The Effect of Organizational Trust and Intellectual Capital on Ficohsa Financial Institution's Business Performance and Competence in Honduras

Abstract

Emerging technologies and globalization have blurred the boundaries between nations, making our word a global village. For businesses this has meant a radical change in the way they do business, forcing agreements to happen without ever having face-to-face contact, done only under good faith and trust. It has also transformed work dynamics, in which organizations struggle to perform in a transformed fierce, highly competitive, cut-through global market. To meet these high demands organizations are now moving towards becoming learning organizations where intellectual capital and knowledge are the key to giving them a competitive advantage and add value to their products and services. However in order to have successful knowledge sharing within and organization a well-established culture of trust in indispensable. This is especially true for the Honduran financial industry, the most affected industry in the country after the 2008 global financial crisis. By developing an integrated model, the Trust-Intellectual Capital and Performance Model (TIP) Model developed by Shih and Funes, this research explores the effect organizational trust has on intellectual capital, the effect intellectual capital has on business performance and the effect business performance has on survival and competitiveness by using partial least square regression (PLS). The data for this study was collected from 254 employees of Ficohsa Financial Institution, Honduras third most important bank. Results obtained suggest organizational trust has a significant and positive effect on intellectual capital; intellectual capital has a significant and positive effect on business performance and business performance significantly and positively affects an organization’s competitiveness. Regarding intellectual capital, results also suggest innovation capital has a positive, highly significant effect on structural capital and structural capital has a positive, highly significant effect on intellectual capital, which includes human and organizational capital. Process capital appears to have a positive, significant effect on structure capital and finally, customer capital seems to have a positive, significant effect on intellectual capital.Emerging technologies and globalization have blurred the boundaries between nations, making our word a global village. For businesses this has meant a radical change in the way they do business, forcing agreements to happen without ever having face-to-face contact, done only under good faith and trust. It has also transformed work dynamics, in which organizations struggle to perform in a transformed fierce, highly competitive, cut-through global market. To meet these high demands organizations are now moving towards becoming learning organizations where intellectual capital and knowledge are the key to giving them a competitive advantage and add value to their products and services. However in order to have successful knowledge sharing within and organization a well-established culture of trust in indispensable. This is especially true for the Honduran financial industry, the most affected industry in the country after the 2008 global financial crisis. By developing an integrated model, the Trust-Intellectual Capital and Performance Model (TIP) Model developed by Shih and Funes, this research explores the effect organizational trust has on intellectual capital, the effect intellectual capital has on business performance and the effect business performance has on survival and competitiveness by using partial least square regression (PLS). The data for this study was collected from 254 employees of Ficohsa Financial Institution, Honduras third most important bank. Results obtained suggest organizational trust has a significant and positive effect on intellectual capital; intellectual capital has a significant and positive effect on business performance and business performance significantly and positively affects an organization’s competitiveness. Regarding intellectual capital, results also suggest innovation capital has a positive, highly significant effect on structural capital and structural capital has a positive, highly significant effect on intellectual capital, which includes human and organizational capital. Process capital appears to have a positive, significant effect on structure capital and finally, customer capital seems to have a positive, significant effect on intellectual capital.