Beyond the High‐Performance Paradigm: Exploring the Curvilinear Relationship between High‐Performance Work Systems and Organizational Performance in Taiwanese Manufacturing Firms
| Date | 01 September 2011 |
| Published date | 01 September 2011 |
| DOI | http://doi.org/10.1111/j.1467-8543.2010.00778.x |
| Author | Nai‐Wen Chi,Carol Yeh‐Yun Lin |
Beyond the High-Performance Paradigm:
Exploring the Curvilinear Relationship
between High-Performance Work
Systems and Organizational
Performance in Taiwanese
Manufacturing Firmsbjir_778486..514
Nai-Wen Chi and Carol Yeh-Yun Lin
Abstract
In this study, we explore the potential downside of the ‘high-performance’
paradigm by examining the curvilinear relationship between high-performance
work systems (HPWS) and organizational performance and the moderating
effects of the industry type. Using data from Taiwanese manufacturing firms,
we find an inverted-U pattern between HPWS and organizational performance
in high-technology firms (N=74), and a linear relationship in traditional
manufacturing firms (N=86). These findings are consistent with the viewpoint
of diminishing returns of HPWS and the contingency perspective. Theoretical
and practical implications of our findings are also discussed.
1. Introduction
How to attract, develop and retain talented human resources (HR) has
become the focus of considerable interest in both academic and popular press
(Becker and Huselid 2006; Pfeffer 1998; Wright and Boswell 2002). Based on
this trend, HR scholars have strongly advocated the necessity to implement
high-performance work systems (HPWS) to attain this goal (Datta et al. 2005;
Guthrie 2001; Huselid 1995). HPWS is an integrated system of HR practices
that enables high performance by enhancing employee skills, abilities and
motivation (Huselid 1995; Wright and Boswell 2002). Although the majority
of empirical findings concerning HPWS support the argument that these
Nai-Wen Chi and Carol Yeh-Yun Lin are both at National Chengchi University.
British Journal of Industrial Relations doi: 10.1111/j.1467-8543.2010.00778.x
49:3 September 2011 0007–1080 pp. 486–514
© Blackwell Publishing Ltd/London School of Economics 2010. Published by Blackwell Publishing Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
systems lead to higher levels of organizational performance (e.g. Delaney and
Huselid 1996; Huselid 1995; Way 2002), there remain several issues that have
not been fully explored in the existing research.
The first unanswered issue pertains to the potential downsides of HPWS as
pointed out by several scholars (e.g. Appelbaum et al. 2000; Godard 2004;
Harley 2002). From the economic cost perspective (e.g. Bryson et al. 2005;
Godard 2001; Jones and Wright 1992), higher costs related to sophisticated
selection tools and to continuous investment in training programmes, and
competitive wages may offset the benefits of HPWS because of the cost–
benefit trade-offs (Forth and Millward 2004). Moreover, given an inherent
limit in the amount of performance that can be increased, diminishing returns
of HPWS can occur when HPWS adoption exceeds its optimal level (Godard
2004; Jones and Wright 1992). As such, the present study attempts to empiri-
cally investigate the possible curvilinear relationship between HPWS and
organizational performance.
The second issue concerns the moderating effects of industrial environment.
Based on the contingency theory perspective, the effects of HPWS on
organizational performance vary under different industrial environments
(Godard 2004; Guest et al. 2003; Jackson and Schuler 1995; Wright et al.
1994). However, our understanding of the moderating effects of industry
types on the HPWS–performance association remains underdeveloped. On
the one hand, Kintana et al. (2006) have found that HPWS execution is often
advantageous for high-technology firms because of fierce competition and
industrial dynamism. On the other hand, Chen et al. (2005) have suggested
that the benefits of HPWS may be less apparent for traditional manufactur-
ing firms owing to their relatively static external environments. Following the
call to explore the boundary conditions of the HPWS–performance linkage
(Becker and Huselid 2006; Guest et al. 2003), we also investigate whether the
curvilinear relationship between HPWS and organizational performance is
moderated by industry type (i.e. high-technology and traditional manufac-
turing industries).
The final issue is whether the positive results obtained from HPWS can be
generalized into Eastern cultures. Published studies that investigate the
HPWS–performance linkages have mainly been conducted in Western coun-
tries, and especially within the US context (Bae and Lawler 2000; Guest et al.
2003; Guthrie 2001). To fully test the generalizability of HPWS–performance
linkages, scholars have demanded that more studies be conducted in Eastern
countries (Bae et al. 2003; Heery 2005; Shih et al. 2006; Wright et al. 2005b).
We respond to this call by testing the aforementioned relationship in Taiwan,
a good HPWS research setting for four reasons. First, although Taiwan has
become an important production source for a variety of high-technology
products in the global market, keen competition from other developed
and developing countries continually forces Taiwanese firms to use their
HR more effectively (Chang and Chi 2007; Chi et al. 2008; Han et al. 2006).
As a result, HPWS adoption has become a common approach for
Taiwanese companies (Bae et al. 2003; Tsai 2006). Second, many US-based
HPWS and Organizational Performance 487
© Blackwell Publishing Ltd/London School of Economics 2010.
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