Inevitable knowledge strategy. A paradigm shift in strategic HRM practices to augment firm’s performance
| Published date | 07 August 2017 |
| Date | 07 August 2017 |
| DOI | https://doi.org/10.1108/ER-01-2016-0006 |
| Pages | 753-774 |
| Author | Arunprasad P. |
| Subject Matter | HR & organizational behaviour,Industrial/labour relations,Employment law |
Inevitable knowledge strategy
A paradigm shift in strategic HRM
practices to augment firm’s performance
Arunprasad P.
Department of Management, University of Dubai, Dubai, UAE
Abstract
Purpose –The purpose of this paper is to determine the impact of strategic human resource management
(HRM) practices and knowledge strategies on the performance of a sample of software companies in India.
Design/methodology/approach –The sample chosen for this study was software professionals in India;
the software companies were chosen based on their listing in the NASSCOM annual report, with financial
turnover as the basis for classification. In order to measure the tangible and intangible outcomes, instruments
used in this study include financial and non-economic performance.
Findings –As per the contingency approach, the fit between strategic HRM practices (staffing, general training,
specific training, performance appraisal, performance feedback, reward and compensation and employee
development) and knowledge strategy dimensions (consolidator, transformer and co-inventor) was observed and
the resultsrevealed that the moderation effect hashad a positive impact on thefirms’performance.
Practical implications –Investment in specific developmental programs for high-potential employees and
quick learners will make knowledge-intensive firms financially sound in the long run. Through an
appropriate reward strategy, employees who are capable of lateral and innovative thinking at work can be
engaged in consistently delivering quality projects, which will have a significant positive impact on overall
project costs and the financial performance of the firm.
Originality/value –The proposed model in this study can enhance a firm’s performance, provided the firm
adopts a specific knowledge strategy and coherently aligns it with strategic HRM practices to achieve a
sustained competitive advantage.
Keywords Knowledge strategy, Firm performance, Organization learning, Strategic HRM
Paper type Research paper
Introduction
India experienced the historical growth of human resource management (HRM) in different
phases, namely, labor welfare (1930s and 1940s); the Factories Act, 1948; the concepts of
personnel function in the 1950s, personnel management in the 1960s, human resource
developmentin the 1980s and since the 1990s, it finally emergedas HRM (Arora and Athreye,
2002; Thite, 2014; Arunprasad, 2016). During this time, with the objective of becoming the
fastest growing economy on the globe and rejuvenating economic reforms, liberalization,
privatization and globalization policies were introduced. In particular, there was a
consequential boost across sectors, especially as it opened a new avenue for the services
industry. Since then, human resources havebeen looked at as a vital resource for the growth
of the Indian information and technology services industry. As per the 2014-2015 report
published by NASSCOM[1], the Indian IT-BPMservices achieved revenues of USD146billion,
with the domestic concentration of around 50 billion, and signifying growth between 12 and
13 percent. The industry employs 3.5 million people directly and 9.5 million indirectly.
Considering the exponential growth of the Indian IT industry and the huge employee
base, people management practices should feed the development and sustaining needs of
individuals, functions/departments, organizations and the industry sector as a whole. Also,
the Indian IT industry’s contribution to the global IT arena has been very significant and
developmental and, hence, local HR expertise has to match global HR practices and think
beyond parochial employee relations issues (Reilly, 2012). Indian IT companies are
extremely people intensive, and thus HRM practices need to be a well-rounded business
partner and provide basic operational to strategic directions from a people management
Employee Relations
Vol. 39 No. 5, 2017
pp. 753-774
© Emerald PublishingLimited
0142-5455
DOI 10.1108/ER-01-2016-0006
Received 12 January 2016
Revised 3 November 2016
30 December 2016
16 April 2017
Accepted 28 April 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0142-5455.htm
753
Inevitable
knowledge
strategy
perspective (Thite, 2014). In an extremely competitive international software market, Indian
firms emphasize the quality of their procedures and human resources to gain a competitive
advantage (Arora and Athreye, 2002). Furthermore, the Indian IT sector should effectively
utilize an individual’s competency and instill the right attitude through effective HRM
practices for a knowledge-based economy. Especially, in knowledge-intensive firms, an
appropriate knowledge strategy guides the firm toward an open learning culture and
effectively manages knowledge resources. Indian software companies have faced daunting
HRM-related challenges, from recruitment to retention, compensation for career planning
and technological obsolescence to employee turnover (Thite, 2004).
Till date, in the global context, there have been numerous theoretical studies and
empirical assertions reported in view of strategic HRM practices and firms’performance
(Theirou and Chatzoglou, 2014; Clinton and Guest, 2013; Boxall and Purcell, 2011; Becker
and Huselid, 2011). Specific to the Indian context, there have been significant contributions
toward emerging theories of HRM practice and its strategic status (Budhwar, 2003; Som,
2007; Paauwe, 2009; Budhwar and Varma, 2010), Furthermore, studies have been conducted
specifically into Indian IT firms (Thite, 2004; Bhatnagar and Sharma, 2005; Bhatnagar, 2007;
Singh and Soltani, 2010; Nigam et al., 2011; Arunprasad and Kamalanabhan, 2011;
Thite, 2014). However, a profound study is still required to analyze the predictors of a firm’s
performance, by firmly aligning strategic HRM practices and a defined knowledge strategy,
which is highly critical to sustaining the growth momentum of knowledge-intensive firms in
a competitive market. The conceptual model is developed and empirically tested, by
adopting the contingency approach as explained in strategic HRM; the moderation effect
between knowledge strategy and individual strategic HRM practices was examined to test
the corresponding impact on firms’performance.
The following section starts with the literature review on strategic HRM, knowledge
strategy and firms’performance. Based on this, a conceptual framework was postulated
and hypotheses were developed and tested, as per the data collected for this study.
This study concludes with detailed discussion of the empirical results, followed by
implications and limitations.
Literature review and hypothesis
Resource-based view (RBV) of the firm –strategic HRM
The key elements of sustained competitive advantage (SCA), as portrayed in a RBV of the
firm, can be improved through more focused investment in strategic HRM (Shaw et al.,
2013). These investments can be targeted through HRM systems, specifically on employee
behaviors and competencies, which strengthen the strategic capabilities of any kind of firm
(Kim and Lee, 2012). According to Barney (1991), a resource-based strategy is a state of
competitive advantage, which arises from the effective utilization of resources that
competitors can hardly imitate. Numerous scholars in strategy and strategic HRM noted
that these resources are personified in individuals (human capital) as knowledge, skills and
expertise, which strengthen the foundation for innovation and creativity (Swart and Kinnie,
2013) and become very difficult for competitors to imitate (Ployhart et al., 2011; Campbell
et al., 2012). Human capital, including the experience, judgment and intelligence of
individual members of the firm, can potentially meet the demands of SCA (Becker, 1964).
Moreover, the knowledge possessed by these individuals can be integrated with emerging
market needs and trends, through continuous learning and knowledge-sharing processes
(Arunprasad and Kamalanabhan, 2008). Training, robust selection, reward and
compensation and other specific HRM practices can enhance the value, rarity, non-
substitutability and inimitability of the organization’s human resources, to sustain their
competitive advantage (Shaw et al., 2013). According to Teece et al. (1997), the RBV and
dynamic capability are defined as a firm’s ability to integrate, build and reconfigure internal
754
ER
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