Innovation and firm performance: the role of human resource management practices

Publication Date07 April 2015
Date07 April 2015
AuthorMirta Diaz-Fernandez,Mar Bornay-Barrachina,Alvaro Lopez-Cabrales
SubjectHR & organizational behaviour,Global HRM
Innovation and firm
performance: the role of human
resource management practices
Mirta Diaz-Fernandez, Mar Bornay-Barrachina and
Alvaro Lopez-Cabrales
Department of Business Administration, Pablo de Olavide University,
Seville, Spain
Purpose The purpose of this paper is to study the relationship between human resource
(HR) practices and innovative performance in the Spanish industry. Specifically, the authors will focus
on innovativeness, analysing the extent to which this capability is favoured by some human resource
management (HRM) practices as investments on training and whether it is also affected by the use of
full time and/or temporary workers.
Design/methodology/approach The authors propose the assessment of these relationships by
means of the Spanish Survey of Industrial Strategic Behaviour. The authors focus the longitudinal
analysis on the period 2001-2008, years of the highest economic growth in Spain during the last
Findings The findings show that the most innovative firms are also the most competitive ones in
terms of added value. Moreover, while a significant and positive relationship between the use of
full-time workers and innovativeness is demonstrated, the role of temporary workers employees
remains unclear. Finally, and surprisingly, training investments on new technologies, languages and
data processes do not have any impact on innovativeness. The paper is closed with a discussion about
some lessons the authors may learn from these wealthy years and the role played by HRM investments
on firms.
Practical implications This study demonstrates the existence of two objectives that managers
should seek to achieve. On one side, they should focus on innovation as a way of increasing firm
performance. And, on the other side, managers should invest on specific training, in order to develop
more innovative and profitable organizations.
Originality/value This paper proposes and tests a model where innovation mediates the
relationships between HRM practices and performance. Such mediation would be a contribution to
the strategic HRM field as very recent research call for the study of new mediators. Also, this paper
employs panel data (2001-2008) for assessing these relationships. This is worthy because it is coherent
with the idea of internal development of capabilities, instead of cross-sectional analyses and because
the authors may infer causality with the study design, as it is demanded by researchers.
Keywords Human resource management (general), Work performance and productivity,
High-performance organizations, Processes of HRM, Research methodology
Paper type Research paper
1. Introduction
Organizations in the new economy are facing turbulent environments and strong
competition. The resource-based view (RBV) of the firm explains the importance
of developing valuable and scarce resources and capabilities (Prahalad and Hamel,
1990), which are said to be the source of sustainable competitive advantage (Barn ey,
1991; Barney and Wright, 1998; Wright et al., 1994). Scholars have been providing
Evidence-based HRM: a Global
Forum for Empirical Scholarship
Vol. 3 No. 1, 2015
pp. 64-80
©Emerald Group Publishing Limited
DOI 10.1108/EBHRM-10-2012-0012
Received 8 October 2012
Revised 24 September 2013
Accepted 30 September 2013
The current issue and full text archive of this journal is available on Emerald Insight at:
Research Project No. ECO2010 14939: Explicative model of dynamic capabilities: a HRM
approach, Spanish R&D Funding (Ministry of Economy and Competitiveness).
evidence about the contribution of human resources (HR) to competitiveness,
in generating human capital advantagethrough recruiting and retaining exceptional
human talent that provides value and cannot be easily imitated by other organizations
(Barney and Wright, 1998; Boxall, 1998). Researchers also suggest that human reso urce
management (HRM) helps develop organizational capabilities, a proxy variable
of competitive advantage. Such capabilities are firm specific, produce complex social
relationships, are embedded in the firms history and culture, and generate tacit
organizational knowledge (Barney, 1991; Grant, 1996; Reed and DeFillippi, 1990).
HRM can contribute to organizational capabilities insofar as it elicits and reinforces
the set of role behaviors that create firm identity, innovation, quality orientation and so
on (Lado and Wilson, 1994; Wright et al., 1994). However, few studies have analysed the
relationship between HR and the development of advantageous organizational
capabilities. Prior research has analysed the role of HRM practices on firm
performance, using return on investment, profits and turnover as dependent variables
(DVs) (Paauwe, 2009). They have assessed different models of HRM practices, as
Commitmentor Internal developmentvs Market basedor Buysystems (Arthur,
1994; Dyer and Reeves, 1995; Guest, 1997; Ichniowski et al., 1997; McDuffie, 1995).
However, these papers measured the contribution of HRM practices through financial
metrics and more research is needed to explain the contribution of HRM practices in
intangible and firm specific organizational capabilities, in the way recommended by
Wright et al. (1994) or, more recently, Kang and Snell (2009). With innovation as one of
these organizational capabilities (Damanpour, 1991), it would be worthy to assess the
way in which HR investments contribute to such innovative capability.
Another limitation of prior HR research comes from the cross-sectional nature of
previous scholarship, especially because of the dynamic character of innovation, which
requires a longitudinal study design. Cross-sectional studies lack opportunities to
measure causality between HRM and performance (Combs et al., 2006; Paauwe, 2009).
The purpose of this paper is to analyse whether the number of innovations depends
on applied HRM practices. We study it by means of a longitudinal design, allowing us
to derive causality considerations from our analyses (Boselie et al., 2005; Wright et al.,
2005). We assess to what extent employment security and investments in employee
training are related to innovation and further performance. This drives us to a direct
effects model of HRM practices on innovation and a mediation of such a variable in the
relationship between HRM practices and performance. We also consider a possible
interaction of employment security and training practices, assessing to what extent
effects of training on innovation are moderated by employment security. In doing
so, we assess a sample of 1,369 Spanish manufacturing firms, depicting data from 2001
to 2008, years of an important rise in the global and Spanish economy. Our study thus
covers a period of economic growth, which will allow us to learn some lessons from
such a wealthy period where HRM investments were abundant and firms were happy
to commit expenses on developing their employees.
This paper is expected to contribute to the extant literature in several important
ways first, by enriching the debate about the consequences of buyingvs making
employees and their performance. It is a well-known research stream in the strategic
HRM (SHRM) field (Delery and Doty, 1996), but we add the possibility of interaction
between staffing and training practices, as we propose that the positive effects
of training on innovation are moderated by employment security. Second, we include
innovation as a DV, which is considered as a proxy of organizational capabilities, and,
by studying the contribution of HRM practices to innovation, we apply Lado an d
and firm

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