Can HRM alleviate the negative effects of the resource curse on firms? Evidence from Brunei
| Pages | 1931-1947 |
| Published date | 06 November 2017 |
| Date | 06 November 2017 |
| DOI | https://doi.org/10.1108/PR-04-2016-0081 |
| Author | Tamer K. Darwish,Abdul Fattaah Mohamed,Geoffrey Wood,Satwinder Singh,Jocelyne Fleming |
| Subject Matter | HR & organizational behaviour,Global HRM |
Can HRM alleviate the negative
effects of the resource curse on
firms? Evidence from Brunei
Tamer K. Darwish
The Business School, University of Gloucestershire, Cheltenham, UK
Abdul Fattaah Mohamed
Baiduri Bank Group, Bandar Seri Begawan, Brunei Darussalam
Geoffrey Wood
Essex Business School, University of Essex, Colchester, UK
Satwinder Singh
Business School, Brunel University, Uxbridge, UK, and
Jocelyne Fleming
The Business School, University of Gloucestershire, Cheltenham, UK
Abstract
Purpose –The resource curse literature suggests that firms operating in non-oil and non-gas industries in
petrostates face considerable challenges in securing competitiveness and sustaining themselves. Based on a
firm-level survey within a micro-petrostate, Brunei, the purpose of this paper is to explore the relationship
between specific HR policies and practices and organisational performance; analyse, compare, and contrast oil
and gas with non-oil and non-gas sectors; and draw out the comparative lessons for understanding the
potential and performance consequences of HR interventions in resource-centred national economies.
Design/methodology/approach –Data for this study were generated from a primary survey administered
amongst the HR directors in companies operating in all sectors in Brunei. A statistically representative
sample size of 214 was selected.
Findings –The authors confirmed that firms in the oil and gas sector indeed performed better than other
sectors. However, the authors found that the negative effects associated with operating outside of oil and gas
could be mitigated through strategic choices: the strategic involvement of HR directors in the affairs of the
company reduced employee turnover and added positively to financial returns across sectors.
Practical implications –Developing and enhancing the role of people management is still very much easier
than bringing about structural institutional reforms: the study confirms that at least part of the solution to
contextual difficulties lies within, and that the firm-level consequences of the resource curse can be
ameliorated through a strategic choice.
Originality/value –The nature of the present investigation is one of few studies conducted in
South East Asia in general and in the context of Brunei, in particular. It also contributes to the authors’
understanding whether HR interventions can ameliorate the challenges of operating in a non-resource sector
in a resource-rich country.
Keywords Quantitative, Human resources, Employee turnover, Oil and gas sector,
Perceived financial performance, Resource curse theory
Paper type Research paper
Introduction
As the literature on the “resource curse”alerts us, firms operating in national economieswith
significant oil and gas industries face serious challenges in securing competitiveness. This is
owing to the tendency for the oil and gas sector to crowd out investment in physical and
human capitalin other areas, associated governanceproblems, a tendencyfor policy makers to
look to oil and gas to resolve developmental problems rather than promoting more broadly
based institution building, and currency overvaluation and volatility (Collier, 2010; Ross, 2012).
In many petrostates, the oil and gas sector is closely controlled and regulated, whilst
Personnel Review
Vol. 46 No. 8, 2017
pp. 1931-1947
© Emerald PublishingLimited
0048-3486
DOI 10.1108/PR-04-2016-0081
Received 9 April 2016
Revised 4 October 2016
Accepted 6 February 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0048-3486.htm
1931
Negative
effects of the
resource curse
on firms
non-resource industries are neglected (Auty, 1993). In such challenging circumstances, it can
be argued that the human dimensions of organisational competitiveness are vested with
particular importance. Based onthe case of a micro-petrostate, Brunei, this paper looks atthe
extent to which HR practices may help mitigate negative sectoral effects, comparing and
contrasting the case of firms operating within the oil and gas sector with those operating in
other sectors, and draws out the comparative lessons for understanding the potential and
performance consequences of HR interventions in resource-centred national economies.
In exploring the link between HR practices and performance, the impact of strategic HR
involvement (SHRI) and strategic HR devolvement (SHRD) in organisations has received
increasing attention (see, e.g. Pfeffer, 1998; Budhwar, 2000; Paauwe, 2009; Guest, 2011;
Sheehan, 2012; Singh, Darwish, Costa and Anderson, 2012; Darwish et al., 2015).
The integration of Human Resource Management in the formulation of business strategy is
referred to as SHRI; SHRD, on the other hand, can be defined as the devolution of key HR
practices to line managers, and away from personnel specialists (Brewster and Larsen, 1992;
Darwish and Singh, 2013). It has been argued that the integration of HR practices and
policies within business and corporate strategy may enhance the overall organisational
performance (OP), as might HR devolution, and ameliorate any challenges posed by context
(see Cunningham and Hyman, 1999; Budhwar, 2000; Andersen et al., 2007; Karami et al.,
2008; Sheehan, 2012). However, a number of studies on this have been carried out in the
West; hence, this paper is an attempt to fill this lacuna through focussing on the case of an
emerging market petrostate.
More specifically, we explore the impact of specific SHRI and SHRD on employee
turnover, and the managerial perceptions of financial performance across all industries in
the petrostate of Brunei, and whether such interventions can ameliorate the challenges of
operating in a non-resource sector in a resource-rich country. The country is a relatively
developed and stable Southeast Asian country with rich natural source endowments. It
could be further claimed that firms operating in comparable markets, as well as in
commodity-driven economies, could learn valued lessons from the Bruneian context,
especially in terms of differences, and whether the challenges faced in non-oil and gas
sectors in such contexts are insurmountable.
The resource curse and firm competitiveness
The resource curse literature suggests that resource-rich countries tend to be characterised
by inferior and more volatile macro-economic performance when compared to those with
less mineral riches (Auty, 1993; Alexeev and Conrad, 2009; Bhattacharya and Hodler,
2010). This is due to the tendency for currencies to be overvalued, making other industries
less competitive, investors concentratingontheeasyreturnsfromminerals,andon
securing lucrative contracts from royalty enriched governments. The latter, in turn, have
fewer incentives to promote the deepening of institutions and associated policies aimed at
securing broad-based economic development, or promote and support developmental
initiatives that are difficult to sustain without continued financial lifelines, making for
volatile and uneven sectoral performance (Collier, 2010; Ross, 2012). Critics have charged
that countries indeed benefit from natural resource windfalls (cf. Alexeev and Conrad,
2009; Haber and Menaldo, 2001). However, more recent work has pointed to the fact that
such studies drew on a particular panel of countries and time period; in the present time of
historically high and volatile commodity prices, the challenges faced in promoting broad-
based development from natural resource booms have become even more intense
(Andersen and Ross, 2015; Wiens et al., 2014). What does this mean then for the practice of
HRM? First, the particularly uneven nature of growth is likely to lead to skill gaps in
non-resource sections of the economy (Nuur and Laestadius, 2010). Second, lucrative
protected job opportunities in the state sector, and from oil and gas firms seeking to secure
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