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Organizational culture & transformational leadership as predictors of employee performance.


The era of globalization has made the business environment increasingly challenging and unstable (Burke 2004). In India, this era started with the introduction of the New Economic Policy (NEP) in 1991. It is worth noting that India holds a prominent place among the new emergent economies and as such, the forces of globalization have had a definitive impact on firm practices here (Biswas, Giri, & Srivastava 2006, Budhwar & Boyne 2004). According to Ulrich (1997), some of the major challenges facing the emerging economies of today are globalization, changes in customer expectations, changing structures of revenues and costs, a greater concern for organizational capability development, capacity to keep pace with environmental changes, innovations in the technological arena, attracting, developing, and retaining skilful and knowledgeable human resource capital, and ensuring the sustainability of long-term changes. Organizations can duplicate technology, processes, products, and strategy. As noted by Barney (1996), a firm's intangible assets such as human resources and related processes and practices are unique and inimitable. Thus, intangible factors such as organizational culture and leadership practices may form tangible outcomes in terms of individual performance and organizational excellence by forming the basis for framing organization wide policies and procedures. Chauhan, (2005) noted that change has become inherent in the contemporary business scenario. Chauhan et al. (2005) also observed that these environmental changes required greater levels of managerial effectiveness in order to keep organizations competent on the face of such swift changes. Goldman Sachs Investment Bank (2003) and World Bank (2001) placed India alongside Brazil, Russia, and China as the four major players in the world business scenario.

It is important to investigate the cultural facets that make up effective managerial behaviour within an organizational framework (Biswas 2006). Zurcher (1968) backs up this point of view wherein it was mentioned that with the worldwide growth in trade and commerce, it is necessary to study such behavioural aspects, especially in a cross-cultural situation.

Traditionally India's national culture has been collectivist and underlines human actions within the broader social ambit (Hofstede 2001). These aspects of national culture are deeply embedded in the individual psyche of the average Indian and are germane towards their affective and cognitive behaviour in a work-life context (Rao & Abraham 2003). Paradoxically though, the nature and flexibility of the Indian culture and the value system are such that often it has absorbed alien customs and adapted them to indigenous norms and practices, thus maintaining the distinct ethos of the society while at the same time globalizing it (Biswas et al. 2006). This has placed the Indian society in a unique position in the oriental world whereby its culture is marked by a philosophy of 'crossvergence'. India plays the role of a leader in establishing the standards of cultural ideals in the contemporary boundary-less business environment (Ralston, Holt, Terpestra, Kai-Cheng 1997). Varma, Budhwar, Biswas, and Toh (2005) put the Indian traditional cultural system into perspective by terming it as the fulcrum of the South-East Asian business milieu. England and Lee (1974) suggest that during periods of environmental turbulence, societies in developing economies such as India tend to take recourse to a path to stability. This implies that organizations in such countries happen to configure their centre of attention towards behavioural and cultural aspects that are indigenous and time tested as well as adapt to foreign norms that meets the bill of the situation. This is done to maintain internal harmony as well as external adaptability. Given that organizations operate within societal bounds, it is clear that behavioural aspects of organizational management requires attention and thus calls for further investigation. With this background, the objective of the current study is to examine the interrelationship among five behavioural constructs namely, organizational culture, transformational leadership, organizational communication, employee performance, and employees' intention to quit. More precisely, the present study investigates the causal impact of organizational culture and transformational leadership on employee performance and intention to quit, wherein organizational communication process is tested as a mediating variable.

Theoretical Background

Traditionally, culture has been the domain of anthropological studies (Ashkanasy, Wilderom & Peterson 2000). The body of literature in the past one and a half decades has, however, taken organizational culture beyond anthropology, and the culture construct is now found to be useful in answering various questions in diverse areas of organizational science. Barney (1996) proposed that resources of the firm are the shared values, beliefs and assumptions by which organizational members respond to the problems of internal integration and external adaptation, are difficult to replicate, and are inimitable, leading to long term and sustained organizational excellence. Barney was referring to an organization's culture as of inimitable, rare and valuable resource that helps firms stay ahead of their competitors in the long run. Ashkanasy et al. (2000) further noted that such widening presence of organizational culture is attributable to the fact that this construct can be widely applied in understanding most comprehensively how organizations and their subunits operate.

According to Reilly and DiAngelo (1990) there is a definite link between organizational culture and organizational communication. This link is not about messages, their sending, and their receipt, but about the bundle of pre-set understandings that make effective communication possible and probable. The bundle of pre-set understanding is what constitutes the shared meanings, assumptions, or perceptions or in other words, the organization's culture. Communication follows an open system or a closed system. Whether the communication system would be open or closed depends on the culture of the organization. In some organizations, culture would give way to a system of open communication, where is a markedly two-way process: the senior management and the staff voice themselves in tandem to contribute to the organization's effectiveness. In other organizations, the link would be characterized by a one-way process from the senior management to the staff; a closed communication system.

Furthermore, leadership was found to be one of the most critical factors that affect the creation, transmission, and maintenance of organizational culture because, it initiates and sustains changes in business environment (Lievens, Van Geit & Coetsier 1997). Schein (1984) pointed out that the bi-directional nature of leadership and culture influenced each other, and created a sustainable and inimitable resource for the organization. Researches indicated that the skills and qualities of organizational members, particularly, those who hold leadership roles were important in establishing and propagating cultural norms in an organization (Cooke & Szumal 2000, Panda & Gupta 2001). Thus, leaders influence organizational outcomes through their impact on employee perceptions, affect, and behaviour (England 1967, Ravlin & Meglino 1987), as well as, through their influence on various forms of affect through mechanisms of value congruence (Meglino, Ravlin & Adkins 1989).

Hermalin (2001) proposed that leadership style influenced organizational communication system because followers entrusted their compliance to leaders. This was because, the latter was assumed to have information about their future course of action. According to Anderson and King (1993) leadership style, in the contemporary business scenario should comprise clear vision and mission, as well as foster innovativeness. Howell and Avolio (1989) suggested that leadership style should develop confidence among followers and enhance their creativity which in turn would facilitate management of change.

Effective communication is an essential requirement to attain organization aims and objectives. Thus, organizational communication is an essential construct to maintain a sense of equilibrium in a dynamic business world (Luthans 1992, Yukl & Tracey 1992). The flow of organizational communication and its direction play a role of vital importance as to how the construct connects leadership and culture to individual-level outcomes such as job performance and an employee's intention to quit or continue with his/her existing organization.

Top-down communication flows with regards to job requirements, role clarity, and goal congruence have had a significant impact on employees' job performance (Katz & Kahn 1966). Furthermore, Goldhaber (1990) found that information regarding job-related issues, when transmitted properly through channels of organizational communication increased clarity regarding job expectations, thereby enhancing job performance levels. Organizational communication played a significant role in disseminating organizational values and missions Whether the communication system would be open or closed depends on the culture of the organization. emanating from the top management and also towards favourable relationship between subordinates and their supervisors (Gardner & Winder 1999). Literature also suggested that upward communication facilitates feedback as well as feed forward, thus ensuring that messages have been clearly conveyed, analyzed, and understood. This facilitates employee performance, thus leading to an overall enhancement of decision-making processes which in turn improves organizational effectiveness (Callan 1993, Fietkau 1990, Goldhaber 1990). Gardner and Winder (1999) further observed that feedback led to assessment and reassessment of job goals which allowed for revised performance standards, ultimately leading to improved job performance. The manner in which an employee perceives the communication styles, policies, and the overall system will determine to a great extent his/her level of morale and motivation which would be reflected in his/her performance outcomes (Pettit Jr., Goris & Vaught 1997, Pincus 1986). This in turn, would have a significant impact on his/her life in the organization.

Pettit Jr. et al. (1997) noted that organizational communication draws strong support as an antecedent of job satisfaction. The ramification is that a satisfied employee would rather stick to his/her current job and show lesser intentions of quitting the organizational environment that provides a system (i.e. communication system) that leads to a healthy quality of work life. During periods of organizational turmoil as faced by organizations all over the world in recent times, lack of suitable information often hastens rapid job transitions by apprehensive employees. In this connection, logical ways of retaining key employees is to keep them well informed about organizational realities and thus reinforce in them the belief that they are keenly valued by the organization (DeRosa, Hantula, Kock & D'Arcy 2004). Previous studies have investigated and established significant relationships in this regard (Burkes, Aytes, Chidambaram & Johnson 1999). Moreover, effective organizational communication strategies enhance the social glue between co-workers which make individuals reluctant to leave the social comforts of the current workplace (Duarte & Snyder 1999, Lipnack & Stamps 1997).

According to Varona (1996), organizational communication systems help formulate individuals' perception about their workplace from an organizational perspective that deals with a wide range of holistic information about the organization. This enhances an individual's continued commitment towards his/her organization which in turn reduces his/her intention to quit. Intention to quit is further reduced through effective sharing of information as it reduces job-related tensions and increases organizational identification. Porter, Steers, Mowday, and Boulian (1974) found that clear and accurate organizational communication showed a strong causal association with the desire to continue with the current organizational membership.

The Hypotheses

On the basis of the above discussion, the following hypotheses were tested (Fig.1):

H1: Organizational culture will have a positive and significant influence on organizational communication.

H2: Transformational leadership will have a positive and significant impact on organizational communication.

H3: Organizational communication will have a significantly negative effect on employees' intention to quit.

H4: Organizational communication will have a significantly positive consequence on employee performance.



For the purpose of the present study, data was collected by a randomly selected 20 organizations throughout India. Subsequently, the HR department of the selected firms was contacted in order to gain permission to collect data. Nine of the 20 organizations agreed to participate in the survey research. A list of participants who voluntarily agreed to fill the survey questionnaires was then collated. Based on the availability of the participants during the data collection period, 400 questionnaires were distributed. Of these, 357 participants returned completely filled-in and analyzable questionnaires which were subsequently subjected to statistical procedures. Thus, the response rate of the study was nearly 90 per cent.

For the study, participants who were managerial level employees in their organizations were selected. Three levels of managerial executives were considered, those belonging to the senior, middle, and junior management cadres to fill the study questionnaire. It was found that the average age of the participants was thirty-seven years, they had a mean work experience of eleven years. Out of these three hundred and fifty seven participants, 83.9 per cent were males, while 16.1 per cent were females. 7.3 per cent belonged to the senior levels of management, 35.6 per cent to the middle managerial levels' and 57.1 per cent belonged to the junior management cadres.


To measure the major variables of the study, items were selected from standardized questionnaires. The participants of the survey indicated their choices in a five-point scale.

Organizational Culture was measured using the 60 item Organizational Culture Questionnaire (OCQ) as developed by Denison (1990). The OCQ contained 4 indices with 3 scales under each. Each scale in turn comprised 5 items that made up the full inventory. The first index was involvement consisting of the scales on empowerment, team orientation, and capability development. The next index was consistency whose scales were core values, agreement, and coordination and integration. The index called adaptability comprised the scales on creating change, customer focus, and organizational learning. The fourth index was mission comprising the scales on strategic direction and intent, goals and objective and vision. The reliability of this scale as indicated by the Cronbach's alpha value was found to be .95.

Transformational leadership was measured using the multifactor leadership questionnaire (MLQ) form 5X (Bass & Avolio 1995). Trans-formational leadership comprised five sub factors which were idealized influence (attributed), idealized influence (behavioural), inspirational motivation, intellectual stimulation, and individual consideration and was manifested by 21 items. The Cronbach's alpha of this scale was .92.

Organizational Communication was measured using a 7 item Organizational Communication Scale, capturing the entire underlying manifest variables of the construct. The Organizational Communication Scale by Roberts and O'Reilly (1974) was used. The scale comprised 7 indices namely, trust, influence, mobility, desire for interaction, accuracy, summarization, and gate-keeping. The Cronbach's alpha of this measure was found to be .73.

Turnover Intention: 4 items used originally by O'Reilly, Chatman, and Caldwell (1991) were used as a measure of Turnover Intention. The Cronbach's alpha for this scale was .70.

Employee Performance was measured using Lynch, Eisenberger and Armeli's (1999) Employee Performance Scale. This scale comprised a total of 16 items, of which 9 measured in-role, and 7 measured extra-role performance. Participants had to indicate the most appropriate response within a range of 1=strongly disagree to 5=strongly agree. The reliability index as represented by the Cronbach's alpha was .90.


In Table 1, the means, standard deviations, correlations, and the reliability indices of the key variables of the study are described. It was found that organizational culture correlated significantly with organizational communication (r=.49, p<.01). The correlations between transformational leadership and organizational communication (r=.48, p<.01) was also found to be significant. The correlation between organizational communication and intention to quit (r=.16, p<.01) and organizational communication and employee performance (r=.44, p<.01) were also significant.

Table 2 presents the standardized regression estimates for the key constructs. Organizational culture significantly and positively influenced the designing of organizational communication (standa-rdized [beta] = .71, C.R. = 7.83). Similarly transformational leadership significantly and positively predicted the organi-zational communication procedures (standardized [beta] = .30, C.R. = 4.80). It was also found that organizational communication had a significant and negative impact on intention to quit (standardized [beta] = -.42, C.R. = -4.47). Finally, organi-zational communication had a significant and positive effect on employee performance (standardized [beta] = .80, C.R. = 8.81).

Structural Equation Modeling (SEM) procedures suggested that the values of critical ratio (C.R.) of the regression estimate (Byrne 2001) when are greater than or equal to 2.58, indicate a 99% level of significance and when are greater than or equal to 1.96 but less than 2.58, indicate a 95% level of significance. To calculate the fit indices which explain the relationships between the hypothesized paths and the latent constructs, AMOS 4.0 SEM procedure was resorted to (Arbuckle & Wothke 1999). Maximum likelihood estimation (MLE) algorithm in order to determine the fit indices was used. Hence, the Goodness-of-Fit Index (GFI) and the Root Mean Square Error of Approximation (RMSEA) were reported as the absolute fit measures. According to Byrne (2001), absolute fit measures were used to compare the hypothesized model in the absence of any other model. Thus, the Tucker-Lewis Index (TLI), the Normed Fit Index (NFI), and the Comparative Fit Index (CFI) are also mentioned. These indices indicate a comparison between the model that was hypothesized and the model with maximum constraints. Finally, the normed chi-square value was also considered as an acceptable measure of fit. According to Hair et. al (1998), the recommended fit values for GFI, TLI, NFI, and CFI are > 0.90. Likewise, while an RMSEA of .0 indicates perfect fit, values that are less than .07 are considered as good fits. The range of the normed chi-square is generally accepted as 1.00 < normed [[??].sup.2] < 3.00. Finally, the Adjusted Goodness-of-Fit (AGFI) as well as the Parsimony-adjusted Goodness-of-Fit (PGFI) measures were also reported.

Table 3 shows the fit measures of the proposed model. For the model as depicted in Figure 1, the normed [[??].sup.2] value was 2.14. The GFI was .91, which was above the recommended value. The TLI was equal to .94, the NFI value was .91, and the CFI value was .95. These values were also much above the recommended values for the respective indices. With the threshold value of RMSEA being .07, the value of RMSEA for the proposed model was .06. Finally, the AGFI and the PGFI values were equal to .88 and .69 respectively.

Mediator Analysis

The mediator status of organizational communication between the independent and the dependent variables were also checked. For this purpose, the suggestions made by Baron and Kenny (1986) and MacKinnon, David and Dwyer (1993) were followed. To establish organizational communication as a mediator, two conditions were taken into consideration. Firstly, it was investigated whether the value of the direct path from the predictors to the criteria was greater than the direct path between them under mediated conditions. Secondly, it was also examined whether the direct path from the predictors to the criteria under mediated conditions was significant. Since, conditions one and two were positive, it was concluded that organizational communication is a quasi mediator between the predictors that is, organizational culture and transformational leadership and the criteria that is, intention to quit and employee performance. The results of the mediator analysis are presented in Table 4 below.

Discussion & Conclusion

One of the reasons that gave rise to the need for the present study was that the process of globalization had given rise to the need for the investigating familiar and hitherto-accepted theories and explanations regarding this construct. The results of the present study imply that organizational culture is a significant and positive predictor of organizational communication. This underlines the acceptance of the first hypothesis that organizational culture will have a positive and significant impact on organizational communication.

The cause and effect relationship signifies that explicit and implicit messages as spread throughout the organization based in organizational philosophy, organizational glue, and management systems and procedures that define an organization's culture. This line of reasoning is corroborated by earlier studies (Schein 1984). The implication of accepting this hypothesis is that the differences in cultural dimensions or the strength of competing values will determine mobility, trust, inter-dependence, and various other facets of organizational communication. Also, previous studies (Agar 1979, Morey & Luthans 1985, Schall 1983, Shockley-Zalaback & Morley 1994, Spradley 1980) indicated that cultural factors were used by organizational members in perceiving and interpreting thematic messages occurring in a work-related context.

From a practical point of view, the association between organizational culture and organizational communication as posited by the first hypothesis that it is important for managers to understand and imbibe the organizational founder's and individual members' values in determining organizational communication activities. This line of reasoning is supported by several studies (Morley et. al 1993, Schall, 1983). Moreover, within the framework of globalized business environment and fluid cross-cultural relationships within and between organizations it is an imperative for managers to design suitable measure to carry the impact of organizational communication on organizational outcomes.

The present study excluded external communication such as public communication, advertisements, and correspondence with external customers and suppliers. We emphasize on communication processes and activities that take place within an organization and include dimensions such as trust between organizational members involved in exchanging information, direction of intra-organizational communication, and the influence of messages on their senders and receivers within the organization.

We postulate that transformational leadership will have a significant and positive influence on organizational communication. As results showed, this was indeed the case. The theoretical fallout of this hypothesis is that since managerial functions, among others, include planning and control, it is the method in which plans and decisions are communicated and subsequently accepted or rejected, that defines organizational efficacy. Theoretically, transformational leaders are those who are able to inculcate organizational achievements in terms of followers' aspirations and thus enthuse the latter in achieving their individual goals and thereby realize person-organization goal congruence. Since this is achieved through mutual trust and non-verbal communication tactics (Greenbaum 1973) which are factors that form the conceptual base of transformational leadership, it is implied that such a style of leadership will have a significant and positive impact on the style of organizational communication.

It is felt that the findings are indicative of the top management's concerns of letting organizational members know about future directions and strategies, communicating to the employees about standards of performance, and letting others, especially at the peer-level, understand the execution of managerial functions. Barring the final implication as stated above, individualized consideration about employees' expectations and an idealized influence on employee perception goes a long way in deciding the mode of an organization's communication procedures. The discussion above provides the theoretical and practical grounds on which the acceptance of the second hypothesis of the study is based.

Organizational communication activities or their lack creates dis-satisfaction among employees as they form a barrier on how an individual understands organizational realities. Such an argument is supported by the study of Varona (1996). This argument would take into account the various themes that make up the organizational life of an individual employee and thus defines organizational culture to him/her. It also reflects supervisory communication and leader member exchange relationships. Since these are the factors that lead to an individual's commitment and motivation at the workplace it is a logical presumption that an individual's continuance in an organization in terms of his/her intrinsic motivation would depend on styles of organizational communication.

The present study underlines the need for a strong climate of communi-cation to realize the effect of culture and leadership on positive levels of employee performance and a negative level of turnover intention. It involves items that reflect the extent to which the dimensions of communication would motivate and inspire employees to realize organizational goals. To that extent, not only will individuals be committed to work wholeheartedly for their organization but would also reveal positive levels of organizational involvement. Such being the case, employees would be averse to quit the organization and disrupt the status quo. As Varona (1996) points out, a healthy organizational communication strategy would serve as a disincentive for organizational members to display their quitting intentions. This buttresses the acceptance of the third hypothesis of the current study wherein it was postulated that organizational communication will have a negative impact and significant effect on employees' intention to quit his/ her organization.

It is evident that organizational communication does play a significant role in increasing or decreasing an employee's intention to quit his/her organization. In practical terms, in the contemporary business environment which allows knowledge workers to make faster transitions, it is essential that managers practice open and trustworthy communication related activities in order to maintain trust and commitment of their subordinates thereby reducing the chances of the latter quitting the organization.

The fourth and final hypothesis of this study stated that organizational communication would significantly and positively predict employee performance. The statistical analysis applied on the relevant data led to the acceptance of this hypothesis. In terms of theoretical implications, the above result stands justified because it is only a positive level of organizational communication which will lead to goal clarity and reduction of role conflict and role ambiguity, thus enhancing employee efficiency and effectiveness. As Gardner and Winder (1999) pointed out that formal and informal communication channels in an organization are powerful tools to motivate and stimulate organizational members to display higher levels of in-role as well as extra-role activities.

The practical implication of this hypothesis is that it underscores that optimizing the efficiency of communication strategies improves individual efficacy. As Gwynne (1999) stated an effective organizational communication strategy sets the benchmark for a 'learning' or a 'knowledge' organization. Since an organization is ultimately a sum total of its individual members, this would be a reflection of individual employees' enhanced capabilities and their performance. Moreover, accuracy of information and trustworthiness of the information received would set the job standards. Thus, communication activities clarify an individual's expected performance and contribute to his/her personal growth and development.

Finally, the present study focused on organizational communication as a key construct in the hypothesized model. It may be noted that organizational communication plays a vital role in binding employees together by transmitting cultural norms from an organizational context to an individual's way of life in the organization. It also increases supervisor-related commitment by helping managers transform their subordinates' performance objectives as complementary to overall organizational goals and mission.

Future Research

Future research scope should include changes in culture and its predictive outcomes in terms of changes in structure and processes of organizational communication. Follow-up research is also required to clarify the processes by which communication strategies would mediate the relationship between transformational leadership and individual's job responsibilities. Furthermore, studies can also verify the mediating aspects of organizational commitment and job satisfaction in predicting associations between organizational communication, turnover intentions, and organizational identity. Finally, in future, researchers may also focus upon variables that interact with communication strategies to forecast communication satisfaction and individual performance on-the-job.


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Soumendu Biswas is Assistant Professor (HR Area), Management Development Institute Gurgaon122001. E-mail:
Table 1 Descriptive Statistics, Correlations,
and Reliability Indices (N=357)

 Mean S.D. 1 2

1. Organizational culture 3.54 .47 (.95)
2. Transformational 3.39 .80 .57 ** (.92)
3. Organizational 3.59 .49 .49 ** .48 **
4. Intention to quit 2.78 .73 .26 ** .10 *
5. Employee Performance 3.56 .55 .68 ** .53 **

 3 4 5

1. Organizational culture
2. Transformational
3. Organizational (.73)
4. Intention to quit .16 ** (.70)
5. Employee Performance .44 ** (.09) (.90)

* p = .05; ** p = .01

Values in parentheses represent Cronbach's alpha

Table 2 Regression Estimates

 Standardized C.R.

Organizational culture [right arrow]
 Organizational communication .71 7.83
Transformational leadership [right arrow]
 Organizational communication .30 4.80
Organizational communication [right arrow]
 Intention to quit -.42 -4.47
Organizational communication [right arrow]
 Employee Performance .80 8.81

Table 3: Fit Indices


Proposed Model .91 .88 .69 .94 .91 .95 .06 2.14
 Model .27 .20 .25 .00 .00 .00 .23 20.34

Table 4 Analysis of Organizational Communication
as a Mediator

 Whether (direct path)
 > (direct path under
 mediated condition)?

Organizational culture [right arrow]
communication [right arrow]
Intention to quit

Transformational leadership [right arrow]
communication [right arrow] YES
Intention to quit

Organizational culture [right arrow]
Organizational communication [right arrow]
Employee performance

Transformational leadership [right arrow]
Organizational communication [right arrow]
Employee performance

 (direct path
 under mediated
 condition) is

Organizational culture [right arrow]
communication [right arrow]
Intention to quit

Transformational leadership [right arrow]
Organizational YES
communication [right arrow]
Intention to quit

Organizational culture [right arrow]
Organizational communication [right arrow]
Employee performance

Transformational leadership [right arrow]
Organizational communication [right arrow]
Employee performance

 Results of
 the mediator

Organizational culture [right arrow]
communication [right arrow]
Intention to quit

Transformational leadership [right arrow]
Organizational Organizational
communication [right arrow] communication
Intention to quit is a
Organizational culture [right arrow]
Organizational communication [right arrow]

 % of explained

Organizational culture [right arrow]
communication [right arrow]
Intention to quit 26.20

Transformational leadership [right arrow]
Organizational 13.04
communication [right arrow]
Intention to quit

Organizational culture [right arrow] 22.60
Organizational communication [right arrow]
Employee performance

Transformational leadership [right arrow]
Organizational communication [right arrow]
Employee performance
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Title Annotation:Contributed Article
Author:Biswas, Soumendu
Publication:Indian Journal of Industrial Relations
Geographic Code:9INDI
Date:Apr 1, 2009
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