As such, trade (represented by the human resource or

unions have to play their role effectively. the industrial relations/employee rela-
tions managers, or their representa-
There is evidence of some employ- tives) at each workplace across differ-
ers, particularly amongst the larger com- ent industrial sectors, namely: agricul-
panies, introducing more modern man- ture, transport and storage, wholesal-
agement techniques in Malaysian working and retailing, hotels and restaurants,
places. These include new methods of manufacturing, telecommunications, fi-
work organisation, inventory management nance and insurance, and health. The
and quality control. Multi-skilling is more primary data was obtained through sur-
prevalent and the working week is made veys using self-administered question-
more flexible to match the needs of pro- naires derived from a few notable re-
duction (Todd, Lansbury & Davis 2004). search instruments (Tolich & Harcourt
Kuruvilla and Erickson (2002) argue that 1999, Bryson 2003, Office of the Em-
as product markets became more ployment Advocate 2004, Poole et al
globalised, the threat of communism 2005).
weakened, and radical unions and par-
ties declined, labour peace became less After piloting the survey instru-
of a priority. At the same time, increased ments with appropriate amendment,
international product market competition 576 questionnaires were mailed to se-
has made cost reduction on the shop-floor lected respondents (non-union mem-
imperative. Such cost reductions often bers) with 168 useable returns after
involved increased use flexible ap- several follow-up contacts of non-re-
proaches such as layoffs, temporary spondents. The survey was completed
workers and sub-contractors. The focus between August and October 2009.
is on the efficient deployment of labour, The responses from selected employ-
that is, reduced wage and non-wage ers were collected during the MEFs
costs. Employers see trade unions as regional meetings. Nevertheless not all
barriers to efforts at restructuring their selected respondents returned the ques-
workforce. Lower unionisation, in line tionnaires on the same day, and thus it
with the flexibility thesis (McGregor & was necessary to follow up with tele-
Sproull 1992), becomes a strategic thrust phone calls to the respective employ-
of employers. ers, to seek their cooperation in filling
up the questionnaire and have them re-
Research Methodology turned early. A total of 215 question-
naires were distributed to the employ-
The survey sample was drawn ers, of which 185 useable returns were
from the Malaysian Trade Union Con- received from a wide geographical
gress (MTUC) and Malaysian Employ- area. The user-friendly SPSS software
ers Federation (MEF) membership da- Version 15 was used to analyse the
tabases and included the employees survey data, to arrive at appropriate
(non-union members) and employers conclusions.
Perceptions on Malaysian Trade employers to have rather negative atti-

Unions tude towards the unions. The role of the
individual rather than the collective aspi-
Table 1 reveals the employers atti- rations of employees is clearly
tudes towards the trade unions, as per- emphasised by employers. Not only could
ceived by employees in unionised com- it be argued that elements of
panies. Only 23.2% of the respondents individualisation are present and increas-
agreed that employers provide access to ing, but employers are placing much em-
unions, to talk to new employees. A small phasis on direct links between manage-
percentage of respondents perceived that ment and employees.
employers do not discriminate against
union members in career progression. On While only 14.9% agreed that em-
whether the employer is willing to nego- ployers display a positive attitude
tiate with the union, 44% of the respon- towards the union, 56.5% of the
dents disagreed that this is so. While only respondents were not sure
14.9% agreed that employers display a whether their employers being
positive attitude towards the union, 56.5% negative towards their union.
of the respondents were not sure whether
their employers being negative towards The main reason cited by employers
their union. A substantial number of re- of unionised companies for their accep-
spondents (67.3%) disagreed that em- tance of unionisation is that they have
ployers provide information about unions to comply with relevant legal provisions
automatically to new employees. Finally, on rights of workers to form unions
85.7% of respondents disagreed that (84.3%). Section 4 of the Industrial Re-
employers encourage all eligible new lations Act 1967 of Malaysia aims to pro-
employees to join the unions, reinforcing tect the rights of workmen as well as
the argument that respondents perceive employers, in the private sector, to form
Table 1 Employers Attitude towards the Trade Union as Perceived by Employees
Items Non-union Members in Unionised Company
(n= 168)
Disagree (%) Neutral (%) Agree (%)
Provide access to union to talk to new 89(53.0) 40(23.8) 39(23.2)
employees
Does not discriminate against union members in 36(21.4) 104(61.9) 28(16.7)
career progression
Willingly negotiates with the union 74(44.0) 67(39.9) 27(16.1)
Managers display a positive attitude towards the 48(28.6) 95(56.5) 25(14.9)
union
Information about union automatically given to 113(67.3) 33(19.6) 22(13.1)
new employees
No discrimination in hiring ex-union members 49(29.2) 103(61.3) 16(9.5)
All eligible new employees are encouraged to 144(85.7) 21(12.5) 3(1.8)
join union
and assist in the formation of their re- employers associations recommend it nor
spective trade unions and in the exercise do their customers require it. Table 2 re-
of their rights, no person can interfere ports the results of the survey.
with, restrain or coerce a workman or
an employer. It appears to be the case It can be noticed from Table 3 that
of unwilling acceptance, that is, failure the employers acknowledge the involve-
to comply would mean having to face ment of trade unions and employee rep-
possible legal action either by the union resentative bodies in workplace issues,
or the government. Some employers also although varied in their extent of involve-
stated that it was usual in their industry ment. Unions are perceived to be in-
(22.7%) and concerns about union dis- volved in issues concerning company
ruption have also played a role in the rules and regulations (35.1%) and female
acceptance of unionisation (23.8%). workers issues (34%) to some extent.
Employers largely disagree that they In critical areas of the organisation such
would prefer to negotiate wages and con- as quality (21.1%), production (24.3%)
ditions collectively. Further, neither the and working practices (26.5%), unions
Table 2 Reasons for Companys Acceptance of Unionisation

Items Employers in Unionised Company (n =185)
We have to comply with relevant legal 4(2.2) 25(13.5) 156(84.3)
provisions on rights of workers to form unions
We are concerned about workers disruption 53(28.6) 88(47.6) 44(23.8)
if we do not comply with it
It is usual in our industry 86(46.5) 57(30.8) 42(22.7)
We prefer to negotiate wages and conditions 130(70.3) 42(22.7) 13(7.0)
collectively, not individually
Our Industry Association recommends it 176(95.1) 9(4.9) 0
Our customers/clients require it 185(100.0) 0 0
Table 3 Employers Perception on the Involvement of Trade Unions

Items Employers in Unionised Company (n =185)
Low (%) Neutral (%) High (%)
Production issues 108(58.4) 32(17.3) 45(24.3)
Quality issues 111(60.0) 35(18.9) 39(21.1)
Team working issues 90(48.7) 63(34.1) 32(17.3)
Health and safety issues 26(14.1) 43(23.2) 116(62.7)
Pay and benefits issues 44(23.8) 48(25.9) 93(50.3)
Working practices 108(58.4) 28(15.1) 49(26.5)
Companys rules and regulations 105(56.8) 15(8.1) 65(35.1)
Interests of female employees 32(17.3) 90(48.7) 63(34.0)
Interests of disabled employees 88(47.6) 71(38.4) 26(14.1)
Cultural and religion activities 86(46.5) 42(22.7) 57(30.8)
Employee welfare system 55(29.7) 38(20.5) 92(49.7)
Social and sporting activities 41(22.2) 45(24.3) 99(53.5)
appear to play a lesser role. Employers involved in social matters, rather than the
perceived the unions involvement rather more critical quality and production is-
low in matters related to team work sues. The aim of employee involvement
(17.3%) and issues pertaining to disabled initiatives is to displace the conflict-based
workers (14.1%). These do not appear to collective bargaining approach with ap-
be key issues among unions, and as such proaches that do not involve unions.
employers do not see unions as being ac-
tive partners in some key areas of their Unions are perceived as being
companies operations. In a few in- more involved in social matters,
stances, the extent of agreement among rather than the more critical qual-
employers about the involvement of both ity and production issues.
the trade unions and employee represen-
tative groups is high and this is consider- Employers believe that their attempts
ing the fact that employers do not gener- at introducing employee involvement and
ally see unions in a positive light. It would participation initiatives have, for example,
appear as if employers attempt to harness induced a high sense of belonging
unions involvement, in ways beneficial to (73.5%), improved communication
their companies, for example, social and (69.2%), enhanced performance
sporting activities (53.5%), employee (68.1%), achieved greater commitment
welfare (49.7%) and cultural and religious (63.2%) and increased overall profitabil-
activities (30.8%). Further, unions in- ity (62.2%). Indeed the employers per-
volvement in health and safety issues ceived positively all items pertaining to
(62.7%) is an indicator that employers see employee involvement and participation
a role for unions in their organisations. initiatives as indicated in Table 4.
Unions involvement in the traditional
bread-and-butter issue, that is, pay and Based on the analysis, employers
benefits is not very high (50.3%). There- appear to have adopted workplace poli-
fore, unions are perceived as being more cies in which they believe that employee
Table 4 Employers Perception on the Extent of Contribution of Employee Involvement and

Participation Initiatives
Items Non-union Members in Unionised Company
(n= 168)
Induced sense of belonging 7(3.8) 42(22.7) 136(73.5)
Improved communication 30(16.2) 27(14.6) 128(69.2)
Enhanced performance 32(17.3) 27(14.6) 126(68.1)
Identified untapped talent 31(16.8) 37(20.0) 117(63.2)
Achieved greater commitment 23(12.4) 45(24.3) 117(63.2)
Reduced industrial dispute/created harmony 35(18.9) 34(18.4) 116(62.7)
Increased overall profitability 33(17.8) 37(20.0) 115(62.2)
Reduced absenteeism rate 26(14.0) 54(29.2) 105(56.7)
Reduced turnover rate 32(17.3) 51(27.6) 102(55.2)
involvement and participation initiatives Conclusion

have an important part to play. However
employers agree that the two most im- A substantial majority of non-union
portant barriers to successful operation members perceive that employers do not
of employee involvement and participa- display a positive attitude towards the
tion are employees resistance to change union, reinforcing the previous findings
and their level of education and training. that employers have rather negative at-
To a smaller extent, employers also per- titude towards the unions. Unions are gen-
ceive that employee representative bod- erally perceived by employers of
ies are possible barriers to employee in- unionised companies, as being able to
volvement and participation. Employers contribute very little to their businesses.
perceived that the low level of support In effect, employers not only hold the
provided by the trade unions as being the view that unions are superfluous, but pos-
other important sources of barriers sibly also a threat to their business. The
(56.7%). This could partly explain em- high level of employer opposition to
ployers antagonistic approach towards unionisation in this study is clearly an in-
unions in Malaysia. Employers perceived dicator of its role in the erosion of col-
that top management support and em- lective representation, leading to the dimi-
ployee rewards systems as being of very nution of union organising efforts. Based
minimal barriers to employee involve- on this study, it can be argued that the
ment. Table 5 reports the barriers to highly competitive and dynamic
employee involvement and participation globalised business environment has been
as perceived by the employers. the key driver in employers attitudes to-
wards trade unions. The employer, who
Employers perceived that top man- has direct and immediate contact with
agement support and employee employees and trade unions can, there-
rewards systems as being of very fore, be viewed as a significant barrier
minimal barriers to employee in- to trade unionism. It is evident that the
volvement. employers favour the unitarist approach,
rather than the pluralist approach. While
Table 5 Employers Perception on the Extent of Contribution of Employee Involvement and

Participation Initiatives
Items Employers in Unionised Company (n=185)
Employee education/training level 30(16.2) 27(14.6) 128(69.2)
Employee resistance to change 32(17.3) 27(14.6) 126(68.1)
Trade unions 26(14.0) 54(29.2) 105(56.7)
Employee representative bodies 90(48.6) 34(18.4) 61(32.9)
Employee turnover rate 102(55.2) 32(17.3) 51(27.6)
Employee absenteeism rate 97(52.4) 54(29.2) 34(18.4)
Top management support 136(73.5) 18(9.7) 31(16.8)
Employee reward systems 128(69.2) 27(14.6) 30(16.2)
the labour practices are focused on em- unethical and unscrupulous when it comes
ployee involvement initiatives, the em- to worker issues. As such, unions are
ployer relationship with trade unions is important, and in fact necessary, to pro-
the one that can be seen as somewhat tect workers interest. Trade unions can
antagonistic. One of the reasons for this be partners, supporting the employers
is the drive for organisational stability and business, rather than merely being seen
harmony in a business environment that as by employers, as the opposition.
is highly competitive, especially compe- Unions have a vested interest in the ex-
tition from low cost economies such as istence and growth of the businesses: it
China and Vietnam. serves their very existence. Union bust-
ing activities may not be the appropriate
The relationship between the employ- approach; instead employers can con-
ers and trade unions is one built on power sider proactive and caring employment
imbalance and suspicions about each policies. There is a need to articulate a
others roles. The capacity of employers vision that seeks to engage both unions
to resist an effective union presence at and employers in an intelligent discourse.
their workplaces has therefore made There is a need for a reformulation of
union membership unavailable to large how trade unions can be represented in
numbers of potential union members. The the workplace and at the national level.
findings suggest that unions will struggle Instead of taking the traditional
to unionise in the face of concerted em- adversarial approach, a partnership ap-
ployer opposition. It would appear that proach may be the best way forward.
unions are not being taken very seriously
by employers. The full scope of employer
Instead of taking the traditional
opposition to trade unionism in Malaysia
adversarial approach, a partnership
is difficult to observe, until further re-
approach may be the best way for-
search on a longer term is carried out.
ward.
Longitudinal research on managers in
industrial relations is rare, and this is im-
portant. The state, with its neo-liberal poli-
cies has, over the years, strengthened leg-
Trade unions need to review their islation to curb the powers of trade
organising strategies, as well as their in- unions. This has led to a situation where
ternal procedures and processes. Trade unions find it difficult to express the dis-
unions should go beyond purely being in- appointments and expectations of work-
volved in their own activities, and be en- ers. Unions, on the other hand, have to
gaged in activities strategic to their com- reassess their strategies, in terms of their
munities and their employers. Employers relationship with employees and employ-
need to implement work practices that ers. The research findings contribute to
accommodate legitimate workers inter- better understanding of workplace issues
ests, and the unions legitimate interests, among the various stakeholders, namely
as well. There are employers who are employees, employers and trade union-
ists, and to some extent, to the state as Bhopal, M. (2001), Malaysian Unions in Po-
well. The results have potential benefits litical Crisis: Assessing the Impact of the
Asian
in that it brings into the open the views
of the different parties about each other, Contagion, Asia Pacific Business Review, 8
the positive elements as well as the prob- (2):73-100.
lems and frustrations. Understanding the Bramble, T. (2001), A Potrait of Australia Trade
viewpoints of others may commit each Union Officials, British Journal of Indus-
other to a long term harmonious work- trial Relations, 39 (4):529-37.
place. It should be emphasised that these Bryson, A. (2003), Working with Dinosaurs?
findings should be further investigated on Union Effectiveness in Delivering for Em-
a longitudinal basis, to better understand ployees, PSA Research Discussion Paper
the changing nature of the business en- 11, London: Policy Studies Institute.
vironment and its implications on trade Department of Statistics (2006), Malaysia Eco-
unionism, in particular. nomic Statistics-Time Series 2005, Malay-
sia.
Acknowledgement Department of Trade Unions (2006), Statistical
Summary of Labour and Human Resources,
This paper draws on the workplace http://www.mohr.gov.my/mohr_key.php
(accessed 30 June 2006).
industrial relations survey financed (un-
der the Fundamental Research Grant Department of Trade Union Affairs (2003), Trade
Scheme, 2008-2010) by the Ministry of Unions by Sector, 2000 Jan 2002 Minis-
Higher Education, Malaysia. try of Human Resources, Malaysia, http:/
/www.mtuc.org.my/statistics.html.
References Gall, G. & McKay, S. (2001), Facing Fairness

at Work: Union Perception of Employer
Opposition and Response to Union Rec-
Aminuddin , M. (2003), Malaysian Industrial
ognition, Industrial Relations Journal, 32
Relations and Employment Law, 4th edn.,
(2) :94-113.
McGraw-Hill, Malaysia.
Gilbert, R. (1993), Workplace Industrial Rela-
Aminuddin, M. (2008), Human Resource Man-
tions 25 Years after Donovan: An Employer
agement: Principles and Practices, Oxford
View, British Journal of Industrial Rela-
University Press, Kuala Lumpur.
tions, 31: 235-53.
Anantaraman, A. (1997), Malaysian Industrial
Hyman, R. (1989), Dualism and Division in
Relations: Law & Practice, Universiti Putra
labour Strategies, in Hyman, R., The Po-
Malaysia Press, Serdang, Malaysia.
litical Economy of Industrial Relations,
Arudsothy, P. (1988), Labor Law and Industrial London: Macmillan.
Relations in Malaysia, Labour and Indus-
Heery, E. (2002), Partnership versus Organiz-
try,1(3).
ing: Alternative Futures for British Trade
Benson, J. & Zhu, Y. (2008), Trade Unions in Unionism, Industrial Relations Journal, 33
Asia: Organization, Strategy and Issues, (1): 20-35.
in Benson, J.& Zhu, Y. (eds), Trade Unions
Jomo, K.S. & Todd, P. (1994), Trade Unions and
in Asia: An Economic and Sociological
the State in Peninsular Malaysia, Oxford
Analysis, Oxon: Routledge.
University Press, Kuala Lumpur.
Jomo, K.S. (1995), Capital, the State and Labour Attitudes and Behaviour in Industrial Re-
in Malaysia, in Capital, the State and lations: A Twenty-year Study, British Jour-
Labour, United Nations Press, Aldershot, nal of Industrial Relations, 43 (1): 117-34.
UK:85-237.
Rajasekaran, G. (2002), Impact of Globaliza-
Josey, A. (1958), Trade Unionism in Malaya, 2nd. tion on Workers and Trade Unions, MTUC/
Edn., Donald Moore, Singapore. LO Norway National Workshop on Global-
ization and its Impact on Workers in Ma-
Kelly, J. (1996), Union Militancy and Social Part- laysia, Petaling Jaya, 16-17 September.
nership, in Ackers, P., Smith, C. & Smith,
P. (eds), The New Workplace and Trade Ramasamy, N. & Rowley, C. (2008), Trade
Unionism: Critical Perspectives on Work Unions in Malaysia: Complexity of a State-
and Organization, Routledge, London. Employer System, in Benson, J. & Zhu,
Y. (eds), Trade Unions in Asia: An Eco-
Kuruvilla, S. (1995), Industrialisation Strategy nomic and Sociological Analysis, London:
and Industrial Relations Policy in Malay- Routledge. The Star, (2002) Convince
sia in Frenkel, S. & Harrod, J. (Eds.), Firms on Need for Unions, MEF Told,
Industrialisation and Labor Relations: Con- Nation, March 28.
temporary Research in Seven Countries,
Ithaca: ILR Press: 36-66. Savant, P.B. (1990), Key-note Address by the
Honble Justice, Proceedings from
Kuruvilla, S. & Erickson, C.L. (2002), Change LAWASIA Second International Seminar
and Transformation in Asian Industrial on Labour Law, New Delhi, 28-30 Septem-
Relations, Industrial Relations, 41(2). ber, Vol. 1.
Leap, T.L. (1995), Collective Bargaining and La- Tolich, P. & Harcourt, M. (1999), Why Do
bor Relations, 2nd. edn., Prentice Hall, New People Join Unions? A Case Study of the
Jersey. New Zealand Engineering, Printing and
McGregor, A. & Sproull, A. (1992), Employers Manufacturing Union, Current Research
and the Flexible Workforce, Employment in Industrial Relations, 2: 267-75.
Gazette, May: 225-34. Todd, P., Lansbury, R. & Davis, E. M. (2004),
Ministry of Human Resources (1991), Labour Industrial Relations in Malaysia: Some
Indicators 1990, Kuala Lumpur. Office of Proposals for Reform, Proceedings of the
Employment Advocate (2004), De facto IIRA 5th Asian Regional Congress, Seoul,
Compulsory Unionisation 1999 Report, Korea Labour Institute
Report of the Australian Government. Todd, P. & Peetz, D. (2001), Malaysian Indus-
N o v e m b e r . h t t p : / / w w w. o e a . g o v. a u trial Relations at Centurys Turn: Vision
printer.asp?showdoc=/home/research- 2020 or a Spectre of the Past?, The Inter-
unionism.asp &SubMenu=4 national Journal of Human Resource Man-
agement 12(8): 1365-82.
Parasuraman, B. (2004), Malaysian Industrial
Relations: A Critical Analysis. Kuala Waddington, J. &Whitston, C. (1993), Research
Lumpur: Pearson Prentice Hall. as Engagement: Trade Unions in the 1990s,
in Forrester, K. & Thorne, C. (eds.), Trade
Poole, M., Mansfield, R., Gould-Williams, J. & Unions and Social Research, Aveburt, En-
Mendes, P. (2005), British Managers gland: 24-44.
Yu-Cheng Lai & Santanu Sarkar
Labour Cost &Foreign Direct Investment-Evidence from

India
This study measures the effect of India & Foreign Direct Investment
labour cost on foreign direct invest-
ment in India and finds out whether India is the second-most populous
the foreign owned firms pay higher country in the world, and is also a con-
wages than their domestic counter- stituent of BRIC. The nation has wit-
parts. The estimation has been done nessed high economic growth post 1990s
by the Ordinary Least Square (OLS) and the foreign investment played an
technique. Data suggest that after important role in its economic develop-
controlling the output, the lower av- ment. India has had some amount of suc-
erage wage attracts foreign invest- cess in exerting a pull on FDI since the
ment in a firm implying that India beginning of 1991. With the liberalization
enjoys comparative advantages of of the countrys economy, the large In-
low labour cost which enables her dian market is being opened to foreign
to lead in product competition glo- investors and several companies are set-
bally. Second, Indian firms will have ting up (or have set up) operations in In-
efficiency wage to encourage em- dia.
ployees to produce higher output. In
addition, the foreign owned firms in As the business around the world
India pay higher wages than their recurrently alter their direction to remain
domestic counterparts. The firms competitive, the government in host
with higher ratio of foreign owner- countries are taking up and trying out
ship pay more wages than the firms various policies to attract foreign inves-
having lower ratio. tors to locate in their countries.
Blomstrm and Kokko (1997) and
Aizenman and Spiegel (2003) have ar-
Yu-Cheng Lai is Assistant Professor, Department
of Finance, Shih Chien University Kaohsiung gued that the governments around the
Campus, Neimen Shiang, Kaohsiung 845, TAIWAN. world actively attempt to attract foreign
E-mail: br00846@yahoo.com Santanu Sarkar is investment to locate in their countries by
Associate Professor, Department of PM&IR, School using substantial government and private
of Business and Human Resources, XLRI
investment incentives such as tax cuts
Jamshedpur 831001
E-mail: santanu_s1@rediffmail.com and property right enforcement. How-
Labour Cost & Foreign Direct Investment-Evidence from India
ever, in the case of India, over and above vironment (Carstensen & Toubal 2003).
the governments fiscal and financial in- Based on the evidence from China, Gao
centives for MNCs, the cheap human re- (2005) indicated that the labor quality will
source has also played an imperative role have more significant effect rather than
in attracting foreign investors in to the the labor cost in attracting foreign invest-
country. Based on the studies of India ment from the developed countries.
and China, Wei (2005) argued that India
has advantage in its cheaper labor cost, Girma et. al. (2001) found that labour
lower country risk, geographic closeness productivity in foreign firms is higher than
to OECD countries, and cultural similar- in domestic firms after controlling other
ity, and these advantages can increase inputs. Based on higher productivity, they
the FDI inflow (Wei 2005). Nevertheless, indicated that foreign firms pay more
policy maker seems to have made their than the domestic firms. Sarkar and Lai
own judgments that inward FDI is valu- (2009) have also indicated that the firms
able to their countries (Lipsay & Sjoholm with no foreign investment (domestic
2004) and to some extent such a scenario firms) are found to be less productive in
prevails in India.1 sectors with more foreign investment com-
pared to those domestic firms in sectors
Literature Review with relatively smaller foreign presence.
Hatziu (2000), and Janicki and The extra wages paid by foreign
Wunnava (2004) have claimed that high firms may come from (1) informa-
unit labour cost increases FDI outflow tional asymmetries, (2) effective
but decreases FDI inflow. Moreover, use of the newer technology, and
according to Feenstra and Hanson (3) mitigation of labour turnover
(2001), foreign outsourcing is associated between foreign and domestic
with increase in the wages paid to skilled firms.
employees in the United States, Japan,
Hong Kong and Mexico. However, la- Besides labour productivity, the for-
bor cost may not impede the FDI inflow, eign owned firms may pay extra wage
if the host country has high market po- to employees in the host countries. The
tential as well as legal and economic en- extra wages paid by foreign firms may
come from (1) informational asymme-
tries, (2) effective use of the newer tech-
1. The annual budget document of the government
(2005) lays down the policy makers own
nology, and (3) mitigation of labour turn-
conviction about the opportunities provided by over between foreign and domestic firms.
the growing foreign investment in terms of Eicher and Kalaitzidakis (1997) claimed
technological up-gradation, gaining access to global that informational asymmetries coupled
managerial skills and practices, optimizing with human capital differences may ex-
utilization of human and natural resources, and
competing internationally with higher efficiency
plain why foreign owned firms pay higher
(Annual Budget Document, Government of India wages than domestic firms in developing
2005). countries. Blomstrom and Kokko (2003)
have found that foreign owned firms ini- three possible wage effects. Foreign
tiate more on-the-job training programs firms entering the domestic market could
than their domestic counterparts, and either (i) increase wages, or (ii) have no
these foreign firms also bring with them effect, or (iii) could even cause a decline
the product quality improvement prac- in wages paid by domestic firms. In the
tices like quality control, just-in-time etc., first case, the labour demand in domes-
which are the antecedents for the effec- tic firms will shift to the left when for-
tive use of newer technology. Besides, eign ownership increases in an industry
foreign owned firms pay higher wages sector, because the domestic firms will
to alleviate the labor turnover as domes- simultaneously raise the wages to attract
tic employees over a period of time tend (or retain) better workers (Feenstra &
to move from foreign to domestic firms Hanson 1999). 4 In addition, the labour
owing to technology spillover (Sarkar & demand will further increase because the
Lai 2009). 2 value of human capital will increase if
domestic firms invest more in employees
With the increased foreign presence training due to foreign competition. As a
in local market, increased level of com- result, both competition and demonstra-
petition is likely to compel the domestic tion effects will lead to higher wage for
players to be either (a) more productive domestic firms.
by investing in physical capital, or (b)
efficiently use the resources so as to ef- In the second situation, the labour
fectively apply the technology induced demand in domestic firms may not change
by foreign firms to remain competitive, with the increase in foreign investment.
or (c) quit. The consequence of this form It may happen that foreign firms do not
of competition is an abridged dispersion have much technology transfers, and they
of overall output in a specific industry. are simply acquiring domestic firms that
The foreign firms may increase output are already in high wage sectors. As a
through their own higher productivity and result, the domestic firms do not face
also by raising the productivity of domes- much competition and demonstration ef-
tic firms (Aizenman & Spiegel 2003, fects. Hence, the foreign presence will
Girma et. al. 2001). 3 However, the pro- have no or little impact on domestic
ductivity spillover may not always get firms wages. In the third situation, the
reflected in the wage spillover. There are labour demand in domestic firms will de-
cline after foreign investment increases
2. In order to obtain know-how or technology from in an industry sector. This would happen
foreign owned firm, the domestic firms may pay
higher wages to attract employees from foreign
owned firms.
4. Feenstra & Hanson (1999) indicate that the growth
3. Export monitoring and enforcement costs are in FDI can increase the skilled labour wage. Both
assumed to be lower for domestic firms than for labour demand and skill-biased technical change
foreign owned firms, but foreign owned firms have will shift the demand away from low-skilled
the countervailing productivity advantages activities, while increasing the relative demand
(Aizenman & Spiegel 2003). and wages of the higher skilled labour force.
since the foreign firms will be able to at- in equation (2), where total cost is repre-
tract the best workers from domestic sented by ( w + ei ) and r.
firms, leaving them with low wage em-
ployees. Therefore, the competition and Ci 3 rK ! ( w ! ei ) L .......................(2)
demonstration effects will be absent in this
situation; besides, employees of domestic By setting output price to unity, the
firms will not have many on-the-job train- firms aim at profit maximization can be
ing to develop their human capital. expressed as:
Theoretical Model Maxf 3 g i F ( K , L) # Ci =
On the basis of Besley and Burgess' g i 7i K W LX # rK # ( w ! ei ) L ...........(3)

(2002) study, we have developed in this
paper a model to measure the effect of Now we would like to determine how
wages on FDI.The state of technology in the optimal choice functions will respond
Cobb-Douglas production function is rep- to change in a parameter of wage
resented by Ai where A f and Ad represent ( w + ei ), and rent of capital (r). The op-
the state of technology adopted by the timal choices have to satisfy the first-or-
foreign and domestic firms, respectively. der conditions. First-order conditions re-
To avoid problems of firm size, fixed quire f K 3 f L 3 0 , which leads to the
capital costs and number of firms, we following respectively:
have adopted the convenient assumptions W Qi
of constant returns to labour (L) and 3 r ................................(4)
capital (K). Using a Cobb-Douglas for- K
mulation, the production function is given X Qi
3 w ! ei .........................(5)
by F ( K , L 3 Ai K W LX W , X 2 1 . Produc- L
tion in a firm is measured as g i F ( K , L) As seen in Equation (5), more pro-
where F ( K , L) is a homogenous productive workers will have a higher mar-
duction function. Hence, owners of firms ginal product and hence will be paid
will enjoy a rent due to the scarcity of higher wages, considering that the em-
the factor represented by gi ,where ployment number will be equal for both
g f and g m are used for foreign and do- foreign and domestic firms. The output
mestic firms, respectively. Prices of all for foreign and domestic firm will be
manufactured goods are normalized at L
equal to Q f 3 ( w ! e f ) L and Qd 3 ( w ! ed )
one. X X
respectively. The output differential be-
Qi 3 g i Fi ( K , L ) 3 7 ig i K W LX .......................(1) tween foreign and domestic firms will be
equal to the premium differential between
All firms operate in a common set of foreign and domestic firms
L
( Q # Q 3 ( e # e ) X , :Q f d 3 :e f d X . We
L
factor markets for labour and capital f d f d
whose prices are w and r. In the present assume that if the foreign firms have
study, we have taken the cost expression higher output in comparison to domestic
firms ( :Q f d = Q f Qd 4 0 ), the output dif- tal formation. However, the bargaining

ferential between foreign and domestic power of employers will discourage the
firms ( :Q f d ) will become larger, and as capital accumulation ( Kw <0). Using
a result, the foreign firms will pay higher Cramers rule, we found
premium than domestic firms #KL
K
( :ef d = ef ed > 0). On the other hand, if the w
3
(1 # W # X )g Q
20 ..............(8)
output spills over from foreign to domes-
tic firms, then the output differential be- Now, based on equation (8), we can
tween foreign and domestic firms ( : e f d ) determine the effects of a change in wage
will become smaller, leading to smaller on inward FDI. The inward FDI will en-
premium differential between these two courage the capital accumulation
types of firms. It implies that premium ( F D I(inK f lo w ) >0). Finally, as shown in
of domestic firms ( ed ) will increase. equation (9), the wage will discourage the
inward FDI.
From these two first-order condi-
FDI (inf low ) FDI (inf low ) K
tions, the ratio of marginal products of 3 2 0 ........(9)
w K w
capital and labour to their respective mar-
ginal cost was established. As seen in Based on the above, we have three
equations (6A) and (6B), the second-or- objectives for the present study. The first
der condition is derived from the first-or- objective is to examine the relationship
der condition with respect to the wage (w). between foreign investment in firms and
K L their labour cost. Here we would exam-
f KK ! f KL 3 0 ..............(6A) ine whether the labour cost will attract
w w foreign investment in firms in India. How-
K L ever, the firms having higher output in
f LK ! f LL 3 1 .................(6B)
w w host country may also attract FDI inflow,
The second-order conditions were therefore, the model measure the effect
established in equations (6A) and (6B). of labour cost after controlling the out-
The determinant of the cross-partials of put (labour productivity).
the objective function is given as:
f KK f Although the high wage may pre-
D = f
KL
f LL
vent inflow of foreign investment
LK
from the host countries, the foreign
# W (1 # W )g Q WXg Q owned firms may still pay extra
K 2 KL
= W X g Q # X (1 # X )g Q .... (7) wages to induce higher output.
K L L2
WX (1 # W # X )g 2Q 2
= >0 Although the high wage may prevent
K 2 L2
inflow of foreign investment from the
Based on the equations (6A and 6B) host countries, the foreign owned firms
and (7), we will be able to determine the may still pay extra wages to induce higher
effects of a change in wages on the capi- output. Therefore, the second objective
is to analyze whether the extra wages extra wages compared to their do-
will be paid by foreign owned firms rather mestic counterparts?
than the domestic firms and what if the
3. Since the output will spill over from
extra wages in the foreign owned firms
foreign firms to domestic firms, the
do not have a significant effect on out-
domestic firms may also pay higher
put. As we have explained before, there
wage to their employees to motivate
may not be any effect because of (1) in-
them to deliver improved output.
formational asymmetries, (2) effective
Therefore, in that case, does foreign
use of the newer technology, and (3) al-
ownership in an industry sector af-
leviation of labour turnover between for-
fect the wage of domestic firms?
eign and domestics firms.
(Whether there will be significant
wage spill overs to domestic
Finally, the third objective of our study
firms?)
is to measure the wage spill over effect.
We have seen that the outputs of foreign The Expected Model
firms will spill over to domestic firms,
leading to higher output in domestic firms We have followed the approach
(Sarkar & Lai 2009). Moreover, the out- taken by earlier studies and estimated the
put differences between foreign and do- linear FDI inflow at firm level in equa-
mestic firms will decline, leading to tion (10). The statistics for all variables
higher premium for labour effort in the of the present study are described in
domestic firms. But will there be a simi- more details in the next section on mea-
lar spill over in the case of wage? The sure.
wage of domestic firms may depend on
whether the labour demand will be dif- FDI firmijt= W it+
n 33
Zk X + X Wageijt+dit+ ijt......
ferent for domestic firms in a particular k 31 it 1
(10)
industry sector where the presence of
foreign owned firms is relatively higher.
Based on the papers by Girma et. al.
Therefore, the specific research (2001) and Sarkar and Lai (2009), in the
questions to be addressed in this study present study we have built three models
are as follows: to test our hypotheses. In order to test
the model, we have adopted the variable
1. Does the lower labour cost attract of foreign ownership at firm level as FDI
foreign direct investment in to India? firmijt which can measure the FDI inflow
at firm level. The independent variables
2. Because foreign owned firms have will include log output Yijt for firm i in in-
higher output than domestic firms, dustry j at time t which is regressed on a
foreign firms may pay higher wages vector of variables Xit, which is a matrix
to encourage their employees to de- of log inputs hypothesized to impact firm
liver higher output. In that case do level output, namely labour productivity
the foreign owned firms in India pay ( LPit ), firm size (Size it ), capital
(Capital it), and wage (Wage ijt). 5 Based lead to either (a) foreign firms having a
on the study of Girma et al. (2001), we countervailing productivity advantages
have adopted the variables of labor pro- (Aizenman & Spiegel 2003), or (b) in-
ductivity ( LPit ) and wage (Wageijt). The formational asymmetries coupled with
real wage will directly reflect the cost of human capital differences giving rise to
labour, and the labour productivity is the empirically observed multiple wage equi-
measurement of production value of unit librium. Hence, foreign firms may pay
labour. The firms having higher labour higher wages compared to domestic firms
productivity in host country may also at- in developing countries.
tract FDI inflow and decline the outflow;
therefore, the model will measure the Now, with the aim of finding out
effect of labour cost after controlling the whether the Indian labour has benefited
output (labour productivity). We have from the presence of foreign firms, the
used the labour productivity index as the second and third hypotheses of the study
proxy. After controlling the labour pro- were tested. Consequently, the output
ductivity, the model has used wage vari- regression in equation (11) was written
able
n 33
to measure the effect of labour cost. as:
n33
Z k and are vector of constant param- Y ijt = it+1 Wageijt+ Z Xit +2FDI
k 31
k
k 31
eters to be estimated. Assuming that is n33
firmijt+3 FDI firmijtWageijt + Y k
correlated with regressors, dummy vari- k 31
ables or within estimator d it is used FDIfirm ijt Xit + d it + ijt ... (11)
where it for each firm i is obtained by
In the above equation, if the foreign
including dummy variables, which takes
subscribed capital (equity) participation
the value 1 for the corresponding i and
increases the firms output, one should
0, otherwise d it denotes industry dummy
observe a positive coefficient on FDI
and annual time dummy. is a random
firmijt. The estimation of the above equa-
error term. The use of annual time
tions has been done by the Ordinary
dummy and industry dummy helps to tone
Least Square (OLS) technique. In the di-
down concerns that the type of industry
rection of answering the research ques-
and year in which foreign investment is
tions, we have followed the approach
made might be correlated with factors
taken by the earlier studies and estimated
that also affect firms total output.
the wage function at the firm level as:
With the increased foreign presence n33
Wageijt=it+ Z Xit+ X1 FDI firmijt+ X 2
in local market in India, the increased
k
k 31
competition in labor market is likely to FDIindustryjt+ X 3 FDIfirmijt

compel the domestic players. This may n33
FDIindustryjt +
k 31
Yk
5
The output function compares variation in FDIfirm ijt Xit + d it + ijt .. (12)
knowledge involved in choices about factor
combinations, size, capital intensity of the firm, This forms the basis of our empirical
or sources of the firm level inputs. work. Here, log output Wageijt for firm i
in industry j at time t is regressed on a dummy variables or within estimator

vector of variables X it , which is a ma- d it is used where it for each firm i is
trix of inputs hypothesized to impact firm obtained by including dummy variables,
level wage, namely labour productivity which takes the value 1 for the corre-
( LPit ), firm size ( Sizeit ), and capital sponding i and 0, otherwise. d it denotes
( Capitalit ). There are two measures of industry dummy and annual time dummy.
foreign ownership i.e., FDIfirm ijt and is a random error term.
FDIindustry jt (more details in section on
measure). is a vector of constant pa- Data
rameters to be estimated. Aitken and
Harrison (1999) estimated the spill overs The study uses the detailed firm-level
hypothesis using a cross-section of indus- panel data of Indian industries from
tries instead of firm level panel data Capitaline 2005 a database of Capi-
where the coefficient on foreign share tal Market Ltd (an Indian Information
was understood as a measure of spill Services firm) that provides firm level
overs from FDI to domestic firms. The financial information of more than 13,000
interaction terms for FDIfirm ijt and companies. The present study has used
FDIindustryjt is expected to measure the data related to only 305 firms distributed
spill over effect. In order to avoid the among 14 industries for three years
problem of endogeneity, we set some (2002-03 to 2005-06) due to the con-
variables which simultaneously determine straints on matching variables of differ-
the foreign ownership and firms output. ent types and to obtain greater homoge-
The variables FDIfirm ijtXit can control neity in data set, however (Table 1). The
the problem of endogeneity. Assuming data set originally used for analysis con-
that is correlated with the regressors, sists of 630 firms from 14 industries, but
Table 1: Industry-wise Sample Distribution

Industry Sector No. of Firms
Chemicals & allied products carbon black, paints, plastics, fertilizers, 63
Engineering power generation, steel, metal 53
Domestic appliances and FMCG decorative, leather products 20
Services trading, telecommunication, construction, entertainment 7
Electronics and electrical appliances/equipments 19
Food and diary products coffee, tea, vanaspati, distilleries, sugar 19
Computers 8
Pharmaceuticals and biotechnology 23
Automobiles and auto ancillaries 30
Textile 23
Cement 10
Mining minerals / refineries / oil exploration/gas 12
Paper 6
Others rubber, tyres, miscellaneous, 12
Total 305
to attain larger consistency in the data, sion, Government of India on foreign in-
firms with very high and low rate of per- vestment. In the context of growing het-
formance were dropped from the list of erogeneity of production function and
305 firms finally chosen. Some industries measures of output, data was pooled from
were either dropped or merged with other 14 industry sectors to estimate the log-
because there were too few firms in a linear equation rather than estimating for
specific industry like, trading, telecommu- only few sectors. Estimation for a few
nication, construction, and entertainment selected sectors could result in the lack
sector were merged with service indus- of control for correlations between ex-
try. Furthermore, some observations planatory variables and unobservable het-
were dropped due to the missing value erogeneous firm specific factors that af-
for labour cost. Three hundred and five fect the firms output. Though, just about
odd firms from 14 industries in the study all the industry sectors as categorized in
account for the majority of Indian stock the major RBI reports were taken for
markets and therefore, they were pur- analysis with varied number of observa-
posively included in the sample. tions made in each sector, the selection of
sectors is largely driven by considerations
The categorization of industry sectors of the past trend of inward FDI in to In-
in the present study is driven by the pat- dia. 6 The data set is a balanced panel;
tern of classification of sectors made by therefore, total number of observation is
Reserve Bank of India (RBI) and the rec- n-T and contains information on firms
ommendation made by Planning Commis- output, sales turnover, foreign equity par-
Table 2: The Percentage of FDI Inflow in India

Industry 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01
Chemicals & allied 17 18 16 9 15 9 19 8 7
products
Engineering 25 8 15 18 35 20 21 21 14
Domestic 6 1 12 0 1 2 0 0 0
Appliances
Finance 1 10 11 19 11 5 9 1 2
Services 1 5 11 7 1 11 18 7 12
Electronics and 12 14 6 9 7 22 11 11 11
electrical equipment
Food and Diary 10 11 7 6 12 4 1 8 4
Products
Computers 3 2 1 4 3 5 5 6 16
Pharmaceuticals 1 12 1 4 2 1 1 3 3
Others 25 19 19 24 14 22 13 35 30
Total 100 100 100 100 100 100 100 100 100
Source: RBI Annual Reports
6 A distinct purpose for inward FDI in four sectors
service and computers industries (with positive
growth) and chemical, food and diary industry
ticipation, market capitalization, gross Measure

block, and employee cost. As seen in
Table 2, the foreign direct investment has The present study sought to extend
increased in most industries since 1992. the existing literature on creation of mea-
sures used in estimation of panel data for
testing spill overs hypothesis. The sample
6. contd. statistics is given in Table 3. With regard
sectors (with negative growth of inward FDI) to dependent variables, FDI firm ijt is a
through 1990s till 2002 is apparently confirmed vector that captures the share of foreign
in these reports. Besides, the entry barriers to ownership at firm level. In the light of the
foreign investment in each of these industries vary
and show that either by RBI automatic route or current workable recommendations made
by Foreign Investment Promotion Boards (FIPB, to Government of India as well as the
Govt. of India) approval, the existing equity limits governments existing equity limit, the
in most of the sectors are not more than 40 % framework adopted for the study treats
except for a few which allow 100% FDI.
the percentage of foreign equity partici-
Furthermore, some sectors are yet to open to
foreign investment. The engineering, services, pation (FEP) in firms as the measure for
electronics and electrical equipment and FDI firm. The share of foreign equity par-
computers, were the main sectors receiving FDI ticipation (FEP) has been used as the
in 2000-01 base year for the study. Domestic measure for FDI firmijt, which varies be-
appliances, finance, food and diary products
tween 0 and 100 %. FDI industryit is a
which were important sectors attracting FDI in
the early 90s, have seen a downtrend in the latter measure of the ratio of industry sales of
half of the nineties. Furthermore, services and NDF to the total sales of the industry for
computers have seen an increasing trend in the a particular year.7 FDI industry = 1, if the
latter half of the last decade and the trend seems percentage of foreign equity in the firm
to be continuing till this decade. Given the
50%; and 0 if < 50% for the last three
imperative of attracting FDI for increasing Indias
GDP growth rate, there should be presumption consecutive years. As given in Table 3,
in favour of permitting FDI. Accordingly, entry output is defined as log value of total out-
barriers to FDI (i.e., over and above those applying put at the firm level. The value of sales
to private investment generally) in any industry less change in inventories (Sales turnover
must be explicitly justified. Government in recent
times felt that many of the entry barriers had it
[Inventories it Inventories it-1]) is
greater justification at the time they were imposed, taken as a measure of the dependent vari-
but with a much stronger and more competitive able log output. With regard to indepen-
economy many of these can be removed. This dent variables, we have taken the yearly
will eliminate minor irritants that are sometimes average employee cost (unit labour cost)
blown out of proportion by interested parties to
the detriment of the national interest. Some of the
major recommendations with which government
is presently working and likely to show certain
7
For example, say in year 2002-03, total number
significant changes in the coming days are mostly of NDF in Cement Industry is 11 and industry
sales of these 11 firms is Rs. 33.3 million, and if
lifting up the equity limit from 20+% to at least the industry sales for 2002-03 is Rs. 120.46
50%, and most of the sectors with existing equity million, then the ratio can be found to calculate
limits of 50% or 74% are likely to open to foreign FDI Industry for Cement in 2002-03 as 0.28.
investors with equity limit as high as 100%. But the ratio is below 0.50, and then FDI industry
for cement is zero.
Table 3: The Sample Statistics

Variable Means Standards Deviation
Dependent Variables:
FDI firm ijt: The share of foreign equity 5.95144 (6.99242)
Output: log total Output at the Firm Level 9.4549 (0.4992)
Independent Variables:
LPit: log labor productivity 6.5151 (0.1857)
Wageit: log value of yearly unit labor cost expressed in Rupees 0.020 (0.0194)
Sizeit: log value of size 9.0008 (6.0992)
Gross Block: log value of capital input 9.2179 (0.5271)
FDI Industry ijt: 0.0100 (0.0227)
Industry Dummy variables:
D1: Chemicals and Fertilizers 0.206557 (0.404835)
D2: Engineering 0.17377 (0.378912)
D3: Domestic Appliances/FMCG 0.065574 (0.247536)
D4: Telecommunication 0.022951 (0.149747)
D5: Electric-Electronic 0.062295 (0.241691)
D6: Food and Diary Products 0.062295 (0.241691)
D7: Computers 0.02623 (0.159817)
D8: Pharmaceuticals 0.07541 (0.264051)
D9: Automobiles , Auto, Ancillaries 0.098361 (0.297802)
D10: Textile 0.07541 (0.264051)
D11: Cement 0.032787 (0.178078)
D12: Mining-oil-refineries 0.039344 (0.194413)
D13: Paper 0.019672 (0.138871)
Time Dummy variables:
T-Dummy 0.333333 (0.471405)
T-Dummy-1 0.333333 (0.471405)
T-Dummy-2 0.333333 (0.471405)
as proxy of wage. It is calculated as the reported in Table 4. The dependent vari-

annual employee cost divided by total num- able i.e. FDI inflow for firm i in industry
ber of employees at firm level and is also j at time t is regressed on a vector of
taken as a measure of log value. Any price variables which is a matrix of firm level
deflator did not deflate both values of out- inputs hypothesized to impact the FDI
put and wage, as the annual time taken inflow for firm i in industry j at time t
for the study is few (T = 3). Market capi- after controlling output for firm i in in-
talization is taken as a measure of firm dustry j at time t. The un-standardized
size (Sizeit) and gross fixed capital stock coefficients in Table 4 indicate that there
(gross block as given in Capitaline da- is a decrease in percentage of FDI in-
tabase) as a measure of capital input flow at firm level for each unit of wage,
(Capital it). whereas, there is an increase in percent-
age of FDI inflow at firm level for each
Effects of Foreign Investment unit of output.
The results for the equation (1) are Results of OLS reported in columns
1 and 3 of Table 4, show positive coeffi- ductivity in columns 1 and 3 of the table
cients for wage results, but have nega- indicate that labour productivity will en-
tive coefficients for output. On the other courage foreign owned firms to increase
hand, the OLS results in columns 5 of their investment.
Table 3 show positive effect on wage,
but are statistically insignificant. For each percentage of wages
there will be a decrease in foreign
In columns 1 and 3 of Table 4, the direct investment at firm level.
explanatory power and significance level Labour productivity will encourage
of the coefficients of the model ex- foreign owned firms to increase
pressed in column 1 (after introducing their investment.
firm size and capital as dependent vari-
ables) is greater than coefficients in col- In order to measure the effect of
umn 3. 8 The coefficients of labour pro- wage on FDI inflow, we re-estimated
ductivity and wage in the function (A) equation 1 without labour productivity
are greater than function (B) in Table 4. variable and the results are reported in
However, the negative effect on wage column 3 of Table 4. With regard to the
in columns 1 and 3 of Table 4 indicate explanatory power and significance level,
that for each percentage of wages there values in column 3 are weaker than those
will be a decrease in foreign direct in- in column 1. It therefore suggests that
vestment at firm level. On the other hand, the function (B) is less important than
the positive coefficients on labour pro- function (A).
Table 4: Effect of Wage on Foreign Investment
Function (A) Function (B)
Coefficient Coefficient
(1) (2) (3) (4)
Intercept (a it) -28.773(4.578)*** -19.550(4.284)***
LPit 3.475(0.666)*** 0.214
Sizeit 0.193(0.098)** 0.067 0.250(0.098)** 0.087
Capital it 3.687(0.361)*** 0.382 3.863(0.365)*** 0.400
Wageijt -4.164(0.809)*** -0.195 -2.183(0.725)*** -0.102
Number of firms 305 305
R square 0.235 0.206
a. (Dependent Variable = Foreign ownership percentage of firm level) * p < .01 ** p < .005 *** p < .001
b. Regressing share of foreign ownership at firm levels on log inputs & output at firm levels. The industry and
time dummy variables are also included in the regressions. All standard errors are shown in parentheses
8
The R2 values suggest that the joint contribution With regard to the effect of wage on
of all the input factors are statistically significant output, the results for the equation (2) are
with 21.4 % and 20.9 % of variance explained by
reported in Table 5. In columns 1 and 3
the given set of predictor variables used in
function (A) and (B) of equation (1). of Table 5, we estimated equation (2)
Table 5: Effect of Labor Cost for Foreign Investment on Firms Output

Function (A) Function (B)
(1) (2) (3) (4)
Intercept (a it) 0.215(0.202) 0.349(0.247)
LPit 0.277(0.029)*** 0.169 0.339(0.036)*** 0.207
Wageijt 0.146(0.035)*** 0.068 0.057(0.043) 0.027
Sizeit 0.033(0.004)*** 0.114 0.030(0.005)*** 0.105
Capital it 0.706(0.016)*** 0.726 0.700(0.020)*** 0.719
FDI firm ijt 0.003(0.001)** 0.032 -0.030(0.024) -0.297
FDI firm ijtLPit -0.012(0.004)*** -0.812
FDI firm ijtWageijt 0.020(0.006)*** 1.079
FDI firm ijtSize it 0.0001(0.001) 0.032
FDI firmijtCapital it 0.0001(0.002) 0.030
R Square 0.859 0.862
a. (Dependent Variable = Log Output at the Firm Level )* p < .01 ** p < .005 *** p < .001
b. Regressing log output at firm level on log inputs & share of foreign ownership at firm levels. The industry
and time dummy variables are also included in the regressions. All standard errors are shown in parentheses.
using OLS. Without controlling the variables The coefficient of 0.013 on FDI
of the interaction term for FDIfirm ijt , the firmijtWageijt suggests that increase in
column 1 of Table 5 (function A) shows employees wages in a foreign owned firm
that both Wage ijt and FDIfirm ijt have will increase the firms predicted output
positive significant effect on firms out- rather than in domestic firms. Therefore,
by paying extra wage, foreign firms will
put. 9 It suggests that increase in employ-
be able to achieve greater output com-
ees wage and foreign ownership in a firm
pared to their domestic counterparts in
will raise the firms predicted output. As India. At the same time, the coefficient of
seen in column 1 and 3 of Table 5, the -0.012 on FDIfirmijtLPit suggests that the
coefficient of 0.277 and 0.339 on LPijt labour productivity will increase lesser
suggests that increase in employees pro- output in foreign owned firms in compari-
ductivity in a firm will raise the firms son to the domestic firms.
predicted output.
The results for the equation (3) are
Increase in employees wage and reported in columns 1 to 3 of Table 6.
foreign ownership in a firm will The dependent variable i.e. wages for
raise the firms predicted output. firm i in industry j at time t is regressed
on a vector of variables which is a ma-
trix of firm level inputs hypothesized to
9
However, there exists the multi-collinearity
impact the wages. OLS results reported
problem between FDIfirmijt and their interaction in column 3 of Table 6 show positive co-
with firms input, leading to the insignificant efficient for FDIindustry jt. In column 3,
coefficients of FDIfirmijt and Wage ijt in function B. the positive and significant term for the
Table 6: Effect of Foreign Ownership on FDI

With the industry and time dummy Without the industry and time dummy
(1) (2) (3) (4)
Intercept (a it) 1.799(0.221)*** 1.956(0.212)***
LPit 0.405(0.030)*** 0.531 0.415(0.029)*** 0.545
Sizeit 0.0083(0.005)* 0.062 0.0082(0.005)* 0.061
Capital it 0.0904(0.019)*** 0.200 0.0684(0.018)*** 0.151
FDI firm ijt -0.018(0.020) -0.393 0.0143(0.020) 0.305
FDI industryit 0.0031(0.049) 0.003 0.0533(0.031)* 0.050
FDI firmijtFDI industry it 0.0086(0.008) 0.074 0.0125(0.007)* 0.107
FDI firm ijtLPit -0.001(0.003) -0.110 -0.005(0.003) -0.680
FDI firm ijtSizeit 0.0009(0.001) 0.193 0.0013(0.001)** 0.283
FDI firmijtCapital it 0.0006(0.002) 0.119 0.0001(0.002) -0.098
R Square 0.421 0.367
a. (Dependent Variable = Log wage) * p < .01 ** p < .005 *** p < .001
b. Regressing log output at firm level on inputs & share of foreign ownership at firm levels. The industry and
time dummy variables are also included in the regressions. All standard errors are shown in parentheses.
FDIfirmijtFDIindustryit suggest that for- have comparative advantages of low

eign investment will increase wages in labour cost, which will enable her to lead
the particular industry. in the product competition globally.
Therefore, the lower price of labour will
Conclusion attract more investment in to India. It also
suggests that the foreign firms may in-
The interesting phenomenon sug- troduce several labour-intensive firms in
gested by the results from this study is India. At the same time, the higher labour
that the firms labour productivity will sig- productivity will also attract the capital-
nificantly and positively increase with for- intensive firms to India.
eign investment in the firm. It was also
found that the lower average wages will
India may have comparative ad-
attract the foreign investment in a firm,
vantages of low labour cost, which
leading to a comparative advantage (Wei
will enable her to lead in the prod-
2005). Compared to the evidence of
uct competition globally.
China (Gao 2005), the labour cost has sig-
nificant but negative effect on inflow of
FDI in India compared to the FDI in With regard to the output, the foreign
China. The labour cost and labour pro- firms in India will pay extra wages to
ductivity are two important factors that encourage their employees to produce
can be used to determine the inflow of higher output. The extra wages will have
foreign investment (Feenstra & Hanson more effect on foreign owned firms out-
2001, Harms & Meulen 2009). India may put than on their labour productivity. At
the same time, the empirical evidence Evidence from India, Working paper
from the present study shows that extra DEDPS 33, London School of Economics
and Political Science. London, UK.
wage will have lesser effect on firms
output than its labour productivity. It im- Blomstrm M. & A. Kokko (2003), The Eco-
plies that the foreign owned firms will nomics of Foreign Direct Investment In-
centives, Working Paper 168, Stockholm,
prefer to pay extra wages to induce
Sweden
higher output.10
........(1998), Multinational Corporations and
Spill Overs, Journal of Economic Surveys,
The positive spill over effect on labour
12: 247-277
cost of domestic firms in India will cor-
respond to the finding of Feenstra and Carstensen K. & F. Toubal (2003), Foreign Di-
Hanson (1999). The domestic firms may rect Investment in Central and Eastern Eu-
ropean Countries: A Dynamic Panel Analy-
pay higher wages to attract and retain sis, Kiel working paper 1143, Institut fr
talented employees, because the wages Weltwirtschaft, Kiel, 27
of employees in domestic firms will fol-
Eicher T. S. & P. Kalaitzidakis (1997), The Hu-
low the wages in foreign owned firms man Capital Dimension to Foreign Direct
over a period of time. Moreover, the posi- Investment: Training, Adverse Selection
tive wage spill over can explain that for- and Firm Location, Teo Eicher, Panteilis
eign investment will increase the aver- Kalaitzidakis, Trade, Dynamics and
age costs in a specific industry (Sarkar Growth: 200-50
& Lai 2009, Aitken & Harrison 1999). Feenstra R. C. & G. H. Hanson (2001), Gobal
Especially, the labour cost will increase Production Sharing and Raising Inequality:
in a particular industry sector which has A Survey of Trade and Wages, Working
paper 8372, Cambridge, MA, NBER
higher percentage of foreign ownership.
........(1999), Foreign Direct Investment and
Relative Wages: Evidence from Mexicos
References Maquiladoras, Quarterly Journal of Eco-
Aitken, B. & Harrison, A. (1999), Do Domestic nomics, 114(3): 907-40
Firms Benefit from Foreign Investment? Gao T. (2005), Labor Quality and the Location
Evidence from Venezuela, American Eco- of Foreign Direct Investment: Evidence
nomic Review, 89: 605-18. from China, China Economic Review,
Aizenman J. & M. M. Spiegel (2003), Institu- 16(3): 274-292.
tional Efficiency, Monitoring Costs, and Girma S., D. Greenaway & K. Wakelin (2001),
the Investment Share of FDI. Working Who Benefits from Foreign Direct Invest-
paper 2003-06, San Francisco, FRB of San ment in the UK?, Scottish Journal of Po-
Francisco litical Economy, 48: 119-33
Besley T. & R. Burgress (2002), Can Labour Hatzius J. (2000), Foreign Direct Investment
Regulation Hinder Economic Performance? and Factor Demand Elasticities, European
Economic Review, 44: 117-43
10
In order to obtain know-how or technology from Harms P. & Meulen P. (2009), The Demograph-
foreign owned firm, the domestic firms may pay ics of Expropriation Risk, Working paper
higher wages to attract employees from foreign 09.02, Study center, Gerzensee
owned firms.
Janicki H. P. & P. V. Wunnava (2004), Determi- Sarkar S. & Y. C. Lai (2009), Foreign Direct In-
nants of Foreign Direct Investment: Em- vestment, Spill Overs and Output Disper-
pirical Evidence from EU Accession Can- sion The case of India, International
didates, Applied Economics, 36: 505-09 Journal of Information and Management
Sciences, 20(4): 491-503
Lipsay R. E. & F. Sjholm (2004), The Impact of
Inward FDI on Host Countries: Why such Wei W. (2005), China and India: Any Difference
Differences? Does FDI Promote Develop- in their FDI Performance? Journal of Asian
ment? City University of New York, New Economics, 16: 719-36.
York
M. V. Anuradha
Unionism as Collective Action: Revisiting Klandermans

Theory
M. V. Anuradha
Introduction
Politicized collective action is defined

as a power struggle between various
This paper examines unionization entities within a society with the under-
as a subset of collective action. standing that it affects the broader so-
It is an attempt to reappraise cial structure. (Simon & Klandermans
Klandermans model of union 2001). When the values and norms of the
participation. The three theories out group are judged as non-normative
stated by Klandermans to ex- and negative (Mummendey & Wenzel
plain union participation namely 1999) intolerance towards the out group
the frustration aggression, the is experienced and in such situations
rational choice and the people tend to prefer collective to indi-
interactionist theories are vidual action (Louis & Taylor 1999).
claimed to be limited in their ap-
plication when viewed in isola- Social Identity theory, Self Catego-
tion. The historical, cultural, so- rization theory (Tajfel 1982, Turner et
cial, economic and political en- al 1994, Tougas & Veilleux 1988, Wright,
vironments the individual is em- Taylor & Moghaddam 1990; Simon et
bedded in are also instrumental al 1998, Mummendey et al 1999, De
in determining union participa- Weerd & Klandermans 1999,
tion. Limitations and implications Mummendey & Wenzel 1999, Louis &
for future research are discussed. Taylor 1999, Tajfel & Turner 2003, Van
Zomeren et al 2004, Van Zomeren,
Postmes & Spears 2008, Van Zomeren,
Spears, & Leach 2008, Musgrove &
McGarty 2008, Derks, Van Laar &
Ellemers 2009) and the Relative Depri-
M. V. Anuradha is with XLRI Jamshedpur, C H vation theory (Crosby 1976, Guimond &
Area (East), Jamshedpur 831039 E-mail: Dube-Simard 1983, Martin, Bricman &
mv.anuradha@gmail.com Murray 1984, Kawakami & Dion 1993)
Unionism as Collective Action: Revisiting Klandermans Theory
are amongst the three most studied ex- engage actively in union activities the so-
planations of collective action. cial linkages and social pressure lead the
non-participants also to participate. The
Trade unionism is also a power three theories are used as three separate
struggle between the management unrelated explanations of union participa-
and the workers and is determined by tion.
and in turn determines the economic
and social structures of the society. Despite the popular appeal of the
paper, Klandermans (1986a) points out
These explanations seem equally rel- that each theory is limited in its applica-
evant to understand trade union activity as tion. The frustration aggression hypoth-
a kind of collective action. Trade unionism esis is weak as dissatisfaction might not
is also a power struggle between the man- always lead to aggression. Union partici-
agement and the workers and is determined pation is just one of the many ways in
by and in turn determines the economic and which frustration can be reduced. The
social structures of the society. It too in- interactionist theory too is limited as it
volves a relatively deprived in-group (work- over emphasizes homogeneity and ne-
ers) and an out-group (management) which glects individual differences in behaviour.
most theories of group behaviour suggest It doesnt answer the question: Why
to be the necessary condition for politicized would people conform? Klandermans
collective action. The use of social-psycho- (1986a) does not suggest any limitations
logical theories to explain union activity was of the rational choice theory.
not very popular in the industrial relations
literature (Heartly & Kelly 1986) till Each theory is limited in its appli-
Klandermans (1986a) proposed three so- cation.
cial psychological theories to explain union
participation. The three theories suggested The present paper looks at partici-
by him were the frustration aggression, ra- pation in trade unions as a form of col-
tional choice and interactionist theories. lective action. It aims to reappraise
Frustration-aggression, as the name sug- Klandermans (1986a) proposed theories
gests, refers to an increase in union par- of union participation. The three social-
ticipation as a way to vent ones frustra- psychological theories cannot be looked
tion against the employer. The rational at in isolation. It is claimed that only when
choice perspective uses the expectancy they are seen as an interrelated whole
theory to explain participation behaviour. can it be called a useful theory for pre-
An individual weighs the expected costs dicting union participation.
and benefits of engaging in a particular
union activity, if the benefits outweigh the The next section extends on the
costs he/she engages in union activity. stated limitations of the three theories
Lastly the interactionist theory proposes using sound theoretical explanations and
that union participation is a result of social an integrated model of union participa-
mimicking. When people in ones vicinity tion is proposed.
The Indian Journal of Industrial Relations, Vol. 46, No. 3, Januarty 2011 413
M. V. Anuradha
Frustration-Aggression Theory ones reaction to dissatisfaction at work

apart from individual personality charac-
The Frustration-aggression explana- teristics. High investment on a job in
tion assumes that dissatisfaction with terms of number of years spent, training
ones work situation would cause an in- in skills specific to the job etc led to voice
dividual to participate in trade union ac- behaviour especially when ones satisfac-
tivity. But does this always happen? tion with the given job was high. It may
be that voice is regarded as a difficult
The exit-voice-loyalty model sug- and costly action, and that workers en-
gested by Hirschman (1970) as a re- gage in voice only when their motivation
sponse to organizational decline has been to improve conditions is particularly
researched extensively. Later versions of strong (Rusbult, Zembrodt & Gunn 1982,
the model included a fourth response Rusbult et al 1988)
category i.e. neglect. Exit refers to quit-
ting an organization. Voice refers to an The presence of attractive viable al-
active attempt at changing the circum- ternatives was a strong predictor of exit
stances either by discussions or actions (Rusbult, Zembrodt & Gunn 1982,
like participating in the union or whistle Rusbult et al 1988, Withey & Cooper
blowing. Loyalty refers to waiting with 1989). While some suggest that the avail-
patience for conditions to improve and ability of alternatives increases the prob-
neglect is a means of passive inaction. ability of an active (exit, voice) response
The four response strategies could either to job dissatisfaction (Rusbult et al 1988
be active (voice, exit) or passive (loyalty, cited in Withey & Cooper 1989) others
neglect), constructive (voice, loyalty) or claim that it generally leads to destruc-
destructive (exit, neglect) (Rusbult, tive reactions (exit and neglect).
Zembrodt & Gunn 1982, Louis & Taylor
1999). This extended version of Klandermans (1986a) while stating
Hirschmans exit-voice-loyalty model has that frustration might lead to union par-
been especially useful in understanding ticipation also suggests that frustration
how individuals might respond to dissat- seems to be filtered through the sieve of
isfaction at work (Freeman 1980, Farrell rational choice. The cost of action
1983, Rusbult et.al 1988, Mayes & (Withey & Cooper 1989, Hoffman 2006)
Ganster 1988, Withey & Cooper 1989, seems to be quite an important predictor
Boroff & Lewin 1997) of whether active, passive, constructive
or destructive strategy is chosen as the
Satisfaction, Investment & means to vent dissatisfaction with ones
Alternatives work situation.
Prior satisfaction with the job, amount Proposition 1 :

of investment in a job (both psychologi-
cal and material) and the kind of alterna- a. Frustration (Dissatisfaction) with the
tives available were found to predict employer/work situation will lead to
union participation (voice) when the the least possible cost or group efficacy
cost of non-participation (exit/ne- (Klandermans, B. 1984, Klandermans, P.
glect/loyalty) is higher than the ben- G. 1984, Martin, Bricman, & Murray
efits of participation. 1984, Flood 1993, Mackie, Devos &
Smith 2000, Musgrove & McGarty 2008,
b. When one experiences high satisfac- Van Zomeren, Spears, Fischer & Leach
tion with ones job, high investments 2004, Van Zomeren, Spears, & Leach
are made on the job and lesser num- 2008, Van Zomeren, Postmes & Spears
ber of attractive alternatives are 2008) the permeability of the out-group
available, frustration most often leads boundaries, ones distance from these
to union participation. boundaries and the stability as well as le-
gitimacy of the groups actions. (Wright,
Rational Choice Theory Taylor & Moghaddam 1990, De Weerd
& Klandermans 1999)
The rational choice theory of union
participation suggests that individuals will Proposition 2 :
participate in union action only when the
benefits outweigh the costs of doing so. The willingness to act is determined
by the expectancy of rewards (rational
The value expectancy theory has choice) even when the activity is valued
been used extensively to explain the cost positively.
benefit analysis undertaken by individu-
als in union participation. Three chief Despite its intuitive appeal the ratio-
concerns of people while deciding to par- nal choice theory seems incomplete.
ticipate in union activity are costs and
benefits related to the goal of the activ- Despite its intuitive appeal the ratio-
ity called goal motive, costs and ben- nal choice theory seems incomplete. Is
efits related to the expected reactions of human behaviour always driven by ra-
significant others referred to as social tionality? There is more than ample evi-
motives and the material costs and ben- dence in the history of social movements
efits related to participating in union ac- when rationality seemed to have failed
tivity known as the material motive to explain human action. The
(Klandermans1986 b, Flood 1993). The interactionist theory answers this ques-
value one places on collective action or tion to some extent.
the perception of relative deprivation is
necessary but not enough to instigate the Interactionist Theory
willingness to act. In fact whether one
participates in union activity or not is a The interactionist theory looks at the
multiplicative effect of the value he/she social context the individual is embedded
places on the action along with the ex- in as the cause of union participation.
pectancy of the effectiveness of action When people in ones vicinity engage ac-
in terms of the rewards it can procure at tively in union activities the social link-
M. V. Anuradha
ages and social pressure lead other non- goal - a rational choice, is the cause for
participants also to participate. social mimicking in these cases. (Mackie,
Devos & Smith 2000, Musgrove &
Klandermans(1986a) explanation of McGarty 2008 Van Zomeren et al 2004,
interactionism seems to be somewhat Van Zomeren, Spears & Leach 2008, Van
blurred. His explanation of interactionism Zomeren, Postmes & Spears 2008)
can be understood at two levels. Firstly,
it is the immediate context that the per- Yet when motives behind participa-
son is situated in. If people in ones im- tion in collective action or social move-
mediate surroundings, community, orga- ments were studied it was found that
nization etc are participating in collective identification with the group and ones
action it motivates that person to collec- own identification as an activist was this
tivize too especially if there is a percep- extra element that went beyond rational
tion of a collective grievance. Second cost-benefit analysis of participation in
is whether, at a broader level, the im- collective action (Tajfel 1982, Tougas &
ages of society that individuals carry Veilleux 1988, Turner et al 1994, Simon
within their minds determine their deci- 1998, De Weerd & Klandermans 1999,
sion to participate in union activity or not. Tajfel & Turner 2003). The emotion
Klandermans claims that the based coping is driven by anger directed
interactionist theory though relevant in against the out-group. This anger is
many situations tends to overemphasize strongest when the group identification
homogeneity? Why will people conform? is high. Though perceived injustice, effi-
He asks. It is suggested here in defence cacy and identity theory have been the
of the theory that the psychological as- most studied explanations of participation
pects of group dynamics can be intrigu- in collective action, the social identity
ing at times, surpassing rationality. theory showed the strongest effect on
participation both directly and indirectly
There could be two different reasons through its effects on the other two theo-
why people mimic other actors in their ries. (Van Zomeren, Postmes & Spears
social milieu and engage in collective 2008)
action as a result. This dual pathway
model has been referred to as goal based Social identity theory showed the
or problem focused coping and anger strongest effect on participation
based or emotion focused coping strate- both directly and indirectly through
gies in collective action (Van Zomeren its effects on the other two theo-
et al 2004, Strmer & Simon 2004, Van ries.
Zomeren, Spears & Leach 2008). Prob-
lem focused coping refers to the percep- The relative deprivation explanations
tion that engaging in collective action will too claim that a perception of relative
be instrumental in the achievement of deprivation at an individual or personal
desirable goals. The perception of the level (egoistical deprivation) at best leads
groups efficacy in reaching its desired only to individual action. It is the percep-
tion of the deprivation of ones group rela- Applicability

tive to another (Fraternal deprivation)
that leads to collective action. Fraternal If we take into consideration the
deprivation is experienced only when one above mentioned propositions it is clear
identifies highly with ones group. that the three theories suggested by
(Crosby 1976, Guimond & Dube-Simard Klandermans (1986a) to explain union
1983, Kawakami & Dion 1993, participation are not distinct and separate
Mummendey et. al 1999) but are related. Yet this formulation gives
only a partial understanding of union par-
In an organizing model of union re- ticipation. Politicized collective action is
cruitment suggested by Cregan (2005) it not a struggle between two parties alone.
was seen that most unions use a collec- Since it affects the broader social struc-
tive sense of grievance to instigate social ture it invariably involves the state au-
identification and collective action. When thorities or any other third party causing
participation in collective action is based triangulation (Simon & Klandermans
on instrumentality (leading individuals to 2001) and spreading the ambit of the fac-
weigh the costs and benefits of participa- tors that could influence ones decision
tion) alone it may lead to disillusionment to participate in collective action.
when the goal is not reached. Group iden- Whether or not an individual engages in
tity seems to add something more to the collective action is also affected by the
essence of collective action which many economic and political characteristics of
a times may be non-rational (Gallagher the society one is placed in (Kolarska &
& Strauss 1991 cited in Cregan 2005). Aldrich 1980) and varies across regions
Contribution in union activity was seen to even within the same nation (Van der
be higher for people who place a higher Veen & Klandermans 1995)
value on the collective good as opposed
to individual benefits (Flood 1993) and
The same companies which are
strong attitudes favouring labour unions
supportive of unions in their home
biased reasoning leading to a justification
countries do not support such ac-
of union action (Lynn & Williams 1990)
tivity in their branches in other
countries.
Proposition 3:
As far as trade union participation is
a. Social mimicking (Interactionist
concerned, the national variance is
Theory) would directly lead to union
clearly evident in the fact that unionism
participation if the group identifica-
in the emerging sectors is present and
tion is high.
accepted in countries like England (Bain
b. Social mimicking (Interactionaist & Taylor 2002) UK, Australia and USA
Theory) will be mediated by a cost (Lund & Wright 2009). However the
benefit analysis when the group iden- same companies which are supportive of
tification is low. unions in their home countries do not sup-
M. V. Anuradha
port such activity in their branches in broader social and political scenario
other countries (Bain & Taylor 2002). one is situated in.
Sarkar (2009) studied the effect of the
two dimensions of culture: collective/in- Proposition 4:
dividual and vertical/horizontal on union-
ization in BPO industry in India. He found The social, cultural, economic, politi-
that vertical individualists as well as ver- cal and historical context of a nation will
tical collectivists are more prone to par- affect attitudes towards union participa-
ticipate in union activity because of their tion and actual participation such that the
belief and dependence on hierarchy as a cost and benefits of participation and the
source of power and influence. External tendency for social mimicking are all fil-
circumstances other than psychological tered through them.
reasons also affect union participation/
membership. When unemployment is Limitations & Implications
high one is more likely to want to retain
ones job and since exit is difficult it leads Louis & Taylor (1999) point out two
to higher levels of union activity (voice) methodological flaws in research on col-
(Zientara & Kuczynski 2009). In an at- lective action. Firstly, researchers tend
tempt to develop a strong theoretical base to look at very extreme forms of collec-
for this contention, Frenkel & Kuruvilla tive action not taking the entire range of
(2002) proposed that there are essentially actions possible. Secondly, researchers
three logics that drive the employment have not discriminated behaviour inten-
relations environment in a nation espe- tions/actual behaviour from attitudes to-
cially when seen in the light of globaliza- wards collective action. These two loop-
tion-the logic of competition, the logic of holes in research tend to confound the
industrial peace, and the logic of employ- results. This flaw is especially applicable
ment income protection. These in turn in union participation research. Union
are affected by the economic develop- participation can be of various kinds, and
ment strategy of the country, globaliza- the motives behind participating in each
tion intensity, union strength, labour mar- of these activities could differ. (McShane
ket features, and government responsive- 1986, Parks, Gallagher & Fullagar 1995).
ness to workers. The present paper just focused on join-
ing of unions as representing union par-
This complex interaction between ticipation. Future studies could extend the
the logics of action and the factors af- model developed here to include differ-
fecting them makes it impossible for ent kinds of participation.
any kind of convergence in ER prac-
tices in two different nations. These Hirschmans theory has been inter-
findings suggest that no theory of union preted differently by various research-
participation including Klandermans ers. (Saunders 1992) While some theo-
(1986a) can be universally applicable. rists say that loyalty is also a distinct re-
It has to be seen in the light of the sponse category just like exit and voice
Fig. 1: Integrated Model of Union towards them. Therefore instead of look-

Participation ing at why people participate in union
activity another interesting way to study
this phenomenon is to see why people do
not participate in union action. Turning
the model inside out could provide some
insights which are not obvious now.
The perceptions of the costs and ben-

efits of any action are not static and keep
changing with a change in the situation one
is placed in. This would therefore imply
that the inclination to participate in union
activity might also keep changing over-
time depending upon the perception of the
costs versus the benefits of participation
at a given point in time. (Klandermans
1986b). Designing a longitudinal study to
others claim that loyalty acts as a mod- look into the changes in the drivers of col-
erator for exit and voice behaviour. When lective action over time would prove to
organizational loyalty is high people tend be really useful in understanding the ef-
to voice their discontent and try to change fects of the social, cultural, political fac-
the situation. When the organizational tors on collective action. As of now stud-
loyalty is low they tend to make no extra ies of such nature are scaree if any.
efforts towards changing their situation
and end up exiting the firm. But this loy- Acknowledgement:
alty might not always be with the organi-
zation. Individuals could feel higher loy- The author would like to thank Prof.
alty with the industry, work group, ethics Santanu Sarkar (XLRI-Jamshedpur) for
etc. depending upon which group they introducing her to Klandermans theory
identify more with. (Hoffman 2006). This of union participation and for his valu-
possible moderating effect of loyalty and able comments on the paper.
its consequences on participation in union
action has not been touched upon in this References
study. This could be looked into in future
studies. Bain, P. & Taylor, P. (2002), Ringing the
Changes? Union Recognition and Organi-
zation in Call Centers in the UK Finance
Oegema & Klandermans (1994) cite Sector, Industrial Relations Journal, 33
non conversion and erosion as two pos- (3): 246-61.
sible reasons for many individuals not to
Boroff, K. E. & Lewin, D. (1997), Loyalty, Voice,
end up actually participating in collective and Intent to Exit a Union Firm: A Concep-
action despite initial favourable attitudes
M. V. Anuradha
tual and Empirical Analysis, Industrial Guimond, S. & Dube-Simard, L. (1983), Rela-
and Labour Relations Review, 51(1): 50- tive Deprivation Theory and the Quebec
63. Nationalist Movement: The Cognition-
Emotion Distinction and the Personal-
Butler, P. (2009), Non- Union Employee Rep- Group Deprivation Issue, Journal of Per-
resentation: Exploring the Riddle of Mana- sonality and Social Psychology, 44(3): 526-
gerial Strategy, Industrial Relations Jour- 35.
nal, 40(3): 198-214.
Heartly, J. & Kelly, J. (1986), Psychology and
Cregan, C. (2005), Can Organizing Work? An Industrial Relations: From Conflict to Co-
Inductive Analysis of Individual Attitudes operation?, Journal of Occupational Psy-
towards Union Membership, Industrial chology, 59(3): 161-76.
and Labor Relations Review, 58(2): 282-
304. Hoffman, E. A. (2006), Exit and Voice: Organi-
zational Loyalty and Dispute Resolution
Crosby, F. (1976), A Model of Egoistical Rela- Strategies, Social Forces, 84(4): 2313-30.
tive Deprivation, Psychological Review,
83(2): 85-113. Iverson, R. D. & Kuruvilla, S. (1995), Anteced-
ents of Union Loyalty: The Influence of
De Weerd, M. & Klandermans, B. (1999), Individual Dispositions and Organizational
Group Identification and Political Pro- Context, Journal of Organizational Behav-
test: Farmers Protest in the Netherlands, ior, 16:557-82.
European Journal of Social Psychology,
29: 1073-95. Kawakami, K. & Dion, K. L (1993), The Sa-
lience of Self-Identities on Relative Depri-
Derks, B., Van Laar, C. & Ellemers, N. (2009), vations and Action Intentions, European
Working for the Self or Working for the Journal of Social Psychology, 23: 525-40.
Group: How Self- Versus Group Affirma-
tion Affects Collective Behaviour in Low- Klandermans, B. (1986a), Psychology and Trade
Status Groups. Journal of Personality and Union Participation: Joining, Acting, Quit-
Social Psychology, 96(1): 183202. ting, Journal of Occupational Psychology,
59(3): 189-204.
Farrell, D. (1983), Exit, Voice, Loyalty, and
Neglect as Responses to Job Dissatisfac- Klandermans, B. (1986 b), Perceived Costs and
tion: A Multidimensional Scaling Study Benefits of Participation in Union Action,
The Academy of Management Journal, Personnel Psychology, 39: 379-97.
26(4): 596-607.
Klandermans, B. & Simon, B. (2001). Politicized
Flood, P. (1993), An Expectancy Value Analy- Collective Identity: A Social Psychological
sis of the Willingness to Attend Union Analysis, American Psychologist, 56(4):
Meetings, Journal of Occupational and 319-31.
Organizational Psychology, 66: 213-22.
Klandermans, B. (1984), Mobilization and Par-
Freeman, R. B. (1980), The Exit-Voice Trade ticipation: Social-Psychological Expansions
Off in the Labour Market: Unionism, Job of Resource Mobilization Theory, Ameri-
Tenure, Quits, and Separations, The Quar- can Sociological Review, 49(5) 583-600.
terly Journal of Economics, 94(4): 643-73.
Klandermans, B. (1993), A Theoretical Frame-
Frenkel, S. & Kurivilla, S. (2002), Logic of Ac- work for Comparison of Social Movement
tion, Globalization and Changing Employ- Participation, Sociological Forum, 8 (3):
ment Relations in China, India, Malaysia 383-401.
and the Phillipines, Industrial and Labour
Relations Review, 55(3): 387-412. Klandermans, P. G. (1984). Mobilization and
Participation in Trade Union Action: An
Expectancy-Value Approach. Journal of Discrimination and Tolerance in Inter-

Occupational Psychology, 57: 107-20. Group Relations: Reactions to Inter-Group
Difference, Personality and Social Psy-
Kolarska, L. & Aldrich, H. (1980), Exit, Voice chology Review, 3(2): 158-74.
and Silence: Consumers and Managers
Responses to Organizational Decline, Mummendey, A., Kessler, T., Klink, A. & Mielke,
Organizational Studies, 1(1): 41-58. R. (1999), Strategies to cope with Nega-
tive Social Identity: Predictions by Social
Lawler, J. J. (1986), Union Growth and Decline: Identity Theory and Relative Deprivation
The Impact of Employer and Union Tac- Theory, Journal of Personality and So-
tics, Journal of Occupational Psychology, cial Psychology, 76: 22945.
59(3): 217-30.
Musgrove, L. & McGarty, C. (2008), Opinion-
Louis, W. R. & Taylor, D. M. (1999), From Based Group Membership as a Predictor
Passive Acceptance to Social Disruption: of Collective Emotional Responses and
towards an Understanding of Behavioural Support for Pro-and Anti-War Action,
Responses to Discrimination, Canadian Social Psychology, 39(1): 3747.
Journal of Behavioural Science, 31(1):19-28
Oegema, D. & Klandermans, B. (1994), Why
Lund, J., & Wright, C. (2009), Enabling Man- Social Movement Sympathizers Dont Par-
aged Activism: The Adoption of Call Cen- ticipate: Erosion and Non-conversion of
ters in Australian, British and US Trade Support, American Sociological Review,
unions, New Technology Work and Em- 59(5): 703-22.
ployment, 24(1): 43-59.
Parks,J. M., Gallagher, D. G. & Fullagar, C. J. A.
Lynn, M. L. & Williams, R. N. (1990), Belief- (1995), Operationalizing the Outcomes of
Bias and Labour Unions: The Effect of Strong Union Commitment: The Dimensionality
Attitudes on Reasoning. Journal of Orga- of Participation, Journal of Organizational
nizational Behaviour, 11(5): 335-43. Behaviour, 16:533-555.
Mackie, D. M., Devos, T. & Smith, E. R. (2000), Roiser, M. & Little, T. (1986), Public Opin-
Inter-Group Emotions: Explaining Offen- ions, Trade Unions and Industrial Rela-
sive Action Tendencies in an Inter-Group tions, Journal of Occupational Psychol-
Context, Journal of Personality and So- ogy, 59(3): 259-72.
cial Psychology, 79(4): 602-16.
Rusbult , C. E., Zembrodt , I. M. & Gunn, L. K.
Martin, J., Bricman, P. & Murray, A. (1984), (1982), Exit, Voice, Loyalty, and Neglect:
Moral Outrage and Pragmatism: Explana- Responses to Dissatisfaction in Romantic
tions for Collective Action, Journal of Involvements, Journal of Personality and
Experimental Social Psychology, 20(5): 484- Social Psychology, 43(6): 1230-42.
96.
Rusbult, C. E., Farrell, D., Rogers, G. & Mainous
Mayes, B. T. & Ganster, D. C. (1988), Exit and III, A. G.(1988), Impact of Exchange Vari-
Voice: a Test of Hypotheses Based on ables on Exit, Voice, Loyalty, and Neglect:
Fight/Flight Responses to Job Stress. An Integrative Model of Responses to
Journal of Organizational Behaviour, 9: Declining Job Satisfaction, The Academy
199-216. of Management Journal, 31(3): 599-627.
McShane, S. (1986), The Multi-dimensionality Sarkar, S. (2009), IndividualismCollectivism as
of Union Participation, Journal of Occu- Predictors of BPO Employee Attitudes
pational Psychology, 59(3): 177-87. towards Union Membership in India. Asia
Mummendey, A. & Wenzel, M. (1999), Social Pacific Journal of Management, 26: 93
118.
M. V. Anuradha
Saunders, D. M. (1992), Introduction to Re- Cognition and Social Context, Personality

search on Hirschmans Exit, Voice, and Loy- and Social Psychology Bulletin, 20(5): 454-
alty Model, Employee Responsibilities and 63.
Rights Journal, 5(3): 187-90.
Van der Veen, G. & Klandermans, B. (1995),
Simon, B. & Klandermans, B. (2001), Politicized Union Commitment: Introduction, Jour-
Collective Identity: A Social Psychological nal of Organizational Behavior, 16:503-04.
Analysis, American Psychologist, 56(4):
319-31. Van Zomeren, M., Postmes, T. & Spears, R.
(2008), Toward an Integrative Social Iden-
Simon, B., Loewy, M., Sturmer, S., Weber, U., tity Model of Collective Action: A Quanti-
Freytag, P.,Habig, C.,Kampmeier, C. & tative Research Synthesis of Three Socio-
Spahlinger, P. (1998), Collective Identifi- Psychological Perspectives, Psychological
cation and Social Movement Participation, Bulletin, 134 (4): 50435.
Journal of Personality and Social Psychol-
ogy, 74(3): 646-58. Van Zomeren, M., Spears, R. & Leach, C. W.
(2008), Exploring Psychological Mecha-
Strmer, S & Simon, B. (2004), Collective Ac- nisms of Collective Action: Does Relevance
tion: Towards a Dual-Pathway Model, of Group Identity Influence How People
European Review of Social Psychology, 15: Cope with Collective Disadvantage? Brit-
59-99. ish Journal of Social Psychology, 47: 353
72.
Sverke, M. & Kuruvilla, S. (1995), A New
Conceptualization of Union Commitment: Van Zomeren, M., Spears, R., Fischer, A. H. &
Development and Test of an Integrated Leach, C. V. (2004), Put Your Money
Theory, Journal of Organizational Where Your Mouth Is! Explaining Collec-
Behaviour, 16:505-32. tive Action Tendencies Through Group-
Based Anger and Group Efficacy, Journal
Tajfel, H. & Turner, J. C. (2003), The Social of Personality and Social Psychology, 5:
Identity Theory of Inter-Group 64964.
Behaviour, in Hogg, M. A. (Ed), Social
Psychology: Intergroup Behaviour and So- Withey, M. J. & Cooper, W. H. (1989), Predict-
cial Context, (Vol 4), Sage Publications, ing Exit, Voice, Loyalty, and Neglect, Ad-
London. ministrative Science Quarterly, 34 (4): 521-
39.
Tajfel, H. (1982), Social Psychology of inter-
Group Relations, Annual Review of Psy- Wright, S. C., Taylor, D. M. & Moghaddam, F.
chology, 33: 1-39. M. (1990), Responding to Membership
in a Disadvantaged Group: From Accep-
Tougas, F. & Veilleux, F. (1988). The Influence tance to Collective Protest, Journal of
of Identification, Collective Relative Dep- Personality and Social Psychology, 58(6):
rivation, and Procedure of Implementation 994-1003.
on Womens Response to Affirmative Ac-
tion: a Causal Modelling Approach, Ca- Zientara, P. & Kuczynski, G. (2009), Employ-
nadian Journal of Behavioural Science, ees Desire to Join or Leave a Union: Evi-
20(1): 15-28. dence from Poland, Industrial Relations:
A Journal of Economy and Society, 48(1):
Turner, J. C. Oakes, P. J., Haslam, S. A. & 185-92.
McGarty, C. (1994). Self and Collective:
Jobless Growth:A District-Level Analysis of Tamil Nadu
2001-05
B. S. Prakash & A. Balu
Using the district data on indus- The Study

trial production for the organised
manufacturing sector (OMS) in The phenomenon of jobless growth
Tamil Nadu the paper identifies is identified with high growth in value-
areas which have experienced added with low growth in employment.
jobless growth. Examining the It is also associated with the hypothesis
inter-district variations in the of job displacement implying that the net
performance of OMS units in the creation of employment is either negligi-
state, the paper identifies districts bly small or even negative (i.e. a decline)
which have fared better both in as job creation in some regions/industries
terms of labour productivity and is offset by job losses in others. In this
employment gains, distinguishing context, the study of sub-national regions
in the process the districts which at the level of a state and at its further
have lagged behind in this re- disaggregation in to districts is useful for
gard. The findings of the study focused policy attention aimed at achiev-
support the hypothesis of job dis- ing balanced regional development. This
placement expected to prevail in paper presents the findings of a district
an atmosphere of competitive eco- level data analysis on the organised manu-
nomic environment. Some data facturing units in the state of Tamil Nadu
problems requiring policy atten- (TN). The study is confined to the first
tion have been identified which, quinquennium of the new millennium
if addressed, contribute to a more (2001-05) in view of the availability of
effective generation of data at the data for this period. The results are ex-
district level. pected to reveal the impact of reforms
initiated in the early years of 1990s hav-
ing allowed a reasonable gap of time pe-
B.S. Prakash is Associate Professor, School of Social riod for adjustment. The job creation dur-
Sciences, Economics, Indira Gandhi National Open ing the period in OMS should ideally be
University, New Delhi. E-mail: bagurprakash
@ignou.ac.in. A. Balu is Lecturer in (VELS
compared with the corresponding trends
University, Pallavaram, Chennai 600117. E-mail: in their unorganised counterpart viz. the
balrek77@yahoo.co.in unorganised manufacturing sector
(UMS)1. This has, however, been pres- tributions, percentage growth rates,
ently constrained by the non-availability labour productivity ratios and elasticities.
of data for the UMS for 2005-06 to per- The analysis is based on data for four
mit a comparative analysis of the growth variables viz. number of units, employ-
therein for the two time points2. ment, fixed capital and value-added. The
two value based variables, fixed capital
Data Base & Methodology and value-added, are deflated (to base
1993-94) by using the all India Index for
The district level data used in the Machinery and Tools and Wholesale Price
study are drawn from the states BES Index (WPI) respectively so as to enable
(Bureau of Economics & Statistics) temporal assessment of data over time.
which collects them for the Annual Sur- The growth rates4 have been calculated
vey of Industries (ASI) of CSO. The
3. Two mergers are effected in the database for the
data, published for 31 districts, have been study [one Krishnagiri with Dharmapuri and
reorganised by effecting two mergers to another Ariyalur with Perambalur] to make the
yield a data set of 29 districts 3 for the dataset correspond with the published UMS
study. The methodology adopted com- district-profile for the State
prises simple techniques/tools like: defla- 4. (a) The logarithmic value of the variable is
tion, univariate/bi-variate frequency dis- regressed over the time variable taken in
chronological order with the coefficient of the
time variable yielding the instantaneous growth
1. This is owing to the fact that the forward- rate. This is converted into compound growth
backward linkages between the OMS and the rate by effecting the antilogarithmic
UMS would lead to employment expansion in transformation. We may mention in passing that
the UMS which also acts as a factor for the there is an absolute convergence (read identical)
employment contraction in the OMS (e.g. of the growth rates obtained by taking either of
ancillarisation). The phenomenon of jobless the two logarithmic transformations viz. to base
growth must therefore be viewed in totality, not 10 or base e which is empirically verified for all
restricting it only to the OMS, particularly the cases in the study. This fact is, however, as
because the share of the organised sector itself in yet a matter of debate as the observed empirical
general has been stagnant at around 7 percent in convergence is not unambiguously supported by
the overall economy in India. Indeed, the theoretical validation. A brief 4-part theoretical
explanation, which does not answer the question
employment in the total manufacturing sector
conclusively but offers explanation on why they
(TMS) had increased by 1.7 percent over the
could be different, provided by Prof. D. N. Rao
period 1995-2001 as compared to (-) 0.8 percent
is available with the authors. The authors express
growth during the years 1985-95. In particular,
their gratitude for inputs provided by Prof. U.
the UMS during 1995-01 had registered an
Sankar, Prof. D. N. Rao and Prof. Arup Mitra in
employment growth of 2.3 percent as against a this regard.
decline of 0.3 percent in the OMS during the
period 1995-01 (Prakash 2006;:34). (b) There have been a few cases where the values
of GVA (i.e. output minus inputs) for some time
2. The district level data for UMS for the state of points were negative. Since the logarithm for
T.N. is presently available only for the year 2000- negative values are not straightaway defined (i.e.
01. When the data for 2005-06 becomes available, they are defined as complex numbers and not as
the corresponding increase/growth in real numbers) in such cases the growth rates have
employment in UMS can be studied between the been calculated either by the point to point method
two points of time. or by leaving out the negative values for the specific
time points.
Jobless Growth:A District-Level Analysis of Tamil Nadu 2001-05
by using the trend method so as to have modate all variants of this situation and
the advantage of taking into account each help in arriving at a decision on the accep-
of the values in the time series as opposed tance or rejection of the jobless growth
to the point-to-point method which ignores hypothesis for the State, a classification
the intermediate time values. The phe- of employment elasticity is made into five
nomenon of jobless growth is examined categories viz. (a) employment creating
for its two profiles viz. the absolute and growth (in which both employment and
the relative gains/losses in employment in output are positively growing), (b) employ-
which the latter is examined with the per ment displacing growth (i.e. employment
unit values so as to reveal an average growth is negative but GVAs growth is
picture prevailing in the state5. One com- positive), (c) districts which are stagnat-
monly used method for assessing the ing (i.e. both employment growth and GVA
changing levels of employment is to con- growth are negative), (d) employment cre-
sider the change in employment elasticity ating but not with accompanied output
(with reference to either value-added or growth (i.e. employment growth is posi-
capital) over time. The method, however, tive but output growth is negative) and (e)
makes for meaningful interpretation when districts registering not only positive
the growth rates in both the variables un- growth in both employment and output but
der consideration are positive; in other also that the employment elasticity is
cases (i.e. when either of the two vari- greater than unity (i.e. employment growth
ables or both register negative growth as compared to output growth is higher).
rates) their interpretation is misleading, to The identification of the best performing
avoid which one has to specify the dif- districts from others is made on the basis
ferent scenarios and appropriately clas- of a classification of the districts into posi-
sify the districts6 into each. To accom- tive employment growth registered on the
one hand and positive labour productivity
5. The relative profile of jobless growth is assessed growth on the other.
to drive home the lack of homogeneity in the
industrial performance/spread in the state. An Employment Growth
added rationale is that in a period of industrial
competition, capital would be relatively more
invested in regions which have better Table 1 presents the employment
infrastructural facilities. While this contributes growth rate registered by districts. The
to some regions developing more than the others, overall growth for the State is an impres-
this carries implications on the availability of
skill sets in the labour force. Further, the mortality 6. See a note on making sense of employment
of units or its expansion/contraction owing to elasticities in Kannan & Raveendra (2009:83).
demand and market considerations would also See also Mazumdar & Sarkar (2004:3019),
impact on variations in employment levels. particularly for their observation that there was
While one might take the view that employment evidence of an end of the experience of jobless
generated anywhere is good for the state, its growth during the period of reforms. They base
implications on enhancing the ability for labour this conclusion on observed employment elasticity
mobility and skill development (the latter vis-- in organised manufacturing which had registered a
vis educational facilities in the state/district) turnaround from - 0.16 in 1980-86 to + 0.33 in
carry specific policy implications. 1986-96.
sive 4 percent per annum over the five State, have registered an absolute employ-
year period. As many as 14 out of 29 ment growth of more than the States av-
districts, accounting for 48.3 percent of erage of 4 percent.
Table 1: Performance of Districts by Growth* in Employment: 2001-05

Range of Districts (actual growth rate within No. of Percent**
Employment brackets for positive growth Districts
Growth (%) registered districts)
Negative Tiruvannamalai, Namakkal, Tiruchy, 11 23.9
Cuddalore, Nagapattinam, Tiruvarur,
Thanjavur, Sivagangai, Virudhnagar,
Tuticorin, Kanyakumari
0-2 Perambalur/Ariyalur (0.6), 2 2.1
Tirunelveli (1.3)
2-5 Chennai (3.4), Kancheepuram (3.2), 5 27.4
Vellore (4.8), Dindigul (4.7), Madurai (4.8)
5-10 Tiruvallur (5.3), Salem (5.4), Theni (5.6), 8 23.3
Erode (5.8), Villupuram (6.6),
Pudukkottai (6.7), Ramnad (8.7),
Nilgiris (8.9)
Above 10 Coimbatore (10.3), Dharmpuri (11.3), 3 23.3
Karur (15.8)
Total 29 100.0
Average Growth Rate for the State (%) 3.98
Notes: * Unless specified otherwise, by growth is meant growth estimated by considering absolute values.
This is as opposed to relative growth for which per unit values are considered.
** Percentage in column 4 is the cumulative percentage share of employment in the districts figuring
in column 2.
While this is the brighter side, as many

As many as 14 out of 29 districts, as 11 districts (accounting for a signifi-
accounting for 48.3 percent of cant 38 percent of the State but only 24
State, have registered an absolute percent share in employment) who have
employment growth of more than registered negative growth rate in em-
the States average of 4 percent. ployment. It thus follows close to two-
thirds of the districts in the State (62 per-
Two more districts have scored more cent by including Perambalur/Ariyalur
than 3 percent annual employment and Tirunelveli which have also registered
growth including which the proportion of positive employment growth) have reg-
better performing districts in the state istered positive growth rate in employ-
rises to 55.2 percent. Between them, ment. The situation in this respect is,
these 16 districts have a total employ- however, less bright when the relative
ment share of 74 percent in the State. position of employment generated in the
State is considered7. While this is not al- with both these variables. About 14 dis-
together unexpected, as capital which is tricts, accounting for close to half of the
crucial for units in the OMS has a ten- total in the State (48.3%), have registered
dency to gravitate towards areas/districts positive growth rate in both employment and
better endowed with superior infrastruc- GVA. The share of GVA from among these
ture, its implications for skill development 14 districts is a significant 71 percent of the
and labour mobility facilitating measures8 total GVA in the State. Further, as many as
are areas where specific policy initiatives 10 of these 14 districts have registered
are merited. higher than the States average growth rate
in GVA of 5 percent. Evidently, these are
Employment & GVA Growth the districts which have performed in a man-
ner that is worthy of emulation for best prac-
Growth in employment without growth tices. For this, specific studies like identifi-
in GVA amounts to output-less growth. cation of the industry groups which have
In the present times of globally competi- cornered higher shares in employment and
tive policies such a growth path may not GVA are warranted. There is a wide varia-
be desirable. Table 2 presents the per- tion in the growth rates registered in GVA by
formance of districts read in conjunction these 10 districts ranging from 5.5 percent to
35.3 percent. In addition, there are equally
significant 5 districts, amounting to 17.2 per-
About 14 districts, accounting for
cent of total districts in the State, which have
close to half of the total in the State
registered impressive growth rate in GVA
(48.3%), have registered positive
although with negative growth rate in employ-
growth rate in both employment
ment. With these five districts included, the
and GVA.
cluster of districts which have performed well
with respect to GVA accounts for a signifi-
7. The States relative employment growth (i.e.
cant two-thirds of the districts in the State
employment growth by considering the per unit
values) is low at 0.3 percent. The total no. of (65.5%). Particular policy focus on indus-
districts which have registered higher than this trial performance, however, needs to centre
relative average is 8 accounting for a total of 27.6 on 6 districts of the State which have regis-
percent of the State. From this perspective, the tered negative growth rate both in employ-
sharp decline from 62 percent performance (when
considered by the absolute employment ment and GVA. More importantly, as many
generation) to 28 percent in relative terms is as 13 districts amounting for 45 percent of
noteworthy. It is significant to note that 6 districts the total districts in the State have regis-
[viz. Tirunelveli, 4.3%; Nilgiris, 4.5%; tered higher than the States average rela-
Coimbatore, 5.1%; Vellore, 5.5%, Karur, 8.4%
and Theni, 9.7%] have registered employment tive growth rate (1.3 percent) in GVA9.
growth in the range of 4 to 10 percent by this
yardstick. 9. Out of these 13 districts which have registered
higher than the relative growth rate in GVA for
8. The implications can be pointed out by way of
the state, 11 districts (leaving aside Pudukkottai
state-run working persons hostel facilities,
and Ramnad) are the same as those which have
particularly for women, to aid such inter-district
registered higher than the states average absolute
movement.
growth rate in employment.
Table 2: Performance of Districts by Growth in Employment and Gross Value-added: 2001-05
Growth in Districts (figures within brackets No. Percent**

Employment and GVA are growth rate in GVA) of
Districts
Negative Growth Tiruvannamalai, Tiruchi, 6 11.3
in both Thanjavur, Virudhnagar,
Employment and GVA Tuticorin, Kanyakumari
Negative Growth i Sivagangai (6.9), Cuddalore (17.7), 5 4.3

in Employment Nagapattinam (29.8),
but Positive Tiruvaraur (31.2), Namakkal (41.3)
Growth in GVA
Positive Growth Erode (-5.8), Theni (-6.5), 4 13.5

in Employment Chennai (-6.6), Dindugul (-10.8)
but Negative
Growth in GVA
Positive Growth Villupuram (0.3), Vellore (0.6), 14 70.9

in both Ramnad (3.2*), Tirunalveli (4.0),
Employment and Perambalur/Ariyalur (5.5),
GVA Salem (5.7), Tiruvallur (7.6),
Kancheepuram (7.7), Madurai (9.0),
Pudukkottai (15.0), Karur (16.6*),
Dharmapuri (16.9), Nilgiris (24.2),
Coimbatore (35.3).
Total 29 100.0
States Absolute Growth Rate in GVA 5.0
States Relative Growth Rate in GVA 1.3
Note: * marked districts growth rate (GR) are relative GR as their absolute growth rate were abnormally
high or low casting doubt on the data. This point is elaborated in the section on data problems.
** Percentage in column 4 refers to cumulative percentage share of GVA in the districts figuring in
column 2.
Growth in Employment & Fixed sents the profile of districts for these two
Capital variables considered together for their
growth profiles. The three districts of
Unlike in the case of GVA where out- Kancheepuram, Nilgiris and Madurai are
put-less employment growth was not con-
sidered desirable in the present competi-
Districts with positive employment
tive world, districts with positive employ-
growth but negative growth in capi-
ment growth but negative growth in capi-
tal could be regarded as ideal for a
tal could be regarded as ideal for a labour
labour surplus economy like ours.
surplus economy like ours. Table 3 pre-
notable for registering positive growth rate both in employment and fixed capi-
rate in employment (to recall the two dis- tal. These 15 districts have also shared
tricts of Kancheepuram and Madurai among themselves a total of 60.5 percent
have registered employment growth in the of FC in the State. Together, therefore,
range of 3 to 5 percent and Nilgiris 8.9 as many as 18 districts in the State (or
percent growth in employment) with 62 percent of districts in the State) have
negative growth rate in FC. This is sug- faired extremely well both in attracting
gestive of a fairly large number of indus- significant investment to the districts (to-
trial establishments in these three districts talling 82.2 percent share in FC) as also
to have pursued labour intensive meth- in contributing to employment (76.1 per-
ods of production techniques. Further, a cent share of employment in the State
significant number of 15 districts, ac- among them). The States average
counting for 51.7 percent of districts in growth in FC is also a high 6.4 percent
the State, have registered positive growth with even the relative average growth
Table 3: Performance of Districts by Growth Rate (GR) in Employment & Fixed Capital (FC):
2001-05
Growth in Districts (figures within brackets No. of Districts Percent
in Employment are growth rate in FC)
and FC
Negative Growth Tiruvannamalai, Thanjavur, 3 1.0
in both Kanyakumari
Employment and
FC
Negative Growth Sivagangai (3.5), Nagapattinam (5.7), 8 16.8

in Employment Tiruchi (9.0), Namakkal (11.2),
but Positive Tuticorin (11.6), Tiruvarur (18.4),
Growth in FC Virudhunagar (18.8), Cuddalore (24.0)
Positive Growth Madurai (-1.0), Kancheepuram (-5.9), 3 21.7

in Employment Nilgiris (-7.3)
but Negative
Growth in FC
Positive Growth Vellore (0.9), Chennai (2.1), 15 60.5

in both Perambalur/Ariyalur (2.6), Tirunelveli (4.2),
Employment Dindigul (6.3), Villupuram (6.4), Salem (7.3),
and FC Pudukkottai (8.3), Coimbatore (9.4),
Theni (9.5), Erode (11.7), Tiruvallur (11.9),
Ramnad (12.2), Dharmapuri (12.4),
Karur (27.2),
Total 29 100.0
States Absolute Growth Rate in GVA 6.4
States Relative Growth Rate in GVA 2.7
Note: Percentage in column 4 indicates the cumulative share of FC in the districts figuring in column 2.
rate a significant 2.7 percent. Viewed Employment Elasticity

comprehensively by taking all the three
key variables of employment, GVA and Table 4 presents the employment elas-
FC, therefore, the conclusion that close ticity for the districts classified into five
to three-fifths of the State (i.e. more than groups based on the sign or direction of
60 percent) have faired well is thus em- growth in employment and GVA. 11 dis-
pirically supported. We note, however, tricts accounting for 37.9 % of the total
that isolating the districts which have com- districts in the state, in which the employ-
monly performed well with respect to an ment content of the output growth regis-
ideal employment augmenting variable/in- tered vary from a low of 0.11 to a high of
dicator like labour productivity and em- 0.95, are classified for their employment
ployment elasticity, distinguishing thereby creating growth characteristic. Another 2
the best performing districts from the poor districts (viz. Vellore and Villupuram),
performing ones, is now required. We now whose employment elasticity is above
turn our attention in this direction. unity, are also classifiable to this group.
Table 4: Employment Elasticity w.r.t. GVA for Districts Classified for Employment Creating/
Displacing & Other Characteristics
A. Employment Creating Growth i.e. Both Employment and GVA have Positive Growth Rate Reg-
istered
(i) Perambalur/Ariyalur (0.11), (ii) Karur (0.22),
(iii) Coimbatore (0.29), (iv) Tirunelveli (0.33),
(v) Nilgiris (0.37), (vi) Kancheepuam (0.42),
(vii) Pudukkottai (0.45), (viii) Madurai (0.53),
(ix) Dharmapuri (0.67), (x) Tiruvallur (0.70),
(xi) Salem (0.95)
B. Employment Displacing Growth i.e. GVA has Registered Positive Growth Rate but Employ-
ment has Registered Negative Growth Rate
(i) Dindigul (- 0.44), (ii) Sivagangai (- 0.36),
(iii) Cuddalore (- 0.32), (iv) Nagapattinam (- 0.31),
(v) Tiruvarur (- 0.03)
C. Stagnating Districts i.e. both Employment and GVA have Negative Growth Rate
(i) Tiruvannamalai (0.02), (ii) Tuticorin (0.10),
(iii) Kanyakumari (0.24), (iv) Tiruchy (0.50),
(v) Virudhnagar (1.10), (vi) Tanjavur (2.81)
D. Both Employment and GVA have Positive Growth Rate Registered with Employment Elasticity
above Unity and Very High i.e. Employment Growth Rate Much Higher Than GVA Growth Rate
(i) Vellore (8.00), (ii) Villupuram (22.0)
E. Employment Growth Rate is Positive but GVA Growth Rate is Negative
(i) Theni (-0.86), (ii) Ramnad (- 0.21),
(iii) Chennai (- 0.52), (iv) Erode (- 1.00)
Employment Elasticity for the State as a whole During the Period is: 0.80
Note: Figures within brackets are values of employment elasticity.
growth. From this point of view, it is re-

The conclusion that there exists alistic to take a look at those districts
enough empirical evidence to reject which have performed well both in terms
the hypothesis of jobless growth for of employment growth and labour pro-
the State in general is supported. ductivity (LP). Table 5 presents a classi-
fication of districts in this regard. About
Combining these two groups the propor- 62.1 percent of the districts (i.e. 18 dis-
tion of districts characterised by employ- tricts) in the State have registered posi-
ment creating growth is 44.8 percent in the tive growth rate in labour productivity.
state. The two other classifications with These 18 districts have together contrib-
negative employment elasticity [viz. (i) em- uted 75.3 percent of LP share in the state.
ployment growth is positive but output However, seven out of these 18 districts
growth is negative and (ii) output growth have registered negative growth rate in
is positive but employment growth is nega- employment. Thus, 11 districts out of 29
tive in which the latter is characterised by or about 38 percent of total districts in
its employment displacing feature] carry the State have registered positive growth
positive feature due to which they cannot rate both in employment and LP. They
be considered from an altogether negative also share a significant 74.2 percent of
perspective; rather, they need to be fo- LP share among themselves. While these
cused with policy initiatives for improving 11 districts could be considered among
their infrastructural and educational base the best performers, in particular, five dis-
which would then give the required fillip tricts viz. Dharmapuri, Coimbatore, Karur,
for converting their potential into employ- Pudukkottai and Ramnad are notable for
ment creating districts. Thus, although their above 5 percent growth rate reg-
about six districts have evidenced stagnat- istered in both employment and LP. On
ing characteristics, having registered nega- the other side of this success story, are
tive growth rate in both employment and the four districts of Kanyakumari,
GVA, the State as a whole has registered Tiruvannamalai, Tiruchy and Tuticorin for
an impressive aggregate employment elas- having registered negative growth rates
ticity of 0.80. On the basis of this indica- in employment and LP.
tor, therefore, the conclusion that there ex-
ists enough empirical evidence to reject the Data Problems
hypothesis of jobless growth for the State
in general is supported. Wide Year-to-Year Fluctuations:
Due to many reasons, year-to-year varia-
Employment Growth with Growth in tions in data collected and published by
Labour Productivity the government agencies generally pre-
vail. It appears that while they are con-
The demands of competitive industrial trolled after due checking for more ag-
environment require that industrial growth gregate level data like national/ states, at
should be facilitated by the creation of right district level it perhaps is done less me-
atmosphere needed for its expansion and ticulously. One is therefore left with the
Table 5: Performance of Districts in terms of Growth in Employment & Labour Productivity

(LP): 2001-05
Range of Districts in the Range of Absolute Percent*
Labour Employment Growth (%) No of
Productivity Negative 0-2 2-5 Above 5 Districts
Growth (%)
Negative Kanyakumari Chennai Vellore 11 24.7

Tiruvannamalai Dindigul Villupuram
Tiruchy
Tuticorin Erode
Nilgiris
Theni
0-2 Virudhnagar 1 1.1
2-5 Tirunelveli Kanchee Tiruvallur 4 14.9
-puram Salem
Above 5 Namakkal Perambalur/ Madurai Dharmapuri 13 59.3
Cuddalore Ariyalur Coimbatore
Nagapattinam Karur
Tiruvarur Pudukkottai
Thanjavur Ramnad
Sivagangai
Total 29 100
Note: The absolute growth rate in LP for the State is 1 percent. Its relative growth rate is - 2.5 percent.
* Percentage in column 7 is the cumulative percentage share in labour productivity in the districts
figuring in columns 2 to 5.
option of either using the data published as sider here. One factor is the major under-
it is or make such adjustments as techniques reporting by data furnishing establishments
of research methodology may permit to the official survey like ASI. Another rea-
sometimes. We point out three such in- son, as Sastry (2003) terms it, is due to
stances of severe data trough for GVA in agency bias11. Better training to persons
the database used for the study10 in which, engaged in collecting data in the BES par-
as mentioned in footnote 4 (b), we have ticularly on substituting non-responding
proceeded to skirt around the problem by units would help in this respect.
leaving out the negative values. But why
do such data problems arise and what can Inconsistency Between Sum of De-
be done about it is relevant for us to con- flated District-wise Total and Directly
Deflated Total of States ASI Total: It is
10.Data for Villupuram on GVA, expressed in lakhs observed that there is wide difference be-
of rupees, was 10013, 11077, -29846, 9888 and tween the sum of deflated values for the
13166 for the 5 years during 2001-05. Likewise,
for Salem it was -7684, 63749, 86574, 76813 and 11.Sastry (2003:410) suggests before pooling state
93581; and for Tiruvarur it was -368, 307, 390, and central samples, it should be ensured that
573 and -347. divergence between state and central estimates is
districts and the directly deflated total of on, it would amount to major improvement
States ASI total. Theoretically, such huge in data availability.
difference is unexplainable. There is no
detail furnished by other researchers work- Variation in Results Due to Differ-
ing on disaggregate level data on such as- ent Grouping of Districts: The present
pects of data behaviour. There is one re- study has merged two districts in two cases
lated information mentioned by an author reducing the total number of districts for
which is mentioned in the subsequent point which data was originally published from
below. It is felt that dissemination of ex- 31 to 29 for Tamil Nadu. One objective for
perience on such aspects would be useful this particular merger was to make the data
in handling such data problems. set compatible with those of the UMS.
Geographical proximity, economic homoge-
Inconsistency Due to Different De- neity of units disturbed due to recent politi-
flators Used: One could use different cal decision on division of districts in the
deflators available for deflating a single state, etc. also guided the present merger
value based variable like GVA (e.g. WPI, made for the study. What is important to
IIP, GDP deflators, etc.). This would yield mention, however, is that depending on the
altogether different results in the estimated merger, results of estimated growth rates
growth rates. An acknowledgement of this would change remarkably. A situation of
problem was mentioned by Sidhu rejection of jobless growth hypothesis ar-
(2007:175). Data on deflators, needed for rived at on the basis of the results of the
estimating TFP values, are particularly present database might change if some
lacking which can be greatly improved by other merger scheme of districts is fol-
some accommodation in data publishing lowed! Details on such data related issues,
policies. A brief account on this was pro- shared by researchers, therefore would
vided by Prakash (2006a:45-46). If worked amount to important exchange on aspects
11 Contd. of data management and their implications.
not significant at the district level. In case of The points outlined in this subsection are
wide variations, pooling of the estimates may made with this auxiliary objective in view.
not be advisable and may worsen the estimates.
As a rule of thumb, pooling may be undertaken if
difference between the central and state estimates
Conclusion
at district level is within 30 percent of pooled
estimates. The other necessary conditions for The analysis presented in the paper
obtaining pooled estimates are: (i) data entry rejects the jobless growth hypothesis for
layout for both state and central samples should Tamil Nadu based on the observed aggre-
be identical, or at least compatible; and (ii)
estimates should be generated at the district level.
gate employment elasticity for the State and
If any district is composed of more than one the percentage of districts which have reg-
stratum, estimates are to be generated first at istered significant growth profiles in vari-
stratum level and then at district level by ables like employment and labour produc-
combining the stratum estimates . Sastrys tivity. The evidence, however, supports the
observations were on the NSS data on monthly
per capita expenditure but its relevance for district
hypothesis of job displacement widely re-
level data in general remains. ported to prevail in situations of extreme
industrial competition in liberalised policy Sidhu, Hina (2007), Share of Wages and Competi-
regimes. Districts which have faired poorer tiveness in Indian Industry, The Indian Jour-
nal of Industrial Relations, 43(2).
and need to be focused with industry spe-
cific promotional policies are identified. Kannan, K. P. & Raveendran, G (2009), Growth
Implementation of suitable measures for Sans Employment: A Quarter Century of
Jobless Growth in Indias Organised Manu-
expansion of educational and training fa-
facturing, Economic and Political Weekly,
cilities, through flexi-community oriented March 7, XLIV (10).
models/approaches (Prakash 2003: 397,
Prakash, B. S. (2003), Vocational Education in
2004: 89, 2006b:1-17) would go a long way
the Context of the Present Labour Market
in improving the labour market situation in Demands Issues and Challenges: A Per-
the state. spective, Journal of Educational Planning
and Administration, XVII (3).
Acknowledgements Prakash, B. S. (2004), Demand for Training and
Employment Pattern of ITI Graduates,
The authors are grateful to Sh. I. C. Journal of Educational Planning and Ad-
Dhingra, Associate Professor of Econom- ministration, XVIII(1),
ics, Delhi University, for reading the Prakash, B. S. (2006a), Productivity Trends in
manuscript more than once and making Manufacturing: Implications for Employ-
many useful suggestions for improving ment Planning, The Indian Economic Jour-
the paper. nal, 54(3).
Prakash, B. S. (2006b), Skill Development

References through Vocational Education: A Stock Tak-
ing of Issues and Policy Perspective,
Mazumdar, Dipak & Sandip Sarkar (2004), Re- Manpower Journal, XLI(4).
forms and Employment Elasticity in Sastry, N. S. (2003), District Level Poverty
Organised Manufacturing, Economic and Estimates: Feasibility of Using NSS House-
Political Weekly, July 3. hold Consumer Expenditure Survey Data,
Economic & Political Weekly, January 25.
Efficiency of Indias Intermediate Goods Industries in the
Liberalized Regime
M. Manonmani & M. Ramya
This study analyses the technical Intermediate Goods

scale, cost and allocative effi-
ciencies of select Indian interme- Manufacturing is an organized activ-
diary goods industries such as ity devoted to the transformation of raw
manufacture of chemical and materials into marketable goods. In tech-
chemical products, paper and nical parlance, marketable goods are
paper products, leather and known as economic goods; they cannot
leather products and non-metal- be obtained without paying a price. This
lic mineral products in the liber- is in contrast to free goods, which are
alized regime between 1991-92 available at no cost. The manufacturing
and 2005-06. The efficiency system usually employs a series of value
scores were obtained by apply- adding processes to convert raw materi-
ing Data Envelopment Approach als into more useful forms and eventu-
(DEA). It was found that for the ally into finished products. The outputs
entire period, technical, scale, from one manufacturing system may be
cost and allocative efficient De- utilized as the inputs to another. A manu-
cision Making Units were more facturing system is, therefore, a typical
under variable returns to scale input-output system, which produces out-
(VRS) than under constant re- puts (economic goods) through activities
turns to scale (CRS) production that transform the inputs (raw materials).
technology. In an industrialized country, the manufac-
turing industries are the backbone of the
national economy because it is mainly
through their activities that the real wealth
is created.
A crucial characteristic of the pro-

M. Manonmani is Associate Professor (E-mail: duction process in the industrialized coun-
manomyil@yahoo.com) & M.Ramya (E-mail:
punitha.mramya0@gmail.com) is Research Scholar
tries is that many goods are produced in
in the Department of Economics, Avinashilingam one industry and used as input in other
Deemed University for Women, Coimbatore-641043 industries, in both home country and the
trade partner countries. The goods are industries were selected based on their
called intermediate goods and, are pro- significant contributions to the economy.
duced goods which, through the produc-
tion processes, are transformed into Chemical Industry
goods of a greater value, whether another
intermediate good or the final good. The chemical industry is an impor-
tant constituent of the Indian economy
Intermediate goods and are pro- with an estimated turnover at around
duced goods which, through the US$ 35 billion, constituting 1.5 per cent
production processes, are trans- of the global chemical industry esti-
formed into goods of a greater mated at US$ 2,400 billion. The total in-
value, whether another intermedi- vestment in the sector is nearly US$ 60
ate good or the final good. billion and the employment is about one
million. The industry accounts for 13-
Because of high degree of special- 14 percent of the total exports and 8 -9
ization in production processes, and the percent of the total imports into the
optimal use of the production factors in country. Gujarat dominates with 51 per-
the single split processes, it is important cent of the total share of major chemi-
that intermediate goods, to a great ex- cals produced in the country (Eleventh
tent, fulfill the connected specific needs Five Year Plan 2007-12).
of factors. In every link of the produc-
tion processes there is precisely defined Increased competition resulting from
need for intermediate goods according to, globalization is driving the chemical in-
certain kind of specification. The produc- dustry towards consolidation, cost re-
tion technology for the group of interme- duction, location of manufacturing bases
diate goods being considered is taken to close to raw materials, cheaper energy
be non-combinable. This means that the sources, lower tax regimes, increased
single producer of the final good cannot use of information technology (IT), and
obtain characteristics in proportions not intensification of R&D activities. At the
represented among the available interme- same time, the industry is responding to
diate goods by buying more of such goods the increased environment conscious-
and using them in combination conse- ness worldwide. Over the last decade,
quently. the Indian chemical industry has evolved
from being a chemical producer to be-
The production of a specific variety coming an innovative industry. With in-
of the final good requires one specific creasing investments in R&D, the indus-
variety of intermediary goods, the ideal try is registering significant growth in the
intermediate goods. Therefore, the num- knowledge sector comprising speciality
ber of ideal intermediate good varieties chemicals, and pharmaceuticals.
is identical with the produced number of Broadly, the share of basic, knowledge,
final goods varieties. Among the inter- and speciality chemicals is 57 per cent,
mediary goods industries, the following 18 per cent, and 25 per cent, respectively.
Efficiency of Indias Intermediate Goods Industries in the Liberalized Regime
Leather Industry sumption of paper in India is 7.2 kg, which

is far lower than that in other emerging
The importance of the Indian leather economies, for example it is 45 kg in
industry is derived from the fact that it is China, 15-20 kg in other East Asian coun-
labour-intensive and contributes substan- tries, and much higher level that exists in
tially to exports. Artisans, micro enter- the US and Europe. The consumption of
prises, and SSIs account for 60-65 per- paper is likely to increase manifold with
cent of the total production. The manu- the rise in literacy.
facturing activity provides full-time em-
ployment to 1 million persons and activi- At the end of the Tenth Five Year
ties connected with the recovery of hides Plan there were about 666 industrial units
from carcasses provides part-time employ- with the total installed capacity of 8.50
ment to another 0.8 million. The turnover million tons of paper and paperboard.
of the industry was Rs 25,000 crore in However, 98 units with a capacity of 1.1
2004-05, out of which Rs 10,800 crore (43 million tons have been closed due to en-
per cent) was exported. Exports have vironmental problems. The industry pro-
risen in recent years from US$ 1.9 billion duces 5.80 million tons of paper and pa-
in 2006-07. The composition of exports of perboard. It has made significant
leather and leather goods has been mov- progress after independence with gov-
ing increasingly towards leather footwear, ernment support and fiscal incentives.
but the share (32 per cent in 2006-07) still The country is almost self-sufficient in
falls far short of the 65 per cent share of most varieties of paper and paperboard,
footwear in the world export of leather and imports are taking place only of cer-
and leather products. The Inter-Ministe- tain speciality items such as coated pa-
rial Group constituted to evolve a com- per, cheque paper, etc. However, the in-
prehensive strategy for the development dustry has failed to keep pace with the
of the leather sector has assessed that technological advances and is beset with
India has the potential to expand exports major difficulties such as high production
from the level of US$ 2.7 billion in 2005- cost, pollution problems, and finished pa-
06 to US$ 7 billion in 2011-12. per quality not conforming to international
standards.
Paper Industry
Mining Sector
Paper industry is one of the 35 high-
priority industries in India and is presently Accelerated growth rate of the In-
growing at 6.3 per cent per annum. The dian economy needs rapid development
turnover is nearly Rs 17,000 crore per of the mining sector, on which most of
annum and its contribution to the national the basic industries depend. The efforts
exchequer is around Rs 2,500 crore. The for locating minerals over the last 55
industry employs 0.3 million people di- years have enhanced reserves of vari-
rectly and is estimated to employ 1 mil- ous minerals. The mining sector was
lion people indirectly. The per capita con- opened to FDI in 1993 and 100 per cent
FDI has been allowed since 2000. Dur- Data Envelopment Approach (DEA).
ing the Eleventh Five Year Plan however, While the stochastic frontier approach
the actual flows for prospecting have (econometric approach) estimates the
been minimal in the absence of policies efficiency of the firms by estimating the
conducive to FDI. Attracting FDI for ex- production function, the DEA technique
ploration and prospecting will require a involves the use of mathematical pro-
revision of the current non-investor- gramming to estimate the efficiency of
friendly mining regime and adoption of a the firms / industry. DEA is a non-para-
multi-disciplinary approach, embracing metric, deterministic methodology for
the legal framework, technology, determining relatively efficient produc-
sustainability, infrastructure, and proce- tion frontier, based on the empirical data
dural streamlining. on chosen inputs and outputs of a num-
ber of entities called Decision Making
There is an increasing recognition of Units (DMUs). From the set of avail-
the necessity to assess the efficiency of able data, DEA identifies reference
performance of the manufacturing sec- points (relatively efficient DMUs) that
tor. Efficiency is a very important factor define efficient frontier (as the best prac-
for productivity growth especially in de- tice production technology) and evaluate
veloping economies, where resources are the inefficiency of other interior points
scarce and opportunities for developing (relatively inefficient DMUs) that are
and adopting better technology have below the frontier.
lately started dwindling. Past studies
showed that productivity can be raised The DEA provides a measure of ef-
by improving efficiency, which usually is ficiency that allows intra-firm compari-
neglected, without increasing the resource son, as the efficiency measure is a pure
base or without developing new technolo- number. The main advantage of DEA is
gies. that unlike SFA, it does not require the a
priori assumption about the analytical
The Data form of the production function. Instead,
it constructs the best practice production
The data for the current study was solely on the basis of observed data and
collected from secondary sources like therefore the possibility of misspeci-
the economic survey and the annual sur- fication of the production technology is
vey of the industries (various issues). The minimized. In the case of SFA, the pa-
reference period chosen for the study is rameter estimates are sensitive to the
from 1991-92 to 2005-06. choice of the probability distribution speci-
fied for the disturbance term.
DEA Model
The DEA provides a measure of
There are basically two approaches efficiency that allows intra-firm
for estimation of efficiency, viz., the Sto- comparison, as the efficiency
chastic Frontier Approach (SFA) and the measure is a pure number.
There are two approaches to estimat- lowing mathematical programming

ing the efficiency of a firm by DEA viz., problem:
the output-oriented efficiency and the S
input-oriented efficiency. In the output u Y
r =1
r ro
oriented approach, efficiency is deter-
max h0(u,v) = S ............(1)
mined by maximum output that can be
produced from an input bundle. In the
v x
i =1
i io
input-based measure, the technical effi- subject to

ciency of a firm is evaluated by the ex-
S
tent to which all inputs could be propor-
tionally reduced without a reduction in the
u Y
r =1
r rj
m 1, j = 1, 2..., jo ,..., n......(2)

output. Among a number of DEA mod-
els, the two most frequently used ones v x
i =1
i ij
(input oriented) the CCR model (Charnes,

Cooper & Rhodes Model) and BCC
ur 0, r = 1,2,....,s ............... (3)
model (Banker, Charnes & Cooper
Model) have been used in the study. The vi 0, j = 1,2,....,m ................. (4)
DEA model has been used to estimate
the technical, scale, cost and allocative
where xij is the observed amount of
efficiency of the industries under study.
input of the ith type of the DMU (xij>
0, i = 1,2,......n, j = 1,2,.....n) and yrj
I. Technical Efficiency
= the observed amount of output of
the rth type for the jth DMU (Yrj >
(i) CCR Model: Charnes, Cooper and
0, r = 1,2,.....s, j = 1,2,...n).
Rhodes (1978) introduced a measure
of efficiency for each DMU that is The variables u r and v i are the
obtained as a maximum of ratio of weights to be determined by
weighted outputs to weighted inputs. the above programming problem.
The weights for the ratio are deter- However, this problem has infinite
mined by a restriction that the simi- number of solutions since if (u*, v*)
lar ratios for every DMU have to be is optimal then for each positive sca-
less than or equal to unity, thus re- lar ( u*, v*) is also optimal. Fol-
ducing multiple inputs and outputs to lowing the above one can select a
single virtual output without requir- representative solution (u,v) for which
ing pre-assigned weights.
m
The efficiency measure is then a
function of weights of the virtual
v x
i =1
i io = 1 ...............................(5)
input-output combination. Formally,

the efficiency measure for the DMU to obtain a linear programming prob-
can be calculated by solving the fol- lem that is equivalent to the linear
fractional programming problem
(1) - (4). Thus, denominator in the the optimal solution *, which is the
above efficiency measure h 0 is set to efficiency score (so-called technical
equal one and the transformed lin- efficiency or CCR efficiency) for the
ear problem for DMU can be writ- particular DMU and repeating them
ten: for each DMUj , j = 1,2,....n effi-
S ciency scores for all of them are ob-
max z 0= u Y
r =1
r ro ...................... (6) tained. The value of is always less
than or equal to unity (since when
tested, each particular DMU is con-
subject to
strained by its own virtual input-out-
put combination too). DMUs for
S m which *q1 are relatively inefficient
u Y -v x
r =1
r rj
r =1
i ij 0, j = 1,2,..., n...(7) and those for which *q=1 are rela-
tively efficient, having their virtual
m
input-output combination points lying
v x
r =1
i io = 1 ..............................(8) on the frontier. The frontier itself
consists of linear facets spanned by
efficient units of the data and the re-
ur 0, r = 1,2,...., s................... (9) sulting frontier production function
(obtained with the implicit constant
vi 0, i = 1,2,...., m.................. (10) returns to scale assumption) has no
unknown parameters.
For the above linear programming ii. BCC Model: Since there are no con-
problem, the dual can be written (for straints for the weights j, other than
the given DMU) as: the positivity conditions in the prob-
lem (11) - (14), it implies constant re-
min z 0 = o........................... (11)
turns to scale. For allowing variable
returns to scale, it is necessary to add
subject to
the convexity condition for the
n n weights j, i.e. to include in the model
lY
j =1
rj Yro , r = 1, 2,...., s l Y
j =1
r rj (11) - (14) the constraint:
n
yro r = 1,2,...,s.................... (12)
l
j =1
j = 1 ............................... (15)
n
oxio - l x
j =1
j ij 0, i = 1,2,..., m ...(13)
The resulting DEA model that exhibits
variable returns to scale is called
BCC model, after Banker, Charnes
lj 0, j = 1,2,...,n.............(14)
and Cooper (1984). The input-ori-
ented BCC model for the DMU0 can
Both the above linear problems yield be written formally as:
min z 0 = o........................... (16) all technical efficiency score (measured

by the CCR model) and pure technical
subject to
efficiency score (measured by the BCC
n
model).
l Y
j =1
r rj Yro r = 1, 2,..., s ........ (17)
III. Cost Efficiency
n
oX10 l j xi j 0, i = 1, 2,..., m .. (18) The standard measure of cost effi-

j =1
ciency is obtained via a two stage pro-
cess: i) estimate the minimum price-ad-
n
l
j =1
j = 1 ............................... (19) justed resource usage given technologi-
cal constraints, and (ii) compare this mini-
mum to actual, observed costs. Cost ef-
j q 0, j = 1,2,...,n................ (20) ficiency can be measured if input prices
are available in addition to output and in-
Running the above model for each put data. Let x =(x1, ....x k) R+k de-
DMU, the BCC efficiency scores are notes a vector of inputs and y = (y1,
obtained (with similar interpretation ....Ym) R+m denote vector of outputs.
of its values as in the CCR model). Formally, the cost efficiency model can
These scores are also called pure be specified as :
m
n
technical efficiency scores, since
they are obtained from the model that Min z,x w jo x j ............ (21)
z i =1 allows variable returns to scale and
j =1
i =1
hence eliminates the scale part of s.t. z.Y q y0
the efficiency from the analysis. Gen-
erally, for each DMU the CCR effi- z.x x0
ciency score will not exceed the
BCC efficiency score, what is intu- zi q 0
itively clear since in the BCC model
each DMU is analysed locally (i.e.
compared to the subset of DMUs
that operate in the same region of
returns to scale) rather than glo-
bally. where Y is an n x m matrix of ob-
served outputs for n industries and x is
II. Scale Efficiency an n x k matrix of inputs for each indus-
try. z is a l x n vector of intensity vari-
Following the scale properties of the ables and w = (w1,...wk) R+k denoted
above two models, (Cooper et al. 2000) input prices. The constraints of the model
the scale efficiency is defined as follows. (21) define the input requirement set
For a particular DMU, the scale effi- given by:
ciency is defined as the ratio of its over-
L(y) = (x. z. y q y0, z xd x, z i qo, terms of average inefficiency they would

n have need 19.9 per cent, 47.7 per cent
z
i =1
i = 1 ) ........................... (22) 21.9 per cent and 22.6 per cent more in-
puts to produce the same output, which
implies waste of resources to the extent
The input requirement set specifies mentioned above.
a convex technology with Variable Re-
turns to Scale (VRS),n which is imposed Under VRS production technology,
by the constraint z i = 1 . Leaving the number of efficient DMUs ex-
i=1
the constraint out of the model changes ceeded the number of efficient
the technology to Constant Returns to DMUs under CRS production
Scale (CRS). technology.
IV. Allocative Efficiency Under VRS production technology,

the number of efficient DMUs ex-
Allocative efficiency is defined as a ceeded the number of efficient DMUs
ratio of cost efficiency score to techni- under CRS production technology.
cal efficiency score. This efficiency Under VRS production technology,
score was estimated for the present study higher average efficiency was always
both under CRS production and VRS pro- recorded. It may be due to the reason
duction technologies. that DMUs that were efficient under
Constant Returns of Scale (CRS) were
Results & Discussion accompanied by new efficient DMUs
that could operate under increasing or
Technical Efficiency: The results decreasing returns to scale. Higher de-
regarding technical efficiency scores of gree of average technology ineffi-
the selected intermediary goods indus- ciency, particularly under CRS produc-
tries are presented in Table 1. tion technology, can be attributable to
the fact that the industries may not be
Under Constant Returns to Scale using the most efficient technology
(CRS) production technology, technical available to transform the inputs into
efficiencies during the period 1991-92 to outputs. Due to differences in products
2005-06 were 0.834, 0.677, 0.820 and produced, the industries were likely to
0.815 respectively for industries manu- have different best practice frontiers;
facturing Chemical & Chemical Products, relatively small regional spheres of op-
Paper & Paper Products, Leather & eration of the industries may have re-
Leather Products and Non-Metallic Min- sulted in inefficiencies; and structured
eral Products. This implies that the in- problems regarding staff efficiency and
dustries needed only 83.4 percent, 67.7 operating efficiency may have pre-
per cent, 82.0 per cent, and 81.5 percent vented the firms from improving their
of the inputs currently being used. In efficiency levels. It can be concluded
Table 1: Technical Efficiency (TE) Estimates
Industry Chemical and Paper and Leather and Non-Metallic

Chemical Products Paper Products Leather Products Mineral Products
DMU CRS VRS CRS VRS CRS VRS CRS VRS
1991-92 0.793 1.000 0.968 1.000 0.863 1.000 1.000 1.000
1992-93 0.942 1.000 0.934 0.968 0.735 0.998 0.738 0.988
1993-94 0.982 1.000 1.000 1.000 1.000 1.000 0.747 1.000
1994-95 0.886 0.949 0.815 0.997 0.693 0.855 0.792 0.999
1995-96 0.886 0.910 1.000 1.000 0.712 0.863 1.000 1.000
1996-97 0.840 0.868 0.905 1.000 0.731 0.876 0.709 0.970
1997-98 0.677 0.822 0.793 0.951 0.957 1.000 0.775 1.000
1998-99 0.725 0.907 0.598 0.704 0.946 0.759 0.750 0.966
1999-00 0.681 0.893 0.393 0.396 0.770 0.814 0.731 0.958
2000-01 0.763 1.000 0.427 0.427 0.766 0.810 0.728 0.865
2001-02 0.689 0.882 0.432 0.433 0.832 0.906 0.752 0.960
2002-03 0.870 0.939 0.411 0.415 0.783 0.882 0.708 0.762
2003-04 0.876 0.983 0.478 0.483 0.902 0.964 0.795 1.000
2004-05 1.000 1.000 0.475 0.480 0.807 0.886 1.000 1.000
2005-06 1.000 1.000 0.524 0.536 1.000 1.000 1.000 1.000
Average 0.834 0.944 0.677 0.719 0.820 0.907 0.815 0.965
Technical
Efficiency
(1991-92
to 2005-06)
Average 0.199 0.059 0.477 0.390 0.219 0.102 0.226 0.036
Technical
Inefficiency
1991-92 to
2005-06
No. of 2 6 2 4 2 4 4 7
Technical
Inefficient
DMUs
(1991-92 to
2005-06)
Note: Calculations based on ASI data. CRS- Constant Returns to Scale. VRS- Variable Returns to scale
that though the efficiency of the firms firm lies in the range of increasing, con-
varied considerably on account of the stant or decreasing returns to scale. In
various reasons mentioned, all the firms other words, it reveals the scale char-
were estimated to be on the frontiers acteristics of DMUs. Market efficiency
at least once. In other words, both un- can be increased if more DMUs attain
der CRS and VRS technologies, the ef- constant returns to scale, because fewer
ficiency scores or levels during the en- resources are wasted. The measure-
tire period, are indicative of the fact ment of economies of scale, therefore,
that the efficiency of firms was not helps assess, at the same time whether
strongly influenced by the size of pro- higher market concentration should be
duction. encouraged to improve efficiency. A
DMU may be scale inefficient, if it ex-
Scale Efficiency: The scale effi- periences decreasing returns to scale or
ciency scores of all the industries se- if it has not taken full advantages of in-
lected, for the present study are pre- creasing returns to scale. Indeed most
sented in Table 2. of the inefficient DMUs presented in-
creasing returns to scale characteristics
which indicates that industries can in-
crease the scale to effectively improve
DEA results applied to know the
that efficiency. It is clear that ineffi-
scale efficiency of industries for
ciency can be due to the existence of
the entire period revealed that the
either increasing or decreasing returns
industries were not operating at an
to scale.
optimum scale.
Cost Efficiency: Table 3 gives de-
DEA results applied to know the
tails regarding cost efficiency scores of
scale efficiency of industries for the en-
selected industries for the reference pe-
tire period revealed that the industries
riod under study.
were not operating at an optimum scale.
The average scale efficiency of manu-
Under Constant Returns to Scale
facturing Paper and Paper Products was
(CRS) technology, industries manufactur-
maximum (97.9 percent), followed by
ing Chemicals and Chemical Products,
Leather and Leather Products (92.4 per-
Paper and Paper Products, Leather and
cent), Chemical and Chemical Products
Leather Products and Non-Metallic Min-
(92.1 per cent) and Non-Metallic Min-
eral Products were efficient to the ex-
eral Products (84.4 per cent). In terms
tent of 73.9 percent, 52 .9 per cent, 65.3
of average inefficiency, production could
per cent and 79 per cent respectively.
increase to the extent of 2.1 per cent,
Under Variable Returns to Scale (VRS)
8.2 per cent and 18.4 per cent respec-
production technology the same indus-
tively in the above industries, by taking
tries were more efficient to the extent of
advantage of their scale characteristics.
87.2 per cent, 58.9 per cent, and 77.8 per-
DEA allows assessment of whether a
cent and 83.8 percent respectively. The
Table 2: Scale Efficiency (SE) Estimation
Industry Chemical Paper Leather Non-

and RTS and RTS and RTS Metallic RTS
Chemical Paper Leather Mineral
Products Products Products Products
1991-92 0.793 IRS 0.968 IRS 0.899 IRS 1.000 CRS
1992-93 0.942 IRS 0.944 IRS 0.910 IRS 0.806 IRS
1993-94 0.982 IRS 1.000 CRS 1.000 CRS 0.795 IRS
1994-95 0.922 IRS 0.933 IRS 0.934 IRS 0.823 IRS
1995-96 0.953 IRS 1.000 CRS 0.859 IRS 1.000 CRS
1996-97 0.939 IRS 1.000 CRS 0.861 IRS 0.722 IRS
1997-98 0.974 IRS 1.000 CRS 1.000 CRS 0.777 IRS
1998-99 0.900 IRS 1.000 CRS 1.000 CRS 0.762 IRS
1999-00 0.899 IRS 0.935 IRS 0.920 IRS 0.741 IRS
2000-01 0.780 IRS 0.978 IRS 0.950 IRS 0.824 IRS
2001-02 0.905 IRS 0.950 IRS 0.882 IRS 0.757 IRS
2002-03 0.923 IRS 0.990 IRS 0.824 IRS 0.852 IRS
2003-04 0.909 IRS 0.982 IRS 0.940 IRS 0.795 IRS
2004-05 1.000 CRS 1.000 CRS 0.882 IRS 1.000 CRS
2005-06 1.000 CRS 1.000 CRS 1.000 CRS 1.000 CRS
Average Scale 0.921 - 0.979 - 0.924 - 0.844 -
Efficiency
(1991-92 to
2005-06)
Average Scale 0.085 - 0.021 - 0.082 - 0.184 -
Inefficiency
(1991-92 to
2005-06)
No. of Scale 2 - 7 - 4 - 4 -
Inefficient
DMUs (1991-92
to 2005-06)
to 2005-06)
Note: Calculations based on ASI data. RTS - Returns to Scale. IRS - Increasing Returns to Scale.
DRS - Decreasing Returns to Scale. CRS - Constant Returns to Scale.
Table 3: Cost Efficiency (CE) Estimates

1991-92 0.507 1.000 0.735 1.000 0.724 1.000 0.907 1.000
1992-93 0.651 0.997 0.752 0.692 0.689 0.904 0.678 0.935
1993-94 0.739 1.000 0.898 1.000 1.000 1.000 0.703 0.833
1994-95 0.726 0.923 0.678 0.722 0.634 0.695 0.759 0.820
1995-96 0.794 0.900 1.000 1.000 0.596 0.630 0.970 1.000
1996-97 0.722 0.833 0.708 0.732 0.583 0.601 0.697 0.731
1997-98 0.639 0.729 0.613 0.649 0.782 0.862 0.765 0.791
1998-99 0.711 0.783 0.589 0.619 0.636 0.715 0.744 0.764
1999-00 0.680 0.743 0.305 0.358 0.581 0.694 0.727 0.745
2000-01 0.700 0.757 0.323 0.360 0.566 0.692 0.725 0.737
2001-02 0.656 0.707 0.234 0.264 0.588 0.725 0.725 0.726
2002-03 0.801 0.840 0.250 0.268 0.550 0.643 0.700 0.712
2003-04 0.844 0.870 0.266 0.285 0.642 0.809 0.766 0.778
2004-05 1.000 1.000 0.267 0.285 0.560 0.699 0.996 0.998
2005-06 0.910 1.000 0.321 0.325 0.671 1.000 1.000 1.000
Average 0.739 0.872 0.529 0.589 0.653 0.778 0.790 0.838

Cost
Efficiency
(1991-92
to 2005-06)
Average 0.353 0.146 0.890 0.697 0.531 0.285 0.265 0.193
Cost
Inefficiency
(1991-92 to
2005-06)
No. of Cost 1 4 1 3 1 3 1 3
Inefficient
DMUs
(1991-92
to 2005-06)
Note: Calculations based on ASI data. CRS - Constant Returns to Scale. VRS - Variable Returns to
Scale.
cost efficient DMUs were more under Conclusion

VRS production technology. The aver-
age cost inefficiency was more under For the entire period, technical, scale,
CRS production technology than under cost and allocative efficient DMUs were
VRS production technology. more under Variable Returns to Scale
(VRS) production technology than under
Allocative Efficiency: Allocative Constant Returns to Scale (CRS) produc-
efficiency scores of the industries for the
tion technology. Inefficiency could be due
reference period is presented in Table 4.
to the existence of either increasing or
decreasing returns to scale. Technical ef-
Over the study period, the industries
ficiency was more in industries
under CRS production technology had
manucaturing Chemical and Chemical
on an average, allocative efficiency level
Products both under CRS and VRS pro-
of 89.0 per cent, 75.0 per cent, 79.8 per-
duction technologies. Technical ineffi-
cent and 97.0 per cent for Chemical and
ciency was more in industries
Chemical Products, Paper and Paper
manucaturing Paper and Paper Products
Products, Leather and leather Products,
under CRS and VRS production technolo-
and Non-metallic Mineral Products re-
gies. Cost efficiency both under CRS and
spectively implying that the industries
VRS production technologies, was more
were 11 per cent, 25 per cent, 20.2 per-
in industries manufacturing Non-Metal-
cent and 3 per cent inefficient respec-
lic Mineral Products, while cost ineffi-
tively. In the case of VRS production
ciency was more in industries manufac-
technology, an average allocative effi-
turing Paper and Paper Products under
ciency of 92.5 per cent, 78.7 per cent,
CRS production technology. Industries
85.4 per cent and 86.9 per cent could
manufacturing Paper and Paper Products
be observed by industries manufactur-
were found to be cost inefficient, when
ing Chemical and Chemical Products,
compared to other industries under VRS
Paper and Paper Products, Leather and
production technology. Allocative effi-
Leather Products and Non-Metallic Min-
ciency under CRS and VRS technology
eral Products respectively implying that
was observed more in industries manu-
the industries were on an average 7.5
facturing Non-Metallic Mineral Prod-
per cent, 21.3 per cent, 14.6 per cent
ucts. On the contrary, high allocative in-
and 13.1 per cent inefficiency respec-
efficiency was observed in industries
tively in these industries. More efficient
manufacturing Paper and Paper Products
DMUs were observed under VRS pro-
under CRS production technology, while
duction technology compared to CRS
Paper and Paper Products proved as an
production technology. The average in-
allocatively inefficient industry under
efficiency scores were more for Paper
VRS production technology when com-
and paper Products both under CRS and
pared to the others.
VRS Production technologies.
Table 4: Allocative Efficiency (AE) Estimates

1991-92 0.640 1.000 0.760 1.000 0.839 1.000 0.907 1.000
1992-93 0.691 0.997 0.804 0.993 0.937 0.906 0.910 0.945
1993-94 0.753 1.000 0.898 1.000 1.000 1.000 0.941 0.833
1994-95 0.819 0.973 0.832 0.725 0.914 0.813 0.958 0.821
1995-96 0.897 0.989 1.000 1.000 0.837 0.729 0.970 1.000
1996-97 0.898 0.960 0.783 0.732 0.797 0.687 0.983 0.754
1997-98 0.944 0.887 0.774 0.683 0.817 0.762 0.987 0.791
1998-99 0.980 0.863 0.985 0.880 0.852 0.942 0.991 0.791
1999-00 0.998 0.832 0.776 0.903 0.754 0.853 0.995 0.778
2000-01 0.928 0.755 0.756 0.844 0.740 0.855 0.996 0.852
2001-02 0.953 0.802 0.541 0.609 0.707 0.800 0.951 0.756
2002-03 0.993 0.892 0.607 0.645 0.703 0.729 0.989 0.934
2003-04 0.962 0.886 0.556 0.590 0.712 0.840 0.964 0.778
2004-05 1.000 1.000 0.563 0.595 0.694 0.789 0.996 0.998
2005-06 0.910 1.000 0.611 0.607 0.671 1.000 1.000 1.000
Average 0.890 0.925 0.750 0.787 0.798 0.854 0.970 0.869
Allocative
Efficiency
(1991-92 to
2005-06)
Average 0.123 0.081 0.333 0.270 0.253 0.170 0.030 0.150
Allocative
Inefficiency
(1991-92 to
2005-06)
No. of Allocative 1 4 1 3 1 3 1 3
Inefficient
DMUs
(1991-92 to
2005-06)
Note: Calculations based on ASI data. CRS - Constant Returns to Scale. VRS - Variable Returns to
Scale.
References issues, Government of India, New Delhi.
Charnes, A. Cooper, W. W. & Rhodes E. (1978),

Central Statistical Organisation (CSO), Annual Measuring the Efficiency of Decision
Survey of Industries (ASI),various issues, Making Units, European Journal Of Op-
Government of India, New Delhi. eration Research, 2: 429-44.
Eleventh Five Year Plan (2007-12) Agriculture, Banker, R. D. Charnes, A. & Cooper, W.W.
Rural Development, Industry, Services and (1984), Some Models for Estimating Tech-
Physical Infrastructure, Volume III, Gov- nical & Scale Inefficiencies in Data Envel-
ernment of India. opment Analysis, Management Science,
Ministry of Finance, Economic Survey, various 30:1078-2092.
Yamini Prakash Sahay & Meenakshi Gupta
Role of Organization Structure in Innovation in the Bulk-

Drug Industry
This study explores the relationship be- Organization Structure &

tween Organization Structure and In- Innovations
novation in the bulk-drug firms of In-
dia. Structure variables include Hori- Structure is directly under the
zontal Complexity, Formalization, Cen- control of organizational decision-
tralization, Concentration of Author- makers to influence innovations.
ity and Participation in Decision-Mak- An organizations structure can
ing. Innovation includes Number of In- best be studied by using percep-
novations and Perceived Innovation. tual measures. Hage and Aiken
Data was collected from employees of (1977), Daftaur (1988), Reddy
two leading bulk-drug firms of India. (1997), Singh and Pestonjee
Qualitative analysis was done using (1988), among many others, stud-
content-analysis. Statistical analysis ied and measured organization
showed significant relationship be- structure as a perceptual/
tween horizontal complexity and num- behavioural variable. The present
ber of innovations. Negative and sig- research is partly behavioural in
nificant relationship has been obtained nature. The focus of the study is
between Centralization and Innova- on how various components of an
tion and between Concentration of Au- organizations structure could fa-
thority and Innovation. A positive and cilitate or inhibit innovations in the
significant relationship has been ob- organization. The objective is to
tained between Participation in deci- study the relationship between Or-
sion-making and Innovation. ganization Structure and Innova-
tions in the bulk-drug firms.
Horizontal Complexity &

Yamini Prakash Sahay is Assistant Professor (HRM
Group), Indian Institute of Management Lucknow, Innovation
Prabandhnagar, Off Sitapur Road, Lucknow 226013. E-mail:
yaminiprakash @rediffmail.com. Meenakshi Gupta is Pavitt (1994) posits that hori-
Professor & Head, Dept. of Humanities & Social Sciences zontal diversification presents key
(H&SS), Indian Institute of Technology Bombay, Powai,
opportunities for new product de-
Mumbai
Role of Organization Structure in Innovation in the Bulk-Drug Industry
velopment, specially in large or R&D

In a bureaucratic organization, for-
based organizations. Jacob (1998) stud-
malized employee participation
ied the Indian advertising company
provides an avenue to attend to the
Mudra, and rated it high on
ideas of employees
innovativeness. He found it characterized
by high horizontal complexity. Consis-
tently positive relationship has been found Centralization & Innovation
between complex division of labour and
organizational innovation (Hage 1999). Khandwalla (1995) posits that decen-
Sharma (2000) found that the innovative tralization has positive motivational effect
chemical firms were characterized by over employees. Jacob (1998) found that
high horizontal complexity. According to Mudra, was highly decentralized. West
Troy, Szymanski and Varadarajan (2001) (2000) supported that high centralization
specialization and horizontal differentia- is a negative predictor of innovations. In
tion were factors on which generation his study Vedamanickam (2001) found
and development of new ideas in an or- positive correlation between decentraliza-
ganization depend. Bommer and Jalajas tion and workplace innovativeness. Kanter
(2004) found that the greatest innova- (2004) also found that innovative organi-
tions happen, where different functional zations were more decentralized. McNulty
units interact to develop products and and Ferlie (2004) consider decentralization
processes that best meet the needs of as a requirement for innovative organiza-
customers. tions. Findings of Khandwalla and Mehta
(2004) indicate that extensive decentrali-
Formalization & Innovation zation helped innovations. To sum up; de-
centralization improves democratic deci-
Schultz and Schilling (1998) found that sion-making, fosters responsiveness among
the more solutions to problems are codi- employees, and enhances the ability of
fied into rules lower is the probability of lower organizational levels to influence se-
discovering solutions that are not yet cov- nior management (Samaratunge 2003);
ered by existing rules. In a bureaucratic thus facilitates innovations.
organization, formalized employee partici-
pation provides an avenue to attend to the Concentration of Authority &
ideas of employees; however there is a Innovation
tension as the employees seek greater
flexibility for informal problem-solving Rothwell (1992) posits that greater
(Shadur, Kienzle Rodwell 1999). West empowerment and increased decision-
(2000) emphasized that increased formal- making at lower levels of management
ization and control system constrains in- reduces number of approvals required
novation. Lewis, Welsh, Dehler and Green for a decision, which adds to the speed
(2002) found that formalization discour- and efficiency of new product develop-
ages idea generation due to inflexibility ment. Dunphy and Bryant (1996) found
that constrains creativity. that in self-managed-teams, team mem-
bers interact with each other rather than Innovation

relying on higher authority for decisions.
This increases the speed of innovation According to Kanter (2004), innova-
by speeding the decision-making process. tion includes: effecting a new policy, which
Shavinina (2003) suggests that empow- is creating a change of orientation or di-
ered multi-functional teams are more rection; creating a new opportunity, which
successful at innovating.m means developing an entirely new prod-
uct or opening a new market; devising a
Participation in Decision Making & fresh method, that is, introducing a new
Innovation process or technology for continued use;
and bringing forth new structural change,
Participation has been found to in- which entails changing of the formal struc-
crease organizational commitment ture, reorganizing or introducing a new
and promote better interpersonal structure, or forging a different link among
relationships among employees. units. Number of innovations has been
used more recently in a growing number
West (1990) defines Participative of innovation surveys as the measure of
Safety as a sense that team members innovation. These involve measures as the
can participate in decision-making and can number of new products produced by a
share ideas without fear, and considers it firm, and the new processes adopted dur-
important for innovation. Participation has ing a specific time period (Souitaris 2002).
been found to increase organizational com-
mitment and promote better interpersonal Perceived Innovation
relationships among employees
(Srivastava 1991). Khandwalla (1995) In a study of 339 organizations, Bart
found positive correlations between par- (2004) measured firm-level innovation on
ticipation in decision-making and organi- a 10-point rating scale by asking respon-
zational innovations in an Indian sample. dents to indicate:
Strauss et al (1998) say that participation
fosters integration, information exchange l How innovative they perceived their
and interaction within groups. For Shadur organization to be.
et al (1999), high participation in decision-
l How important innovation was to their
making leads to greater organizational in-
organization.
volvement. Mintrom (2003) suggests that
more inclusive and participative decision- The concept of perceived innovation
making process in organizations can pro- that the present study measures is similar
mote innovations. Khandwalla and Mehta to Barts (2004) measure of firm-level in-
(2004) found that decisions in innovative- novation. There is almost no other evi-
organic structures emerged through par- dence available in documented form which
ticipation of those involved in and affected studies similar variables, hence, it maybe
by the decision directly. considered as a relatively new variable in
innovation literature.
On the basis of literature reviewed is Organization Structure, comprising

the following hypotheses were generated: four components (Horizontal Complex-
ity, Formalization, Centralization, Concen-
1 (a) Horizontal Complexity has sig- tration of Authority and Participation in
nificant relationship with Number Decision-making). The dependent vari-
of Innovations. able is Innovation, comprising two com-
ponents, Perceived Innovation and Num-
(b) Horizontal Complexity has sig-
ber of Innovations. Operational defini-
nificant relationship with Per-
tions of research variables follow.
ceived Innovation
2 (a) Formalization has significant re- Organization Structure refers to
lationship with Number of Inno- the way in which work and workers are
vations. organized in a firm; with the help of
formal rules and procedures; by dividing
(b) Formalization has negative rela- them according to their functional
tionship with Perceived Innova- expertise; and by prescribing methods
tion of functioning and roles that
3 (a) Centralization has significant re- organizational members need to
lationship with Number of Inno- perform; and by investing the power to
vations. take decisions at desired organizational
levels in the desired personnel.
(b) Centralization has negative rela-
tionship with Perceived Innova- Horizontal Complexity refers to the
tion. degree to which work in an organization
4 (a) Concentration of Authority has is divided horizontally into departments,
significant relationship with Num- sub-departments, functional units and
ber of Innovations. sub-units, on the basis of the different
functions performed. Horizontal com-
(b) Concentration of Authority has plexity is measured by counting the total
negative relationship with Per- number of departments and sub-depart-
ceived Innovation. ments, functional units and sub-units in
the organization. This data has been col-
5 (a) Participation in Decision-Making
lected from secondary sources. Out of
has significant relationship with
the two organizations surveyed, horizon-
Number of Innovations.
tal complexity of the first organization
(b) Participation in Decision Making was 34, and that of the other was 28.
has positive relationship with Per-
ceived Innovation. Formalization is defined in the study
as the extent to which employee
Research Variables behaviour and job/role specifications are
regulated and standardized by the use of
The independent variable in the study formal rules, procedures, and task defi-
nitions in the organization. Formalization Number of Innovations refers to the

has been measured by Hage and Aikens total Number of Innovations introduced
(1977) Formalization Inventory. by the organization over a specific time
period of 7 years. It includes innovations
Centralization refers to the degree happening at all levels of production, in
to which authority for decision making in any department or functional unit. This
an organization is concentrated at a single data was collected from employee inter-
point or organizational/management level. views. Each innovation that employees
It is measured by combining the scale for mentioned was listed by the researcher
Concentration of Authority and the scale verbatim. Employees were asked to in-
for Participation in Decision-Making. dicate how each innovation added value
to the organization; that is, improved ex-
Concentration of Authority is the isting level of functioning, organizational
extent to which the decision making power income, brand-name and the like. On the
is concentrated at higher levels of the or- basis of this data and the operational defi-
ganizational/ management hierarchy and nition of innovation at the three levels of
is measured by the Delegation of Author- production and overall, the researcher
ity scale, devised by Daftaur (1988). categorized responses as an innovation
and not an innovation. For the Num-
Participation in Decision Making ber of Innovations score, total number
refers to the degree of participation of of innovations was added up. Repetitions
members from different hierarchical lev- were cancelled out.
els and functional units in an organiza-
tion, in the decision-making process. It is Perceived Innovation portrays em-
measured by Hage and Aikens (1977) ployee perception of how innovative they
Scale of Personal Participation in Deci- consider their organization in the present
sion-Making. and in the past, at the three levels of pro-
duction: input, throughput and output. The
Innovation refers to the generation measure also includes employee percep-
and implementation of a novel and use- tion of the organizations overall approach
ful idea, introduction of a unique, new or to innovation and innovative
modified product, process or system of activity.Perceived innovation has been
working, or material used by the organi- measured using a scale designed by the
zation; new or improved techniques of researcher and validated for the purpose
production, a change in packaging of of this study.
products, changes in business or HR
strategies of the firm, changes in policies, Test Instruments
entering new markets, or a change in
marketing practices over a specific time Test instruments used to measure
period (7 years). This variable has been variables under study include four rating
divided into two measures: scales and a semi-structured interview.
The questionnaire for survey consisted
of four rating scales. The first scale mea- (1988: 233-34), was used to measure
sures formalization. The second scale Concentration of Authority. It is a Likert-
measures centralization and the third one type, 5-point rating scale, where it is: 1-
was designed by the researcher to mea- never, 2-seldom, 3-sometimes, 4often,
sure perceived innovation. 5-always. Lower the score of an indi-
vidual, higher the centralization score, and
Formalization was measured by vice versa. Only 1 item was reversed
Hage and Aikens Formalization inven- although it was not negatively worded.
tory, cited in Miller (1977: 284-86). The Cronbachs alpha coefficient of reliabil-
scale consisted of 15 items, each to be ity =.95
rated on a 4-point rating scale, where
1-definitely true, 2-true, 3-false and 4- For Scale of Personal Participation
definitely false. Item nos. 6, 7, 9, 10, 11, in Decision-Making Hage and Aikens
12, 13, 14, & 15 were reversed. These scale cited in Miller (1977: 287-89) was
items were not negatively worded, but used. It was a Likert-type 5-point rating
a high score on them indicated low score scale, where 1-never, 2-seldom, 3-some-
on formalization. The Criterion Validity times, 4often, 5-always.
of the scale has been given, the crite-
rion measure used was Alienation. The Criterion Validity measure used
Formalization is positively related to here was that of Autonomy. Organiza-
alienation. The greater the degree of tions, in which decisions were made by
formalization in the organization, the only a few people at the top, relied on
greater the liklihood of alienation from rules and close supervision as a means
work. Dissatisfaction with work is high of ensuring consistent performance by
in organizations where jobs are rigidly the workers. These organizations were
structured. Strict enforcement of rules also characterized by a less professional
was strongly related to work dissatis- staff. The presence of a well trained staff
faction. Social relations are also dis- is related to a reduced need for exten-
turbed when rules are strictly enforced. sive rules. Organizations that are highly
Significant positive relationships were autonomous tend to have a non-partici-
found between routine work and rule pative internal decision structure. Greater
manual, job description and specificity the autonomy, larger is the executives
of job descriptions. span of control.
Centralization was a combined mea- Greater the autonomy, larger is the

sure of Concentration of Authority and executives span of control.
Participation in Decision-Making. Hence
the score for centralization was computed Perceived Innovation was measured
by combining the mentioned variables. by a scale designed by the researcher. It
assessed how innovative employees per-
Delegation of Authority scale, ceive their organization to be, and also
authored by Daftaur, cited in Pestonjee judged employee attitudes regarding or-
ganizational approach towards innovative and perceived innovation. It shows posi-

activity. It consisted of 20 items, to be tive and significant relationship between
rated on Likert-type, 5point rating scale, concentration of authority and perceived
varying in intensity from strongly dis- innovation and between participation in
agree at 1 to strongly agree at 5. Each decision-making and perceived innova-
item was written in both English and Hindi. tion. However, no significant relationship
Test-retest reliability was .86. Internal has been obtained between formalization
consistency validity, calculated by the in- and perceived innovation.
ter-item consistency method was .90.
Table 1: Correlating Structure with Perceived
Interview Schedule Innovation
(N = 130) Pearsons
Questions in the interview schedule Variables Correlation
were semi-structured and open-ended and Formalization r = .30
covered all different relationships studied Centralization r = -.28**
Concentration of r = -.30**
in this research.
Authority
Participation in r = .20*
Sample Decision-Making
**(p<.01) *(p<.05)
A stratified random sample of 130
employees from two bulk-drug (pharma- Table 2 shows a significant relation-
ceutical/chemical) organizations was se- ship between centralization and per-
lected for data collection. Employees rep- ceived innovation. It shows significant
resented four management levels (senior, relationship between concentration of
middle, junior management & supervisory authority and perceived innovation, and
staff). 100 subjects were from a leading participation in decision-making and per-
firm in Mumbai, out of which 60 were ceived innovation. This indicates a sig-
subject to detailed interviews. 30 subjects nificant difference in the perceived in-
were from another leading firm in novation scores of employees low in cen-
Mumbai, out of which 18 were inter- tralization, concentration of authority and
viewed. In all, 78 employees were sub- participation in decision-making and those
ject to in-depth interviews and all 130 high in the same. However no significant
employees were subject to questionnaires. relationship between horizontal complex-
The sample consisted of employees from ity and perceived innovation, and be-
across R&D, Production, Engineering & tween formalization and perceived inno-
Technology, Marketing, Quality Control, vation has been obtained.
and Purchase departments.
In Table 3 all structural variables
Quantitative Results show significant relationship with num-
ber of innovations except concentration
Table 1 shows a negative and signifi- of authority. Some frequencies of hori-
cant relationship between centralization zontal complexity indicate a value of 0.
Therefore, Fishers Exact test of significance from SPSS version 11.5 was used
to compute the values.
Table 2: OneWay ANOVA with Perceived Innovation N = 130; df = 1, 128
Variables Levels N Means S.D. F-Ratio
Horizontal Low 30 80.60 9.97 F = .08
Complexity High 100 80.01 10.22
Formalization Low 36 79.75 10.97 F = .07

High 94 80.30 9.84
Centralization Low 65 81.92 8.04 F = 4.09*
High 65 78.37 11.65
Concentration Low 105 81.70 8.38 F= 14.25**

of Authority High 25 73.60 13.85
Participation Low 81 78.73 10.59 F = 4.32*

in Decision making High 49 82.49 8.93
** (p<.01) * (p<.05)
Table 3: ChiSquare with Number of Innovations N = 130; df = 2, 1
Variables Levels Low High

Innovation Innovation Chi-Square
Frequency Frequency ( 2)
Horizontal Low 30 0 130**
Complexity High 0 100
Formalization Low 13 23 4.77*

High 17 77
Centralization Low 21 44 6.24**

High 9 56
Concentration Low 27 78 2.14

of Authority High 3 22
Participation Low 14 67 4.06*

in Decision Making High 16 33
**(p<.01) *(p<.05)
Qualitative Analysis 78) was analyzed qualitatively using con-

tent-analysis. Total number of innovations
Data produced by interviews (N = recorded during a period of 7 years in the
two bulk-drug organizations was: 490. 29 According to the present researcher,

at input level, 331 at throughput level, and complexity of division of labour enhances
130 at output level. A majority of the organizational learning, problem-solving
employees (78.20%) say that a high level and creative capacities of the organiza-
of horizontal complexity facilitates inno- tion; hence, is important for innovations.
vations. 88% employees are in favour of Troy et. al. (2001) posit that specializa-
negative relationship between formalization and horizontal differentiation were
tion and innovation. A majority, 74.30% factors on which generation and devel-
say that a low level of centralization leads opment of new ideas in an organization
to high number of innovations. 70.51% depend. Bommer and Jalajas (2004)
support a positive relationship between found that greatest innovations happen,
participation in decision-making and num- where different functional units interact
ber of innovations. to develop products and processes that
best meet the needs of the customer. This
Horizontal Complexity & is done through the effective use of
Innovation sources internal to the organization. Even
researchers who were in favour of flat
Horizontal complexity shows signifi- structures for innovations, believed and
cant relationship with number of innova- found evidence that high horizontal com-
tions (significant chi-square), but not with plexity facilitated innovation.
perceived innovation (F-ratio is not sig-
nificant). When content analyzed, 78.20% Employees interviewed expressed
employees said that a high level of hori- that in specialized areas of work, experts
zontal complexity facilitates innovation. become better experts over time, skills
Hence, Hypothesis 1 has been partially develop and mature and a strong focus
supported by findings of the study. Hy- over ones specialized area gives rise to
pothesis 1 (a) has been supported while creative breakthroughs, and creates av-
hypothesis 1 (b) has not been supported. enues to try out new and different prac-
tices. Hence, there was greater possibil-
ity and interest for research and devel-
Horizontal diversification presents
opment. Also a greater number of ideas
key opportunities for new product
arise and can be chosen from. These
development, especially in R&D
ideas would be brighter, richer in content
based organizations.
and more focused; because they come
from experts and specialized domains.
Pavitt (1994) posits that horizontal There is also more efficient coordination
diversification presents key opportunities of specialists for innovative tasks in or-
for new product development, especially ganizations showing elaborate and clear
in R&D based organizations. Consis- departmentalization. When each function
tently positive relationship has been found was separately operating, it was easier
between complex division of labour and to coordinate and organize work.
organizational innovation by Hage (1999).
Formalization & Innovation capacity for processing and monitoring

information increases, and load for infor-
Chi-square test shows significant re- mation processing on top management is
lationship between formalization and reduced. As a result better and focused
number of innovations. Correlation value attention can be given to work, and this
does not show significant relationship facilitates innovation. With an increase
between formalization and perceived in- in decentralization, there is an automatic
novation, so does ANOVA (F is not sig- increase in flexibility allowed in the or-
nificant). Hence, hypotheses 2 (both a ganization. Rothwell (1992) says that
& b) have been supported by findings of decentralization plays an important role
statistical analysis. Qualitative analysis in rapid and successful new product de-
supports quantitative. Content analysis velopment, and increased empowerment
shows 88 % employees supported a nega- at lower levels of management reduces
tive relationship between formalization number of approvals required for a deci-
and innovation. Researchers like West sion. This finding has been supported by
(2000) and Lewis et. al. (2002) empha- employee interviews. Employees say that
sized that increased formalization and empowerment, especially at lower man-
control system constrains innovation due agement levels facilitates innovations.
to inflexibility. Many researchers found This is because lower level employees
negative relationship between formaliza- are directly associated with the manufac-
tion and innovation, others failed to find turing plant, machinery and labour; hence,
any relationship. are most aware of day-to-day problems.
If lower levels in the organization are
Increased formalization and con- empowered, it would speed up decision-
trol system constrains innovation making and save time which is wasted in
due to inflexibility. processing an idea.
Centralization & Innovation The level of centralization, higher

is the level of perceived innova-
Correlations show a negative and sig- tion and vice versa
nificant relationship between centraliza-
tion and innovation indicating that lower Khandwalla (1995) found that decen-
the level of centralization, higher is the tralization had a positive motivational ef-
level of perceived innovation and vice fect, hence contributed to innovations.
versa. One-way ANOVA and chi-square Shavinina (2003) found that innovative
are also significant. Content analysis sup- organizations had low level of centraliza-
ports this finding, showing that a major- tion, and emphasized that formation of
ity, 74.3% employees say that low cen- empowered teams in such organizations
tralization leads to high number of inno- helps innovation. To sum up, decentrali-
vations. Hypothesis 3 (a) & (b) has thus zation facilitates innovation by improving
been supported. Dessler (1986) found democratic decision-making, fostering
that with decentralization, management responsiveness among employees, and
enhancing the ability of lower manage- Participation in Decision-Making &

ment to influence senior management Innovation
through empowerment decision-making
(Samaratunge 2003).
Higher the level of participation in
decision-making, higher is the
Evidence from interviews with senior level of perceived innovation.
management indicates that decentraliza-
tion allows an organization to rapidly and
easily respond and adapt to different and Positive and significant correlation
between participation in decision-making
changing environmental conditions, re-
and innovation indicates that higher the
sulting from market competition. This
level of participation in decision-making,
helps innovation since decision-making is higher is the level of perceived innova-
faster. It can be regarded as a stimulat- tion. Findings of one-way ANOVA and
ing factor for encouraging employees to chi-square are also significant. The con-
take control of their tasks. With decen- tent analysis supports findings of corre-
tralization comes greater job satisfaction, lation. 88.46% employees supported a
greater flexibility in ones performance positive relationship between participa-
of duties, and greater opportunities of tion in decision-making and innovation.
doing things in new and different ways. Hence, hypotheses 5 (a) & (b) have been
completely supported. According to West
Most employees across other man- (1990), participation in decision-making
agement levels also report that low level in an organization engenders participa-
of centralization facilitates innovation. tive safety in its employees; a sense in
individuals that they can participate in the
They said that with decentralization,
decision-making process and can share
there was greater autonomy and flex-
ideas without fear. Participative safety
ibility in taking decisions regarding ones according to him is important for innova-
part of work. Employees were free to tion. Bartol and Martin (1991) found, that
prioritize and time their work. For ev- involving employees across the organi-
ery decision they did not have to wait zation in development of ideas often posi-
for long or depend completely upon se- tively influences their willingness to help
nior levels. As a result decision-making implement the ideas. Dunphy and Bryant
and implementation was speeded up. (1996) found that as a result of high par-
There was greater motivation to work, ticipation, the decision-making process is
this led to organizational commitment. speeded up. Participation in decision-
According to employees interviewed, making decreases reliance upon higher
decentralization was positive for both, levels in an organization and this helps
innovations. Strauss et. al. (1998) found
initiation as well as implementation of
that where there were high levels of par-
innovations. This interview data supports
ticipation in decision-making, there was
literature and findings. greater information sharing and interac-
tion within groups. It is more likely that pation in decision making led to job-in-
these groups will work through difficul- volvement among employees. They found
ties associated with introduction of inno- that participation in decision-making also
vations and benefit from participation. leads to better interpersonal relationships
Information and opinions about innova- and communication, not only horizontally
tion and innovation process are worked across departments but also vertically
out more comprehensively ensuring more across various hierarchical levels. Such
effective outcomes. Participative and factors help to spur innovations in a ma-
creative decision-making for innovations jor way. As expressed by senior manage-
is more effective in comprehensively ment, participation helps the organization
solving an informational conflict. This not to come up to, even lead the competitive
only increases the chances of success of standards of the environment, by helping
a particular innovation, but also increases innovations.
receptivity for future innovations.
Khandwalla and Mehta (2004) found that Conclusions
participation in decision-making helped
those employees in problem-solving who Measurement of innovation is a diffi-
were actually involved in and affected cult and complex task with limited meth-
by a decision directly, this facilitated cor- ods to account for. There is hardly any
porate creativity. The finding has been evidence in literature which measures the
supported by similar responses of em- approach of an organization towards inno-
ployee interviews. vating, the encouragement it offers to in-
novation efforts, and the emphasis it lays
Employees said when ideas come on shaping and aligning its processes and
from various levels in an organization, structure to facilitate innovations. This el-
and are then discussed in groups repre- ement is critical to innovation, and the
senting different specialized areas and present research has made an attempt to
levels of hierarchy it is definitely an en- address the same. Measures of innovation
riching exercise for the purpose of inno- in the study include both perceptual and an
vations. In this way, not only does an idea actual measure. The perceptual measure
become rich technically in content but its of innovation, perceived innovation, the
implications, marketability and other dy- scale of which measures employee percep-
namics of implementation are also dis- tions of innovations at the three levels of
cussed in such participative environ- production (input, throughput, output), and
ments. Ideas that are found weak are of organizations approach towards inno-
rejected, saving time, and decision-mak- vation. The scale has been validated by
ing and implementation is speeded up. inter-item consistency, and reliability has
Employees also expressed that participa- been obtained by the test-retest method.
tion led to greater organizational commit- Both reliability and validity were found to
ment and greater job-involvement and be high. This scale is one of its kind, since
job-satisfaction among employees. it is difficult to find a documented counter-
Shadur et. al. (1999) found that partici- part in the literature available.
Suggestions for Industry and in the rapid introduction of new prod-

ucts in the pharmaceutical sector. Be-
To increase innovations there is a sides, such networks would also help in-
need to increase participation in decision- crease job satisfaction and contribute to
making in both the organizations sur- employee retention.
veyed. It would be beneficial for them to
incorporate a suggestion scheme. This Incorporation of product-teams for
would especially help lower level employ- new product development is another
ees in the organization to shed their inhi- suggestion that is likely to spur innova-
bitions and contribute their ideas without tions in organizations surveyed. As per
fear of evaluation, hence, engender par- observations made; although their strat-
ticipative safety (West 1990) in them. egy focuses on development of new
Subsequent participative discussions in- products, yet they have not extensively
volving different organizational levels worked as product-teams for product
would be of help to spur innovations development. Product-teams are
through brainstorming sessions. The formed for specific assignments but not
process is likely to not only speed up idea as a regular practice. Some initiatives
generation and decision making, but
for new product development have
would also encourage free-flowing com-
been shelved or lost mid-way. This
munication between various organiza-
maybe due to lack of executives for-
tional levels.
mally designated to take the responsi-
To increase innovations there is a bility of such projects. It is suggested
need to increase participation in that the two organizations studied could
decision-making in both the orga- best be structured as partial matrices.
nizations surveyed. It would be This would not require major changes
beneficial for them to incorporate in the already existing framework of the
a suggestion scheme . company. A more major structural
change would be organizing as ambi-
Organizations surveyed should allow dextrous structures, which would re-
and encourage formation of informal quire major administrative changes in
networks within the organization. A firm the organization. Hence, it could be
could benefit by supporting such infor- considered as a long term goal for the
mal group activity. Cross, Nohria and organization.
Parker (2002) found that informal net-
works often provide the glue that holds This study is partly behavioral in na-
together cross-functional process-im- ture. The approach to the study of
provement initiatives. The researchers structure-innovation relationship sug-
state the example of one such type of gested in the present research may be
informal network, known as the Com- regarded as a basis for speculative
munity of Practice, which has been criti- thinking and future research. It pro-
cal in reducing drug development costs vides a frame work for further study.
References Lewis, M. W., Welsh, M. A., Dehler, G. E. &

Green, S. G. (2002), Product Development
Bart, C. (2004), Innovation, Mission Statements Tensions: Exploring Contrasting Styles of
and Learning, International Journal of Tech- Project Management, Academy of Manage-
nology Management, 27 (6/7): 544 61. ment Journal. 45 (3): 546 64.
Bommer, M. & Jalajas, D. S. (2004), Innovation McNulty, T. & Ferlie, E. (2004), Process Trans-
Sources of Large and Small Technology- formation: Limitations to Radical Organi-
based Firms, IEEE Transactions on Engi- zational Change within Public Service Or-
neering Management, 51 (1): 13 18 ganizations, Organization Studies. 25:
1389 1412.
Cross, R., Nohria, N.& Parker A. (2002), Six
Myths about Informal Networks - and Mintrom, M. (2003), Market Organizations and
How to Overcome Them, MIT Sloan Deliberative Democracy: Choice and Voice
Management Review, 43 (3): 67 75. in Public Service Delivery, Administration
and Society. 35: 52 81.
Daftaur, C. N. (1988), Cited in D. M. Pestonjee
(Ed.), Second Handbook of Psychological Pavitt, K. (1994), Key Characteristics of Large
and Social Instruments. New Delhi: Con- Innovating Firms, in M. Dodgson & R.
cept Publishing Rothwell (Eds.), The Handbook of Indus-
trial Innovation, Edward Elgar
Dessler, G. (1986), Organization Theory: Integrat-
ing Structure and Behaviour, Prentice Hall. Reddy, A. A. (1974), Cited in U. Pareek and T. V.
Rao, Handbook of Psychological and So-
Drach-Zahany, A., Somech, A., Granot, M. & cial Instruments. Baroda: Samashti
Spitzer, A. (2004), Can We Win Them All?
Benefits and Costs of Structured and Flex- Rothwell, R. (1992), Successful Industrial In-
ible Innovation Implementations Journal novation: Critical Factors for the 1990s,
of Organization Behavior,25 (2): 217 34. R&D Management, 22 (3): 221 39.
Dunphy, D. and Bryant, B. (1996), Teams: Pana- Samaratunge, R. (2003), Decentralization Poli-
ceas or Prescriptions for Improved Perfor- cies in Sri Lanka: Perceptions and Perfor-
mance, Human Relations.49: 677 99. mance, South Asian Journal of Manage-
ment.10 (2): 30 43.
Hage, J. & Aiken, M. (1977). Cited in D. C. Miller,
Handbook of Research Design and Social Schultz, M. & Schilling, M. A. (1998), Improv-
Measurement. New York: David McKay ing the Organization of Environmental
Management: Ecosystem Management,
Hage, J. T. (1999), Organizational Innovation External Interdependencies, and Agency
and Organizational Change. Annual Review Structures, Public Performance and Man-
of Sociology, 25: 597 622. agement Review, 21 (3): 293 308
Jacob, N. (1998), Creativity in Organizations, Shadur, M. A., Kienzle, R. and Rodwell, J. J.

New Delhi: A. H. Wheelar. (1999), The Relationship between Orga-
nizational Climate and Employee Percep-
Kanter, R. M. (2004), The Middle Manager as tions of Involvement: The Importance of
Innovator, Harvard Business Review. 82 Support, Group and Organization Man-
(7/8): 150 61. agement. 24: 479 503.
Khandwalla, P. N. (1995), Management Styles, Sharma M. M. (2000), Innovation in the Chemi-
New Delhi: Tata-McGraw Hill. cal Industry, in S. Purkayastha (Ed.), Glo-
Khandwalla, P. N. & Mehta, K. (2004), Design of bal Innovation Strategies, New Delhi: Tata
Corporate Creativity. Vikalpa, 29 (1): 1328. McGraw - Hill
Shavinina, L. V. (Ed.)( 2003), The International Characteristics, Journal of the Academy

Handbook on Innovation, Elsevier Science. of Marketing Science, 29: 89 101.
Singh, A. P.& Pestonjee D. M. (1988) Cited in D. Vedamanickam, J. (2001), Study of Workplace

M. Pestonjee. (Ed.), Second Handbook of Innovativeness in Manufacturing, Ph.D.
Psychological and Social Instruments. New Thesis, Sailesh J. Mehta School of Man-
Delhi: Concept Publishing agement, Indian Institute of Technology,
Bombay.
Souitaris, V. (2002), Firm-Specific Competen-
cies Determining Technological Innovation: West, M. A. (2000), Creativity and Innovation
A Survey in Greece, R&D Management, at Work, in M. Vartiainen F. Avallone and
32 (1): 61-77 N. Anderson (Eds.), Innovative Theories,
Tools and Practices in Work and Organiza-
Srivastava, D. K. (1991), Organizational Effec- tional Psychology, Canada: Hogrefe and
tiveness: Role of Organizational Structure Huber Publishers
and Process, and Personality. Ph.D. The-
sis, Dept. of Humanities and Social Sci- West, M. A. (1990), The Social Psychology of
ences, Indian Institute of Technology (IIT), Innovation in Groups. in M. A. West and
Bombay J. L. Farr (Eds.), Innovation and Creativity
at Work: Psychological and Organizational
Strauss, G., Heller, F., Pusic, E. & Wilpert, B. Strategies, Chichester Wiley
(1998), Organizational Participation: Myth
and Reality, Oxford University Press. Wijnberg, N. M., Ende, J. V. D. & Wit, O. D.
(2002), Decision Making at Different Lev-
Troy, L. C., Szymanski, D. M. and Varadarajan, els of the Organization and the Impact of
P. R. (2001), Generating New Product New Information Technology: Two Cases
Ideas: An Initial Investigation of the Role from Financial Sector, Group and Orga-
of Market Information and Organizational nization Management, 27 (3): 408 29.
Psychological Climate as an Antecedent of Job Satisfaction & Job Involvement
Psychological Climate as an Antecedent of Job Satisfaction

& Job Involvement
Soumendu Biswas
Studies pertaining to human re- Introduction

source (HR) management in India
have revealed a variety of factors The increasing global spread of busi-
that significantly affect employ- ness and the greater participation of
ees attitude towards their jobs multi-national corporations (MNCs) in
not the least of which is their per- developing markets calls for focusing at-
ception about the immediate job tention towards management practices in
environment or the psychological different parts of the world (Budhwar
climate. The present study posits 2003, Napier & Vu 1998). Among the
two attitudinal variables of job rapidly expanding economies of the
satisfaction and job involvement world, India holds a position of promi-
as consequences of psychologi- nence (Biswas, Giri & Srivastava 2006,
cal climate. Data were collected Budhwar & Boyne 2004). It is evident
from 357 mangers/executives and that global changes have had a signifi-
subject to multivariate data cant impact on the Indian economy too.
analysis procedures. The results Chauhan, Dhar and Pathak (2005) ob-
established that psychological served that change per se is a routine
climate is a statistically signifi- affair in the contemporary business sce-
cant predictor of positive levels nario; what is more important is a recog-
of job satisfaction and job in- nition of the fact that managerial efficacy
volvement. The theoretical and needs to keep pace with such rapid trans-
practical connotations of the formations. Furthermore, it appears that
study and possible areas of fu- in the era following the South East Asian
ture research are also discussed. financial crisis of 1997-98 (World Bank
2001) and in accordance with the report
published by Goldman Sachs (2003), In-
dia along with Brazil, Russia, and China
is poised to be a major player in the world
business scenario.
Soumendu Biswas is Assistant Professor,
Management Development Institute, Gurgaon-
122001. E-mail: sbiswas@mdi.ac.in It has been observed that Indias na-
Soumendu Biswas
tional culture has a rich heritage which ioral aspects that are indigenous and at
is helpful in clarifying different human the same time give way to a certain level
actions. It is further understood that these of novelty. Given that organizations op-
cultural facets are deeply ingrained in the erate within the domain of societal norms
individual psyche and are relevant in posi- and values, it is evident that behavioral
tive cognition and affect of individuals at aspects of managing organizations call for
the workplace (Rao & Abraham 2003). further study. Based on this supposition,
At the same time, the indigenous culture the objective of the current study was
of India has been quick to accept alien formulated wherein the inter-relationship
customs and mores while preserving its between three behavioral constructs
distinctive values and rules (Biswas et were examined namely, psychological
al. 2006). This has established the In- climate, job satisfaction, and job involve-
dian social order as a classic example of ment. More specifically, the present study
the oriental world. In terms of investigates the causal impact of psycho-
crossvergent socio-cultural ethos there- logical climate on job involvement and job
fore, India stands as a leader in estab- satisfaction. The following section re-
lishing the norms and practices that domi- views literature related to the key vari-
nate managerial practices in the contem- ables.
porary borderless business environment
(Ralston, Holt, Terpstra, & Kai-Cheng Theoretical Background
1997). In a cross-cultural framework, the
above discussion indicates that the stat- Before the introduction of the New
ure of India is quite elevated in the glo- Economic Policy (NEP) in 1991, the In-
bal socio-economic map. So much so, that dian business environment was discern-
Varma, Budhwar, Biswas, and Toh (2005) ible through the dominance of firms in
noted that Indias traditional cultural sys- the manufacturing sector. These firms,
tems are acting as a fulcrum of the South whether public or private, were usually
East Asian business environment. large organizations and were marked by
mechanistic processes and rigid practices
(Biswas & Varma 2007). In fact, firms
Indias national culture has a rich
belonging to the service sector such as,
heritage which is helpful in clarify-
educational institutions, healthcare orga-
ing different human actions.
nizations, and media and communications
were basically owned by the state. This
England and Lee (1974) noted that was a direct consequence of Nehruvian
during periods of environmental turmoil, welfare philosophy that emphasized plu-
societies in emergent economies such as ralistic utilitarianism. The fall out of such
India tend to follow a path that leads to a socio-political arrangement was the
stability. This further implies that in a bid lack of emphasis on individual
to maintain internal homogeneity and ac- behavioural aspirations (Varma et al.
climatize to the external changes, soci- 2005). Thus, till the privatization of the
ety focuses on retaining certain behav- Indian economy in the early 1990s, In-
dian organizations were extremely bu- The relevant literature recommends the
reaucratic and were characterized by examination of psychological climate as
one-way flow of decision making from a primary antecedent of a variety of in-
the top to the bottom. Indeed, Hofstede dividual-level outcomes such as job sat-
(2001) observed that such managerial isfaction, and job involvement (James,
philosophies and practices are not un- James & Ashe 1990, Parker et al 2003,
common in social cultures that are domi- Woodard, Cassill & Herr 1994). This ar-
nated by collectivism and high power dis- ticle seeks to empirically examine these
tance norms. theoretical suggestions in the context of
the Indian management scenario.
However, with the liberalization of
the Indian business environment mana-
Job satisfaction has been found to
gerial practices especially those related
be a multidimensional construct
to cognitive and affective facets of indi-
manifesting the emotional evalua-
vidual employees at the workplace un-
tions of individuals regarding their
derwent major alterations. Furthermore,
expectations and how well they
human resource (HR) practices in Indian
have been met.
firms have experienced a sea change, as
contemporary HR policies and practices
are designed in a manner that promotes Job Satisfaction has been defined as
individual involvement on-the-job and a pleasurable or positive emotional state
encourages extra-role behaviour in addi- resulting from the appraisal of ones job
tion to the in-role behaviour of employ- or job experience (Locke 1976:1300).
ees (Biswas 2006, Budhwar & Khatri Wanous and Lawler (1972) identified
2001, Pattnaik & Biswas 2005). As several different operational definitions
Biswas and Varma (2007: 666) observed: of job satisfaction examining different
HR practices in India are increasingly facets of job satisfaction and their com-
geared towards improving the way indi- bined effect in providing a general un-
vidual employees perceive their day-to- derstanding of the job satisfaction con-
day working environment, or the way struct. Job satisfaction has been found
they perceive the psychological climate to be a multidimensional construct mani-
in the workplace [italics added]. festing the emotional evaluations of indi-
viduals regarding their expectations and
Thus, to understand the group of ac- how well they have been met. Schnake
tions in relation to the administration of (1983) conceptualized three dimensions
members of an organization, the appro- of job satisfaction representing intrinsic,
priate literature recommends an investi- extrinsic, and social aspects of job satis-
gation of those variables that are related faction. In effect, Schnakes (1983) di-
to an individuals acuity a propos their mensions of job satisfaction cover cog-
immediate workplace atmosphere based nitive and affective responses made by
on their everyday experiences (Schneider individuals in connection with their work
1975, Strutton, Pelton & Lumpkin 1993). environment.
Soumendu Biswas
Moorman (1993) pointed out that job that job satisfaction was one of the im-
satisfaction was a significant indicator of portant variables in explaining turnover
the extra-role behaviour of individuals as intentions among employees. In their
manifested by organizational citizenship meta-analytic review, Cotton and Tuttle
behaviour (OCB). In their meta-analytic (1986) reported a negative relationship
review of the OCB construct, Podsakoff between Job Satisfaction and turnover
et al (2000) noted that satisfaction has intentions.
been frequently studied as an anteced-
ent of OCB. Organ and Ryan (1995) in
Job Involvement appears to be a
their meta-analysis referred to job satis-
construct that follows directly from
faction as a strong predictor of OCB.
the way individuals are affected by
Earlier, Bateman, and Organ (1983) con-
their immediate work environment
tended that the direct relationship be-
and interpersonal relationships
tween job satisfaction and job perfor-
mance was hazy, and the more immedi-
ate consequence of job satisfaction was Job Involvement is a construct that
likely to be OCB. The rationale provided arises out of interactions between indi-
by Bateman and Organ (1983:588) was: vidual disparity of sensitivity about the
to the extent that job satisfaction, as was work settings and personality traits (Ruh,
conventionally measured, reflects this White & Wood 1975, Sandler 1974,
positive affective state, it is more likely Schein 1983). According to Lodahl and
that more satisfied persons display more Kejner (1965), Job Involvement affects
of the pro-social, citizenship behaviours. people for whom his or her job consti-
Further support for the direct effect of tutes the most important portion of life.
job satisfaction on OCB is derived Thus, Job Involvement can be conceptu-
through the work of Organ (1994), who alized as the degree to which a person
stated that job satisfaction was related identifies psychologically with his work
to the unprompted and uncompensated or the importance of work in his total self
actions of individuals that were studied image (Lodahl & Kejner 1965: 24).
as extra-role or OCB. Other studies that Hence, Job Involvement appears to be a
distinctly suggested the influence of job construct that follows directly from the
satisfaction on OCB included Farh, way individuals are affected by their im-
Podsakoff, and Organ (1990), Organ mediate work environment and interper-
(1998), and Organ and Konovsky (1989). sonal relationships (Ruh et al. 1975).
Additionally, literature reported that Based on the discussion above, the

job satisfaction successfully predicted following hypotheses were formulated for
turnover intentions (Baysinger & Mobley the purpose of empirical testing:
1983, Farrel & Rusbult 1981, McEvoy &
Cascio 1985, Mobley 1982, Price & H1: Psychological climate will have
Mueller 1981, Steers & Mowday 1981). a significantly positive impact on job sat-
Mobley et al (1979) highlighted the fact isfaction of individual employees at work.
H2: Psychological climate will have facturing sector companies, while 177
a significantly positive influence on job (i.e. 49.58 per cent) belonged to service
involvement of individual employees at sector organizations. Moreover, 83.9 per
work. cent of the survey participants were males,
while 16.1 per cent were females. The
The hypotheses above are presented average age of the participants was 36.9
schematically in the path diagram as in years. The average weekly hour spent
Fig.1 by the participants at work was 52.4, and
their average years of work experience
Fig 1: The Path Model Associating the Latent was 10.7. Finally, 7.3 per cent of those
Constructs surveyed belonged to senior management,
35.6 per cent were from middle manage-
ment, and 57.1 per cent reported working
at junior management levels.
Measures
Psychological Climate (PC) was

calculated using the Psychological Cli-
Data Collection mate Measure as reported by Brown and
Leigh (1996). This scale comprised six
The respondents involved in the study factors of PC namely, supportive manage-
were executives/managerial cadre em- ment, role clarity, contribution, recognition,
ployees from different organizations. self-expression, and challenge and in-
Data were collected from a total of 357 cluded 21 items. The reliability measure
participants through a survey question- of this scale was found to be .90.
naire. A covering letter describing the
reason of the study was attached with Job Satisfaction was measured us-
each questionnaire. This letter gave de- ing the 11 item Job Satisfaction Instru-
tails about the voluntary and anonymous ment covering the three dimensions of
nature of the study. Furthermore, par- satisfaction, namely, intrinsic, extrinsic,
ticipants were assured that the responses and social satisfaction as reported by
would be used only for research purpose. Schnake (1983). Three items were used
The questionnaires, when completed, to measure extrinsic satisfaction, four
were returned to the researcher via mail, items to measure intrinsic satisfaction,
in pre-stamped envelopes which were and four items were used to measure
made available with the questionnaires. social satisfaction. The Cronbachs alpha
for this scale was .90.
Sample
Job Involvement was measured us-
Of the 357 participants, 180 (i.e. ing 4 items of the Job Attitude Scale as
50.42 per cent) belonged to the manu- developed and reported by Lawler and
Soumendu Biswas
Hall (1970). This AMOS 4.0 (Arbuckle & Wothke 1999) were utilized to
scale measured the achieve the results.
affective attachment
of individuals with Results
their job. The value
of the Cronbachs al- Table 1 presents the means, standard deviations, corre-
pha representing the lations, and reliability indices for the key variables of this
scale reliability was study. It may be noted that Psychological Climate correlated
82. positively and significantly with job satisfaction (r = .63, p =
.01) as well as Job Involvement (r = .48, p = .01).
Data Analysis
Psychological Climate correlated positively and sig-
The Statistical
nificantly with job satisfaction (r =.63, p =.01) as well
Package for Social
as Job Involvement (r=.48, p=.01).
Science version 10.0
(SPSS 10.0) and the
Analysis of Mo- Table 1: Descriptive Statistics, Correlations & Reliability Indices
(N=357)
ments Structure
(AMOS 4.0) were Mean S.D. 1 2 3
used to analyze the 1. Psychological climate 3.65 .53 (.90)
data. The statistical 2. Job satisfaction 3.40 .65 .63** (.90)
analyses that were
3. Job involvement 3.52 .60 .48** .46** (.82)
conducted included a
measurement and a **p=.01,Values in parentheses represent Cronbach alpha
structural equation
model (SEM). The In order to examine the causal linkages, multiple regres-
path model based on sion analyses were conducted on the variables included in
the hypotheses this study. Table 2 shows the standardized regression esti-
emerging out of the mates between the key constructs. As shown in the table,
review of literature Job Satisfaction was significantly influenced by Psychologi-
was subjected to cal Climate (standardized = .76, p = .01). Similarly, Job
structural equation involvement was significantly and positively predicted by Psy-
analysis and fit tests. chological Climate (standardized = .53, p=.01).
Apart from the re-
Table 2: Regression Estimates
gression analysis, a
variety of statistics Standardized C.R.
including the normed
Psychological climate Job satisfaction .76 8.94
Chi-square (x2/d.f.),
Psychological climate Job involvement .53 7.59
goodness-of-fit, cen-
trality parameters,
and normed-fit-indi- The present study used the maximum likelihood estima-
ces as provided by tion (MLE) algorithm to determine the fit indices. Accord-
ingly, the Goodness-of-Fit Index (GFI) chi-square value was also used as an
and the Root Mean Square Error of Ap- acceptable measure of fit.
proximation (RMSEA) were reported as
the absolute fit measures. According to Table 3 shows the fit measures of the
Byrne (2001), absolute fit measures proposed model. For the model as de-
should be used for comparison between picted in Fig.1, the normed x2 value is
the hypothesized model and an absence 2.42. The GFI is .91. The TLI is equal
of any other model. The other measures to .91, the NFI value is .88, and the CFI
which were also reported were the value is .93. With the threshold value of
Tucker-Lewis Index (TLI) and the Com- RMSEA being 0.07, the value of RMSEA
parative Fit Index (CFI). These indices for the proposed model is 0.06. Finally,
indicated a comparison between the hy- the AGFI and the PGFI values are equal
pothesized model and the model with to .88 and .66 respectively, thus confirm-
maximum constraints. Finally, the normed ing a good fit of the model.
Table 3: Fit Indices
Fit Indices GFI AGFI PGFI TLI NFI CFI RMSEA Normed x2
Proposed Model .91 .88 .66 .91 .88 .93 .06 2.42
Independence Model .37 .30 .33 .00 .00 .00 .21 16.75
Discussion & Conclusion (Johannesonn 1973). However, low in-

ter-correlation between them has placed
The results of the regression and the Psychological Climate and Job Satisfac-
SEM procedures justifies the acceptance tion as distinct concepts which led to the
of the first hypothesis that is, Psychologi- formulation of the first of the present
cal Climate will have a significantly posi- study hypothesis. Furthermore, the im-
tive influence on Job Satisfaction. Theo- plication of the acceptance of the first
retically, an individuals behaviour is af- hypothesis is that job clarity, task con-
fected by events in the external environ- trol, management control, and task re-
ment and in this context individual out- ward and recognition which are dimen-
comes are going to be predicted by psy- sions of Psychological Climate play an
chological perceptions rather than objec- important role in determining Job Satis-
tive realities. These individual outcomes faction of an employee. This viewpoint
also include job-related ones such as is corroborated by earlier studies, too
work performance (James et al 1978). (Futrell, Swan, & Todd 1976, Todd 1973).
Interestingly, psychological percep- From a practical point of view it is

tions of ones immediate work environ- important for managers to be aware of
ment or in other words, Psychological employees perceptions about work re-
Climate were once viewed as synony- alities. It is therefore an imperative that
mous with the Job Satisfaction Construct managers design their subordinates work
Soumendu Biswas
responsibilities in such a manner that pothesis that Psychological Climate will

there are less stressors and a greater have a significant and positive impact on
amount of challenge, rewards, and rec- Job Involvement. In this study, Psycho-
ognition. Moreover, with Psychological logical Climate was conceptualized at
Climate proving to be a significantly posi- both the unit-level as well as the indi-
tive predictor of an attitudinal factor like vidual-level. At both the levels, the com-
Job Satisfaction, it further underscores munality lies in that managerial policies,
that support and sincerity in supervisor- practices, and processes are based on the
subordinate and peer-related relationships same individuals psychological percep-
enhance an individuals level of Job Sat- tion (Schulte, Ostroff, & Kinicki 2006).
isfaction. Cohesion among organizational In this connection, Job Involvement is
members is also an important underlying conceptualized as the extent of an
factor in increasing an employees Job individuals psychological identification
Satisfaction. Essentially, these factors of with his/her job. Hence, the acceptance
psychological perception improve of the second hypothesis stands concep-
individuals Job Satisfaction by augment- tually justified. The theoretical implica-
ing their social satisfaction. tion of this statement is that the amount
of involvement an individual will have with
his/her job will depend upon the affirma-
It is an imperative that managers
tive strength with which he/she psycho-
design their subordinates work
logically perceives the various facets of
responsibilities in such a manner
his/her job and job environment.
that there are less stressors and a
greater amount of challenge, re-
Additionally, a positive view of an
wards and recognition.
employees immediate work environment
would build up both discretionary as well
Apart from social satisfaction, the as non-discretionary role perceptions. It
present study also took into consideration would make work more meaningful and
intrinsic and extrinsic factors of Job Sat- rewarding for the individual employee.
isfaction. Indeed, the results of the The above discussion clearly impresses
present study shows that innovativeness the theoretical underpinnings of the ac-
and challenge, external and internal rec- ceptance of the second hypothesis.
ognition of work, and managerial impar-
tiality all of which represent dimensions From a practical perspective, the re-
of Psychological Climate lead to boost sults indicating support for a positive in-
individual Job Satisfaction level. This fluence of psychological climate on job
contention is supported by previous lit- satisfaction points at the fact that the
erature too (Montes, Fuentes, & managerial processes must be clearly
Fernandez 2003). defined so as to be precisely discerned
by the employees. This precision in the
The results of the present study also definition of processes refers not only to
led to the acceptance of the second hy- overall management policies but also, to
an employees immediate job-related de- will be his/her level of organizational

tails that would lead to an intensification identification and commitment. Evidently,
of role and goal clarity and instil in the such an attitude would egg the individual
individual a greater sense of psychologi- to continue with the organization and re-
cal fulfilment in discharging his/her role strain his/her turnover intention.
responsibilities. In this process, employ-
ees will also be able to develop sense and From a practical viewpoint, manag-
meaning-making out of their work and ers should create such an environment
work environment. through job designs and managerial pro-
cesses such as organizational communi-
In this context, managers should be cation and human resource policies and
especially attentive towards framing sub- practices so as to make employees ac-
ordinates performance requirements and cess information easily, reduce stress, and
standards. Subordinates should perceive on the whole make the whole work ex-
that their job is innovative and challeng- perience more pleasurable and fruitful.
ing leading to process clarity and greater This in turn, would constrain the employ-
identification with the job or in other ees from looking for employment options
words, this would lead to a heightened elsewhere and thus diminish their inten-
level of job involvement. tion to quit the current employment.
It is further suggested that employ-

That Job Satisfaction will have a
ers should create policies and practices
significantly negative effect on
that encourage participatory decision
turnover intention stands true.
making and improve the sense of em-
ployee ownership of business. This would
As evident from Table 2, the regres- further improve individuals propitiation
sion result proves that the third hypoth- with their role and its requirements. How-
esis that Job Satisfaction will have a sig- ever, a rider here is that tin the process
nificantly negative effect on turnover in- of favourable job designing that magni-
tention stands true. This outcome in fact, fies Job Satisfaction and intends to re-
has been endorsed by earlier studies duce turnover intentions should factor
(Freeman 1978, Shields & Price 2002). cultural aspects of social life. Organiza-
The implication of this result is that the tions are after all, a part of the overall
complexity of work environment, if per- societal framework and rules and norms
ceived in a favourable light would in- should be in keeping with accepted cul-
crease an individuals Job Satisfaction. tural mores.
Thus, Job Satisfaction forms a central
factor in whether an individual identifies Future Scope of Research
with his/her job and by extension, with
his/her organization. Thus, greater an in- It was felt that there are certain ar-
dividual is extrinsically, intrinsically, and eas arising out of the present study that
socially satisfied with his/her job, greater may be addressed by future research.
Soumendu Biswas
Firstly, the proposed model should be Biswas, S., & Varma, A. (2007), Psychological
tested separately in manufacturing and Climate and Individual Performance in In-
dia: Test of a Mediated Model, Employee
service sector firms. This is because,
Relations, 29(6): 664-76.
immediate work environment differ sig-
nificantly in organizations between these Biswas, S., Giri, V. N., & Srivastava, K. B. L.
two sectors. Hence the predictive char- (2006). Examining the Role of HR Prac-
tices in Improving Individual Performance
acteristic of Psychological Climate may and Organizational Effectiveness, Man-
vary across the sectors. Secondly, the agement & Labour Studies, 31(2): 111-33.
current study took into account two ma-
Brown, S. P. & Leigh, T. W. (1996), A New
jor attitudinal variables that is, Job Satis-
Look at Psychological Climate and Its Re-
faction and Job Involvement. Attitudinal lationship to Job Involvement, Effort, and
variables have historically, showed Performance, Journal of Applied Psychol-
marked difference when grouped by gen- ogy, 81: 358 68.
der. Hence separate models based on Budhwar, P. S. (2003). Employment Relations
gender should check for the mediational in India. Employee Relations, 25(2): 132-
capabilities of Job Satisfaction and Job 48.
Involvement. Finally, future studies may
Budhwar, P. S. & Boyne, G. (2004), Human
also take into account the construct of Resource Management in the Indian Public
organizational citizenship behaviour and Private Sectors: An Empirical Compari-
which is a non-discretionary component son, International Journal of Human Re-
of work. source Management, 15(2): 346-70.
Budhwar, P. S., & Khatri, N. (2001), A Com-

References parative Study of HR Practices in Britain
and India, International Journal of Human
Arbuckle, J.L. & Wothke, W. (1999), Amos 4.0 Resource Management, 12(5): 800-26.
Users Guide. Chicago, IL: Smallwaters
Byrne, B. M. (2001). Structural Equation Mod-
Corporation.
elling with AMOS: Basic Concepts, Ap-
Bateman, T. S., & Organ, D. W. (1983). Job Sat- plications, and Programming, Mahwah, NJ:
isfaction and the Good Soldier: The Rela- Lawrence Erlbaum Associates Publishers.
tionship between Affect and Employee
Chauhan, V. S., Dhar, U. & Pathak, R. D. (2005),
Citizenship, Academy of Management
Factorial Constitution of Managerial Ef-
Journal, 26: 587-95
fectiveness: Re-examining an Instrument in
Baysinger, B. D., & Mobley, W. H. (1983), Em- Indian Context, Journal of Managerial
ployee Turnover: Individual and Organiza- Psychology, 20(1/2): 164-77.
tional Analysis, In G. R. Ferris and K. M.
Cotton, J., & Tuttle, J. (1986), Employee Turn-
Rowland (Eds.), Research in Personnel and
over: A Meta Analysis and Review with
Human Resource Management, vol. 1.
Implications for Research, Academy of
Greenwich, CT: JAI Press.
Management Review, 11: 55-70.
Biswas, S. (2006), Organizational Culture and
England, G. W. & Lee, R. (1974), The Relation-
Psychological Climate as Predictors of
ship between Managerial Values and Mana-
Employee Performance and Job Satisfac-
gerial Success in the United States, Japan,
tion. PhD Thesis,, Indian Institute of Tech-
India, and Australia, Journal of Applied
nology, Kharagpur
Psychology, 59: 411-19
Farh, J. L., Podsakoff, P. M. & Organ, D. W. Locke, E. A. (1976), The Nature and Causes of
(1990), Accounting for Organizational Job Satisfaction, in M. D. Dunnette
Citizenship Behaviour: Leader Fairness and (Ed.), Handbook of Industrial and Orga-
Task Scope versus Satisfaction, Journal nizational Psychology, Chicago: Rand
of Management, 16: 705-21. McNally
Farrell, D., & Rusbult, C. E. (1981), Exchange Lodahl, T. M. & Kejner, M. (1965), The Defini-
Variables as Predictors of Job Satisfaction, tion and Measurement of Job Involvement,
Job Commitment and Turnover: The Im- Journal of Applied Psychology, 49: 24 33
pact of Rewards, Costs, Alternatives, and
Investments, Organizational Behaviour MacKinnon, D. P., Warsi, G. & Dwyer, J. H.
and Human Performance, 27: 78-95 (1995), A Simulation Study of Mediated
Effect Measures, Multivariate Behavioural
Freeman, R. (1978), Job Satisfaction as an Eco- Research, 30(1): 41-62
nomic Variable, American Economic Re-
view, 68: 135-41 McEvoy, G. M. & Cascio, W. F. (1985), Strate-
gies for Reducing Employee Turnover: A
Futrell, C. D., Swan, J. E. & Todd, J. T. (1976), Meta-analysis, Journal of Applied Psychol-
Job Performance Related to Management ogy, 70(2): 342-53
Control Systems for Pharmaceutical Sales-
men. Journal of Marketing Research, 13: Mobley, W. H. (1982), Employee Turnover:
25-33. Causes, Consequences and Control, Read-
ing, MA: Addison-Wesley
Goldman Sachs Investment Bank (2003), Dream-
ing with BRICs: The Path to 2050. Re- Mobley, W. H., Griffeth, R. W., Hand, H. H. &
trieved May 3, 2008 from http:// Meglino, B. M. (1979), Review and Con-
en.wikipedia.org/wiki/BRIC ceptual Analysis of the Employee Turn-
over Process, Psychological Bulletin, 86:
Hofstede, G. (2001), Cultures Consequences, (2nd 493-522
Ed.) Thousand Oaks, NJ: Sage Publications.
Montes, F. J. L., Fuentes, M. D. M. F. &
James, L. R., Hater, J. J., Gent, M. J. & Bruni, J. Fernandez, L. M. M. (2003), Quality
R. (1978), Psychological Climate: Impli- Management in Banking Services: An Ap-
cations from Cognitive Social Learning proach to Employee and Customer Percep-
Theory and Interactional Psychology, tions, Total Quality Management, 14(3):
Personnel Psychology, 31: 783-813. 305-23
James, L. R., James, L. A., & Ashe, D. K. (1990), Moorman, R. H. (1993), The Influence of Cog-
The Meaning of Organizations: The Role nitive and Affective Based Job Satisfaction
of Cognition and Values, In Benjamin on Relationship between Satisfaction and
Schneider (Ed.), Organizational Culture and Organizational Citizenship Behaviour.
Climate, San Francisco, CA: Jossey Bass. Human Relations, 46: 759-76.
Johanneson, R. E. (1973), Some Problems in the Napier, N. K. & Vu, V. T. (1998), International
Measurement of Organizational Climate, Human Resource Management in Develop-
Organizational Behaviour and Human Per- ing and Transitional Economy Countries:
formance, 10: 118-44 A Breed Apart? Human Resource Man-
agement Review, 8(1): 39-77
Lawler III, E. E. & Hall, D. T. (1970), Relation-
ship of Job Characteristic to Job Involve- Organ, D. W. (1994), Personality and Organiza-
ment, Satisfaction and Intrinsic Motiva- tional Citizenship Behaviour, Journal of
tion, Journal of Applied Psychology, 54: Management, 20: 465-78
305 12
Soumendu Biswas
Organ, D. W. & Konovsky, M. A. (1989) Cog- Ruh, R. A., White, J. K. & Wood, R. L. (1975),
nitive versus Affective Determinants of Job Involvement, Values, Personal Back-
Organizational Citizenship Behaviour, ground, Participation in Decision Making
Journal of Applied Psychology, 74: 157-64 and Job Attitudes, Academy of Manage-
ment Journal, 18(2): 300-12
Organ, D. W. & Ryan, K. (1995), A Meta-ana-
lytic Review of Attitudinal and Disposi- Sandler, B. E. (1974), Eclectism at Work: Ap-
tional Predictors of Organizational Citizen- proaches to Job Design, American Psy-
ship Behaviour, Personnel Psychology, chologist, 29: 767-73
48: 775-802
Schein, E. H. (1983), Organizational Psychology,
Parker, C.P., Baltes, B.B., Young, S.A., Huff, J.W., (3rd Ed.). New Delhi, Prentice Hall of In-
Altmann, R.A., Lacost, H.A. & Roberts, dia Private Limited
J.E. (2003), Relationship between Psy-
chological Climate Perceptions and Work Schnake, M. E. (1983), An Empirical Assess-
Outcomes: A Meta-analytic Review, Jour- ment of the Effects of Affective Response
nal of Organizational Behaviour, 24: 389- in the Measurement of Organizational Cli-
416. mate, Personnel Psychology, 36 (4):791-
807
Pattnaik, S. & Biswas, S. (2005), The Mediat-
ing Role of Organizational Citizenship Schneider, B. (1975), Organizational Climates:
Behaviour between Organizational Identi- An Essay, Personnel Psychology, 28: 447-
fication and Its Consequences, Paper pre- 79.
sented at the International Research Con- Schulte, M., Ostroff, C. & Kinicki, A. J. (2006),
ference of the Academy of Human Resource Organizational Climate Systems and
Development (AHRD), February 24-27, Psychological Climate Perceptions: A
Estes Park, CO Cross-level Study of Climate-satisfaction
Podsakoff, P., MacKenzie, S., Paine, J., & Relationships, Journal of Occupational
Bacharach, D. (2000). Organizational citi- and Organizational Psychology, 79: 645-
zenship behaviors: A critical review of the 71
theoretical and empirical literature and sug- Shields, M. A. & Price, S. W. (2002), Racial
gestions for future research. Journal of Harassment, Job Satisfaction, and Inten-
Management, 26(3), 513-563 tions to Quit: Evidence from the British
Price, J. L. & Mueller, C. W. (1981), Professional Nursing Profession, Economica, 69: 295-
Turnover: The Case of Nurses, New York: 326.
Spectrum Steers, R. M. & Mowday, R. T. (1981), Em-
Ralston, D. A., Holt, D. H., Terpstra, R. H. & ployee Turnover and Post-Decision Ac-
Kai-Cheng, Y. (1997), The Impact of Na- commodation Processes, in B. M. Staw
tional Culture and Economic Ideology on and L. L. Cummins (Eds.), Research in Or-
Managerial Work Values: A Study of the ganizational Behaviour, Greenwich, CN:
United States, Russia, Japan, and China, JAI Press
Journal of International Business Studies, Strutton, D., Pelton, L.E. & Lumpkin, J.R. (1993),
28(1): 177-207 The Relationship between Psychological
Rao, T. V. & Abraham, E., S. J. (2003), HRD Climate and Salesperson-Sales Manager
Climate in Organizations in T. V. Rao (ed.), Trust in Sales Organization, Journal of
Readings in Human Resource Development, Personal Selling and Sales Management,
New Delhi, Oxford and IBH Publishing Co. 13(4): 1-14
Pvt. Ltd
Varma, A., Budhwar, P., Biswas, S. & Toh, S. M. Woodard, G., Cassill, N. & Herr, D. (1994), The
(2005), An Empirical Investigation of Relationship between Psychological Cli-
Host Country National Categorization of mate and Work Motivation in a Retail En-
Expatriates in the United Kingdom, Paper vironment, New York, NY: Routledge
presented at the European Academy of
Management, May, Munich, Germany World Bank. (2001), World Development Report,
New York: Oxford University Press
Wanous, J.P. & Lawler, E. E., III. (1972), Mea-
surement and Meaning of Job
Satisfaction,Journal of Applied Psychol-
ogy, 56: 95-105
Vimal Babu
Divergent Leadership Styles Practiced by Global

Managers in India
Vimal Babu
Studies have emphasised that ex- Introduction

patriates leadership style plays
a pivotal role. It has been con- The demands on the effective expa-
sidered as a prime criterion to be triate managers have mounted globally.
successful and effective in the The way these expatriate managers
host country. This study has ex- tackle the cultural issues would determine
amined twenty-five Japanese and success or otherwise of the business of
Twenty-three American expats in MNCs in the host country. Increased
India focusing on their leader- complexity in the business world also
ship styles. In order to determine pushed the expatriate managers to un-
the leadership styles of these man- derstand cultural issues (Schein 1992).
agers from altogether different Due to globalisation and constantly in-
countries the study has investi- creasing trend of expatriate managers to
gated ten leadership components. manage the business in host countries
Furthermore, these results were like India and China (two largest emerg-
analysed to identify the differ- ing economies of the world), many ques-
ences and similarities. Statistical tions have been raised as to how these
tests revealed that there were sig- expatriate managers lead their subordi-
nificant differences on four lead- nates in host nations, their behaviour to-
ership components out of ten and wards others and most importantly, the
the remaining six leadership com- style of leadership mostly preferred and
ponents had non-significant dif- practiced.
ferences. The study also sheds
light on the implications for ex- According to Yukl 2006, there exists
patriates, with regard to leader- no single leadership style that can be
ship effectiveness. confirmed as the perfect one that works
well under all conditions. He further
states that expatriate managers will have
Vimal Babu is Assistant Professor (HRM &
to adopt different leadership styles de-
Entrepreneurship Area), NIILM-Centre for
Management Studies, Greater Noida (India). E-mail: pending upon different culture in the host
vimalsairam@gmail.com countries. Muenjohn and Armstrong
Divergent Leadership Styles Practiced by Global Managers in India
(2007a) hold that leadership styles and are often higher. On the other hand, cul-
behaviour cannot be isolated from cultural differences can provide tangible
ture and hence it is one of the core ele- benefits and can be used competitively.
ments that influence leadership style and The potential for management frustration,
approach. This view was justified by costly misunderstandings and even busi-
Hofstede (1984) that US leaders have the ness failures increase significantly when
tendency to rate the performance of the dealing with people whose values, beliefs,
followers on an individual basis based on customs are different from each other
his 4 dimension theory. But in the case (Bass 1990). However, when understood
of Japanese management, leaders pre- and successfully managed, differences in
fer to evaluate the performance in group culture can lead to innovative business
or collectivism. practices and sustainable sources of com-
petitive advantage. Success in an increas-
Japanese subordinates prefer that ingly competitive global market depends
their leader should praise their efforts on the knowledge and sensitivity of man-
and be supportive when needed. Same agers to cultural differences in leader-
is expected if the leader is an American ship styles.
and subordinate is Japanese. As Ameri-
can leaders are not used to the cultural
Success in an increasingly com-
differences and peculiarities of a new
petitive global market depends on
(Japanese) culture wherein hospitality
the knowledge and sensitivity of
and admiration takes the centre stage and
managers to cultural differences in
business matters are considered to be
leadership styles.
discussed at later stages. Among Ameri-
can leaders, such care is expected to be
taken while dealing with Japanese sub- America and Japan are considered
ordinates, but it is ignored often and as a to be good examples for studying cross-
result stiffness in relationship occurs and cultural leadership interaction due to the
business gets affected by all means. Con- clear cross-cultural differences between
sidering the global business competition, the countries. Four classical cultural di-
the aforementioned aspect of dealing with mensions identified by Hofstede (1984)
employees due to cultural differences are used to describe the situations in USA
among the expatriate managers are be- and Japan. The US represents a small
ing found to be entrenched more and power distance where subordinates and
more these days. superior consider each other as more
equal; they have a fare amount of au-
This makes it critical ever to try to tonomy to participate in decision making.
understand different cultures and their On the other hand, Japan represents a
influence on the ways people do business moderate power distance where inequali-
and view the world (Hall 1995). The costs ties and hierarchical systems exist. Sub-
of not understanding are getting greater ordinates are supposed to be told what
and greater. Turnover and absenteeism to do. Japan was ranked high in uncer-
Vimal Babu
tainty avoidance in which people try to and because leadership is studied in dif-
avoid ambiguous situation by establish- ferent ways that require different defini-
ing formal rules and regulations. Life- tions (Muenjohn 2008, Achua and Lussier
time employment is more common in this 2000). Leadership has been defined in
country. terms such as traits, styles, influence, in-
teraction patterns, role relationships, and
America represents low uncertainty occupation of an administrative position
avoidance where people have high toler- (Yukl 2006). In most definitions, leader-
ance for ambiguity and job mobility is ship reflects a process whereby inten-
more common. As a western society, tional influence is exerted by leader over
USA ranked very high in individualism. subordinates to guide, structure and fa-
They concern for themselves as indi- cilitate activities and relationships in a
vidual rather than concerning the prior- group or organization. Each definition
ity and rules of the group. On the other differs in many respects and it reflects
hand, Japanese are well known for the disagreement about identification of lead-
group oriented achievement in which the ers and leadership processes. Research-
interests of the group take precedence ers use different phenomena to investi-
over of the individual. gate and interpret the results in different
ways (Yukl 2006). There have been sev-
The last dimension of Hofstede is eral studies investigating the relationship
Masculinity/femininity. Surprisingly, Ja- between cultures and leaderships. Also,
pan was ranked very high in masculinity there have been confirmations that lead-
while USA was ranked moderate. Mas- ership styles differ by cultures (Bae et al
culinity values concern the extent of 1993, Han et al 1996).
emphasis on work goals, earning, and
advancement. As a result of this, it is in-
Culture plays a significant role in
teresting to see how American and Japa-
establishing a relationship be-
nese expatriates adopt their leadership
tween leadership and power.
styles when they are working for over-
seas assignments and to differentiate
their styles of leadership. This study Recent literature in the behavioural
aimed to: a) examine leadership styles of sciences appears to suggest that culture
American and Japanese expatriate man- may play important and different roles
agers who are working in India; and b) in our understanding of the body of
compare the similarities and differences knowledge. For example, the place of
on leadership styles between the expa- study (Korea vs the USA) for an MBA
triates. degree appears to impact on the deci-
sion-makers managerial style (Bae et
Leadership al 1993). The literature also appears to
imply that students perceptions of vari-
There is no universal definition of ous management issues significantly dif-
leadership because leadership is complex fer depending on their religious back-
ground (Safranski & Kwon 1990). In a strategies across Australian, UK, Japa-
recent study, Han et al. (1996) argued nese and Taiwan managers. The Aus-
that culture plays a significant role in es- tralians were found to be most similar
tablishing a relationship between lead- to the USA regarding their emphasis on
ership and power. For example, Ameri- reasoning and bargaining with subordi-
can respondents are likely to rate their nates. Due to cultural differences, ex-
instructors more favourably in terms of patriates transferred to another culture
structure than the Korean counterparts. may experience culture shock. This
American respondents rated their in- shock may cause feeling of helplessness,
structors expert knowledge much confusion and frustration. It may also
higher than the Korean respondents be- include role shock because each role in
cause of social expectations; instructors society involves a certain set of expec-
in USA are expected to be experts in tations that often differ across cultures
certain fields while Koreans expect their (Frederick & Rodrigues 1994, Harris &
instructors to know everything. Similar Moran 1987). This kind of a shock tends
findings were also reported by Favilla to happen with expatriate managers
et.al (1996). when they have to conduct and manage
business abroad. If expatriates are
Some scholars argue that an objec- aware of such variations before hand and
tively effective leadership style may be prepared to adjust their behaviour in re-
effective precisely because it is per- lation to different expectations, they
ceived by followers as being appropri- could partly avoid misunderstanding and
ate for the situation at hand (Campbell, work more effectively from the begin-
Bommer & Yeo 1993). In other words, ning of the assignment (Black & Porter
leaders should behave in accordance 1990, Stewart et al 1994).
with a given situation. In addition, cul-
ture also determines leadership styles. Japanese & American Leaderships
For example, rational persuasion in
which meaning and factual reasoning
Japanese organizations are de-
are provided to requests, and explana-
scribed as highly hierarchical and
tions of what is to be done and why are
are rigidly organized.
furnished; and consultation in which the
followers are involved in the process of
planning or making a decision are likely Japan is the second largest trading
to result in target commitment in US partner with the United States. Japan is
culture (Yukl & Falbe 1990, Yukl, Kim high in masculinity and uncertainty avoid-
& Falbe 1996). In the light of the above ance and medium on collectivism. Japans
findings, leadership styles that work leaders require respect and obedience
well in one context may not be effec- from their subordinates. Leaders have
tive in a different cultural context. historically responded with paternalistic
Schmidt and Yeh (1992) indicated the attitudes towards their subordinates.
prevalence of common leaders influence Japanese organizations are described as
Vimal Babu
highly hierarchical and are rigidly orga- ers satisfaction and organizational com-
nized. Japanese managers are expected mitment. As the country is high on indi-
to care for personal lives of their subor- vidualism, supportive and participative
dinates (Ouchi & Wilkins 1988). The leadership therefore have a high degree
phrase I trust you, you can do it re- of impact but directive leadership has no
flects that Japanese managers typically significant impact on the follower. Re-
outline general objectives, make unclear wards and punishments are based on in-
group assignments and let subordinates dividual performance. Therefore, leader
carry out objectives by their own ap- contingent reward and punishment are
proaches. When it comes to the decision expected to have positive impact in the
making, Japanese tendency is for collec- U.S. The suggestion systems in U.S. look
tive decision making and extensive con- for home run advice but little improve-
sultation. Bass (1990) maintained that ment suggestions are appreciated.
Japanese managers emphasize on equal-
ity of all group members and support Japanese managers focus on improv-
group harmony. Compliments and criti- ing the work-process whereas American
cisms are usually directed at the group. managers focus on the results. Japanese
Charisma is important for senior manag- prefers to criticize among themselves
ers who establish an overall theme, de- and admit mistakes while American
velop strategy and engage in high-level avoids direct criticisms (Pasa 2000).
external relations. Japanese managers Japanese managers place more
also dont like to take risk (Bass 1990). importannce on relationship as they be-
In Japan, the ideal leader should be flex- lieve that bigger deals will result if more
ible, fair, a good listener, outgoing and time and attention are paid to people. The
responsible. Japanese businessman usually wants to
build personal relationship first while the
Westerner usually wants to make a deal
Charismatic leadership is impor-
first. Japanese managers want a long-
tant at all levels in U.S. organiza-
term relationship. In contrast, American
tions.
managers drive for the results because
they believe that budgets met or projects
Leader contingent reward and pun- completed are more important when it
ishment are expected to have positive comes to goals and evaluations. Ameri-
impacts in the U.S. Bass (1990) found can managers place a little attention to a
that charismatic leadership is important harmony of a group while Japanese man-
at all levels in U.S. organizations. For the agers give extra importance to WA or
Americans, the ideal leader should be harmony, because they believe that it will
intelligent, honest, understanding, with a facilitate the work and encourage people
good verbal skills and determinant. to contribute more. Japanese managers
American managers are medium on pa- are interested in learning more about an
ternalism. Supportive leadership shows individual employees life because it gives
strong positive relationships with follow- the supervisor a better chance of under-
standing the needs and capabilities of an Results

employee. For Japanese managing the
whole person rather than a person is the Participants: The number of Ameri-
best way to get that person engages in can respondents was 23. Majority of the
his or her job. American expatriates were aged 45 or
older (60.9%) and well-educated (Mas-
Research Methodology ter degree, 52.2%). Most of them worked
and stayed in India for more than 4 years
Two nations, Japan and The United (43.5%). For Japanese, there were 25
States, were chosen because: a) both expatriate who completed the question-
the countries have clear cultural differ- naire. Most of them were older than 45
ences according to Hofstedes 4 dimen- years (84%) and had a university qualifi-
sion model; b) these two countries play cation (Bachelor degree, 76%). Similar
major roles in the worlds economy; c) to the American expatriates, 44% of the
managers from these two countries are Japanese respondents worked and lived
viewed as effective business leaders; in India.
and d) Japan is viewed as the represen-
tative from the East and the United Ratings on Leadership Factors
States from the West. Two groups of
population were selected from a cross- Mean values of ten leadership fac-
section sample (random stratified) of tors for both the groups (Table 1) showed
managers in different companies in In- that both the American and Japanese
dia. These companies were chosen be- managers had the highest mean value in
cause of the approval to collect data achievement orientation (4.46 and 4.29).
from managers of the organization and Visionary ability (4.42) came second for
high level of cooperation was assured. the Americans while for the Japanese it
The research population covers 132 for- was motivation (4.20). The third factor
eign-based companies in India; 74 of for American was training succession
them were American firms and 58 were (4.41) whereas it was visionary ability for
Japanese firms. The sample size was 50 the Japanese. Motivation was the fourth
companies; 25 of each group. 74 English factor for the Americans with the mean
questionnaires were sent to 74 Ameri- 4.30 while it was performance feedback
can firms. As for Japanese firms, En- for the Japanese (4.12).
glish and Indian versions of questionnaire
were sent to Japanese translator for Comparisons
translation before distribution among 58
Japanese firms. Returned Japanese The t-test function was employed to
questionnaires were sent for translation compute similarities and differences be-
back in to Indian language then trans- tween the two groups (Table 2). There
lated into English language by a re- were four leadership factors in which the
searcher. American and Japanese managers were
significantly different from each other.
Vimal Babu
More specifically, the significant differ- differences between two groups. The rest
ences between American and Japanese of the factors showed non-significant dif-
expatriates on their leadership behaviours ferences between the two groups of man-
can be found in regard to Decision Mak- agers including Communication Skills,
ing, Visionary Ability, Training Succession Achievement Orientation, Performance
and Supervising, which was lower than Feedback, Motivation, Leadership and
the 0.05 which represented significant Followers Performance.
Table 1: Ranking Leadership Factors of American and Japanese Managers
American Japanese
Ranking Leadership Factors Mean Leadership Factors Mean
1 Achievement orientation 4.46 Achievement orientation 4.29

2 Visionary ability 4.42 Motivation 4.20
3 Training succession 4.41 Visionary ability 4.13
4 Motivation 4.30 Performance feedback 4.12
5 Supervising 4.30 Training succession 4.08
6 Performance feedback 4.21 Followers performance 3.92
7 Followers performance 4.21 Communication skills 3.88
8 Decision making 4.19 Supervising 3.88
9 Leadership behaviour 4.13 Leadership behaviour 3.84
10 Communication skills 4.04 Decision making 3.78
Table 2: Comparison of the Results of American and Japanese Managers on Leadership Factors
Mean
Leadership Factors US Japan t-Value Sig (2-tailed)
Communication skills 4.04 3.88 .81 .41

Achievement orientation 4.46 4.29 1.29 .20
Decision making 4.19 3.78 2.53 .01
Visionary ability 4.42 4.13 2.05 .04
Training succession 4.41 4.08 2.15 .03
Performance feedback 4.22 4.12 .67 .50
Motivation 4.30 4.20 .53 .59
Supervising 4.30 3.88 2.41 .02
Leadership behaviour 4.13 3.84 1.24 .21
Followers performance 4.22 3.92 1.49 .14
American Expatriates leadership behaviour was well accepted

and respected by the Indian followers
whose performance was, in general, im-
American managers, in general,
proved because of their supervision.
had good communication skills.
Japanese Expatriates
Several aspects of leadership styles
of the American managers were dis- Japanese managers, in general, had
closed. American managers, in general, good communication skills. They commu-
had good communication skills. They nicated well with their Indian subordi-
communicated well with their Indian sub- nates and well understood what the Indi-
ordinates and understood what the Indi- ans communicated to them. Japanese
ans communicated to them. They were managers were also very high achieve-
very high achievement oriented and con- ment oriented and concerned with the
cerned with the task objectives, set chal- task objectives, set challenging goals and
lenging goals and assumed responsibili- assumed responsibilities for solving task-
ties for solving task-related problems. related problems. Also, Japanese man-
Also, the American managers were quite agers were a bit above average decision
decisive decision makers, often clarified makers, usually clarified reasons and
reasons, trained and involved and empow- trained, involved and empowered follow-
ered followers to make efficient deci- ers to make efficient decisions. Japa-
sions. The American managers were nese managers were clear in express-
highly clear in idealized vision and future ing idealized vision and future oriented.
oriented and also highly concerned with Furthermore, Japanese managers also
their subordinates by training their follow- concerned with their subordinates by
ers for day-today jobs and preparing them training their followers for day-today jobs
for future jobs. In addition, they also and preparing them for future jobs. In
trained them to work more effectively and addition, they also trained them to work
efficiently and intensively provided feed- more effectively and efficiently and
backs for their followers leading to im- regularly provided feedbacks for their
provements in their followers perfor- followers. Their feedbacks identified
mance. The American managers moti- ways to improve their followers perfor-
vated their subordinates to work harder mance. Japanese managers often moti-
by stating clearly what the desired per- vated their subordinates to work harder
formance is and what is not. They often by stating clearly what the desired per-
worked with their subordinates to improve formance is and what is not. They
followers performance and provided worked with their subordinates to im-
them training, developed their skills, sched- prove followers performance and pro-
uled their work and set performance goals. vided training, developed skills, sched-
Lastly, the American managers viewed uled works and set performance goals
their leadership behaviour to be effective for their followers. They viewed their
and suitable in the Indian context. Their leadership behaviour effective and suit-
Vimal Babu
able in the Indian context and their lead-

ership behaviour was accepted and re- American managers had more
spected by the Indian followers. Their knowledge and skills to transfer
followers performance, in general, was and train their subordinates
improved because of their supervision.
The items that made significant
differences between the two groups were
Japanese managers often moti-
the first, the third and the fourth sub-
vated their subordinates to work
dimension items. These differences may
harder by stating clearly what the
be because of the different nationalities,
desired performance is and what is
education and years in India of two
not.
groups of managers. When it comes to
the decision making, Japanese has the
Differences in Leadership Styles tendency for collective decision making
and extensive consultation (Ouchi 1970).
The significant differences on the This could be the reason why Japanese
leadership styles of American and Japa- were not skilled in making decisions in
nese expatriates could be explained by difficult situations that need quick and
investigating the items representing four effective action. The Americans were
leadership styles. On the decision mak- more decisive in making decisions
ing factor, the first item was You often because of the highly individualistic norm
clarify reasons for your decisions in that enabled them to make quick and
which American managers showed effective decision in hard times. In
Strongly Agree rate (X=4.52) while addition, Americans were more familiar
Japanese showed Agree rate (X=4.2). in uncertain situations as they had low
The second item was You understand rate on uncertainty avoidance of
the desires of followers and make deci- Hofstedes 4 dimension theory (Hofstede
sions that benefit majority in which 1984). This factor also allowed them to
American managers showed Agree have better skills in making difficult
rate (X=3.78) while Japanese showed decisions particularly under vague
Agree rate (X=3.72). The third item circumstances. American managers had
was You train, involve and empower more knowledge and skills to transfer and
followers to make efficient decisions train their subordinates. They also had
in which American managers showed more tools to analyse the situations and
Strongly Agree rate (X=4.39) while make more precise decisions. Therefore
Japanese showed Agree rate they could have higher mean in this sub-
(X=4.04). The last item was You dimension factor. In addition, Americans
make business decisions without hesi- tend to know deep in particular things
tation in an unstructured situation in while Japanese knew roughly of many
which American managers showed things. This could make the content of
Agree rate (X=4.09) while Japanese knowledge transferred had unequal
showed Agee rate (X=3.76). impact to Indian subordinates. Some
Indian workers knew many things but tween two groups were the first and the
could not get anything out of them while third sub-dimension items. These differ-
the others can take full advantage in what ences may be because of the different
they knew very well. age range and education levels of the two
groups of managers. American manag-
The years of expatriate managers ers age range spread around 25 to more
stay in India had effect on the decision than 45 years while Japanese managers
making factor; the longer the expatriate age range spread around 36 to more than
managers stay in India, the better the 45 years. This could be the reason why
decisions by them because they experi- American managers were more future-
enced the Indian environment for some- oriented than the Japanese counterparts
time. In this case, majority of both Ameri- since the environment today forced this
can and Japanese managers stayed in generation to be more aggressive and
India for more than four years. So they compete relentlessly.
have been exposed to the Indian envi-
ronment equally so they should perform American managers had more ana-
similarly in this factor but because of the lytical tools, knowledge, skills to articu-
nature of American managers, they per- late and develop idealized vision. There-
formed better. American managers were fore they achieved higher mean in this
more decisive decision makers according sub-dimension factor. Considering train-
to Hofstede (1984) because they were ing succession, the first item was You
good at unstructured situations. For vision- train your followers for today jobs and
ary ability, the first item was You always prepare them for future jobs in which
look forward and are future oriented to American managers showed Strongly
which American managers showed Agree rate (X=4.43) while Japanese
Strongly Agree rate (X=4.43) while Japa- showed Agree rate (X=4.08). The sec-
nese showed Agree rate (X=3.92). ond item was You train your followers
to work more effective and efficient in
The second item was You under- which American managers showed
stand corporate strengths, weaknesses, Strongly Agree rate (X=4.39) while Japa-
opportunities and threats before devel- nese showed Agree rate (X=4.08). Both
oping companys visions in which the sub dimension items made significant
American managers showed Strongly differences between the two groups. The
Agree rate (X=4.48) while Japanese age of managers affected the training
showed Strongly Agee rate (X=4.28). factor. People of the same generation
The last item was You can express an tend to understand each other well be-
idealized vision of a future that is signifi- cause the environment they experience
cantly better than the present in which is pretty much the same. Therefore, the
American managers showed Strongly American managers and their subordi-
Agree rate (X=4.35) while Japanese nates tend to better perform in this as-
showed Agee rate (X=4.20). The items pect. Based on the research finding,
that made significant differences be- majority of American managers hold
Vimal Babu
Masters degree while majority of Japa- years. Thus they have equal experience
nese obtained only Bachelors degree. The in working with the Indian followers and
American managers had more knowl- should perform similar in this factor.
edge, skills to train their workers to work However since the Americans had more
more effective and be efficient than Japa- analytical tools and skills to supervise and
nese subordinates. Therefore they could identify the strengths and weaknesses of
achieve higher mean value in this factor. their followers they performed better in
this dimension. According to Hofstedes
The last factor of difference was (1984) four dimension model, Americans
supervising. The first item was You im- have low value in power distance dimen-
prove the performance of subordinates sion where followers find it more com-
by working with them to identify their fortable to work with their superiors be-
strengths and weaknesses to which the cause followers dont need to follow ev-
American managers showed Strongly erything their managers ask or command
Agree rate (X=4.30) while the Japanese if they have the proper reasons to sup-
showed Agee rate (X=3.79). The sec- port their actions. Therefore, American
ond item was You provide training, de- managers and their subordinates could be
velop skills, schedule works and set per- more collaborative than in the case of
formance goals for your followers to Japanese managers and their followers.
which the American managers showed
Strongly Agree rate (X=4.30) while their Limitations & Conclusions
Japanese counterparts showed Agee rate
(X=4.12). Both the items made signifi-
Leaders self-ratings tended to be
cant differences between the two groups.
less accurate than those by the
These differences may be partly from the
others.
different age range, education, years in
India and power distance of the two
groups of managers. People of similar The current study has used expats
ages could work far better than people self-assessment on the leadership com-
of different ages. They usually experi- ponents which could result in self-inflated
enced the similar environment that built rating. Muenjohn and Anona (2007b) cau-
them under the same business frame- tioned that a leaders self-ratings tended
work. Also, they could learn things from to be less accurate than those by the oth-
each other faster since they spoke the ers. Therefore, further research is rec-
same language. ommended to include leadership assess-
ments from other sources, particularly
The longer the expatriate managers from subordinates which could provide
stay in India the better would be their leaders with more accurate information.
collaboration with the Indian subordi- Also, the population frame in this study
nates. In this case, majority of both the was relatively small when compared to
American managers and their Japanese the American and Japanese expats work-
counterparts stayed in India more than 4 ing overseas. Subsequent research should
try to replicate the present findings by of the American managers, followers

seeking a larger population. should prepare and learn how to achieve
the challenging goals and be able to take
Both the American and Japanese more task-related responsibilities.
managers did very well in Achievement
Orientation dimension. Therefore, under References
the supervision of both the groups of man-
agers, followers should be expected to Achua, C. & Lussier, R. (2000), Leadership,
work hard to achieve the challenging Theory, Application and Skill Develop-
ment, United States of America, South-
projects, always look for improvement and Western College Publishing.
also future oriented. Also, the American
managers gave considerable attention to Bae, M., Kwon, I.W., Safranski, R. & Han, D.C.
(1993), Impact of Education and Other
the decision making dimension. They of-
Contextual Factors on Management Values:
ten trained, involved and empowered their a Study of Managers in the Republic of
subordinates in making decisions. They Korea, in Essays in Honour of Professor
are decisive decision makers in unstruc- Hi-Young Hahn, Seoul National University
tured situations. Therefore, under super- Press, Seoul
vision of the American managers, follow- Bass, B.M. (1990), Bass & Stogdills Handbook
ers should prepare to take high responsi- of Leadership, New York, The Free Press.
bilities and learn how to make decisions Black, J.S.& Porter, L.W. (1990), Managerial
under tension situations. The Japanese Behaviours and Job Performance: a Success-
managers did fairly in the supervision di- ful Manager in Los Angeles May Not Suc-
mension. They did not often improve the ceed in Hong Kong, Journal of Interna-
performance of their subordinates by tional Business Studies, 22: 99-113.
working with them to identify their Campbell, D.J., Bommer, W. & Yeo, E. (1993),
strengths and weaknesses. They provided Perceptions of Appropriate Leadership
less training; developed less skills, sched- Style: Participation versus Consultation
across Two Cultures, Asia Pacific Journal
uled less works and set lower performance of Management, 10(1): 1-19.
goals for their followers than the Ameri-
can managers. Therefore, under supervi- Favilla, E., Kwon, I.W., & Han, D.C. (1996), The
Attitudes of Management Students to
sion of the Japanese managers, followers
Their University Education: United States
should not expect their managers to pro- vs Korean Students, International Jour-
vide frequent training. Rather the follow- nal of Management, 13(4): 446-55.
ers should rely on themselves to develop
Frederick, W.R., & A.F. Rodrigues (1994), A
skills to improve work quality. Spanish Acquisition in Eastern Germany:
Culture Shock, Journal of Management
The American managers gave con- Development, 13(2):42-48.
siderable attention to this dimension. Hall, Edward T. (1995), The Silent Language, New
They set challenging but realistic goals York: Anchor Books.
and deadlines. They are willing to assume
Han, D.C., Kwon, I.W., Stoeberl, P.A & Kim,
responsibilities for solving task-related J.H. (1996), The Relationship between
problems. Therefore, under supervision Leadership and Power among Korean and
Vimal Babu
United States Business Students, Inter- Pasa, S.F. (2000), Leadership Influence in a High
national Journal of Management, 13(2): Power Distance and Collectivist Culture,
135-47. Leadership & Organization Development
Journal, 21(8): 414-26.
Harris, P.R. & R.T. Moran (1987), Managing
Cultural Differences, Houston, Gulf Pub- Safranski, R.& Kwon, I.W. (1990), Religion and
lishing Company. Management: an Attempt to Isolate Spe-
cific Relationship, in S. Bejemin Prasas
Hofstede, G. (1984), Cultures Consequence, In- (ed), Advance in International Comparative
ternational Differences in Work Related Management, Vol 4, JAI Press, Greenwich,
Values, Beverly Hills, CA, Sage Publica- CO.
tions.
Schein, E. (1992), Organizational Culture and
Muenjohn, N. (2008), Leadership Concepts and Leadership, 2nd ed., San Francisco, CA:
Theories: Its Past and Present, Academy Jossey-Bass.
of International Business (AIB), 4-6 De-
cember in Kuala Lumpur, Malaysia. Schmidt, S. & Yeh, R-S. (1992), The Structure
of Leader Influence, Journal of Cross-cul-
Muenjohn, N. & Armstrong, A. (2007a), Trans- tural Psychology, 23(2): 251-64.
formational Leadership: the Influence of
Culture on the Leadership Behaviours of Stewart, R., J. Barsoux, A. Kieser, H. Ganter.&
Expatriate Managers, International Jour- P. Walgenbach (1994), Managing in Britain
nal of Business and Information, 2(2): 265- and Germany, St. Martins Press, New
83 York
Muenjohn, N. & Armstrong, A. (2007b), Self and Suutari, V. (1996), Variation in the Leadership
Other Assessment: Leadership Behaviours Behaviour of Western European Managers,
as Perceived by Expatriate Managers and Finnish Expatriates, International Journal
Host Nation Subordinates, ANZAM, of Human Resources Management, 7(3):
Sydney. 677-707.
Ouchi, W. (1970), Theory Z-How American Busi- Yukl, G. & Falbe, C.M. (1990), Influence Tac-
ness Can Meet the Japanese Challenge, tics and Objectives in Upward, Downward,
Reading, MA, Addison-Wesley. and Lateral Influence Attempts, Journal
of Applied Psychology, 75: 132-40
Ouchi, W.G. & Wilkins, A.L. (1988), Organiza-
tional Culture, in Westoby, A. (Ed.), Cul- Yukl, G., Kim, H. & Falbe, C.M. (1996), Ante-
ture and Power in Educational Organiza- cedents of Influence Outcomes, Journal
tions, Milton Keynes Open University of Applied Psychology, 81: 309-17.
Press.
Yukl, G. (2006), Leadership in Organizations,
seventh edition, New Jersey, Prentice Hall.
Induction Age, Training Duration & Job Performance on
Organizational Commitment & Job Satisfaction
N.K. Natarajan & Dinesh Nagar
This study was carried out as part Introduction

of a larger study in a public sec-
tor organization with an all In- Organizational commitment has an
dia presence. The study explored important place in the study of organiza-
the influence of induction age, tional behaviour. A vast number of stud-
training duration and job perma- ies have found relationships between or-
nence of organizational commit- ganizational commitment and attitudes
ment and job satisfaction among and behaviours in the workplace (Porter
220 participants from a large et al 1974, Koch & Steers 1978). The
public sector organization who literature has multiple definitions of or-
rated 18 items commitment scale ganizational commitment. Meyer and
developed by Meyer & Allen and Allen (1991) identified three types of
15 items self-developed job sat- commitments; affective commitment,
isfaction scale. Results found that continuance commitment, and normative
employees inducted at a younger commitment. They defined affective
age and trained by the organiza- commitment as the emotional attachment,
tion for a longer duration are identification, and involvement that an
more committed to the organiza- employee has with his organization and
tion normatively. Furthermore, its goals. While normative commitment
permanent employees were found is a feeling of obligation towards the or-
to be more committed normatively ganization continuance commitment is the
and also exhibited higher job willingness to remain in an organization
satisfaction as compared to con- because of the investment that the em-
tract employees. ployee has which are non-transferable.
Affective and normative commitments
have been found to be predictors of posi-
N.K. Natarajan is a commissioned officer of the tive organizational behaviour, including
Indian Navy, presently posted as Recruitment increased work performance and satis-
Psychologist in Services Selection Board, Bhopal.
faction, tenure and attendance (Allen &
Dinesh Nagar is Professor& Head of the Department
of Psychology, Barkatullah University, Bhopal. Meyer 1996). Continuance commitment,
E-mail: smartnats1@hotmail.com on the other hand, has been found to be
negatively related or unrelated to positions among members (Fogarty &

tive organizational behaviours. Dirsmith 2001, Jones 1983). Several
scholars (e.g. Becker & Strauss 1956,
Locke & Lathan (1976) give a com- Gecas 1990, Kraimer 1997, Pfeffer
prehensive definition of job satisfaction 1998) have reported the importance of
as pleasurable or positive emotional socialization that occurs in organizations,
state resulting from the appraisal of primarily that which prepares individu-
ones job or job experience. Job satis- als for work and occupations, is one of
faction is a result of employees percep- the most significant influences on indi-
tion of how well their job provides those viduals who are in or approaching adult-
things that are viewed as important. hood. One of the most predominant
Luthan (1998) posited that there are modes of formal socialization followed
three important dimensions to job satis- in organizations is training. It there-
faction: (a) Job satisfaction is an emo- fore, suggests that younger the age of
tional response to a job situation, as such induction and longer the duration of train-
it cannot be seen, it can only be inferred, ing better will be the internalization of
(b) Job satisfaction is often determined organizational orientations and norms
by how well outcome meet or exceed resulting in higher commitment and job
expectations, and (c) Job satisfaction satisfaction.
represents several related attitudes such
as work itself, pay, promotion opportu- Younger the age of induction and
nities, supervision and co-workers which longer the duration of training bet-
are most important characteristics of a ter will be the internalization of
job about which people have effective organizational orientations and
response. Job satisfaction is so impor- norms.
tant that its absence often leads to leth-
argy and reduced organizational commit- Another antecedent of commitment
ment (Moser 1997). and job satisfaction which has not been
explored much by scholars is the perma-
Organizations are thought to influ- nence of job. Perry & Wise (1990) ar-
ence the values, attitudes, and behaviours gued that public sector employees have
of members through the processes of high levels of commitment to the organi-
socialization (Caplow 1964, Fogarty & zation and its goals because they are a
Dirsmith 2001). However, the process by different type of employees, with strong
which that occurs and the relative out- ethics and job security. In the same vein,
comes are challenged often, or at least Lio (1995: 241) has stated that facing
not fully understood (Bachman, Sigelman todays difficult times, many public em-
& Diamond 1987, Faris 1976). Organi- ployees appreciate the relatively secure
zational socialization is a process of mu- job situation associated with public em-
tual adjustment that reduces uncertainty ployment and consider it a major reason
in tasks and environments by creating for their organizational commitment.
common behaviours and shared orienta-
Induction Age, Training Duration & Job Performance on Organizational Commitment
Given the importance of commitment Measures

and job satisfaction for organizational ef-
fectiveness, it is aimed here to examine Organizational commitment. To
the affect of induction age, initial training measure organizational commitment the
and permanence of job on organizational scale developed by Meyer, Allen, & Smith
commitment and job satisfaction. Though (1993) was used. This scale measured
there are no previous findings in the In- commitment in three components namely
dian context, it is hypothesized that respon- affective, normative and continuance
dents who have been inducted early and commitments and has 18-items in it with
trained for longer duration will exhibit six items measuring one particular com-
higher affective and normative commit- ponent of the commitment. This scale has
ment and will also exhibit higher job sat-
been widely used in the field and has me-
isfaction. Also, permanent employees will
dian reliabilities (assessed using coeffi-
exhibit higher affective and normative
cient alphas) across many studies of .85
commitments and job satisfaction.
for affective commitment, .73 for nor-
Respondents mative commitment and .79 for continu-
ance commitment. A detailed discussion
Questionnaires were distributed to 220 of the construct validity of this scale is
employees of a large public sector orga- found in Allen and Meyer (1996). Re-
nization. All the 220 people returned the spondents were asked to record their
completed questionnaire, yielding a return response against each statement on a 7
rate of 100%. Fifty eight per cent (N = point scale, 1 being very strongly disagree
128) of respondents were selected by the and 7 being very strongly agree.
organization when they were at the age
of 18 years and were trained extensively Job satisfaction. A 15 item scale
(four years) for occupations within the was developed to measure job satisfac-
organization and 42% (N = 92) of the re- tion. The coefficient alpha was .92. The
spondents were selected around the age maximum and minimum score ranged
of 22-23 years, after they had finished from 105 to 15 respectively. To deter-
their education and were trained for a mine how different items of job satisfac-
very short period (1 year) by the organi- tion scale could be grouped into higher-
zation. The respondents belonged to both order categories, a principal component
the categories of employment namely, factor analysis with a varimax rotation
permanent and contract. Seventy five per was run on the ratings. Although, the re-
cent (N = 164) of the respondents were
sulting solution displayed three factors
permanent employees - who enjoy job
with eigen values greater than one, an
security till superannuation and the remain-
examination of the screen plot suggested
ing 25 % (N = 56) of the respondents were
contract employees with an initial contract a two-factor solution accounting for
period of 10 years which is extendable to 59.61% of the variance with the indi-
14 years in some cases. vidual factors contributing 34.75 and
24.85 % of variance, respectively. Items ary with a loading of .863. But the same
with rotated factor loadings of .484 or was not taken as a separate factor. In-
more were summed together to define a stead it was considered with the compos-
component scale. The results of the two- ite score in order to partial out the affect
factor solution were used to create of salary. The coefficient alpha was .92.
scales. The subscales are briefly de-
scribed below. The participants were asked to read
each statement carefully and record their
Factor 1: Intrinsic Job Satisfac- responses on a 7 point scale, 1 being very
tion. The ratings of the items which highly dissatisfied and 7 being very highly
loaded on the first factor (i.e. items 2, 4, satisfied.
7, 11, 12, 14 & 15 of the scale) were
summed. The coefficient alpha was .91. Procedure
This grouping was labelled intrinsic job
satisfaction as they were more to do with The participants were selected at
aspects like recognition, growth etc. random and assembled in small groups
in various locations of the organization.
Factor 2: Extrinsic Job Satisfac- Questionnaires were distributed and col-
tion. The second scale, labelled Extrin- lected personally. Participants were as-
sic Job Satisfaction consisted of items sured that their responses will be com-
3, 5, 6, 8, 9, 10 and 13. The coefficient pletely confidential and anonymous, and
alpha was .86. This grouping was labelled that no individual questionnaire would be
extrinsic job satisfaction as they were shown to any member of the organization.
more to do with material aspects like pay
and perks. Results
The third factor included only one The findings of study are tabulated
item i.e. item 1 which was related to sal- in Table 1.
Table 1: Mean Difference of Commitment and Job Satisfaction Across Age and Type of Entry
and Job Permanence
Age and Type of Entry Job Permanence
Adolescents Adult with t Permanent Contract t

with long short Employee Employee
training training N=164 N=56
N=128 N=92
Commitment
1. Affective 29.0547 28.1957 .919 29.1707 27.3036 1.774
2. Normative 29.7187 27.2935 2.71** 29.5854 26.1250 3.45**
3. Continuance 25.8516 24.9457 1.17 25.8598 24.3393 1.747
Job Satisfaction
1. Intrinsic 34.4141 32.5217 1.828 34.1707 32.0179 1.837
2. Extrinsic 33.6875 32.6630 1.110 33.6707 32.0536 1.552
3. Total Job 74.2656 70.7826 1.878 73.9207 69.5536 2.084*
Satisfaction
** p<.001; * p< .005
It is seen that respondents who were egories of respondents to be significantly

inducted at a younger age and trained in- different on both the outcome measures
tensively for a period of four years were of commitment and job satisfaction.
found to be more committed to the orga- However, the finding was quite surpris-
nization normatively as compared to the ing as there were no significant differ-
respondents who joined at a later age after ences on any component of commitment
completing their education. There was no and job satisfaction except normative
significant difference on any other compo- commitment. Normative commitment is
nents of commitment and job satisfaction. an outcome of a sense of obligation to-
Further more, respondents who are perma- wards the organization. Since the respon-
nent employees of the organization exhib- dents in this case were inducted at a very
ited higher normative commitment and to- young age (18 yrs) and have been nur-
tal job satisfaction. Once again there is no tured into adulthood, prepared for an oc-
significant difference on any other compo- cupation within the organization, it is natu-
nents of commitment and job satisfaction. ral that they will have higher sense of
obligation and exhibit higher normative
Discussion commitment as compared to their coun-
terparts. On the other hand no significant
difference on affective commitment in-
Longer the training better will be
dicate that induction age and training has
the alignment which in turn will
nothing to do with developing emotional
result into higher commitment and
attachment with the organization or job
job satisfaction.
satisfaction. Perhaps there are other an-
tecedents of affective commitment and
There were no earlier expectations job satisfaction.
from this study due to lack of earlier find-
ings liking age of entry and initial training
Induction age and training has
duration with organizational commitment
nothing to do with developing emo-
and job satisfaction. However, having
tional attachment with the organi-
prior knowledge that organizational so-
zation or job satisfaction.
cialization, of which training is the pre-
dominant form, helps individuals in ori-
enting with the organization and its norms, In the case of job permanence, it is
it was reasonable to expect that longer seen that permanent employees exhibited
the training better will be the alignment higher normative commitment and total
which in turn will result into higher com- job satisfaction. Once again there were
mitment and job satisfaction. Further, no prior expectations due to lack of previ-
younger the subjects more effective will ous findings. The higher normative com-
be the process of socialization as once mitment can be explained in the light of
the value system is internalized it remains Lios (1995) finding that secure job situa-
enduring and is difficult to change. Thus, tion is associated with organizational com-
it is reasonable to expect the two cat- mitment. Additionally, it was found that
permanent employees exhibit higher total within the organization. There has been
job satisfaction. A closer look at the com- wide spread criticism to this practice par-
position of the subscales of job satisfac- ticularly when a large talent pool with ad-
tion would reveal that the first item of the equate qualification is available in the
scale which was related to salary was country. Increasingly, even in the private
not included in any of the two sub scales sector, organizations are investing a lot of
namely, intrinsic and extrinsic job satisfac- time and resource in training their people.
tion. However, the same was taken into This practice is very common in the IT
the total job satisfaction scale (composite and ITES sectors. One definite advantage
score). This was done to partial out the of this as evidenced in this study is that
effect of salary. As expected, the per- employees will develop a feeling of obli-
manent employees were found to exhibit gation and be committed to the organiza-
higher total job satisfaction though there tion which will reduce the attrition rate.
were no significant differences in the case Further, it is often believed that job per-
of intrinsic and extrinsic job satisfactions. manence results into complacency and
This goes to prove that constant flow of low productivity. Perhaps this is not true.
money throughout their work life results Job permanence provides financial secu-
in a perception of higher job satisfaction rity which takes care of the physiological
for permanent employees when compared needs of a person and if they are still found
with the contract employees. to be less productive the reasons have to
be traced in other organizational processes
relating to meeting the higher order needs
Secure job situation is associated
of employees such as appraisal, working
with organizational commitment.
conditions, leadership etc. Thus, it could
be said that job permanence in itself is not
The most striking result of this study bad for the organization.
is that even though the normative com-
mitment of the employees who have been
It is often believed that job perma-
trained for longer duration and the ones
nence results into complacency and
who enjoy job permanence is high, it is
low productivity
not resulting into higher intrinsic or ex-
trinsic job satisfactions, which is against
the earlier findings by Allen & Meyer Conclusion
(1996). Hence, it could be said that per-
haps job satisfaction is not necessarily In a crisp sum, it could be said that
linked to normative commitment. the early induction and long training du-
ration results into higher normative com-
Relevance of the Study mitment. Also, job permanence results
into higher normative commitment and
Several pubic sector organizations in- total job satisfaction. It could also be said
duct employees at a much younger age that higher normative commitment does
and train them for specific occupations not necessarily lead to higher job satis-
faction. However, the regular flow of in- Behaviour, 12: 119-28

come enjoyed by permanent employees Kraimer, M.L. (1997), Organizational Goals and
influences the general perception of job Values: A Socialization Model, Human Re-
satisfaction. sources Management Review, 7(4): 425-47.
Lio, K. (1995), Professional Orientation and

References Organizational Commitment among Public
Employees: An Empirical Study of Deten-
Allen, N.J. & Meyer, J.P. (1996), Affective, tion Workers, Journal of Public Adminis-
Continuance, and Normative Commitment tration, Research and Theory, 5: 231-46.
to the Organization: An Examination of
Locke, E. A. & Lathan, G. P. (1976), Theory of
Construct Validity. Journal of Vocational
Goal Setting and Task Performance,
Behaviour, 49: 256-76.
Englewood Cliffs, N.J: Prentice-Hall.
Bachman, J.G., Sigelman, L. & Diamond, G.
Luthans, F. (1998), Organisational Behaviour,
(1987), Self-Selection, Socialization, and
Boston: Irwin McGraw-Hill.
Distinctive Military Values: Attitudes of
High School Seniors, Armed Forces & So- Meyer, J.P. & Allen, N.J. (1991), A Three-com-
ciety, 13(2): 169-88. ponent Conceptualization of Organizational
Commitment, Human Resource Manage-
Becker, H.S. & Strauss, A.L. (1956), Careers,
ment Review, 1: 61-89.
Personality, and Adult Socialization, Ameri-
can Journal of Sociology, 62(3): 253-63. Meyer, J.P& Allen, N.J. (1997), Commitment in
the Workplace: Theory, Research, and Ap-
Caplow,T. (1964), Principles of Organization,
plication, Thousand Oaks, CA: Sage Publi-
New York: Harcourt, Brace & World, Inc.
cations
Faris, J.H. (1976), Socialization into the All-
Meyer, J. P., Allen, N. J., & Smith, C. A. (1993),
Volunteer Force. in Nancy L. Goldman and
Commitment to Organizations and Occu-
David R. Segal (Eds.), The Social Psychol-
pations: Extension and Test of a Three-com-
ogy of Military Service, Beverly Hills, CA:
ponent Conceptualization. Journal of Ap-
Sage Publications.
plied Psychology, 78 (4): 538-52.
Fogarty, T.J. & Dirsmith, M. W. (2001), Orga-
Moser, K. (1997), Commitment in Organiza-
nizational Socialization as Instrument and
tions, Psychologies, 41 (4): 160-70.
Symbol: An Extended Institutional Theory
Perspective, Human Resource Develop- Perry, J.L & Wise, L.R. (1990), The Motiva-
ment Quarterly, 12(3): 247-66. tional Bases of Public Service, Public Ad-
ministration Review, 50 (3): 367-73.
Gecas, V. (1990), Contexts of Socialization, in
Morris Rosenberg and Ralph H. Turner Pfeffer, J. (1998), Understanding Organizations:
(Eds.), Social Psychology: Sociological Per- Concepts and Controversies, in D.T. Gil-
spectives, New Brunswick, NJ: Transac- bert, S.T. Fiske, & G. Lindzey (Eds.), The
tion Publishers. Handbook of Social Psychology, New York:
McGraw-Hill.
Jones, G.R. (1983), Psychological Orientation
and the Process of Organizational Socializa- Porter, L.W., Steers, R.M., Mowday, R.T. &
tion: An Interactionist Perspective, The Acad- Boulian, P. (1974), Organizational Com-
emy of Management Review, 8(3): 464-74. mitment, Job Satisfaction and Turnover
among Psychiatric Technicians, Journal of
Koch, J. & Steers, R. (1978), Job Attachment,
Applied Psychology, 59:603-09.
Satisfaction and Turnover among Public
Sector Employees, Journal of Vocational
Anshuman Bhattacharya
Predictability of Job-Satisfaction: An Analysis from Age

Perspective
The Life Span Model of Career Job Satisfaction

Development divides the life span
into five different stages; Initial, Job satisfaction is commonly inter-
Establishment, Maintenance, preted as the intrinsic sense of accom-
Growth and Decline. An indi- plishment emerged from performing
vidual becomes a full time mem- tasks while carrying out ones contrac-
ber in an organization at Estab- tual obligations. Locke (1969) defines job
lishment Stage and remains en- satisfaction as, Pleasurable emotional
gaged with the same or different state resulting from the appraisal of ones
employers until he reaches the job as achieving or facilitating the
Decline Stage around 60 years of achievement of ones job values. The
age. The employee may frequently appraisal is based primarily on core job
change his employers but his at- characteristics comprising skill variety,
titude towards the job changes in task identity, and task significance, and
a consistent manner. The results on critical psychological states that in-
of a survey in an insurance com- clude experienced meaningfulness of the
pany with Minnesota Satisfaction work and knowledge of actual results of
Questionnaire fail to predict over- the tasks. These parameters determine
all satisfaction at any stage. It is the resultant pleasurable state of the in-
concluded that appropriate dividual (Hackman & Oldham 1976).
modulation in each aspect while Korman, Greenhaus and Baden (1977),
designing contents of a job for however, define the feeling as, the level
an employee at a particular age and direction of a workers emotion and
group may increase his satisfac- effect toward a job and job situation.
tion to a large extent. Their definition points towards measur-
able nature as well as directional (posi-
tive/negative) character of the construct.
They also study its linkage with individual
performance and collective morale of the
Anshuman Bhattacharya is Research Scholar,
employees.
Faculty of Commerce, Banaras Hindu University.
E-mail: anshumanbhattacharya@hotmail.com
Predictability of Job-Satisfaction: An Analysis from Age Perspective
Job satisfaction is the outcome of con- 2. Achievement: The feeling of accom-

vergence of individual expectations and plishment I (the employee) get from
perceived accomplishments from differ- the job;
ent facets of the job. The more is congru-
3. Activity: Being able to keep busy all
ence between expectation and actual ac-
the time;
complishments stemming from a job, the
greater is the satisfaction derived from it. 4. Advancement: The chances for ad-
When the feeling is stemmed from the vancement on this job;
situation as a whole, it is termed as global
satisfaction (Francis & Milbourn Jr. 5. Authority: The chance to tell other
1980:70). Since the proposed study is all people what to do;
about job, the distinction between work 6. Company policies and practices: The
and job should be made clear at the very way company policies are put into
beginning. Work, in occupational context, practice (Procedural Justice);
is a wider concept than job. Warr, Cook,
and Wall (1979) refer the term job to the 7. Compensation: My (the employees)
tasks undertaken in a particular setting, pay and the amount of work I (he/
whereas work is taken to cover job more she) do (Distributive Justice);
generally. Francis and Milbourn Jr. 8. Co-workers: The way my (the
(1980:11) define a job as a collection of employees) co-workers get along
individual tasks that a worker performs. with each other (Interpersonal Jus-
It is the formal link with the organization tice);
and an important part in the formation of
individuals work role. Kanungo (1982) 9. Creativity: The chance to try my (the
observed satisfaction with job as a func- employees) own methods of doing
tion of jobs capacity to satisfy ones the job (Self-actualization Value);
present needs, whereas satisfaction with
10. Independence: The chance to work
work as a normative belief about value of
alone on the job;
work in ones life and is a function of ones
past cultural conditioning or socialization. 11. Moral values: Being able to do things
Janssen et al. (1999) identified four that do not go against my (the
characteristics of work that render satis- employees) conscience;
faction to the workers. These are work
12. Recognition: The praise I (the em-
content, working conditions, labour rela-
ployee) get for doing a good job;
tions and conditions of employment. Weiss
and colleagues (1967:1), however, identi- 13. Responsibility: The freedom to use
fied a set of twenty aspects that affect my (the employees) own judgment;
satisfaction from ones job. These are:
14. Security: The way my (the
1. Ability utilization: The chance to do employees) job provides for steady
something that makes use of my (the employment;
employees) abilities; 15. Social service: The chance to do
things for other people (Socially Al- the specific characteristics and expec-
truistic Value); tations in different age groups Miller and
Form (1951) and Super (1957) segregate
16. Social status: The chance to be
the life span into five stages. This arrange-
somebody in the community
ment is termed as Life Span Model of
(Achievement Motive);
Career Development. The five stages
17. Supervision-human relations: The of ones life are as below:
way my (the employees) boss
handles his men (Interactional Jus- Stage One
tice);
Miller and Form (1951) term the
18. Supervision-technical: The compe- stage Preparatory Work Period, while
tence of my (the employees) super- Super (1957) terms the Growth Stage.
visor in making decisions; This stage extends from conception to
19. Variety: The chance to do different approximately 14 years of age. This is
things from time to time; characterized by socialization of the child
at home and at school. The self-concept
20. Working conditions: The working begins to form through identification with
conditions. important figures in family and school.
Working condition is the status of
congenial ambience of a workplace that Stage Two
comprises safe, comfortable, clean and
quiet surroundings suitable for maintain- The Initial Period (Miller &Form
ing and improving the performance of an 1951) or the Exploratory Stage (Super
employee. 1957) is generally the life span from 15
to 25 years. Experimenting and testing
Plethora of literature is available on the realities are the most prominent char-
contributing factors of job-satisfaction acteristics of this stage. An individual, as
(Barling, Kelloway & Iverson 2003, a worker, generally initiates part-time
Carraher & Buckley 1996, Major & employment at this stage of work life or
Konar 1984, Miller &Monge 1986, sometimes toggles between different
Mitchell & Michel 1999, Vegt, Emans & occupations.
Vliert 2001). These studies recognize
pay, promotion, supervision, working con- Stage Three
ditions, co-workers, and the job itself as
the most significant predictors, but the Third stage is the Trial Period (Miller
effect of age on these factors has rarely & Form 1951) beginning with first full
been studied. Does age have any impact time job and continuing to a more per-
on the priority of any of these factors? manent work position. Super (1957) rec-
Is there any relationship between age and ognizes this as Establishment Stage when
satisfaction of an employee given all an individual establishes him/herself in a
other factors constant? In order to study particular field. He states that by the time
one reaches 45 it is clear to the individual of employee satisfaction researches

that the life work will be a succession (some of the distinct studies are Farh,
of unrelated jobs. Griffeth & Balkin 1991, Harris & locke
1974, Taylor 1947). Age is a personal
Stage Four factor affecting job-related perceptions
through its inherent aspects (Mobley et
The Stable Work Period (Miller & al. 1979). The present study aims at ana-
Form 1951) is termed as the Maintenance lyzing significance of the age component
Stage by Super (1957) spanning from 45 in job-satisfaction. It studies the predict-
to retirement. The individual at this stage ability of satisfaction level at different
is mainly concerned for holding the place career stages (Establishment and Main-
already made in the professional world. tenance) and relationship between each
Sometimes little new ground though in aspect of the job and overall job-satis-
the existing lines is broken. faction at a particular age.
Stage Five
There are many organizational fac-
tors that cause emotional exhaus-
The last phase of life is termed as the
tion.
Retirement Period (Miller & Form 1951)
or the Decline Stage (Super 1957). The
period extends from retirement to death. Method
Objective of the Study Employees overall job satisfaction

can be expressed on a single rating scale
Sometimes individual employees simply by asking if the employee is satis-
working in the same organization differ- fied or not. Alternatively, it can be con-
ently perceive a particular job aspect; ceptualized through a facet approach.
consequently, their satisfaction from that This approach is premised upon compo-
job aspect also varies (Hackman & nent analysis of feelings and attitudes
Lawler 1971). There are many organi- about different elements, such as pay,
zational factors that cause emotional ex- supervision and work culture etc. (Riggio
haustion; these include variables from the 1990:186). There are two questionnaires
categories of working conditions and so- that have largely been appraised and
cial and labour relations (Schaufeli & used by most of researchers for facet
Enzmann 1998). A number of individual analysis of job-satisfaction. These are Job
and economic factors are also there that Descriptive Index (Smith et al. 1969) and
influence the perception of job content. Minnesota Satisfaction Questionnaire
Feeling of accomplishment and achiev- (MSQ) (Weiss et al. 1967). The Job De-
ing material success are recognized in the scriptive Index contains sub-scales to
Expectancy Theory (Porter & Lawler measure attitudes towards pay, promo-
1968) as two individual factors. The con- tion prospects, supervision, co-workers
cept of pay has always been at the core and the job itself. These scales empha-
size on extrinsic features of satisfaction. insurance company operating principally

Minnesota Satisfaction Questionnaire, on in India. The respondents were working
the other hand, is a vivid questionnaire in different branches in Varanasi; they
consisting of 100 items covering 20 as- were selected on a random basis. Each
pects of a job. Weiss and his colleague individual employee was personally re-
also suggest a set of 20 items each rep- quested to participate, though it had been
resenting one aspect of the job. The short made clear to them that their participa-
form of the questionnaire comprises in- tion was voluntary. The respondents were
trinsic satisfaction, extrinsic satisfaction assured of anonymity of their responses
and general satisfaction as well. The and that it would strictly be used for re-
short form of MSQ has been used in the search only. These questionnaires were
present study. The responses are scored administered in August 2010 during of-
one through five proceeding from left to fice hours over three consecutive work-
right in the closed answers form. Scale ing days. 48 employees out of 65 (73.84
scores are determined by the correspond- percent) returned the completed ques-
ing weight of the option chosen by the tionnaire. 2 out of these (3.08 percent)
respondent. However, overall satisfaction responses were rejected due to incom-
level is the sum of all twenty weights. plete response sheet. Finally, 46 re-
sponses (70.77 percent) were analyzed
Procedure & Participants for measuring their job satisfaction.
A bilingual (English and Hindi) self- Demographic Details

administered questionnaire consisting of
28 closed option opinion expressions is 80.43 percent of respondents are
administered among the participants for employed in different divisions in the zonal
the purpose of measuring the job-satis- office, and 19.57 percent are employed
faction level through satisfaction with in one of the branches. 84.78 percent of
individual component of the job. First part respondents are males and remaining
of the questionnaire contained demo- 15.22 percent are females. All respon-
graphic details of the participants. Sec- dents except one male and one female
ond part contained the short form of are married. Mean age of the respon-
MSQ. These questions are originally dents is 43.18 years (S.D. 3.95). Educa-
framed for measuring the importance of tional qualification of these respondents
different facets of a job to the employee. ranges from High School to Post Gradu-
The third section consisting of open-end ation. Average annual income of the re-
view was focused on eliciting a general spondents is Rs. 2.46 lakhs (rounded off
perception of these respondents for their to the nearest thousand) spread over be-
current job and the work-life they had low Rs. 1 lakh to Rs. 5 lakh. 40 out of 46
led till the day. respondents are attached with the orga-
nization for more than 11 years. Three
The questionnaire was administered of remaining six respondents had an or-
amongst permanent employees of a life ganizational tenure below one year,
around 8 years and 10 years respectively, Descriptive Statistics

remaining three, however, had one to three
years relationship with the institution. The sample was divided into
seven age groups of five years interval
Results ranging 25 to 60. Overall satisfaction
from all 20 aspects was averaged for
Results of the study are classi- getting per-employee response. Table 1
fied into two categories, namely descrip- contains the overall satisfaction.
tive statistics and regression analysis.
Table 1:Overall Satisfaction

Age (Year) 27.5 32.5 37.5 42.5 47.5 52.5 57.5 Average
Job-satisfaction 82.00 72.00 78.09 77.07 88.63 76.75 92.33 80.98

(Percentage)
Regression Analysis tion in the Establishment stage can be

predicted more accurately (standard er-
When satisfaction with job was pre- ror 4.85) than that in the next stage
dicted taking the entire sample, it (standard error 11.21) of career. The dif-
fetched the result with standard error ference between actual and predicted
6.6 (Fig. 1). The sample is then segre- satisfaction in Establishment stage is
gated into Establishment stage and minimum (1.08) at the age of 42.5, how-
Maintenance stage as has been identi- ever, maximum (5.73) at 32.5 years age
fied by Super (1957). Satisfaction has (Fig. 2), whereas in maintenance stage
been predicted for both the stages with this difference is minimum (4.58) at 47.5
the help of linear regression (Fig. 2 and and 57.5 years, but maximum (9.75) at
3). It has been found that job-satisfac- 52.5 years (Fig.3).
Fig. 1: Job Satisfaction
Slope 0.36
Standard Error 6.60
Figure 2 : Satisfaction in Establishment Stage
Slope -0.174
Standard Error 4.85
Figure 3: Satisfaction in Maintenance Stage
Slope 0.37
Standard Error 11.21
Correlation coefficient of each job- found that employee-attitudes towards
aspect with overall satisfaction has been activity, social status, supervision (both
calculated in order to probe into the rea- humanitarian and technical), security,
sons of discrepancy in results of the ability utilization, and authority, responsi-
same sample. Combined correlation of bility, social service aspects hugely dif-
the two stages reveals that variety, so- fer in the two stages. The differences
cial status, supervision (both humanitar- can also be understood through Fig. 4.
ian and technical), security, including
working conditions, company policies and
Variety, social status, supervision
practices are the least contributing as-
(both humanitarian and technical),
pects to the overall satisfaction (Table 2).
security, including working condi-
In other words these aspects in the job
tions, company policies and prac-
profile can, if designed carefully, dramati-
tices are the least contributing as-
cally increase job-satisfaction. Other 13
pects to the overall satisfaction.
aspects are significantly correlated with
satisfaction with job. It was, however,
Table 2 : Age and Job-aspect Satisfaction Correlations

S. No. Job aspects Establishment Maintenance Combined
1 Activity 0.13 1.00 0.68
2 Independence 0.93 0.98 0.97
3 Variety 0.74 0.98 0.41
4 Social Status -0.32 0.84 0.40
5 Supervision-Humanitarian 0.41 -0.30 0.18
6 Supervision-technical 0.35 -0.97 0.05
7 Security 0.44 1.00 0.08
8 Compensation 0.69 0.96 0.61
9 Advancement 0.56 0.71 0.57
10 Working conditions 0.75 0.68 0.38
11 Co-workers 0.94 0.85 0.79
12 Achievement 0.87 1.00 0.86
13 Ability Utilization 0.72 0.29 0.69
14 Authority 0.98 0.29 0.73
15 Com. Policies & Practices -0.06 -0.30 0.14
16 Creativity 0.96 0.98 0.87
17 Moral Value 0.92 0.86 0.90
18 Recognition 0.75 0.84 0.72
19 Responsibility 0.16 0.92 0.95
20 Social Service 0.13 0.98 0.78
Figure 4
ceived reasons for

their satisfaction/dis-
satisfaction. Most of
these employees were
satisfied with their
jobs because of con-
genial work environ-
ment and its capacity
to fulfil the necessities
of life. Two of them
Work-life Satisfaction Open specifically mentioned facilities provided
Window View for childrens education as a satisfying
factor. One employee mentioned that he
It was found that seven respondents is satisfied with his work-life because he
(15.22%) had left the open-end view can meet-out familial responsibilities si-
section blank and 17 others (36.96%) had multaneously with carrying out his voca-
just expressed their overall satisfaction tional obligations. Seven respondents,
with their respective jobs and work-lives, however, were overwhelmed by the
they had not clarified the reason for their brand-name; they were satisfied with
satisfaction. Remaining 22 (47.83%) re- their work-life only because they are at-
spondents expressed individually per- tached with such an internationally re-
nowned organization. 5 respondents were individual satisfied to the utmost level.

satisfied because they faced and over- Most of us grow up with some dreams
came new challenges every day. One but by the time we reach the age of 20
respondent in the study was found very all fantasies are gone. When an individual
accommodative in nature; he states that, enters vocational life for the first time
work-life is satisfactory as long as you around 20 (Initial Stage) the employee is
can adjust with it. full of zeal but gradually it turns into
merely a means to earn the livelihood,
One assistant level employee was more over they have yet to learn exper-
dissatisfied with organizational negli- tise in their respective fields. Due to
gence in social programmes, whereas one these reasons, soon it becomes tiresome
manager cadre officer is very satisfied for them to perform even simple obliga-
with the other programmes conducted tions in the organization (Smart &
in the institution. Another assistant level Peterson 1997). Results of the present
employee, working in customer griev- study also corroborate a similar finding.
ances department, is satisfied for getting Satisfaction with compensation aspect in
chance to interact with customers, respondents at Establishment stage (r =
whereas another one in the same depart- 0.69), in contrast with those at mainte-
ment was dissatisfied for he does not get nance stage (r = 0.96), is less strongly
chance for social-interactions. 16 among correlated with overall satisfaction with
22 employees were very satisfied with their jobs. Perhaps this is a significant
all other aspects of their work-life save reason why employees at Establishment
the pay package in comparison with their stage do not feel that even workload can
workload. 3 of them were dissatisfied bring about satisfaction. On the contrary,
with prevailing bossism. According to employees at Maintenance stage find it
one of them, I also found negative as- one of the most significant contributors to
pect in the name of bossism, stating that job satisfaction. This difference emerges
boss was always right. 8 respondents because of their different levels of satis-
were dissatisfied with the promotional faction with compensation. Further, em-
policy in the organization; most of them ployees at Maintenance stage are experts
were of the opinion that unfair promo- in their respective jobs; it results in their
tional policy somewhere hampers the intrinsic motivation for the job.
quality of work in the institution.
Satisfaction with compensation as-
Discussion pect in respondents at establish-
ment stage in contrast with those
Let us begin with the question, why at Maintenance stage is less
can job-satisfaction not be predicted strongly correlated with overall
through age? The answer lies in the di- satisfaction with their jobs.
versified relationships among individual
aspects of job in different career stages. Although compensation is a signifi-
When dreams come true, it makes any cant contributor to job-satisfaction, dif-
ferent stages of the career give contra- their higher expertise in relation to lim-
dictory results (Cron 1984). It is evident ited scope in job-profile. Their counter-
form the findings that activity and respon- parts, in contrast, are enthusiastic for
sibility are reflections of each other and is learning new skills. As a result they per-
mediated by compensation satisfaction. ceive utilization of abilities as a signifi-
Consequently, the correlation between re- cant factor of job-satisfaction.
sponsibility and overall satisfaction re-
sembles with that of activity in both stages. Authority is considered as a signifi-
cant contributor to job-satisfaction. The
Social status is another conflicting present study also corroborates this.
aspect of ones job-satisfaction. Employ- However employees in Maintenance
ees in the Establishment stage are (gen- stage do not support it. It may be because
erally) still striving for achieving their of their pre-existing authority in the or-
dream status in the society whereas ganization.
those in the next stage have either
achieved or about to achieve the aspired By the age of 45 lower order needs
status. They, hence, find it very signifi- are either satisfied or assured of being
cantly correlated with the satisfaction. satisfied. This stage is a partition line be-
Dissatisfaction regarding inferior social tween the lower order and higher order
status leads them to exert themselves to needs. Employees at maintenance stage,
the utmost level. therefore, assign higher value to social
service component in their job contents.
When employees are at the Estab-
lishment stage, they are still learning the Despite the wide discrepancies, ten
work-roles. They themselves realize their aspects of job consistently satisfy an in-
need for supervision (both humanitarian dividual at any of the stages in career.
and technical). Since they are trained in These are independence of activities,
their fields, they correlate supervision only variety in tasks, advancement in career,
41 and 35 percent respectively to overall congenial working conditions, friendly
satisfaction. Once they reach the next relationship with co-workers, and sense
higher stage in career, they are efficient of achievement while on job, sound poli-
in respective vocational skills and are able cies and practices in the organization, op-
to supervise themselves. They, therefore, portunity to utilize ones creativity in job,
are highly dissatisfied with supervision. safeguard of moral values, and recogni-
tion of contributions to the organization.
Concern for security in older ones is
quite natural. This is why they, in con- Conclusion
trast to younger employees, rank it first
in contributing to the overall satisfaction. In general Indian employees rate
Utmost utilization of abilities, however, their work environment, teamwork and
does not satisfy older organizational other aspects of their work more
members. The reason for that may be favourably than employees of other coun-
tries in the Asia-Pacific countries (The faction with a particular aspect of his/
Hindu 2004). The surveyed employees her job?
are obliged to their bosses and colleagues
for their professional success. Congenial References
work environment of course can improve
the satisfaction level in employees, longer Barling, Julian, Kelloway, E. Kevin& Iverson,
working hours with moderate pay pack- Roderick D. (2003), High Quality Work,
Job Satisfaction and Occupational Inju-
age, however, neutralizes the up thrust ries, Journal of Applied Psychology, 88 (2):
in satisfaction. Brand loyalty certainly 276-83
works even in employment but unfortu-
Carraher, Shaw M. & Buckley, M. Ronald (1996),
nately it does not persist for long when
Cognitive Complexity and the Perceived
poor implementation of excellent policies Dimensionality of Pay Satisfaction, Jour-
is observed all over by these enthusias- nal of Applied Psychology, 81(1):102-09
tic employees (Cloutier & Vilhuber 2008).
Cloutier, Julie & Vilhuber, Lars (2008), Proce-
The present study also supports the view. dural Justice Criteria in Salary Determina-
Maintenance-stage employees who ex- tion, Journal of Managerial Psychology,
pect the management to provide for more 23(6): 713-40
opportunities to utilize their abilities are Cron, William L. (1984), Industrial Sales Per-
more dissatisfied with company policies son Development: A Career Stages Perspec-
and practices. tive, The Journal of Marketing, 48(4): 41-
52.
On the premise of empirical results Farh, Jiing-Lih, Griffeth, Rodger W., & Balkin,
and foregone discussion thereon, it might David B. (1991), Effects of choice of pay
be concluded that age is not a factor af- plans on satisfaction, goal setting, and per-
fecting job-satisfaction. But when the formance, Journal of Organizational Be-
havior, 12: 55-62.
reasons were analyzed through individual
aspects of job, we get a comparatively Francis, James G. & Milbourn Jr., Gene (1980),
clear view. The expectation trend can Human Behaviour in the Work Environ-
ment: A Managerial Perspective, Goodyear
well be ascertained on the premise of
Publishing Co. Inc, California: Santa
age factor. It will help in designing the Monica.
job contents for a cadre which one
Hackman, J. Richard & Lawler III, Edward E.
reaches at a particular age. The manage-
(1971), Employee Reactions to Job Char-
ment, in this manner, can enhance the acteristics, Journal of Applied Psychology,
satisfaction level of their employees. 55(3): 259 86.
Hackman, J. Richard, & Oldham, Greg R. (1976),

The study however raises a few Motivation through the Design of Work:
questions. Does the result hold well even Test of a Theory, Organizational
in other professions? To what extent Behaviour and Human Performance,16:
other factors affect ones attitudes in the 250-79.
work place like justice-perceptions, Harris, Thomas C., & Locke, Edwin A. (1974),
work-values and aspiration levels oper- Replication of white collar-blue collar dif-
ate on predicting expectations and satis- ferences in sources of satisfaction and dis-
satisfaction, Journal of Applied Psychol- Riggio, Ronald E. (1990), Introduction to Indus-

ogy, 59(3): 369-70. trial and Organizational Psychology. Scott
Forseman & Company.
Janssen, Peter P.M., De Jonge, Jan & Bakker,
Arnold B. (1999), Specific Determinants Schaufeli, W.B. & Enzmann, D. (1998), The Burn-
of Intrinsic Work Motivation, Burnout and out Companion to Study and Practice: A
Turnover Intentions: A Study among Critical Analysis, London: Taylor &
Nurses, Journal of Advance Nursing, Francis.
29(6): 1360 69.
Smart, Roslyn & Peterson, Candida (1997),
Kanungo, Rabindra N. (1982), Measurement of Supers Career Stages and Decision to
Job and Work Involvement. Journal of Change Career, Journal of Vocational
Applied Psychology, 67(3):341 49. Behaviour, 51: 358-74
Korman, Abraham K., Greenhaus, Jeffrey H.& Smith, Patricia Cain, Kendall, L.M. & Hulin, C.L.
Baden, Irwin J. (1977), Personnel Atti- (1969), The Measurement of Satisfaction
tude and Motivation, Annual Review of in Work and Retirement, Chicago: Rand-
Psychology, 28:175 96. McNally.
Locke, Edwin A. (1969), What Is Job Satisfac- Super, Donald E. (1957), The Psychology of
tion? Organizational Behaviour and Hu- Careers, New York: Harper & Row.
man Performance,4(4): 309 36.
Taylor, Fred W. (1947), The Principles of Scien-
Major, Brenda & Konar, Ellen (1984), An In- tific Management, New York: Norton.
vestigation of Sex Differences in Pay Ex-
pectations and Their Possible Causes, The Hindu (14th December, 2004), Job Satisfac-
Academy of Management Journal, tion Higher among Indian Workers, Says
27(4):777-92. Study
Miller, D.C. & Form, W.H. (1951), Industrial Vegt, Gerben S. Van Der, Emans, Ben J. M.&
Sociology, New York: Harper. Vliert, Evert van De (2001), Patterns of
Interdependence in Work Teams: A Two-
Miller, Katharine I.& Monge, Peter R. (1986), Level Investigation of the Relations with
Participation, Satisfaction, and Productiv- Job Team Satisfaction, Personnel Psychol-
ity: A Meta-analytic Review, Academy of ogy, 54 :51-69.
Management Journal, 27(4) 777-92
Warr, Peter, Cook, John,& Wall, Toby (1979),
Mitchell, Terence R.& Mitchell, Amy E. (1999), Scales for Measurement of Some Work
The Meaning of Money: An Individual Attitudes and Aspects of Psychological
Difference Perspective, Academy of Man- Well being, Journal of Occupational Psy-
agement Review, 24(3): 568-78. chology, 52: 129 48.
Mobley, William H., Griffeth, H.H., Hand, H.H. Weiss, David J., Dawis, Rene V., England, George
& Meglino, B.M. (1979), Review and W. & Lofquist, Lloyd H. (1967), Manual
Conceptual Analysis of the Employee Turn- for the Minnesota Satisfaction Question-
over Process, Psychological Bulletin, naire, Minnesota Studies on Vocational
86:493-522. Rehabilitation, Vol.22. Minneapolis: Uni-
versity of Minnesota Industrial Relations
Porter, Lyman W., Lawler, Edward E. (1968), Center.
Managerial Attitudes and Performance,
Homewood, IL: Irwin.
Pushpendra Priyadarshi
Employer Brand Image as Predictor of Employee

Satisfaction, Affective Commitment & Turnover
The race for an employer to be Background

seen differently has only intensi-
fied in recent years mainly due to Employer branding has captured con-
the availability of multiple oppor- siderable attention in recent times. Aca-
tunities and scarcity of good demicians and practitioners have reported
quality talent in the emerging evidence of organisations expending con-
markets. Employer branding is siderable resources on development of
fast emerging a potential tool not employer brand programme indicating its
only to communicate the potential value (Backhaus & Tikoo 2004). Em-
employees but also to the exist- ployer branding as a concept is an ex-
ing employees that the value tension of relationship marketing prin-
proposition of the current em- ciples (Christopher, Payne & Ballantyne
ployer supersedes their competi- 1991, Kotler 1992, Morgan & Hunt
tors. Participated by 240 execu- 1994), which identify the need to build
tives from various organsiations acquisition and retention strategies across
the study shows the importance of a number of critical stakeholder markets
managing employer brand image through closer relationships. One of the
for existing employees through most basic understandings about brand
highlighting the difference becomes from the definition provided by the
tween the existing and preferred American Marketing Association which
levels of employer attributes. It defines a brand as a name, term sign,
further highlights the relation- symbol, or design, or combination of them
ship between employer brand at- which is intended to identify the goods
tributes and job related attitudes and services of one seller group or group
showing how these attributes im- of sellers and to differentiate them from
pact them. those of competitors (Backhaus & Tikoo
Employer branding as a concept is

Pushpendra Priyadarshi is Assistant Professor an extension of relationship mar-
(HRM) at Indian Institute of Management, Lucknow keting principles
226013. E-mail: pushpendra@iiml.ac.in.
Employer Brand Image as Predictor of Employee Satisfaction
2004). The term employer branding is Resource consultants Hewitt Associates

used for the application of branding prin- suggests five steps to developing a strong
ciples to human resource management. employer brand: (1) understand your
The concept is being increasingly used organisation, (2) create a compelling
for attracting prospective employees brand promise for employees that mir-
while engaging the present employees to rors the brand promise for customers, (3)
the organisation. develop standards to measure the
fulfilment of brand promise, (4) ruthlessly
In a seminal work on employer align all people practices to support and
branding, also one of the earlier defini- reinforce brand promise, and (5) execute
tions on the subject, Ambler and Barrow the measure (Berthon et al. 2005). Ac-
(1996) defined employer brand in terms cording to Ritson (2002) companies with
of benefits, calling it the package of strong employer brands can potentially
functional, economic and psychological reduce the cost of employee acquisition,
benefits provided by employment and improve employee relations, increase
identified with the employing company. employee retention and even offer lower
Further, employer branding or employer salaries for comparable staff to firms with
brand management involves internally weaker employer brands.
and externally promoting a clear view of
what makes a firm different and desir- The present study focuses on the
able as an employer. According to image audit step of the employer brand-
Backhaus and Tikoo (2004), employer ing process because it is the basis on
branding is essentially a three step pro- which other steps develop. Given the key
cess. First, a firm develops a concept of role of image audit step, it should incor-
the particular value it offers to prospec- porate important stakeholder beliefs
tive and current employees. This value about the characteristics of an attractive
proposition provides the central message employer. Therefore, the purpose of this
that is conveyed by the employer brand. study is to examine the relative impor-
It is of key importance that this value tance of different aspects of employer
proposition derives from a thorough au- brand
dit of the characteristics that make the
firm a great place to work. Once the Review of Literature
value proposition is determined, the sec-
ond step in employer branding consists Despite employer brand gaining con-
of externally marketing this value propo- siderable popularity in HR practitioner
sition to attract the targeted applicant literature (e.g., Frook 2001) empirical
population. The third step involves car- research is still relatively inadequate
rying the brand promise made to re- (Cable & Turban 2001). Backhaus &
cruits in to the firm and incorporating it Tikoo (2004) and Davies (2007) echo the
as part of the organisational culture. In a same sentiments and feel that the advent
sense the last step consists of internally of the employer brand as concept has
marketing the employer brand. Human been recent in academic field and its theo-
retical foundation is gradually being de- scarce as most of them focus on poten-
veloped even though it is being consid- tial applicants. Our research captures the
ered and applied by practitioners for employer brand image of the current
sometime now. employees and its consequences.
Resource based view (RBV) pro- Although the study of organisational

vides the foundation of the concept of attraction has revealed some insights,
employer branding assuming human capi- there remains much to be learned (Bar-
tal brings value to the firm, and targeted ber 1998). One stream of extant research
investment in human capital should en- investigates organisational characteris-
hance firm performance (Barney 1991). tics and their effects on attraction to the
This framework has special significance organisation. Structural attributes such as
at a time when financial markets are in- decentralised decision making (Turban &
creasingly recognising human capital as Keon 1993) and reward system (Bretz
a source of value for firms and share- et al, 1989), are shown to influence per-
holders (Cairncross 2000). Michaels et ceptions of attractiveness. Gatewood et.
al. (2001) propose the explicit develop- al. (1993) found that perception of an
ment and communication of employee organisations image is a significant pre-
value proposition (EVP) to attract and dictor of decisions to pursue employment
retain talented employee. with that company. Using brand in the
context of employment, employer brand
loyalty was found by many to be a useful
Recruiting right type of talent be-
concept to be applied. Brand loyalty is
comes critical, as does the em-
the attachment that a consumer has to a
ployer brand image in the recruit-
brand (Aaker 1991). Applied in the con-
ment market.
text of employment, employer brand loy-
alty is shaped by behavioural element
In the service industry, employees relating to organisational culture and at-
play a critical role in development of titudinal element relating to organisational
brand image (de Chernatony & Segal- identity (Backhaus & Tikoo 2004). But
horn 2003, Mc Donald, de Chernatony unlike in the case of a product, in em-
& Harris 2001, Bitner, Boom & Mohr ployment brand loyalty switching over to
1994). Therefore, recruiting right type of another brand cannot be done so fre-
talent becomes critical, as does the em- quently and comes at higher cost (Davies
ployer brand image in the recruitment 2008). In a way employer brand loyalty
market (Ewing et. al. 2002). What is even forges greater commitment level result-
more critical is whether this image that ing in increased retention of the talent.
they carried as an applicant is sustained Among benefits, a strong employer brand
with their stay in the organisation (Knox attracts better applicants (Collins &
& Freeman 2006). Research studies in Stevens 2002, Slaughter et al. 2004) and
the area looking for continued associa- shapes their expectations about their
tion of these employees in particular are employment (Livens & Highhouse 2003).
One role of brand is to create and en- ment and turnover of the employees.
hance satisfaction and satisfaction pre-
4. To examine whether employer brand
dicts future behaviour towards the brand
image determined satisfaction, affec-
(Mittal & Kamakura 2001). Job satisfac-
tive commitment and turnover.
tion plays a very important role in creat-
ing customer satisfaction (Heskett et al Sample
1997) and understanding of the various
attributes of employer brand image can The respondents of the study con-
help facilitate customer satisfaction. sisted of professionals, mainly engineers
working in technical and non-technical
Employer brand loyalty is shaped functions, in two telecom companies in
by behavioural element relating to National Capital Region (NCR) Delhi.
organisational culture and attitudi- Nearly two hundred and forty profession-
nal element relating to als were contacted for the study out of
organisational identity. which hundred and twelve responded
(46.67%) to the survey of which ninety
two responses were found suitable for
Research Focus the study. The average age of male re-
spondent was 28 years and for their fe-
The main objective of the study is male counterpart it was 25 years. While
to understand employer brand image of more than 75 % of the respondents were
an organisation from the perspective of Hindus the study was represented by
existing employees. The research ques- major religious categories. 60% of the
tion that the study is designed to answer respondents were males as against 40%
is Does employer brand image impact females. Nearly 45% of the respondents
job related attitude of employees work- had less than 5 years of work experience
ing there? If yes, the following objec- while nearly 30% had more than 10 years
tives are identified to guide our under- of experience.
standing of the nature of relationship
between employer brand image and job Measures:
related attitude:
Demographic Data Sheet: The de-
1. To understand employer brand image mographic data sheet was prepared by
(EBI) in its various dimensions. the author containing details of age, edu-
2. To describe the existing employer cation, religion, gender and work experi-
brand image, the image aspired and ence of the respondents to obtain relevant
significant difference, if any, exist- information.
ing between the two.
Employer Brand Image: The study
3. To understand the nature of relation- used the instrument for employer brand
ship between employer brand image image designed by Knox & Freeman
and job satisfaction, affective commit- (2006). The instrument required the re-
spondents to rate the 20 attributes of To test the underlying structure of

employer brand image according to their the work values, an exploratory factor
current status and importance. The cur- analysis was undertaken. The factor analy-
rent status, presented by whether they sis of these work values were performed
perceived their present organization dis- with the aim of collecting the same infor-
played this attribute, was rated on a five mation but in a reduced number of vari-
point scale ranging from strongly disagree ables. The final outcome was a more par-
(1) to strongly agree (5). Importance, simonious structure of work values. The
reflecting their perception of the attribute principal components method was used and
being important to the organization or not the factors were obtained by employing the
was rated on a five point scale ranging standard criterion of the latent root and ro-
from highly unimportant (1) to highly im- tation Varimax with Kaiser Normalisation.
portant (5). They were then asked for Only those items having factor loading
their ratings of these attributes for their greater than 0.4 were included in the con-
present employers. struction of the new factors.
Table 1: KMO and Bartletts Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .764

Bartletts Test of Sphericity Approx. Chi-Square 806.523
Df 190
Sig. .000
Prior to factor analysis, the Kaiser- ponent, and the item loadings are shown
Meyer-Oklin (KMO) measure of sam- in Table 2. The factors were named con-
pling adequacy and the Bartletts test of sidering the list of items under each com-
sphericity were pursued to test fitness ponent and the respective loadings of the
of the data. The KMO was 0.764, items. Thus the various dimensions of
which was greater than 0.5. The employer brand image emerging were as
Bartletts test of sphericity had a chi- follows:
square value of 806.523, with signifi-
cance lower than 0.000. Both statisti- Factor 1: Organisational Environment
cal data supported the use of factor
analysis for these items. Latent root/ (Eigenvalue = 3.51; Mean Value: 3.996;
eigen values were applied as the crite- Cronbachs Alpha: .828)
ria for selecting the right number of
factors (Kim and Mueller 1994, Hair et Factor 2: Organisational Fame & Flex-
al. 1995, Norusis 1994). The rotation ibility
converged in seven iterations.
(Eigenvalue = 2.69; Mean Value: 3.87;
The result of the component analy- Cronbachs Alpha: .72)
sis, the respective item under each com-
Table 2: Factor Analysis Details
Factors Short Description Factor Mean Cronn- Cumu-

Loading bachs lative
Alpha Vari-
ance
Factor 1 Freedom of initiative .72 3.99 0.83 17.53

Organisational Employs colleagues having things in common .59
Environment Dynamism in business .63
Informal Culture .69
Rotation of Job and Role .55
Investment in T & D .62
Meritocracy .58
Concern for employees .56
Factor 2
Organisational Size of the organisation .53 3.87 0.72 30.98
Fame and Prestigious Employer .75
Flexibility Scope for creativity .81
Stress-free work environment .59
Factor 3
Variety in Variety in daily work .84 3.927 0.76 44.12
Job and Diversity of colleagues .63
Work Work as per standard schedule .60
Setting Usage of academic degree .61
Factor 4
Compensation High salary .67 3.56 0.74 56.96
and career Opportunities for career progression .64
Opportunities for international Travel .86
Opportunities to live and work abroad .59
Factor 3: Variety in Job and Work factors accounting for 56.96 percent vari-
Setting ance. Organisational Environment came
out as the first dimension having highest
(Eigenvalue = 2.63; Mean Value: 3.927; mean value (M = 3.996) among all the
Cronbachs Alpha: .76) four identified factors and it accounted
for nearly 18 percent of variance. Free-
Factor 4: Compensation and Career dom to take initiatives supported by in-
vestments in employee development; dy-
(Eigenvalue = 2.57; Mean Value: 3.56; namic business approach coupled with
Cronbachs Alpha: .74) informal business culture which also re-
spects merit seemed to be driving what
Factor analysis of employer brand signifies as the overall environment of the
image for the organisation resulted in four organisation. This clearly marked the at-
tractive proposition for the employees. Job Satisfaction was measured by

The second dimension was Cammann et al. (1983) three-item scale.
Organisational Fame and Flexibility A sample item is, All in all, I am satis-
which had a mean value of 3.87 and ac- fied with my job ( = 0.84). Respon-
counted for 13.45 percent variance. It dents responded to all items for the above
consists of organisational attributes re- scales using a seven-point Likert-type
lating to organisational reputation and size scale with anchors (1) strongly disagree
having stress free environment where to (7) strongly agree.
employees have scope for creative ex-
pression. Variety in Job and Work Set- Affective Commitment: Organiza-
ting was the third factor (M = 3.92) tional commitment was measured by the
which was signified by attributes like six-item affective commitment scale used
variety in daily work and diversity of col- by Rhoades et al. (2001). A sample item
leagues and accounted for 13.14 percent is, I feel personally attached to my work
variance. Compensation and growth was organization ( = 0.90). Respondents
the fourth dimension and got its name replied to all items for the above scales
from the attributes like long term career using a seven-point Likert-type scale
and high compensation. This dimension with anchors (1) strongly disagree to (7)
accounted for 12.84 percent variance and strongly agree.
had the mean value of 3.56.
Intention to quit was measured by
Colarellis (1984) three-item scale. A
Organisational Environment
sample item is, I am planning to search
came out as the first dimension
for a new job during the next twelve
having highest mean value (M =
months ( = 0.82). Participants re-
3.996) among all the four identified
sponded to all items for the above scales
factors and it accounted for nearly
using a seven-point Likert-type scale
18 percent of variance.
with anchors (1) strongly disagree to (7)
strongly agree.
Table 3: Difference between Current & Preferred Status
Factors Mean Std. Deviation

Organisational Environment Existing 3.99 1.04113
Preferred 5.45 .86376
Organisational Fame and Flexibility Existing 3.86 1.26636
Preferred 5.13 1.08083
Variety in Job and Work Setting Existing 3.92 1.07771
Preferred 5.38 .97671
Compensation and Career Existing 3.55 1.18853
Preferred 5.35 1.07304
Table 3 describes the perceived im- present study will have to provide vari-
age of the organisation as also about their ety in work and suggests a difference on
preferred image and the difference, if any, all the organisational attributes.
between them. The result shows maxi-
mum importance accorded to organis-
The result shows maximum impor-
ational environment followed by variety
tance accorded to organisational
in work and work setting, opportunities
environment followed by variety in
and growth in career and organisational
work and work setting, opportuni-
fame and flexibility. As also the discrep-
ties and growth in career and
ancy observed was highest among all the
organisational fame and flexibility.
attributes studied. Organisation in the
Table 4: Employer Brand Image and Job Satisfaction, Affective Commitment and Turnover:
Correlations and Descriptive Statistics (N=92)
M SD 1 2 3 4 5 6 7
Organisational 3.99 1.04 -

Environment
Organisational Fame 3.87 1.27 .48 ** -
and Flexibility
Variety in Job 3.93 1.08 .56 ** .42 ** -
and Work Setting
Compensation and 3.56 1.19 .36 ** .38 ** .41 ** -
Career
JS 3.79 .93 .02 -.21 * -.06 -.11 -
AC 3.63 1.38 -.20 -.21 * -.16 -.29 ** .52 ** -
** ** *
IQ 3.98 1.06 .18 .28 .40 .22 -.10 -.29 ** -
**Significant at the 0.01 level (2-tailed).
*Significant at the 0.05 level (2-tailed).
Table 4 depicts the mean, standard hence attention to be paid towards cre-
deviation and correlations among the ating opportunities for personal initiative,
variables studied. The components of cultivate informal culture, rotation of job
perceived employer brand image were and roles etc. It was also observed that
found to be correlated, the value ranging existing organisational fame and flexibil-
from 0.36 to 0.56, suggesting convergent ity was negatively related to both satis-
validity of the measure. The existing faction (r = -.21) and commitment (r = -
organisational environment was found to .21) of the employees. It is not surpris-
be negatively related to affective coming that this factor was positively related
mitment (r = -.20) suggesting that exist- to intention to quit (r =.21). The employ-
ing organisational environment reduced ees did not find the work having enough
the commitment level of the employee variety neither their degrees being
utilised, positive correlation with intention compensation and career growth corre-
to quit (r = .40) could be seen there. The lated negatively (r = -.29) to affective
existing opportunities for long term ca- commitment and positively to intention to
reer or international assignment was not quit (r = .22)
satisfactory as factor four representing
Table 5: Summary of Multiple Regression Analysis Predicting Respondents Job Satisfaction,

Affective Commitment and Turnover
Dependent Variables Independent Variable B SE(B) F R2
Job Satisfaction Organisational Fame -.15 .07 -.21 4.12* .04

and Flexibility
Affective Commitment Compensation and -.33 .12 -.29 7.98** .08

Career
Turnover Variety in Job and .39 .09 .40 17.17***.16

Work Setting
N=92; *p<.05, **p<.01, ***p<.001
Multiple regression analyses were ibility was the only attribute found to be
performed to explore the causality be- relating to it ( = -.21; p<.05) albeit nega-
tween employer brand image and the tively. The other attributes viz.
three dependent variables namely, job organisational environment, variety in job
satisfaction, affective commitment and and work setting and compensation and
intention to quit the organisation. We career were not found to be significantly
tested for the direct effects of the vari- impacting job satisfaction. Commitment
ables in the regression model. In general, in todays context is one of the most criti-
the probability of Type I error increases cally desirable attitudes expected from
with the number of predictors used in the an employee. When we ran regression
analyses. Hence to reduce the likelihood equation to find out whether there was
of the Type I errors, a set of predictors any causal relationship between four at-
were introduced in to the regression tributes and commitment we found com-
equation and examined the significance pensation and career to be significantly
levels of individual variables only if the but inversely relating to commitment (
entire set made significant contribution = -.29; p<.01). No evidence was found
to the regression equation (Cohen & for the other three attributes to be im-
Cohen 1975, Taylor & Bergmann 1987). pacting commitment. Intention to quit is
The results of various regression equa- a measure to know whether the em-
tions has been summarised in Table 5. ployee intend to leave the job. The re-
When regression equation was run on job gression equation pertaining to turnover
satisfaction, out of four employer brand proves that out of the four attributes,
attributes, organisational fame and flex- variety and job and work setting was sig-
nificantly related to turnover of the em- The existence of the relationship be-
ployees ( = .40; p<.001). tween employer brand attributes and job
related attitude of an employee was con-
Discussion firmed by the study. The study also
showed that there could be distinct ways
We identified measures to capture in which various facets influence job re-
employer brand image and job satisfac- lated attitudes and hence required dif-
tion, commitment and turnover as ferential attention. Second, the study very
organisational attitude. We found mixed clearly indicates that organisational fame
results as different facets of employer and flexibility was related to job satis-
image impacted all three organisational faction of the employees. Fame and flex-
attitudes. There is dearth of academic ibility accounted for some variance (4%),
work in the context of brand image im- what is significant is that employees felt
pacting the attitude of employees (Lievens the organisation to be short of desirable
2007). The employees perception of his/ prestige as also wanting stress free work
her employers image is shaped by per- environment and scope for creativity.
sonal and professional experiences and The negative relationship between
this in many ways determines his attitude organisational fame and flexibility could
and consequently his behaviour. Hence it be attributed to the discrepancy between
becomes important that an employer ex- existing and preferred levels of
amines, at regular intervals, the factors organisational attribute. This result how-
which are critical for retaining and engag- ever, is partly supported by Davies (2008)
ing the employees. The focus of earlier where satisfaction was determined by
studies has been mainly on prospective friendly and supportive attributes of an
candidate and the present study brings organisation. According to the findings of
out pertinent issues concerning brand this study dimensions like, organisational
image and its impact on job related atti- environment, compensation and career
tude of existing employees. Lievens and variety in work setting were per-
(2007) recommends that internal audits ceived not to be contributing to job satis-
provide an organisation with richer and faction. Understanding the importance of
more comprehensive picture of their im- satisfaction with respect to increased
age which may eventually result in en- motivation and higher performance lev-
suring that a good candidate not only ap- els (Iaffaldano & Muchinsky 1985) and
ply but also stay working there. grater customer satisfaction (Ryan et. al.
1996) only reinforces the importance of
addressing fame and flexibility issues in
When regression equation was run
organisations.
on job satisfaction, out of four em-
ployer brand attributes,
Organisational commitment is defined
organisational fame and flexibility
as identification and involvement with the
was the only attribute found to be
firm, including acceptance of
relating to it.
organisational goals and values, eager-
ness to work hard, and desire to remain rate image was found to be a significant
with the firm (Crewson 1997). The study predictor of decisions to pursue employ-
used affective commitment as a second ment with the company. In this case the
consequent variable and found compen- image had specific reference to variety
sation and career facet of the employer in job and work setting.
attributes to be negatively related to it.
Findings of the study are in line with Limitations
Backhaus & Tikoo (2004) who have
elaborated on employer brand loyalty and This study was conducted in selected
found it akin to organisational commit- Indian organisations and the results are
ment. 8 % variance in affective commit- contextual. More studies required for
ment was found to be determined by the greater generalisation particularly in the
perception of existing employees of ca- context of image audit for organisations
reer and compensation. Clearly the em- facing stiff challenge of attrition.
ployees did not perceive the organisation Gneralisability for this study, its second
providing long term career option and weakness, is again restricted by the non-
compensation. Further, the employers in random nature of the sample used for the
this study needed to convey symbolic survey. Even though we used top two
benefits, typically innovativeness and telecom companies (according to no. of
prestige (Lievens & Highhouse 2003), as subscribers) the sample was small in size
organisational attribute to create distinc- and had limited representation. We sug-
tiveness from other employers. gest and expect that future research in
employer image audit would have wider
Intention to quit is a measure used to representation from telecom companies
examine whether organisational at- to provide us with more clear understand-
tributes contribute to an employees de- ing.
cision to quit an organisation and this
constituted our third measure. Cable and Implications for Management
Judge (1996) attributed applicants unbal-
anced information and unrealized expec- This study provides critical inputs
tation as the main reason of dissatisfac- about internal image audit and how does
tion and turnover of employees. Variety it influence job related attitude. The
in job and work setting attribute in our Indian telecom sector has seen
study emerged as the factor positively phenomenal growth in the past few years
contributing to intention to quit. Having and has attracted lot of talent who looks
16% variance for turnover the forward to long term career prospects
organisations failed in providing a work but with more private participation
setting where employees had diversity of retaining talent and providing value has
colleagues, variety in daily work and their become equally critical for them. In a way
degrees being properly utilised. The find- this study shows how various
ings here are in line with a study by organisational attributes determine job
Gatewood et. al. (1993) where corpo- satisfaction, affective commitment and
intention to quit and the need for clearly Cammann, C., Fichman, M., Jenkins, G.D. &
communicating the value proposition to Klesh, J.R. (1983), Assessing the Atti-
tudes and Perceptions of Organizational
the employees. Members, in Seashore, S.E., Lawler, E.E.
III, Mirvis, P.H. & Cammann, C. (Eds),
References Assessing Organizational Change: A Guide
to Methods, Measures, and Practices,
Aaker, D. (2003), The Power of Branded Wiley, New York, NY.
Differentiator, Sloan Management Review,
Christopher, M., Payne, A., & Ballantyne, D.
45(1) : 83-87.
(1991), Relationship Marketing: creating
Ambler, T. & Barrow, S. (1996), The Employer stakeholder value, Oxford: Butterworth-
Brand, The Journal of Brand Manage- Heinemann.
ment,4(3): 85-106.
Cohen, J.& Cohen, P. (1975), Applied Multiple
Backhaus, K. & Tikoo, S. (2004), Regression/Correlation Analysis for the
Conceptualising and Researching Em- Behavioural Science, Lawrence Erlbaum,
ployer Branding, Career Development Hillsdale, NJ.
International, 9(5): 501-17.
Colarelli, S.M. (1984), Methods of Communi-
Barber, A.E. (1998), Recruiting Employees: cation and Mediating Processes in Realis-
Individual and Organizational Perspectives, tic Job Previews, Journal of Applied Psy-
California, Sage. chology, 69: 633-42.
Barney, J.B. (1991),Firm Resources and Sus- Collins, C.J. & Stevens, C.K. (2002), The Rela-
tained Competitive Advantage, Journal of tionship between Early Recruitment-Re-
Management, 17: 99-120. lated Activities and the Application Deci-
sions of New Labour-Market Entrants: a
Berthon, P., Ewing, M. & Hah, L.L. (2005), Cap- Brand Equity Approach to Recruitment,
tivating Company: Dimensions of Attrac- Journal of Applied Psychology, 87(6): 1121-
tiveness in Employer Branding, Interna- 33.
tional Journal of Advertising, 24(2): 151-72.
Crewson, P.E. (1997), Public-Service Motiva-
Bretz, R.D., Ash, R.A.& Dreher, G.F. (1989), Do tion: Building Empirical Evidence of Inci-
People Make the Place? An Examination of dence and Effect, Journal of Public Ad-
Attraction-Selection-Attrition Hypoth- ministration Research and Theory, 7: 499-
esis, Personnel Psychology, 42: 561-81. 519.
Cable, D.M. & Turban, D.B. (2001), Establish- Davies, G. (2008), Employer Branding and Its
ing the Dimensions, Sources and Values of Influence on Managers, European Jour-
Job Seekers Employer Knowledge during nal of Marketing, 42(5/6): 667-81.
Recruitment, in G. R. Ferris (Ed.), Re-
search in Personnel and Human Resource Ewing, M., Pitt, L.F., de Bussy, N.M. & Berthon,
Management , New York: Elsevier Science. P. (2002), Employment Branding in
Knowledge Economy, International Jour-
Cable, D.M. & Judge, T.A. (1996), Person- nal of Advertising, 21(1): 3-22
Organisation Fit, Job Choice Decisions and
Organisational Entry, Organisational Frook, J.E. (2001), Burnish Your Brand from
Behaviour and Human Decision Process, Inside, B to B, 86: 1-2.
67: 294-311.
Gatewood, R.D., Gowan, M.A.& Lautenschlager,
Cairncross, F. (2000), Inside the Machine: Sur- G. J. (1993), Corporate Image, Recruit-
vey of E-Management, The Economist, 11/ ment Image and Initial Job Choice, Acad-
11, 6.
emy of Management Journal, 36:. 414-24. Morgan, L.M. & Hunt S.D. (1994), The Com-
mitment-Trust Theory of Relationship
Heskett, J.L., Sasser, W.E.J. & Schlesinger, L.A. Marketing, Journal of Marketing, 58: 20-
(1997), The Service Profit Chain: How 38.
Leading Companies Link Profit and Growth
to Loyalty, Satisfaction and Value, The Free Rhoades, L., Eisenberger, R. & Armeli, S. (2001),
Press New York, NY. Affective Commitment to the organiza-
tion: the contribution of perceived organi-
Iaffaldano, M.T. & Muchinsky, P.M. (1985), zational support, Journal of Applied Psy-
Job Satisfaction and Job Performance, chology, 86:825-36.
Psychological Bulletin, 97: 251-73
Ritson, M. (2002), Marketing and HE Collabo-
Knox, S. and Freeman, C. (2006), Measuring rate to Harness Employer Brand Power,
and Managing Employer Brand in the Ser- Marketing, 24, October: 24
vice Industry, Journal of Marketing Man-
agement, 22(7/8):695-716. Ryan, A.M., Schmit, M.J. & Johnson, R. (1996),
Attitudes and Effectiveness: Examining
Kotler, P. (1992), Total Marketing, Business Relations at an Organisational Level, Per-
Week Advance, Executive Brief: 2-9. sonnel Psychology, 49: 853-82.
Lievens, F. (2007), Employer Branding in Bel- Slaughter, J.E., Zickar, M.J., Highhouse, S., &
gian Army: The Importance of Instrumen- Mohr, D.C. (2004), Personality Trait In-
tal and Symbolic Beliefs for Potential Ap- ferences about Organizations: Development
plicants, Actual Applicants and Military of a Measure and Assessment of Construct
Employees, Human Resource Manage- Validity, Journal of Applied Psychology,
ment, 46, No (1):51-69. 89: 85-103.
Lievens, F.& Highhouse, S. (2003), The Rela- Taylor, M.S. & Bergmann, T.J. (1987),
tion of Instrumental and Symbolic At- Organisational Recruitment Activities and
tributes to a Companys Attractiveness as Applicants Reactions at Different Stages
an Employer, Personnel Psychology, 56: of the Recruitment Processes, Personnel
75-102. Psychology, 40(2): 261-85.
Mittal, V. & Kamakura, W.A. (2001), Satisfac- Turban, D.B. & Keon, T. (1993), Organisational
tion, Repurchase Intent, and Repurchase Attractiveness: An Interactionist Perspec-
Behaviour: Investigating the Moderating tive, Journal of Applied Psychology, 78:
Effect of Customer Characteristics Jour- 184-93.
nal of Marketing Research, 38 (1): 131-42.
Communication
Towards Realist Constructivism: Implications for Teaching

& Training
Alok Kumar
What can people possibly know: an

object as it is or their idea of the object?
This question is central to the way people
look at the world. If one can know a thing
as it is, then the world must be real. Only
a real world can have objects whose re-
ality is inherent in them. Whoever knows
Constructivism is a popular but a thing as it is must get the same knowl-
often misconstrued worldview. edge about it. On the other hand, if
This article strengthens the people can only know the idea of a thing
constructivist position by show- and not the thing as such, the world as
ing that it can withstand a know- they know must be an idea!
able real world. Such a position
helps to correct many widespread Only a real world can have objects
practices in the name of whose reality is inherent in them.
constructivist education such as
equating hands-on experiences There are people who look at the
with active learning. Further, it world as their idea. They take all human
spans constructivism over the knowledge as mental constructions. They
entire training life cycle. It makes are the Constructivists and their posi-
a strong case for constructivism tion is called Constructivism. This ar-
as a way to have a world that ticle attempts to enquire into the
knows to live with diversity. constructivist worldview and its implica-
tions for two important ways of human
resource development viz. teaching and
training. It takes a catechistical approach
to explain the idea of constructivism to
the general reader.
Alok Kumar is Assistant Professor (OB/HR),
Chandragupt Institute of Management, Patna- It shows that knowledge construction
800001 E-mail: alokintouch@gmail.com is possible while assuming a know-
Alok Kumar
able reality. Constructivism would be meters. Whose knowledge is correct?

more useful if it accepts knowledge- Can someone answer this question with-
reality correspondence. Such a posi- out taking the frames of reference of the
tion can justify constructivist teach- observers into account? One can still ar-
ing and training. gue that this is the nature of physical re-
ality as explained by the theory of rela-
It shows that in a knowable real
tivity (Einstein 2000).
world the need for generalization or
abstraction strengthens the constru-
Can something uniquely human such
ctivist position. It dispels the widely
as the points of view and culture influ-
prevalent notion of equating hands-
ence the way people know the world?
on experiences with active learning.
Consider the discovery of a new fossil.
It positions constructivism as a com- Must it mean a missing link between two
prehensive approach to look at train- related species? Cant it be taken as just
ing. Further, it outlines the lifecycle another animal created by God? It de-
of a constructivist training. pends on the interpreter. Materialists
would explain it along evolutionary lines
Do People Construct Their Own because they have closed themselves to
Mind-worlds? God; creationists would see Gods intel-
ligence at work because only He can
To do that they must be able to influ- create life. These two explanations flow
ence the way they know the reality. The primarily from the inherent beliefs of the
world doesnt appear as colourful to dogs interpreters rather than the reality per se.
as to humans (Plonsky 1998). Human As theories are by definition falsifiable
physiology has indeed enabled us to see (Popper 1963), a theory can never be
the world differently. One can still argue proved once and for all. The dominant
that it is a case of setting limits by one social paradigm ends up judging the va-
reality viz. physiology over the other viz. lidity of the competing explanations to
colour. Probably a more appropriate ques- declare one as knowledge and the other
tion would be to ask whether the observ- as opinion (Kuhn 1970). The effect of
ers influence reality. culture on the way people look at diverse
phenomena is well researched (Clark
Consider a scenario where Mr. Reji 2002, Hofstede 2001, House et al. 2004).
awaits the train to Kerala. A train passes Indeed, uniquely human influences seem
by in which he spots a child throwing a to affect the way we look at the world!
ball in the air and managing to catch it.
Sitting snugly on her seat, the child did it A theory can never be proved
again by the time the train covered once and for all.
around two meters. While the child knows
that she has taken the catches sitting at Much of the human knowledge results
the very same place, Mr. Reji knows them from the coherent systems of explanations.
as separated by a distance of two Now the known world as an idea appears
Towards Realist Constructivism: Implications for Teaching & Training
to be a plausible proposition. Notice that typical constructivist treatment: diverse

such knowledge is the result of the ques- answers. The preceding discussion indi-
tions posed. A different kind of knowledge cates various possibilities to allow con-
might result from a different set of ques- structed knowledge instead of an objec-
tions. People do seem to construct their tive one: -
own mind-worlds!
If reality cannot be known, then con-
Are We New to a Constructivist structing knowledge remains the only
World? possibility. It imposes an epistemo-
logical necessity to construct knowl-
On the contrary, we humans seem to edge. Radical constructivism takes
have been living in it since the very begin- this position (Glasersfeld 1995).
ning! Rig-Veda, the oldest text known to
If what people know depends on how
humanity, declares that the truth is one,
their mental structures are organised,
even though it is explained in diverse ways
then knowledge has to be a mental
(1.164.46). Upanishads, the celebrated
construction. It imposes a cognitive-
Indian texts, take a constructivist outlook
psychological necessity to construct
in expounding some of their teachings.
knowledge (Kelly 1963, Piaget
Accordingly, they allow the readers to
1954).
build their own interpretations by using
catechism, illustrations, stories, parables If the human brain can produce all
and discovery learning (Mookerji 1969). experiences without any sensory in-
Such thinking can also be traced in Bud- puts, then what people know might
dhism, Taoism and the Zen. be a constructed reality like dreams.
What if the sensory inputs are taken
In the West, it can be traced in the into account to produce experiences?
philosophy of Heraclites who looked at the All sensory inputs, irrespective of the
world as a process. In the relatively mod- physical nature of their objects, are
ern times, it is often attributed to the works electrochemical in nature. What they
of Giambattista Vico (1668-1744), David convey is mere intensity of the sen-
Hume (1711-1776), Immanuel Kant sory contact rather than the real na-
(1724-1804), Arthur Schopenhauer (1788- ture of their objects. Thus brain must
1860), Hans Vaihinger (1852-1933), John construct reality even with sensory
Dewey (1859-1952), Lev Vygotsky (1896- inputs. It imposes a neurobiological
1934) and Jean Piaget (1896-1980). The necessity for knowledge construction
list is only indicative in nature. (Foerster 1973, Llins 2001,
Maturana & Varela 1979).
What Allows Knowledge
Construction? All sensory inputs, irrespective of
the physical nature of their objects,
This question is central to the are electrochemical in nature.
constructivist theories. It has received
Alok Kumar
If the physical reality depends on the resent reality, whatever it may be.
observers, then they must be con- Therefore, instead of investigating
structing their reality by their pres- reality, constructivism investigates
ence. It imposes a physical neces- what constructs it.
sity for knowledge construction
(Diettrich 2001). Knowledge cannot represent real-
ity, whatever it may be.
If knowledge must build upon the
previous knowledge, then society
comes into the picture. Social accep- ii. It rejects the separation of objective
tance must be there for any previous reality from subjective experience. It
knowledge to survive. Here society holds that the knower and the known
need not mean society at large; it can exist in relation to each other. As a
be a small social group as well. Thus consequence, it makes inclusion of
social interactions construct much of the observer a criterion for valid sci-
what people know (Berger & entific explanations. Inter-subjectiv-
Luckmann 1966). ity replaces objectivity in the
constructivist science.
A lot many variants using these pos-
iii. It studies the systems that reference
sibilities in various combinations are
themselves. Such systems interact
present in the constructivist literature.
necessarily with their own states and
They simply indicate that there are many
thus are operationally closed. Their
answers to the question. Notice that
output is actually aprocess itself as
knowledge construction can be allowed
there is no real input to be converted
on at least two distinct grounds: personal
into output. Constructivists treat mind
and social.
and nervous system as examples of
such systems.
What Characterises Constructivism?
iv. It emphasises usefulness as the pri-
Riegler (2005) suggested 10 charac- mary criteria for knowledge to be
teristics, which can be regrouped under valid. Useful knowledge empowers
five common themes: - humans to have a better control of
their worlds. They keep on anticipat-
What people know is their own ing events in the light of their previ-
construction. ous knowledge. As they keep on vali-
dating their anticipations against their
i. It neither accepts nor rejects an ob- experiences, individuals act like per-
jective reality. It simply maintains sonal scientists. Accordingly it holds
that what people know is their own that individuals engage in useful so-
construction. As a consequence, cial interactions. The more individu-
knowledge cannot even approach als accommodate within the frame-
reality. Thus knowledge cannot rep- work of social interactions, the more
sociable they become. It doesnt ac-

Learning can be of any use only if
cept any meaning or knowledge in
it results in useful knowledge.
texts. They are useful as long as they
help readers build their own interpre-
which enables them to go beyond the in-
tation.
formation given (Bruner 1966). Thus
v. As knowledge remains a process people learn to learn as they learn! Be-
rather than an output, the cause knowledge must keep pace with
constructivists prefer processes to changing social interactions, learning and
structures in explaining their worlds. knowledge construction must be a life-
Accordingly, they are ready to revise long process. However learning can be
knowledge as and when required. of any use only if it results in useful
They consider it useful for expand- knowledge.
ing the scientific frontiers.
Can Constructivism Account for
Can Constructivism Account for Useful Knowledge?
Learning?
Knowledge is useful if it can help
Yes, if learning is equated with modi- someone do something. How can knowl-
fied mental structures or schema. Radi- edge help someone do something? Imag-
cal constructivism cannot account for ine that there is no reality outside the
learning from any external influence as mind. In that case all tasks must also be
anything external to mind remains com- mental constructs like knowledge. Hence
pletely unknown. Social constructivism thoughts must be sufficient to accomplish
can account for learning from external any task. Constructing the idea of effort
influences as well. and errors to complicate things hardly
seems useful. Now imagine that there is
In the constructivist worldview, there a reality outside the mind though one can
is nothing in which meaning or knowl- never know it. Can knowledge affect
edge or learning is inherent. Thus no ac- something that is beyond its purview?
tivity is a learning activity; no opportu- Thus it is clear that the agnostic position
nity is a learning opportunity. No teacher of constructivism with regard to reality
can cause learning; no environment is a poses insurmountable difficulties related
learning environment. Once the learner to the nature and scope of knowledge it-
interprets an activity as learning activity, self.
he or she can construct knowledge. One
can interpret an activity as learning ac- Can socially constructed knowledge
tivity only if there is a prior experience be useful? In as much as it enables so-
of learning or knowledge construction. cial interactions, knowledge remains use-
Hence learning is taken as an active pro- ful in the social constructivist worldview.
cess of knowledge construction based on But social construction can only account
the existing knowledge of the learners, for social conventions. It cannot account
Alok Kumar
for anything whose existence doesnt pre- asked about every proposed constructor.
suppose society. Thus a socially con- It leads to an infinite regression and hence
structed knowledge is of limited use. doesnt offer any useful insight. Thus a real
knowledge construction process appears
Can Constructivism Account for more useful and hence valid! This again
Teaching? violates the constructivist assumption. Be-
sides, if mind must interact with its own
Can one teach how to think without states, then no input can have an effect on
assuming some real ways of thinking? its operations, not even teaching inputs.
A constructivist would reply that useful- Thus teaching doesnt make sense in a
ness is enough to teach, reality is not personal constructivist worldview.
necessary. Why should usefulness of
knowledge be emphasised? Useful Teachers have the role of facilita-
knowledge helps people gain a better tors to facilitate knowledge con-
control of their worlds. Must people as- struction.
pire for a better controlled world? Yes, if
they want to survive. Is survival real? Is Can social constructivists teach?
destruction real? Neither can be said Social constructivism assumes a fluid
with certainty as reality can never be knowledge body to account for the dy-
known. Is destruction necessarily less namic nature of social interactions. Can
useful than survival? Indeed, it is if one teachers teach in absence of a largely
assumes that something ceases to exist static body of knowledge? They can
with destruction. But if that something teach only if they need not appeal to a
was a mere construction of a self-refer- real knowledge body all the time.
encing system called mind, it can be re- Wouldnt it mean allowing learners to
constructed. Self-referencing systems construct their own knowledge? Indeed,
dont depend on inputs anyway. The value it would. Teachers have the role of fa-
of such reconstruction can be less only if cilitators to facilitate knowledge construc-
the original was more than a mere mental tion. As the representative of the fluid
construct. But such conclusion violates knowledge-base of the society, they can
constructivist assumption! One can argue even judge the usefulness or validity of
that mind constructs knowledge and not such knowledge. Thus knowledge be-
the knower as such. If the knower is not comes a collective enterprise and shared
the construct, then it must be real. Again meaning becomes the way to access it.
constructivism stands violated. However, teaching is of limited use if the
domain of socially constructed knowledge
One can still argue that there is no itself is limited.
real knower and known; they result from
the knowledge construction process. Is Can Accepting a Knowable Reality
knowledge construction process real? If Help?
not, then what constructs knowledge con-
struction? The same question can be Assume that reality is such that it
cannot be completely known. In that reality can account for the continuous
case, one can only know the reality par- progress of humanity because it makes
tially i.e. in one or more aspects. Hence knowledge-reality correspondence the
one must construct knowledge in order supreme measure of valid knowledge.
to explain the complete reality. If no
knowledge is going to completely de- What difference remains if both
scribe a reality, then every reality must constructivism and objectivism accept a
enable multiple perspectives. Thus knowable reality? Objectivism demands
constructivism still holds good. a single explanation for a particular real-
ity. Such insistence compels it to attempt
Now assume that one can completely to explain as many things as possible on
know a reality. In that case, the senses that basis. Constructivism, on the other
must be able to represent the reality to hand, accepts multiple valid explanations
the mind. Can senses capture general for a particular reality. It remains a much
abstractions such as humanity? One only broader approach to comprehend the
meets with Tom, Dick and Harry, never world. In essence, constructivism can
with humanity as such. Hence all com- withstand a real world. Constructivists
mon nouns and other generalizations must should reconsider their position about
be mental constructs. Imagine the plight reality. A knowable reality is much more
of a medical student who must pass a useful, even for the constructivist, than
medical degree for each patient he or she an unknowable reality or an unreal world.
might treat! Knowledge has to general-
ize to be widely applicable. If generali- How Should Realist Constructivists
zations are mental constructs, then much Teach?
of the knowledge must also be con-
structed. A realist constructivist position is es-
sentially a constructivist worldview that
If generalizations are mental con- accepts knowledge-reality correspon-
structs, then much of the knowl- dence. Thus its way of teaching would
edge must also be constructed. directly flow from the constructivist po-
sition on teaching and learning. For
Reality sets the limits for both per- teaching to be a learning experience: -
sonal and social construction. An un-
checked social construction will make i. It must engage learners minds. En-
social acceptance as the only measure gaging their hands is not enough, not
of valid knowledge. Social acceptance even essential.
has its own inertia that fosters status quo.
ii. It must take their prior knowledge
Personal construction can hardly account
into account.
for knowledge as the collective enter-
prise. Can our present generation take iii. It must foster a democratic environ-
the entire credit for the development of ment where learners should feel free
human civilization? Accepting a knowable to put their views forward for scrutiny.
Alok Kumar
iv. It must be based on a learner-driven they entail. The teacher should discuss
curriculum. On the one hand, the what the discoverer thought at this stage
curriculum should take the learner while explaining the rationale for the next
step-by-step into the higher realms step. Trivial historical facts that might
of knowledge construction, on the interest the students can be shared at
other; it should allow them to skip each step. How the prevalent social con-
some steps if required. ditions shaped the ideas of the discov-
erer would make a great debriefing. It
v. It must provide sufficient time to
might help students see how the present
learners to facilitate knowledge con-
social conditions are influencing their own
struction.
choices. A structured discovery would be
A constructivist approach to teach- more efficient and effective in facilitat-
ing and learning assumes individualised ing knowledge construction than a com-
consideration to learners. It may not be pletely unguided discovery.
useful when the number of learners per
teacher is too large. However, this Constructivism, by its very nature,
doesnt mean a rejection of learning in allows divergent views and hence
groups. On the contrary, it would empha- cannot claim to be the only view
size learning in groups to facilitate social to look at the world. It reserves
construction of knowledge. its right to reject objectivism, but
cannot deny its place in the world.
Unlike personal or social
constructivism, a realist constructivist po-
sition can account for useful knowledge Constructivism, by its very nature, al-
in all spheres. Thus it actually justifies lows divergent views and hence cannot
teaching while broadening its scope and claim to be the only view to look at the
relevance. In practice, constructivist world. It reserves its right to reject objec-
pedagogies end up taking a realist tivism, but cannot deny its place in the
constructivist position without acknowl- world. Teachers who want to improve
edging it. their pedagogy by basing it on
constructivism should take usefulness as
Making learners discover things for its Holy Grail. If it is useful to adopt ob-
themselves need not be the hallmark of jectivist methods such as instruction for a
the realist constructivist pedagogy. Us- while, they should be employed. Can chil-
ing the wheel is more useful than keep- dren learn to write if they are allowed to
ing on reinventing it. However, a struc- interpret alphabets in their own ways? Can
tured discovery can be used to help new employees assimilate if they interpret
learners gain rich experience. A discov- the internal language of the organisation
ery can be structured in two or more in the way they like? Who would allow
steps with a debriefing at each step. cardiac surgeons to hold divergent views
Debriefing can focus on the step, the stu- while performing cardiac surgery? Issues
dents interpretations and the choices that such as these need an objectivist treat-
ment and they better get that. Choosing the students in a discussion on handling dif-
an objectivist method when it is likely to ficult situations in training. By the end of
work best would be in sync with the the class, the students reach a consensus
constructivist emphasis on usefulness. that trainers need to avoid getting angry
with unruly participants. What if the stu-
Does Constructivism Support dents believe that their performance in train-
Assessment? ing need not be consistent with their state-
ments in class? Such deep rooted beliefs
Can assessment take place without defeat the very purpose of the class. Can
assuming reality? It can if social accep- the teacher do anything about it without
tance substitutes reality as the reference knowing about their belief systems? As-
criterion; however, that undermines the sessment provides the way for teachers to
very justification of a constructivist know what they should while they still have
worldview - the dynamism of knowledge. the time to influence the knowledge con-
The problem of status quo is unavoidable struction process. Thus formative assess-
in the social construction paradigm. Ac- ment becomes integral to constructivist
centuating it further by introducing teaching (Brooks & Brooks 1993).
summative assessment can undermine
the constructivist position itself. Are Constructivism & Technology
Summative assessment would reinforce Compatible?
the current social thinking. Hence
summative assessment cannot find a Technology is also a construct in the
place in the constructivist teaching. Note constructivist worldview. Hence there is
that realist constructivists would not face no reason why they should not be com-
such a problem regarding summative as- patible. In fact, new technologies in edu-
sessment. They can justify its use for cation have renewed the interest in
administrative purposes. constructivism (Collins 1991, LeBaron &
Bragg 1994, Mann 1994). Manipulating
Can assessment facilitate learning? a live dog may not be safe, but manipu-
It can if it indicates the need to develop lating an animated dog poses no danger
a more useful interpretation. If the teach- whatsoever. If technology can help learn-
ing activities provide feedback to learners safely manipulate various constructs
ers regarding the usefulness of their in diverse ways, then the quality of knowl-
present construct, then assessment would edge construction might improve. It may
boost knowledge construction. Thus for- also increase the pace of learning.
mative assessment becomes important.
If technology can help learners
Is formative assessment essential for
safely manipulate various con-
constructing useful knowledge? Yes, if its
structs in diverse ways, then the
absence can lead to useless ideas. Con-
quality of knowledge construction
sider a management classroom on training
might improve.
and development. The teacher is engaging
Alok Kumar
Can technology help if it promotes assume the gaps to be either unreal or

constructs that are far removed from life? unknowable? The very fact that it cant
Constructs that are far removed from life makes a knowable reality the core train-
are less likely to find use there. If the ing assumption. Thus the implications of
technological constructs closely represent realist constructivism would determine its
life constructs, then learners get a chance usefulness in training.
to create useful knowledge. Education
technology must be based on a compre- When should a constructivist position
hensive understanding of educational is- be considered in training? The need for
sues and effective practices. Ineffective widely applicable knowledge provides
educational processes are unlikely to be- constructivism a place in the fully know-
come effective simply by virtue of auto- able real world. Accordingly the need for
mation (Campoy 1992). a constructivist training would be there
if the participants are supposed to apply
Tools like multimedia and hypermedia their learning in diverse contexts. After
hold a great potential to boost all, they can use only their own constructs
constructivist teaching and learning. Not in diverse situations. If, on the other hand,
only the learners have fun with them, but they need to use their training almost as
also they get a rich environment for it is on their jobs, then instructions and
knowledge construction (Bagley & drills would be more efficient. Training
Hunter 1992). As with everything else, for machinists can fruitfully use instruc-
no technology is constructivist in itself. tions and drills; training for managers can
It all depends on how it is used and how fruitfully use case studies, discussions,
well it is integrated into the effective simulations, games, movies and
pedagogical practices to facilitate knowl- hypermedia.
edge construction (Strommen & Lincoln
1992).
The need for a constructivist train-
ing would be there if the partici-
It is clear that creating technology to
pants are supposed to apply their
facilitate learning would be easier if one
learning in diverse contexts.
assumes a certain degree of knowledge-
reality correspondence. In fact almost all
the existing so called learning technolo- Will a constructivist training follow
gies actually end up making such an as- objectivist training design? Will a
sumption. constructivist design result from an ob-
jectivist training need analysis? These
What Does It Mean for Training? questions indicate that it is not appropri-
ate to call a training constructivist on the
Can training begin without assuming pretext of having the so called
a performance gap, present or future? If constructivist sessions. A constructivist
it cant, then the performance gap be- approach to training would span its en-
comes central to training. Can training tire life cycle.
Training need analysis: A vision for critically reflecting on those

constructivist training need analysis topics for knowledge validation. Thus
would focus on the existing interpre- the constructivist design would be
tations of the situation and the pro- somewhat relaxed but focused. It
cesses of their formation in an would be able to accommodate some
organisation. It would identify the role pertinent diversions as well. What is
that the structures, policies, strate- required is a lively, mentally engag-
gies and values play in facilitating the ing training rather than a clock-led
existing interpretations in peoples drill. If that means using technology
minds. It would analyze the shared to augment effective pedagogical
idea of the job as well as what the practices, so be it.
incumbents think about it. Inter-sub-
Training implementation: The need
jectivity would help in identifying use-
for dry runs and pilot tests remain
ful issues. It would also use this op-
intact even in the constructivist train-
portunity to know about the deeply
ing. They would help the trainer de-
held beliefs of the people. In case it
velop improved ideas about handling
mandates training, the need analysis
the program. The trainer must under-
should provide trainers an idea about
stand his or her role as a facilitator.
the competencies and the context
Often hands-on experiences are
that the participants would be bring-
equated with active learning. Train-
ing in.
ers must appreciate that the need for
generalization or abstraction de-
Constructivist design would be
mands constructivism in training, not
learner-centred, even learner-
the need for concrete experiences.
driven.
Unless learners engage mentally to
form appropriate concepts, learning
Training design: Constructivist de- cannot really take place. Critical re-
sign would be learner-centred, even flections are essential to engage
learner-driven. Involving them from learners mentally. A democratic train-
the planning stage itself would en- ing environment allowing the partici-
courage them to take the responsi- pants to experience the joy of learn-
bility to learn. Concept maps and ing is a must for any constructivist
mind maps can be used instead of training.
rigidly defined objectives to provide
focus to the training. A constructivist Training evaluation: Formative
design must identify what requires evaluation is more useful for training
facilitation. Topics that can be safely than summative evaluation unless, of
learnt by individuals or groups need course, the training is for certifica-
not claim session time. Trainers can tion. Participants should be involved
give assignments on such topics. It in deciding about evaluation require-
is important that trainers make pro- ments during the design phase itself.
They should know what is expected
Alok Kumar
as a way to deal with different cultures

Peer-evaluation itself would pro- to facilitate global business operations.
mote peer-learning. Constructivism must be considered as a
way to have a more accommodating
of them once they go back to their world that knows to live with diversity.
jobs. They should perceive their role
in taking their organisations to the References
next level. These serve to provide
them with a focus. During the train- Bagley, C. & Hunter, B. (1992), Restructuring,
ing program, they should be involved Constructivism, and Technology: Forging
a New Relationship. Educational Technol-
in assessing each others learning.
ogy, 32(7): 22-27.
Thus peer-evaluation itself would
promote peer-learning. Berger, P. L. & Luckmann, T. (1966), The Social
Construction of Reality: A Treatise in the
Sociology of Knowledge, Garden City, NY:
Why Should Constructivism be Anchor Books.
Considered?
Brooks, J. G. & Brooks, M. G. (1993), In Search
of Understanding: The Case for
Are humans facing incessant Constructivist Classrooms, Alexandria, CA:
struggles based on religious dogmas? Are Association for Supervision and Curricu-
not even scientists found reluctant to lum Development.
accept anything that goes against current Bruner, J. (1966), Toward a Theory of Instruc-
scientific knowledge? Are societies di- tion, Cambridge, MA: Harvard University
vided along various rigidly adhered to re- Press.
alities such as caste, class and race? Are
Campoy, R. (1992), The Role of Technology in
people able to deal with other cultures the School Reform Movement, Educa-
from a position of equality? Myriads of tional Technology, 32(8): 17-22.
such questions keep challenging human-
Clark, M. (2002), In Search of Human Nature,
ity because of our belief in only one pos- London: Routledge.
sible explanation of the reality. Constr-
uctivism offers a solution, not by com- Collins, A. (1991), The Role of Computer Tech-
nology in Restructuring Schools. Phi Delta
pletely denying real knowledge, but by Kappan, 73(1): 28-36.
acknowledging divergent viewpoints. It
brings democracy to knowledge. It opens Diettrich, O. (2001), A Physical Approach to
the Construction of Cognition and to Cog-
a theoretical possibility to develop think-
nitive Evolution. Foundation of Science,
ing minds. It need not murder a beautiful 6: 273341.
fiction by a brutal fact; it acknowledges
Einstein, A. (2000), Relativity: The Special and
their value in different domains. As
General Theory. Retrieved July 10, 2008,
Riegler (2005) suggested, constructivism from http://www.bartleby.com/173/.
must be considered as a way to get rid
of the dogmatism that prevents science Foerster, H. v. (1973), On Constructing a Real-
ity. in F. E. Preiser (Ed.), Environmental
from becoming more fruitful and produc- Design Research, 2: 35-46. Stroudberg:
tive. Constructivism must be considered Dowden, Hutchinson & Ross.
Glasersfeld, E. V. (1995), Radical constructivism: Llins, R. R. (2001), I of the Vortex, Cambridge:

A way of knowing and learning, London: MIT Press.
The Falmer Press.
Mann, C. (1994), New Technologies and Gifted
Hofstede, G (2001), Cultures Consequences: Education, Roeper Review, 16(3): 172-76.
Comparing Values, Behaviours, Institu-
tions, and Organisations across Nations, Maturana, H. R, & Varela, F. J. (1979),
Thousand Oaks, CA: Sage Autopoiesis and Cognition, Boston: Reidel.
House, R. J., Hanges, P. J., Javidan, M., Dorfman, Mookerji, R. K. (1969), Ancient Indian Educa-
P. W., Gupta, V. & Associates (Eds.) tion, Delhi: Motilal Banarasi Das.
(2004), Culture, Leadership, and Piaget, J. (1954),The Construction of Reality in
Organisations: The GLOBE Study of 62 the Child, New York: Ballantine.
Societies, Thousand Oaks, CA: Sage.
Plonsky, M. (1998), Canine Vision [Electronic
Kelly, G. (1963), A Theory of Personality, New Version]. Retrieved July 01, 2010 from
York: Norton. http://www.uwsp.edu/psych/dog/LA/
Kuhn, T. S. (1970), The Structure of Scientific DrP4.htm.
Revolutions (2 ed.), Chicago: University Popper, K. (1963), Conjectures and Refuta-
of Chicago Press. tions. London: Routledge.
LeBaron, J. F., & Bragg, C. A. (1994), Practicing Strommen, E. F. & Lincoln, B. (1992),
What We Preach: Creating Distance Educa- Constructivism, Technology, and the Fu-
tion Models to Prepare Teachers for the ture of Classroom Learning. Education and
Twenty-first Century, American Journal Urban Society, 24(4): 466-76.
of Distance Education, 8: 5-19.
Book Review
Book Review
FROM JUGAAD TO SYSTEMATIC INNOVATION: THE

CHALLENGE FOR INDIA by Rishikesh T. Krishnan, The
Utpreraka Foundation, Bangalore, 2010
The book presents a detailed analy- activity with few subsequent improve-
sis of the market systemic weaknesses ments. It is not the result of an under-
that are responsible for the lower rank- standing of user needs spanning a wide
ing on various measures of innovation, spectrum of users. It is therefore likely
despite India ranks number two in the to have only a restricted application. On
world in terms of annual output of scien- the other hand the combination of inven-
tists and engineers in the country. Trans- tion and application is innovation. The
forming individual creativity into innova- translation of an invention or discovery
tion is a social and collective process. into commercial application unlocks its
Organizations (particularly in the Indian value. It is not static or an one time pro-
context) and social networks constitute cess. Once adopted further improve-
the arena where this process happens. ments on it are often necessary for suc-
Though government policies can provide cessful commercial exploitation of the
incentives to overcome some of the bar- innovation. The survival and growth of
riers to the social process, others that are the industrial firms requires innovation
embedded in the social, cultural and po- and it will be a pre-requisite of competi-
litical fabric are more difficult to over- tive success in the long run.
come. The reason why India remains an
uneven inventor is that it has many such The World Banks report on Unleash-
barriers. They are sticky and threaten to ing Indias Innovation (2007) argued that
persist for years to come. India can unleash existing / capabilities
and build on its innovation potential which
A distinction is made between mod- will lead to sustainable inclusive growth
ern jugaad (Creative Improvisation) and by taking a more strategic, explicit and
innovation. Jugaad is based on individual multi pronged approach to innovation.
ingenuity being displayed across sectors The report emphasized international
and contexts. Indian talent for Jugaad is benchmarking, greater accountability and
reflected in the ease with which we find more focus on results. It attributed
our ways around the myriad rules and Indias sketchy innovation output to in-
regulations posed by government regu- adequate competition, skills, information
lations. Jugaad is not sustainable because infrastructure and finance, a failure to
it does not have a science or engineering diffuse and absorb technology and knowl-
base. It does not have an organizational edge (global & local), a lack of exclusiv-
base or support. It tends to be a one time ity, over reliance on government (which
is too slow) and a fragmented innovation and skill levels and attitude toward tech-
system. The report made several recom- nology and innovation. A major concern
mendations namely on better acquisition is Indias performance on education and
of technology, promotion of industrial skills. Indian organizations face barriers
R&D on new firm creation, on educa- to innovations that have their origin in
tion and tight public private oversight Indian society and culture. These include:
mechanism. poor teamwork, the importance of up-
ward hierarchical progression, a
Another study of interest is the brahiminical attitude that gives brain work
Economist Intelligent Unit (E14 2007) a superior position over physical work, a
report. It uses patents per million popu- weak system and strategic orientation,
lation as a National Innovation Index. The low tolerance of failure, a lack of confi-
study considers the patents granted by dence in innovation capabilities coupled
the U.S, European and Japan patent of- with a failure to positively reinforce in-
fices and ranked India at 58 out of 82 novation efforts and a strong need for
countries based on patent for the period control that comes in the way of joint
2002 05. The report points out that working with other organization.
Indias rank is not expected to improve
much in the period 2007 2012. The The effective function of an innova-
study argues that Indias lower rank on tion system depends upon the interaction
the National Innovation (output) Index is between firms and other players like aca-
because the environment is not condu- demic research institutions and mobility
cive to innovation and is reducing the of scientific personal apart form diffu-
efficiency of conversion of inputs to out- sion of innovation. The author suggests
puts. Indian companies accounted for that by creating a new generation of tech-
just 16 percent of all US patent granted nology driven innovation enterprises that
to Indian inventors or Indian assignees last longer and grow rapidly, we can ex-
between 1995 and 2008. In contrast mul- pect to have a set of new role models
tinational corporations accounted for over that will generate confidence in our in-
half of the patents during the same pe- novative capabilities and act as a posi-
riod and Indian research institutes (pri- tive reinforcement in innovation efforts.
marily the CSIR) for about 22 percent. As we grow in wealth the aversion to
Only 18 percent of the Indian corporate failure (and related by experimentation)
patents are in field other than chemistry should come down. The importance to
(primarily pharmaceuticals). hierarchy can be expected to decline as
well as people will no longer require
Indias relatively poor innovation sup- power to have access to resources. Team
port infrastructure results in a poor effi- work and willingness to work together
ciency of conversion of investment into need to be inculcated in early education.
innovation. Innovation support infrastruc- So do the willingness to experiment and
ture consists of polices that support in- the dignity of physical work. It is empha-
vestment and trade base, technological sized that industrial innovation abilities in
Book Review
India cannot be strengthened without a activities related to industrial R & D in a

more widespread belief in the scientific single department to be called Depart-
method which relies on all forms of sys- ment of Industrial Research and Devel-
tematic experimentation and exploration opment (DIRD). The core mission of
DIRD should be the creation of a strong
From an industrial innovation per- industrial R & D base in the country to
spective higher education has two roles identify industry/ national priorities in
to play- development and supply of man- each areas and targeting resources to-
power which can undertake innovation wards these priority areas
tasks in industry and undertake basic re-
search, but Indias higher education sys- The book will stimulate discussion and
tem currently fails on both the counts. debate on innovation and create a
Both the National Knowledge Commis- favourable climate to undertake this ac-
sion and Yash Pal Committee have called tivity. It will be of interest to study the
for fundamental changes in regulation and progress of inventions that have been ap-
governance of university system and replied in industry and daily life of the people.
placement of the current regulatory in-
stitutions with new ones more suited to P.C. Bansal
the challenges of building Indias knowl- Former Scientist
edge economy. Another suggestion is to Defence Research &
restructure the Ministry of Science and Development Organization
Technology to place all programme and Government of India, New Delhi
MARKETING TO RURAL CONSUMERS:

UNDERSTANDING & TAPPING THE RURAL MARKET
POTENTIAL by Sanal Kumar Velayudhan & Guda Sridhar,
Excel Books, pp 365
Retailing as a business is being prac- redress consumer grievances. Now, the

ticed since time immemorial. The era of consumer is supreme. Systematic ef-
economic reforms has drastically trans- forts are being made to investigate and
formed the way retailing is done. Until understand consumer preferences and
early 90s, when the reform process be- choices for generating information
gan on a serious note, consumer was needed to educate and influence the
made to choose from what was on of- consumer. Innovative designs of retail-
fer; was inconsequential in the design ing like the Mall Culture are emerging
of the product/service, and in planning to woo the consumer even in the rural
and operating distribution network; and hinterland. Also, a formal judicial struc-
there was no effective mechanism to ture namely the consumer forum is now
in place and is active in protecting the markets are traditional and are social sta-
interests of consumers. tus driven. Also, they are not just extrapo-
lation of urban markets. Further, it came
Recent economic uprising in the ru- to light that purchasing power of the ru-
ral markets has witnessed remarkable ral consumers has been on the increase
expansion and diversification. Currently, and simultaneously there has been a shift
rural markets are growing twice as fast in rural consumer expenditure from food
as urban markets and they are already to household manufactured items and
much bigger than the urban markets. services. It was also brought out clearly
Many industrial houses in the country that rural consumers are averse to tak-
have already jumped into the fray to cap- ing risk; and that their purchase decisions
ture a share in the booming rural mar- are based on experiences of progressive
kets. However, very few have suc- farmers, peers, family elders and others
ceeded. Some are crawling and others who have been exposed to urban mar-
are lost in the wilderness. This is because kets. It was very interesting to note that
firm definition of rural markets is still elu- rural consumers are less quality and
sive. Also, there is very little knowledge brand conscious. For them, affordability
about the rural consumers, their purchase and accessibility are crucial. Another sig-
decision process and buying patterns. nificant observation is that there are dis-
tinct gender differences in the behaviour
It is here that the book under review of rural consumers. These differences
on Marketing to Rural Consumers is a are largely caused by situational factors
welcome addition. It is set to facilitate and cultural expectations. An important
understanding and tapping the rural mar- dimension which needs to be borne in
ket potential. The book is a compilation of mind is that rural markets are character-
some of the papers selected from those ized by limited and inappropriate after
presented at the conference on Market- sales service and inadequate information.
ing to Rural Consumers at the Indian In-
stitute of Management (IIM), Kozhikode There is, however, no editorial note
in April 2008. The papers deal with a va- introducing the subject, highlighting the
riety of issues in rural marketing such as issues discussed at the conference and the
boundaries of rural markets, environment extent to which the papers presented at
of rural consumer, factors influencing ru- the conference attempted to find solutions.
ral consumer behaviour, communication Also, many of the papers have not been
and channels in rural markets, and impli- edited properly. Nevertheless, it is a good
cations of rural consumer behaviour for effort by the editors and the book has very
rural marketing strategy. useful material to aid future research in
this emerging area in marketing.
Papers included in the book have
mostly relied on primary data and some M.S. Ramanujam
of the findings are very revealing: For Senior Fellow
instance, it was highlighted that rural Shri Ram Centre for IR &HR, New Delhi
Book
The Indian Journal of Industrial Review
Relations
BookRelations
The Indian Journal of Industrial Review
MANPOWER JOURNAL
Editor: A.Kamala Devi
Sub-editor: Dipika Sen
Volume XLV Number 1 January-March 2010

Editors Note
ARTICLES
Misuses of BPL Cards: A Case Study of Balasore District of Rural Orissa
Bijaya Kumar Malik and Sanjay. K. Mohanty
Restructuring Training and Development Programmes for Handicraft Sector in the J&K State:
An Empirical Study
Parvez A. Mir and Ajaz A. Mir
Managerial Retention: A Socio-Technical Analysis through Sap Lap Framework in a

Power Sector Organization
Koustab Ghosh and Sangeeta Sahney
NOTES & COMMENTS

Traditional Microfinance System in Rural and Backward Areas: A Study in Manipur
M. Kennedy Singh
BOOK REVIEWS
Victims of Social Justice: A Study of Women Landless Labourers, by Hajira Kumar & Jaimon
Varghese
Sanchita Bhattacharya
India: Micro, Small & Medium Enterprises Report, 2010, by The Institute of Small Enterprises and
Development, Cochin
I.C. Awasthi
MANPOWER NEWS
SUBSCRIPTION
ANNUAL SINGLE COPY
INDIA RS. 1200.00 RS. 300.00
OTHER COUNTRIES U.S.$ 180.00 U.S. $ 45.00
Institute of Applied Manpower Research

A-7, Narela Institutional Area, Delhi-110 040
Tel.: 27787214-18; Fax: 91-11-27783467
IAMR e-mail: iamrindia@nic.in Editorial e-mail: editorial_iamr@yahoo.com
Website:http://iamrindia.gov.in
The Indian Journal of Industrial
BookRelations
Review
se
lea
Re
w
Ne
About the Book
There is a huge reservoir and potential for skill training for
work in informal sector. However, the efforts other than
those of the government remain scattered and unaccounted.
In this context, it is important to note that there is no
systematic analysis of skill training experiences outside the
ambit of the government in terms of their approach,
outreach, quality of training, numbers trained and success
rate in enabling the women beneficiaries to access decent
work.
Shri Ram Centre for Industrial Relations and Human Resources Content
(SRC), New Delhi has endeavoured to develop such an PART I: CONCEPTUAL AND METHOD-
analysis based on case studies of 39 training providers at 14 OLOGICAL ASPECTS
locations spread over 8 States in the country. The study Chapter 1: Introduction
overwhelmingly brings to focus the need of quantifying the Chapter 2: The Study and its Domain
skill development capacity of non-governmental players to PART II: GROUND LEVEL EXPERI-
achieve the gigantic task of skilling women in the informal ENCES IN SKILLING WOMEN
sector. The case studies focused on an understanding of the Chapter 3: Targeting Women for Train-
approaches and practices of the training providers and
ing
evolved a feasible model of skilling the disadvantaged women
Chapter 4: Empowerment of Women for
for work in informal sector. The study has also proposed a
feasible model of Public-Private Partnership (PPP), using Work in Informal Sector
the ground level practices, mainly to trigger discussion to Chapter 5: Deciding on Skills to be Im-
develop a design of PPP. parted to Women for Work in the Infor-
mal Sector
The experiences documented here have four important Chapter 6: Women Centred Training
lessons: First, extensive participation of the potential Strategies for Work in Informal Sector
employer at all stages of the training process - from designing Chapter 7: Post-Training Help to Women
course curriculum and content to facilitating decent Chapter 8: Some Basic Issues in Skilling
employment for the trained women - is imperative. Second, of Women
preparing women to access training to improve their Chapter 9: A Model of Skilling for
capability through attitudinal transformation and confidence Women Work in the Informal Sector
building measures is a crucial step which should precede skill Chapter 10: A Model of Public Private
training. Third, innovative approaches to training are called Partnership in Skilling Women for Work
for to develop competencies needed by employers. Fourth,
in the Informal Sector
long periods of post-training follow-up are essential to help
Chapter 11: Skill Development of
skilled women to secure and sustain work.
Women for Work in Informal Sector
Three distinct areas identified for further research are: Summary and Recommendations

Case Studies
Harnessing the potential of private players in 1 Andhra Pradesh
supplementing the efforts of the government in 2 Karnataka
taking-up the mammoth job of skill development 3 Madhya Pradesh

in India, 4 Maharashtra
Workable model of Public-Private Partnership in 5 Rajasthan

skill development, and 6 Tamil Nadu
Training of trainers to overcome accute shortage 7 Uttar Pradesh
of trainers. 8 West Bengal
Appendix
While the present study has set the direction, there is a need Appendix 1: A Conceptual Note on Em
to gather more systematic evidence through field
powerment
investigations.
Appendix 2: State of Art in Skilling
Women in India
Appendix 3: Governance of Skill Devel
Price 325 Pages 250 2010 opment Initiative

Ijirpdf Jan 2011

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ijirpdf Jan 2011

Uploaded by

Copyright:

Available Formats

The Indian Journal of Industrial Relations

A REVIEW OF ECONOMIC &

Multi-nationlas & Industrial

The Indian Journal of Industrial

The Indian Journal of Industrial Relations

Notes for Contributors Subscription Rates

typed in double space, only on one side of

by a declaration by the author that the One Year 1000 100

Five Years 4000 375

The Indian Journal of Industrial Relations

a special (April 2011) issue on

Contact : A.C. Mishra, Asst. Manager (Admn.)

VOLUME 46 NUMBER 3 JANUARY 2011

Multinationals & Industrial Relations in India Ratna Sen 367

Trade Unions in Malaysia:Perspectives of Employers Raduan Che Rose, 384

Labour Cost &Foreign Direct Investment- Yu-Cheng Lai & 396

Unionism as Collective Action: Revisiting M. V. Anuradha 412

Jobless Growth:A District-Level Analysis of B. S. Prakash & 423

Efficiency of Indias Intermediate Goods Industries M. Manonmani & 435

Role of Organization Structure in Innovation in Yamini Prakash Sahay & 450

Psychological Climate as an Antecedent of Soumendu Biswas 465

Divergent Leadership Styles Practiced by Vimal Babu 478

Predictability of Job-Satisfaction: An Analysis Anshuman Bhattacharya 498

Employer Brand Image as Predictor of Employee Pushpendra Priyadarshi 510

Marketing To Rural Consumers:

IJIR online www.irhrjournal.com

SHRI RAM CENTRE

The first decade of the 21 st cen- Introduction

denly became cost conscious and de-

On March 8, 2010, Bosch Limited, Management requested its managers

2009, at Hyundai Motors India Ltds

resentatives Committee for raising em- Mitsubishi gates, disrupting work

eased significantly. Many of them different types of employment con-

6. Although Collective Bargaining is - close links with the industry-friendly

sonably successful. However, there ap- Hayden, Annette (2009), Internationalization

Hindu-Business Line, (21/10/09), Labour Unrest

Trade Unions in Malaysia:Perspectives of Employers &

Raduan Che Rose, Naresh Kumar & Nagiah Ramasamy

This paper examines the views of em- Trade Unions in Malaysia

Aminuddin (2003). As such, trade (represented by the human resource or

Perceptions on Malaysian Trade employers to have rather negative atti-

Table 2 Reasons for Companys Acceptance of Unionisation

Table 3 Employers Perception on the Involvement of Trade Unions

Table 4 Employers Perception on the Extent of Contribution of Employee Involvement and

involvement and participation initiatives Conclusion

Table 5 Employers Perception on the Extent of Contribution of Employee Involvement and

References Gall, G. & McKay, S. (2001), Facing Fairness

Labour Cost &Foreign Direct Investment-Evidence from

Yu-Cheng Lai & Santanu Sarkar

Theoretical Model Maxf 3 g i F ( K , L) # Ci =

On the basis of Besley and Burgess' g i 7i K W LX # rK # ( w ! ei ) L ...........(3)

firms ( :Q f d = Q f Qd 4 0 ), the output dif- tal formation. However, the bargaining

competition in labor market is likely to FDIindustryjt+ X 3 FDIfirmijt

in industry j at time t is regressed on a dummy variables or within estimator

Table 1: Industry-wise Sample Distribution

Table 2: The Percentage of FDI Inflow in India

ticipation, market capitalization, gross Measure

Table 3: The Sample Statistics

as proxy of wage. It is calculated as the reported in Table 4. The dependent vari-

Table 5: Effect of Labor Cost for Foreign Investment on Firms Output

Table 6: Effect of Foreign Ownership on FDI

FDIfirmijtFDIindustryit suggest that for- have comparative advantages of low

Unionism as Collective Action: Revisiting Klandermans

Politicized collective action is defined