HRM and Innovation Strategy

8/4/2019 HRM and Innovation Strategy

1/25

(HOW) DOES THE HR STRATEGY

SUPPORT AN INNOVATION

ORIENTED BUSINESS STRATEGY? ANINVESTIGATION OF INSTITUTIONAL

CONTEXT AND ORGANIZATIONAL

PRACTICES IN INDIAN FIRMS

F A N G L E E C O O K E A N D D E B I S . S A I N I

This paper investigates how human resources are managed in firms of dif-

ferent ownership forms in India and the extent to which strategic human re-

source management (hereafter strategic HRM) techniques have been adopted

to support an innovation-oriented business strategy. Based on a qualitative

study of 54 Indian managers from different firms, this study highlights the

Indian institutional context for strategic HRM. It reveals the extent to which

the Western approach to and configuration of high-commitment/performance

models of HR practices may differ from those found in Indian firms. This study

also has a number of practical implications for HR professionals, HR practices,

and organizations in the global context. 2010 Wiley Periodicals, Inc.

Keywords: business strategy, HRM, India, innovation, performance man-agement, strategic management

Introduction

A

n emerging body of studies has at-tempted to establish links betweenhuman resource management(HRM) practices and innovation,which ultimately contribute to en-

hanced organizational performance (e.g., Ji-mnez-Jimnez & Sanz-Valle, 2008; Katou &Budhwar, 2006; Laursen & Foss, 2003; Seale &Ball, 2003; Selvarajan, Ramamoorthy, Flood,Guthrie, MacCurtain, & Liu, 2007; Shipton,

West, Dawson, Birdi, & Patterson, 2006; Wals-worth & Verma, 2007; Zanko, Badham,Counchman, & Schubert, 2008). While re-search findings vary slightly, most of thesestudies share a similar conclusion: that adopt-ing an innovation-oriented strategy needs tobe supported by a high-commitment, high-performance approach to HRM. A high-com-mitment, high-performance approach toHRM is characterized by extensive trainingand development, extensive employee

Correspondence to: Dr. Fang Lee Cooke, visiting professor of Southwestern University of Finance and Economics,China, and professor of HRM and Chinese Studies, School of Management, RMIT University, 239 Bourke Street,Melbourne 3000, Australia, E-mail: [email protected], phone: +61 3 99255977, fax: +61 3 99255960.

Human Resource Management,Human Resource Management, MayJune 2010, Vol. 49, No. 3, Pp. 377 400 2010 Wiley Periodicals, Inc.

Published online in Wiley InterScience (www.interscience.wiley.com).

DOI: 10.1002/hrm.20356


2/25

378 HUMANRESOURCEMANAGEMENT, MAYJUNE2010

Human Resource ManagementDOI: 10.1002/hrm

involvement and empowerment, high levelsof autonomy and flexibility, and performance-related rewards and recognition (e.g., Guest,Conway, & Dewe, 2004; Guthrie, Spell, &Nyamori, 2002; Huselid, 1995). It has beenargued that these humanistic HR practices

will lead to enhanced psychological outcomes(e.g., organizational commitment and en-gagement) for employees, which will, in turn,lead to enhanced employee productivity andcreativity (e.g., Cooke, 2002; Kanter, 1989).

Existing studies on HRM and innovations(including product, process, and service in-novations), however, have focused primarilyon developed countries as their site of inves-tigation. Few studies have systematically in-vestigated the extent to which HRM has beendeployed strategically to facilitate an innova-tion-oriented business strategy in emergingeconomies such as India, where the approachto HRM may be less sophisticated (Budhwar,2009), and the HRM context may differ sig-nificantly from that in the West. This is inspite of the fact that Indias technologicalcapacity is widely acknowledged and increas-ingly exploited by foreign multinational cor-porations (MNCs) (e.g., Astill, 2008; Khanna,2007; Prahalad & Krishnan, 2008; United Na-tion Conference on Trade and Development

[UNCTAD], 2005). Indeed, innovation andentrepreneurship have played a crucial partin the success of leading Indian firms acrossdifferent business sectors (Khanna, 2007; Pra-halad & Krishnan, 2008).

While there is now a growing body ofstudies on strategic HRM and organizationalperformance in the Indian context (Amba-Rao, Petrick, Gupta, & Von der Embse, 2000;Bhatnagar, 2007b; Biswas & Varma, 2007;Budhwar & Boyne, 2004; Budhwar & Khatri,

2001; Chand & Katou, 2007; Paul & Anan-tharaman, 2003; Rao, 2007; Singh, 2003),these studies have not specifically exploredHRMs role in innovation-oriented businessstrategy. In addition, conforming to the gen-eral trend of studies in HRM and organiza-tional performance, these studies on Indiahave primarily adopted a quantitative method,often with a single respondent at the seniorlevel from each surveyed firm. Survey studiesoffer useful overviews of HRM practices across

a relatively large number of organizations sur-veyed. They do not reveal, however, organiza-tional nuances and complexity in the processof adopting and implementing HR policies. Asecond motivation of this paper, therefore, isto complement an emerging body of quanti-

tative studies on HRM and performance inIndia. This study offers some detailed infor-mation regarding company practices througha qualitative survey using open-ended ques-tions and a small number of in-depth inter-views with managers. This is particularly im-portant because quantitative surveyinformation tends to reveal superficial and, attimes, unreliable information. On the otherhand, more complicated interplay betweeninnovation and HRM practices is illuminatedthrough qualitatively based studies (e.g., Sto-rey, Quintas, Taylor, & Fowle, 2002; Thomp-son, 2007; Zanko et al., 2008). This qualitativeinformation enables researchers to identifyorganizational factors that influence the adop-tion of HRM practices. This takes the litera-ture beyond the resource-based view (RBV) ofstrategic HRM and firm performance. Thisstudy takes into account the institutional andmicro-political perspectives of what shapesHRM practices in the Indian context and theextent to which these practices share similari-

ties with those displayed in Western econo-mies. Conducting a qualitative study on HRMand innovation-oriented business strategy ofIndian firms of different ownership forms,therefore, responds to Tsuis (2004) call formore high-quality indigenous (context-specific) studies to produce contextualizedknowledge and contribute to our global man-agement knowledge. More specifically, we in-vestigate the types of HRM practices thatsample firms have adopted and the extent to

which these practices are deployed strategi-cally to support an innovation-oriented busi-ness strategy.

HRM, Innovation, and OrganizationalPerformance

Theoretical Perspectives

A general consensus pervades the strategicmanagement literature that the ability for an


3/25

ANINVESTIGATIONOFINSTITUTIONAL CONTEXTANDORGANIZATIONAL PRACTICESININDIANFIRMS 379


organization to develop and exploit knowl-edge faster than its competitors is a key com-ponent of competitive advantage (Leonard-Barton, 1995; Nonaka & Takeuchi, 1995;Nonaka & Teece, 2001; Porter, 1980; Prahalad& Hamel, 1990; Storey & Salaman, 2005;

Teece, Pisano, & Shuen, 1997). Researcherson organizational learning and knowledgemanagement also point out that much of theknowledge is tacit and embedded in workpractices, which is difficult to codify (Brown& Duguid, 1991; Lam, 1997; Myers & Davids,1992). The strategic management of humanresources, therefore, through HR interven-tions such as employee involvement, sugges-tion schemes, and knowledge sharing is seenas a value-added HR function. Such effortscapture knowledge that enhances organiza-tional performance, particularly for firmsthat adopt an innovation-oriented businessstrategy (Mumford, 2000; Porter, 1980;Schuler & Jackson, 1987).

A key theoretical perspective that stronglyinfluences strategic HRM is the RBV (Barney,1991; Hoskisson, Hitt, Wan, & Yiu, 1999;Rouse & Daellenbach, 1999). Proponents ofRBV have argued that organizations obtainsustained competitive advantage by imple-menting strategies that exploit their internal

strengths, through responding to environ-mental opportunities, while neutralizing ex-ternal threats and avoiding internal weak-nesses (Barney, 1991, p. 99). RBV proposesthat selecting and accumulating resources arefunctions of both within-firm decision mak-ing and external strategic factors. Within-firm managerial choices are guided by eco-nomic rationality and motives of efficiency,effectiveness, and profitability (Conner,1991). External influences include strategic

industry factors that impact the firm, includ-ing buyer and supplier power, intensity ofcompetition, and industry and product mar-ket structure. These factors influence whatresources are selected and how they are de-ployed (Oliver, 1997).

While the RBV is useful in understandingwhy differences exist between firms, and con-sequently how certain organizations can gaincompetitive advantage, it has not looked be-yond the properties of resources and resource

markets to explain enduring firm heterogene-ity. In particular, it has not examined the so-cial context within which resource selectiondecisions are embedded (e.g., firm traditions,network ties, and regulatory pressures) andhow this context might affect sustainable

firm differences. Nor has RBV sufficiently ad-dressed the process of resource selection:that is, how firms actually make, or fail tomake, rational resource choices in pursuingeconomic rents.

Oliver (1997) addressed this issue by ad-vocating the combination of RBV with thenew institutionalism of organization theory(DiMaggio & Powell 1983, 1991). Oliverviewed firms as being influenced by powerfulforces for difference and similarity. The for-mer would include factors such as an orienta-tion toward efficiency and deliberate decisionmaking, while the latter, in contrast, wouldimply that decisions are embedded deeply inspecific norms and traditions. According toOliver (1997), an organizations businessstrategy may be influenced profoundly by acomplex institutional context of resource de-cisions, not just strategic factors such as thenature of the product market. This institu-tional context includes decision makersnorms and values, corporate history, organi-

zational culture and politics, public and regu-latory pressures, and industry-wide norms(Oliver, 1997). In other words, an organiza-tions business strategy is influenced by itssocial and economic context. Firms may becaptives, to a certain extent, of their own his-tory and that of their clients and the com-munities and countries in which they oper-ate. As Oliver (1997) noted, Yet it is theembeddedness of these institutionalized com-petencies in history that also increases their

likelihood of being perpetuated without ques-tion (p. 702).More specifically, ownership forms have

been found to be helpful in illustrating theoperating environment and hence the HRstrategies firms employ. This is because dif-ferent ownership forms expose firms to dif-ferent business environments with resultantheterogeneous institutional advantages anddisadvantages (Boisot & Child, 1996; Shen-kar & Von Glinow, 1994). Tan (2002) argued


4/25



that ownership type has a significant impacton the environment-strategy configured,which in turn has important performanceimplications for the firm. Similarly, Peng,Tan, and Tong (2004) argued that differentownership types lead to different managerial

outlook and mentality due to a number ofmacro and micro foundations giving rise tovarious managerial cognitions (p. 1105).This is particularly the case in emergingeconomies, where the state is both the regu-lator and a main employer. Further, public-sector firms in these countries retain strongbureaucratic and monopoly features despiteexperiencing an increasing level of exposureto market forces. In addition, due to theunder-development of market institutions,private-sector firms may have to be morestrategic and responsive to remain competi-tive. Indeed, the impact of ownership formson HR practices has been widely observed instudies of HRM in China (e.g., Chiu, 2002;Ding & Warner, 1999; Wei & Lau, 2005).China is one of Indias major competitorcountries in the global economy and sharesconsiderable similarity in market institutiondeficiency.

More recently, Edwards, Colling, andFerner (2007) argued for an integrated politi-

cal economy approach that examines the in-terrelationships between markets and institu-tions, on one hand, and the material interestsof organizational actors, on the other. Theycontended that an emphasis on strategicbehaviour is central to the micro-political ap-proach. Here, the focus is on how actors lookto protect or advance their own interests, theresource they use, and the resolution of con-flicts (Edwards et al., 2007, p. 203, originalemphasis). The role of power and politics in

organizational life was observed a long timeago (e.g., Buchanan & Badham, 1999). In ad-dition, the lack of HRMs organizationalpower, as a function and a specialist depart-ment, has often been considered a stumblingblock to enhancing HRMs strategic role andeffectively implementing new HR initiativesto support organizational goals (e.g., Legge,1978; Ulrich, 1997; Zanko et al., 2008).

In view of the different strands of litera-ture, we argue here that despite the strategic

importance of deploying certain HRM prac-tices to elicit employee innovation to enhanceorganizational performance, firms may not al-ways be able to act in such a strategic way dueto institutional and organizational constraints.We therefore need to investigate firms opera-

tional environments, both internal and exter-nal, to understand the extent to which theyare able to deploy HR strategy to support aninnovation-oriented business strategy.

Empirical Evidence on the LinksBetween HRM and Innovation

In contrast to the burgeoning body of stud-ies that have attempted to establish andmeasure the links between HRM practicesand organizational performance (e.g.,Wright, Gardner, Moynihan, & Allen, 2005),empirical studies on HRM practices and in-novation have been somewhat limited, as anumber of authors have noted (e.g., Camelo-Ordaz, Fernndez-Alles, & Valle-Cabrera,2008; Jimnez-Jimnez & Sanz-Valle, 2008;Laursen & Foss, 2003; Shipton et al., 2006).Interestingly, however, although studies onthe links between HRM and organizationalperformance point to diverse and sometimescontradictory findings, the small but grow-

ing number of studies on HRM and innova-tion conducted in various countries appearto share a more consensual conclusion. Forexample, Laursen and Fosss (2003) surveystudy of 1,900 Danish companies found thatseven out of the nine HRM practices adoptedby manufacturing companies, includingtraining, have led to superior innovativeperformance. The impact of HRM practiceson innovation is more marked in the manu-facturing than the service sector. Their

findings are supported broadly by that ofKatou and Budhwars (2006) study in theGreek manufacturing context and Lau andNgos (2004) survey study of 332 firms inHong Kong.

Similarly, Selvarajan et al.s (2007) surveystudy of 246 firms in Ireland showed that afirms human capital philosophy has a posi-tive impact on its innovativeness and in turnthe firms performance. In addition, Shiptonet al.s (2006) longitudinal study of 22 UK


5/25



manufacturing companies showed that train-ing, induction, teamwork, appraisal, and con-tingent reward, when applied together withexploratory learning focus, are positively as-sociated with innovation in technical systems.Empowerment and employee involvement

are also found to be important HRM practicesthat stimulated innovation. For example, Tsais(2006) quantitative study showed that effec-tively using employee empowerment practiceswas positively related to innovations in thesemiconductor design industry in Taiwan. Inaddition, Mazzanti, Pini, and Tortias (2006)study of the food sector in Italy showed that agood industrial relations environment andemployee involvement helped stimulate orga-nizational innovation. Walsworth and Vermas(2007) study of international firms in the Ca-nadian context, however, showed that train-ing was more beneficial for innovation thanemployee involvement and variable pay.

In contrast, Cano and Canos (2006) sur-vey study of 367 Spanish industrial firms re-vealed that financial reward and public recog-nition for achieved performance were themost effective HRM practices that stimulatedinnovation. Their finding is supported byCamelo-Ordaz et al.s (2008) qualitative studyof 97 Spanish companies in the three most

innovative sectors, which suggested that thetop management teams strategic vision alonedoes not explain a companys innovation per-formance (p. 620), and financial reward forinnovative ideas is the engine for creativity.

While the positive links between certainHRM practices and innovation have beenlargely established, the impact of HRM on in-novation is not automatic; nor should it betaken for granted. Rather, a number of fac-tors, including organizational politics and

senior managements priorities, may influ-ence innovation. This has been uncovered byseveral in-depth case studies (e.g., Cooke,2002; Kim and Bae, 2005; Storey et al., 2002;Zanko et al., 2008).

How firms adopt HRM practices conse-quently affects employees perceptions of theintent of these practices, which will, in turn,affect their outcomes. Indeed, a number ofauthors (e.g., Bowen & Ostroff, 2004; Nishii,Lepak, & Schneider, 2008) have pointed out

the urgent need to examine employeesviews on the firms perceived motive andconsequently the effect of HRM practiceswhen we evaluate their impact. As Nishii etal. (2008) noted, It is not just the HR prac-tices themselves, but rather also employees

perceptions of those HR practices that areimportant for achieving desired organiza-tional outcomes (p. 528).

Strategic HRM and OrganizationalPerformance in India

The opening up of the Indian economy since1991 has led to a dramatic rise in the numberof privately owned Indian firms that havebeen growing into globally competitive MNCs.Meanwhile, heightened market competitionhas resulted in public-sector enterprises re-structuring their organization and reconfigur-ing their business strategy (e.g., Khanna, 2007;Som, 2007). These changes require a new wayto manage human resources. Despite majororganizational changes, however, key charac-teristics that define public-sector firms maypersist, albeit continuously diluted by marketforces. In addition, major HR challenges forfirms operating in India have been the short-age of a skilled/professional workforce and the

high attrition rate (Budhwar, 2009). Firms areincreasingly involved in the war for talent,and some companies have employed severalHR techniques, such as performance manage-ment, training and development, diversitymanagement, and employee recognition, askey HR initiatives to attract and retain talent(Bhatnagar, 2007a). As Singh (2003) observed,there has been a growing awareness of theimportance of HRM as a key driver of businessperformance in India.

Existing studies on HRM practices in Indiahave not only revealed a number of character-istics, but also highlighted the relevance ofstrategic HRM in enhancing organizationalperformance. For example, Budhwar andKhatris (2001) study found that Indian orga-nizations have a unique internal labor marketthat is based on social relations, political con-tacts, caste, religion, and economic power,although there is evidence that private firmsare beginning to focus on competence and


6/25



performance in their HRM policy. Singhs(2003) study revealed that firms with a strate-gic HR orientation perform significantly bet-ter than those with less emphasis on HR do.Paul and Anantharamans (2003) study of In-dian firms in the IT industry showed that

training, job design, compensation, and in-centives have a direct impact on operationalperformance outcomes such as employee re-tention, employee productivity, product qual-ity, speed of delivery, and operating cost.Similarly, Chand and Katous (2007) surveyon the impact of HRM practices on organiza-tional performance in the Indian hotel indus-try also showed that hotel performance waspositively related to good HRM practices.

Bhatnagars (2007b) study found thatwithin a psychologically empowering cli-mate, the strategic role of HR facilitates orga-nizational learning capabilities, which lead tohigher organizational commitment. Simi-larly, Biswas and Varmas (2007) study offirms in both public and private sectors inIndia revealed that individuals perception ofthe psychological climate in the organizationhad a significant positive impact on theirwillingness to engage in organizational citi-zenship behavior, as well as on their job sat-isfaction levels. Further, organizational

citizenship behavior and job satisfaction lev-els had a significant impact on individualsperformance. A consensus from these studiesis that strategic HRM does contribute to en-hanced employee commitment to, andbehavior toward, the organization and ulti-mately organizational performance.

The overall findings in the Indian contextconverge with those of research studies onHRM and organizational performance in theAsian context more broadly (e.g., Bae &

Lawler, 2000; Chan, Shaffer, & Snape, 2004;Kim & Bae, 2005; Lau & Ngo, 2004; Lawler,Chen, & Bae, 2000; Ngo, Turban, Lau, & Lui,1998; Tsai, 2006). They all point to a consen-sual conclusion: that strategic HRM or adopt-ing high-commitment/performance HRMpractices contributes to enhanced organiza-tional performance. This suggests two possi-bilities. One is that there is a relatively highlevel of universality of strategic HRM as aguiding principle, although specific practices,

their function, and their impact may differaccording to societal and organizational con-texts (Kim & Bae, 2005). Another possibilityis that there are stronger external HR attribu-tions in the Asian countries, which share acollectivistic culture (e.g., Japan, South Korea,

China, and India) than in countries charac-terized with individualistic cultures (e.g.,Nishii et al., 2008). In addition, it may be thecase that Asian nations with a collectivisticculture are under great pressure to catch up aslatecomers as global economic players (e.g.,India and China) or to maintain their com-petitive edge (e.g., Japan and South Korea).The perceived need to respond to externalpressure is so paramount, therefore, that em-ployees are more ready to accept HRM prac-tices as a progressive given and adapt theirattitudes and behaviors toward the organiza-tional goals accordingly (Nishii et al., 2008).

In the light of the paucity of empiricalstudies on strategic HRM and innovation-oriented business strategy across differentownership forms in emerging economies,and given the growing significance of Indiain the global economy and as a site for inno-vation, this paper investigates the extent towhich strategic HRM techniques have beenadopted by Indian firms in both the public

and private sectors to gain competitive ad-vantage. Specifically, we address the follow-ing research questions:

1. Are firms using HR initiatives strategicallyto support an innovation-oriented busi-ness strategy? If so, what are the major HRinitiatives these companies adopt?

2. How effective are these HR practices asperceived by managers in supporting theinnovation-oriented business strategy?

3. What may be the major problems andareas for improvement if HR practices areto play a more significant role in support-ing the innovation-oriented businessstrategy for firms to gain competitive ad-vantage?

4. To what extent are the HRM practicesidentified in the Indian context similar toor different from those prescribed in thehigh-commitment/performance model ofHRM and those identified in existing


7/25



studies on HRM and innovation in othersocietal contexts?

To explore these issues in detail, we em-ploy an analytical framework that combinesthe RBV of the firm (Barney, 1991; Werner-

feldt, 1984), the new institutional theory(Powell & DiMaggio, 1991), as well as the or-ganizational politics perspective (Buchanan &Badham, 1999). We provide an exploratoryanalysis of the organizational factors that in-fluence the adoption of HRM practices andthe relationship between the HR strategy andbusiness strategy at the organizational level.We do so with a qualitative and inductivemethodology based on grounded theory (Gla-ser & Strauss, 1967) by examining empiricalevidence from a sample of 54 Indian firms ofdifferent ownership forms. We analyze within-firm decision making, resource deployment,and external strategic factors through a per-spective that emphasizes the role and natureof embedded institutional and organizationalforces that lie at the heart of strategic HRMand business strategy (Child & Tsai, 2005;Farndale & Paauwe, 2007).

Methodology and Backgroundof the Samples

Empirical data used in this paper comes from aqualitative survey of 54 managers from Indian-owned/Indian-invested companies. Each ofthe informants worked in a different companyat the time of the survey. Six managers were ofsenior ranking as the operations director orgeneral manager of a subsidiary level, ninemanagers were of junior ranking as sectionleaders, and the remaining 39 were mid-rank-ing managers. They were aged between late 20s

and late 40s, with the majority being in their30s. Thirty-six informants had worked for thecompany for at least six years; the longest serv-ing informant had worked for his or her firmfor 20 years, and the shortest serving infor-mant had worked for his or her firm for 18months at the time of the study. The infor-mants were therefore familiar with their firmsbusiness and management practices.

These informants were all EMBA gradu-ates, whom the authors had taught between

2006 and 2008. Deploying MBA students andMBA alumni as research targets is a highlyvalid and common approach to collectingdata. This is particularly true for emergingeconomies such as China and India, wherecooperation from informants may be difficult

to secure without a prior relationship. Lead-ing scholars in the management field haveused this method effectively to collect data,and results have been published in leadingmanagement journals (e.g., Chen, Chen, &Xin, 2004; Chen & Tjosvold, 2006; Tsui,Zhang, Wang, Xin, & Wu, 2006; Wang, Law,Hackett, Wang, & Chen, 2005).Good rapportwas established between the authors and theinformants because of the teaching and learn-ing interaction. Further, this personal rela-tionship enhanced informants willingness todevote their time to complete the surveyquestions seriously, to disclose company in-formation, and to share their honest opinionswith the authors. The informants familiaritywith HRM and business strategy knowledgeand practice also made it easier for them toengage in investigating HRM and businessstrategy issues in a more informed and articu-late manner compared with those who hadnot been through MBA education in general.Informants received no incentives for partici-

pating in the study other than a complimen-tary copy of the findings report, which wasanonymized. This research method bears thelimitation of a convenient sample and there-fore may lack generalizability (also see addi-tional discussion in the Conclusions).

We targeted middle managers not justbecause they provided convenient access.Rather, we feel that they are an importantgroup to study, as most of them have somesort of HR responsibility, are likely to be more

connected with the grassroots level than se-nior managers are, and are employees them-selves and recipients of HRM practices. Theirperception is therefore important to assessingthe role of HRM practices and innovations ofthe firms. The need to solicit lower-level em-ployees view on the effect of HRM practicesto complement insights obtained from high-level managers or HR executives has beenarticulated by Bowen and Ostroff (2004) andNishii et al. (2008).


8/25



The sampled companies were spreadacross a range of business areas includingbanking, telecommunications, informationtechnology (IT), consulting, commercial,aerospace, pharmaceutical production/research and development, railway engineer-

ing, automotive production, energy, oil, min-erals, and shipping. Of the 54 companies, 35are state-owned enterprises (SOEs), 12 areprivately owned enterprises (POEs), and sevenare Indian-foreign joint ventures (JVs). Giventhe difficulty in gaining access for academicresearch, we were not able to provide equalnumbers of companies in each business own-ership category. Because this study is of anexploratory nature, however, we feel that thenumber and spread of the cases we obtainedare sufficient to provide information neededfor this papers discussion.

The oldest firm in the sample was estab-lished in 1940 and the youngest in 2000,whereas the majority of the sampled firmswere established prior to Indias economicliberalization in 1991. All sample firms wererelatively large employers. The smallest firmemployed some 800 employees, whereas thelargest employed 56,000 employees. The sec-ond smallest firm employed nearly 8,000employees, and 32 firms employed more than

20,000 employees. All firms have multiplesites in India. The media has reported thatmany are industry leaders. At least 28 of thecompanies were listed in the Business Today(BT) 500 database at the time of the interview.BT 500 is considered the most authoritativelist of major Indian firms across a broad rangeof industries (also see Singh, 2003). The factthat all informants had been sponsored bytheir employer to study their EMBA coursewas indicative of the performance of the firms

and their awareness of management develop-ment as part of their HRM.The qualitative survey was conducted via

e-mails between each of the informants andthe authors from September to November2008. A prepared list (see Appendix) of fivesets of open-ended questions guided the sur-vey. Informants were asked to write downtheir answer to each question in a MicrosoftWord format document and e-mail it back toone of the authors when they had completed

it. Confidentiality was assured to each infor-mant. Each was given three weeks to com-plete the task. A reminder was sent to thosewho did not reply within the three weeks. Intotal, 78 managers were contacted and 67participated in the study. Of the 67 returned

documents, 54 were selected for further anal-ysis after two of the authors conducted aninitial screening for validity and reliability ofthe answers. Among the discarded surveys,six were incomplete (e.g., did not provideevidence to support their claims), and therest either sounded too good to be true and/or relied too much on their company Website with no independent thinking and as-sessment of their companys situation.

This method of survey shares the charac-teristics of in-depth interviews but saved costand time to arrange and travel for the inter-views. It was more convenient for the infor-mants, as they could complete the documentat a convenient time, think through theiranswers, and check for company informa-tion that they might not readily have. Thisprovided richer information than interviewson the spot, which give the informant littletime to think and respond. It allows themanagers voice to come through more fullyand in a reflective way. Information collected

from the informants was supplemented by,and cross-checked against, information fromthe company Web site and media reports.For example, for those who ranked their firmas highly innovative, we also checked if theirfirm had obtained industrial accreditationsand/or industrial/national business awards.In addition, follow-up interviews were con-ducted with 13 informants via telephone toclarify what they had written and to ran-dom-check if what they said on the phone

was in line with what they had written. Sixinformants were interviewed to clarify theirstatements and the other seven were ran-domly selected for checking. During the tele-phone interviews, all informants expandedon their answers. Due to time and other con-straints, we were not able to conduct tele-phone or face-to-face interviews with all ofthe informants, which would have allowedus to uncover more in-depth data through amore interactive process. An additional ben-


9/25



efit of a qualitative survey conducted viae-mail, however, is that the data can be pro-cessed to provide a quantitative picture moreefficiently than that collected via face-to-faceinterviews as the original data is already inelectronic form.

For this studys purposes, we includedfour types of innovation: product, produc-tion process, business process (internal fo-cused), and customer service innovations(external focused). This is in line with thetypologies previous studies have adopted oninnovations (e.g., Jimnez-Jimnez & Sanz-Valle, 2008; Prahalad & Krishnan, 2008;Shipton et al., 2006). In addition, in the listof survey questions e-mailed to each infor-mant, we included a list of examples of HRMpractices (see Appendix) that may be seen assupporting innovation (those that have beenfound in previous studies in other societalcontexts as shown above). This, as Bowenand Ostroff (2004, p. 217) asserted, helped usevaluate the strength of certain HRM prac-tices by assessing their visibility among em-ployees. It also enabled us to compare theextent to which innovation-supporting HRMpractices identified in India match thosecommonly found in the studies of HRM andinnovation elsewhere.

When analyzing the data, a table wasused to record the informants length of ser-vice, company name, year in which the com-pany was established, ownership form,number of employees, the firms type of in-dustry, any of the four types of business in-novations reported, the informants per-ceived level of innovation orientation, majorHR initiatives adopted to support the inno-vation-oriented business strategy, perceivedoverall effectiveness of the HR practices, and

major problems/areas for improvement. Wecoded the information by recording the pre-cise phrases in the relevant cell of the tableand then aggregated the answers. We alsorecorded some quotes for illustrative pur-poses. The data content was coded first bythe lead author and second by the secondauthor for consistency and accuracy (seeMiles & Huberman, 1994). Approximatly94% agreement was achieved between thetwo coders. The authors fully discussed and

resolved differences in coding and datainterpretation.

Findings and Discussion

Informants were asked five sets of questions

(see Appendix). These included companybackground, types of innovations and levelof innovativeness, types of HRM practicesadopted, their effectiveness, and areas forimprovement. Informants were asked toelaborate or give examples to substantiatetheir views.

Types and Level of Innovations

Fourteen managers reported that their com-panies adopted three or four types of innova-tions (see Table I). Thirteen of these firmswere in the high category. Twenty-fivefirms reported adopting two types of innova-tions, with product and production/businessprocess innovations being the main types ofinnovations reported. Among the 25 firmsthat had adopted two types of innovations,only four firms reported having customerservice as one of the two innovations. Thesewere mainly the non-manufacturing firms,with business process and customer service

innovations as their two main innovations.Fifteen firms reported adopting one type ofinnovation, all of which were product-relatedinnovations. This suggested that there is apositive correlation between firms beingranked high in their innovation orienta-tion and the variety of innovations they haveadopted. Among all 54 informants, only 20managers reported adopting customer serviceinnovations in their firm. Eighteen of thefirms fell in the high innovation orienta-

tion category. Based on these answers, it ap-pears that innovations in customer serviceare not yet being treated as a competitive toolfor many of the sample firms.

A total of 28 firms were ranked highin their innovation orientation by infor-mants (see Table II). Among these, 13 areSOEs, nine POEs, and six JVs. Fourteen firmswere ranked medium in their innovationorientation; of these, 13 are SOEs and one a JV. The remaining 12 firms were ranked


10/25



low in their innovation orientation, nineof which are SOEs and three POEs. This sug-gests that a lower proportion of SOEs areperceived to be innovation oriented. State-owned sector mentality and the companyslong history were two common criticismsfrom the informants that were seen as themain causes for the lack of innovationdrive. The nature of the business was alsoseen as one of the reasons for the relatively

low level of innovations of all sorts. Thisincluded, for example, shipping (very cost-sensitive), power generation, and distribu-tion (equipment cannot be altered easilyand customer base is relatively stable). SomeSOEs are clearly in the monopoly positiondue to high entry barriers to the industry(e.g., energy), giving little incentive or pres-sure for the firms to innovate. Informantsfrom firms that were ranked low in theirinnovation intent were critical of their

firms complacent attitude and poor man-agement; in fact, some did not even have anHR department. Organizational politics,lack of transparency and fairness in HR pro-cesses and decisions, lack of performance-based reward and promotion systems, andpatchy and ineffective implementation ofHR practices across sites were commonlyidentified as some of the main problems inthe companys HR system (see below forfurther discussion).

Major HR Initiatives to SupportInnovation-Oriented BusinessStrategy

A range of HR initiatives was reported as hav-ing been adopted by firms to support theirinnovation-oriented business strategy (seeTable III). In particular, learning and develop-ment, employee involvement and qualityinitiatives, performance managementschemes, and employee welfare and engage-

ment schemes were the most commonly re-ported HR practices.

Learning and Development

Training and development was the most com-monly adopted HR practice. In some firms,this was supported by the learning organiza-tion and/or knowledge management initia-tives. Many firms specify a minimal numberof training days per year for their employees.

Some offer company-sponsored higher educa-tion such as MBA courses. Few managers,however, specifically reported having leader-ship or management development programs.Where one is in place, the effects were reportedas positive. For example, a leading private,India-owned multinational firm introduced abusiness leadership award competition pro-gram to encourage innovation in businessstrategy among its young executives (Manager14, private electrical motor company).

T A B L E I Types of Innovation of Indian Firms (N= 54)

Types of Innovation Adopted* Number of Firms by Level of Innovation Orientation Total

High (n = 28) Medium (n = 14) Low (n = 12)

Three or four types of innovations 13 1 -- 14

Two types of innovations 10 12 3 25

One type of innovation 5 1 9 15* These include product innovation, production innovation, business process innovation, and customer service innovation.

T A B L E I I Level of Innovation-Orientation of Indian Firms by Ownership Form

No. of Firms by Level of Innovation

Orientation

No. of SOEs (n = 35) No. of POEs (n = 12) No. of JVs (n = 7)

High (n = 28) 13 9 6

Medium (n = 14) 13 -- 1

Low (n = 12) 9 3 --

Total (N= 54) 35 12 7


11/25



Employee Involvement and QualityInitiatives

Employee involvement was the second mostwidely used initiative in all the companiesstudied. This was implemented mainly inthe form of suggestion schemes. Quality ini-tiatives, such as quality circles, professionalcircles, problem-solving teams, lean initia-tives, kaizen, ISO 9000 series, total qualitymanagement (TQM), and total productivity

management (TPM), were also commonlyreported by informants whose firms wereinnovation-oriented. These are essentiallyforms of employee involvement that requireemployees to participate actively and con-tribute their ideas for business improvement.It was clear from the interview reports thatsuggestion schemes are a big initiative formany companies. Firms used reward mecha-nisms (e.g., financial rewards, promotion,and recognition when suggestions were ad-

opted) to incentivize employees to contrib-ute their innovative ideas to the firm. Someinternalize the scheme as part of the perfor-mance management and a punitive elementcould be traced, as revealed by managers in-terviewed:

Suggestion targets are set at the begi-nning of each year. All suggestionsafter evaluation are awarded and

the best three suggestions of themonth are awarded and recognizedthroughout the organization fortheir contribution. (Manager 16, In-dian-Japanese joint venture automo-tive company)

We need to report the number of sug-gestions made in the appraisal reporteach year. (Manager 25, private elec-tronic instrument company)

T A B L E I I I Types of HRM Practices Adopted to Support Innovation-Oriented Business Strategy

Types of HR Practices No. of Responses (N= 54)

Learning and development

Training and development 48

Career development planning 3

Management/leadership development 5Learning organization 15

Knowledge management 10

Employee involvement and quality initiatives

Suggestion schemes 45

Quality initiatives 32

Performance management

Performance appraisal 28

Performance-related pay 24

Profit- sharing 4

Performance/merit-based promotion 20Employee recognition awards 33

Employee welfare and engagement

Employee welfare schemes 7

Employee engagement initiatives 11

Other HR initiative reported

Recruiting creative employees 3

Empowerment 7

Autonomy 2


12/25



Every officer has to write down thenumber of suggestions that he hasput forward in his appraisal reportevery six months. (Manager 6, state-owned aerospace company)

Performance Management

Performance management schemes are thethird most commonly reported HRM prac-tices adopted by firms to support theirinnovation-oriented business strategy. Theseinclude performance appraisal, performance-related pay, performance/merit-basedpromotion, and profit sharing. In addition,recognizing good performance was widelyused, often involving self-evaluation. As onemanager revealed, For every quarter, em-ployees put down their major achievementsin a prescribed format (for that quarter) andthe best ones are picked and awarded fromeach division (Manager 16, Indian-Japanesejoint venture automotive company).

Employee Welfare and Engagement

Also reported were employee welfare schemesand engagement initiatives that are aimed atimproving employees morale and commit-

ment. Employer-sponsored cultural programs,social functions, and sports events were heldperiodically for employees and their family topromote employees work-life balance and todevelop a strong bond between employeesfamily members and the company. Family isparamount in Indian workplaces and employ-ees families are treated as an extended part ofthe company to gain employees commit-ment. This is particularly important in organi-zations that employ younger graduates in

knowledge-intensive professions, where em-ployees are often expected to work long hoursunder a high level of performance pressure,and the staff turnover rate is high due to theshortage of talent. Providing welfare and orga-nizing social life for employees and theirfamilies are important features of workplaceand community relations in the Indian soci-ety, which is informed by its paternalistic, col-lectivist cultural values. Employees expectthese provisions, and the blurred boundary

between work and family life makes it bothnecessary and relatively easy to organize theseactivities. This is perhaps an important aspectof HRM in Eastern countries, which is sharplydifferent from practices in the Western world.

At least 29 managers reported that their

company had adopted some of the latestHRM practices, albeit often without any diag-nostic analysis and internalization from man-agers and ordinary employees. Managers inthe follow-up interviews believed that thehigh level of publicity surrounding HRMbest practices, particularly from foreignMNCs and flagship Indian-owned firms, wasa main source of influence in their firmsadoption of new HR practices. The role of HRconsultants and HRM/HRD professional net-works/associations was also believed to beimportant in disseminating new HRM prac-tices. Many of these practices have Westernor Japanese origin, such as learning organiza-tion, knowledge management, suggestionschemes, and quality initiatives. This sug-gests that some versions of Western HR prac-tices are being planted in the Indian groundthrough an isomorphic effect, although theirpositive impact may be less evident.

Interestingly, the need to recruit creativeemployees and provide career development

support to employees did not seem to featureprominently as important HRM practices tosupport innovation-oriented business strategy.Only three managers in the high innovationcategory reported recruiting creative employ-ees as an HRM practice. Similarly, only threemanagers mentioned career development plan-ning as a separate HRM practice. This may re-late to the fact that line managers are onlymarginally involved in recruiting and aretherefore not aware of recruitment criteria. But

the fact that the informants have not high-lighted these aspects of HRM may indicate thatthey are not fully aware that these HRM prac-tices are important in supporting an innova-tion-oriented business strategy, particularlyemployee career development. It can be arguedthat training and development and perfor-mance management schemes may include acareer development element. These schemesmay not contain, however, the systematicanalysis and design required for proper career


13/25



development planning. In addition, given thereward (promotion and payment) orientednature of the performance appraisal and man-agement schemes reported, performance man-agement in many firms seems to focus primar-ily on what the employee has achieved in the

past. Firms seem to be more concerned withemployees current performance and whatthey need to perform now, both for themselvesas employees and for their subordinates. Ourfollow-up interviews with managers revealedthat career development planning is generallynot well developed or prioritized. The fear ofstaff turnover and the need to focus on currentperformance to maintain competitiveness werethe two most common reasons cited.

No firms specifically reported adoptingflexible working arrangements or greater au-tonomy as HR initiatives, although two infor-mants reported that their firms employeeshave autonomy within reason. While asmall number (seven) of firms reported em-ployee empowerment initiatives, this tendedto be organizational goal-driven. As onemanager revealed:

People have been empowered tomake decisions provided these arein line with the organizational goals.

Cross-functional teams are createdand given the responsibility and au-thority to meet the goals. A trainingprogramme is in place to help em-ployees understand the culture andwork philosophy of Japanese whichhelps in realigning of individual goalsto that of the parent company. (Man-ager 2, Indian-Japanese joint venturemanufacturing company)

This finding is noteworthy given the factthat autonomy and empowerment are cru-

cial HRM practices to elicit employees com-mitment and creativity (e.g., Kanter, 1989;Nishii et al., 2008; Paul & Anantharaman,2003).

Perceived Effectiveness of HR

Practices

In general, the managers interviewed reportedthat the HR practices their firms adopted haveproven to be effective to various degrees.There was a strong co-relation between theperceived level of firm innovativeness and theperceived effectiveness of their HR practices(Table IV). The main reasons for the perceivedhigh effectiveness of HR practices includeadopting a full range of HR practices that sup-port each other, good bonding with employ-ees that enhances employee engagement,freedom and empowerment that help em-ployees thinking and creativity, and employeeinvolvement in decision making. It is worthnoting that the majority of the firms that wereranked high in their HR effectiveness wereJVs or POEs. Most of them were younger firmsthan SOEs and were seen to be more innova-tive and progressive in their HR and businessstrategy. As one manager remarked:

The HR practices so far have been verygood and this is the reason as to whythe attrition rate in the organizationis very low. The satisfaction level inthe employees with regard to job pro-file and compensation is very good.We have no problems of IR [industrialrelations] in the company. Its a pri-vate company and so far has beenvery effective in ensuring employeeparticipation and their satisfaction.

(Manager 25, private electronic in-strument company)

T A B L E I VPerceived Effectiveness of HRM Practices in Supporting Firms Innovation-Oriented BusinessStrategy

Level of Innovation Orientation

No. of Firms Ranking Their HR Practices by Levels

Total (N= 54)High Medium Low

High 14 13 1 28

Medium 4 7 3 14

Low 2 3 7 12


14/25



More broadly, positive outcomes reportedby those who considered the effectiveness ofHR initiatives as high in supporting theirfirms innovation-oriented business strategyinclude higher efficiency and productivity;employee accountability; customer-centricapproach; creating a work environment thatencourages teamwork, learning, and innova-tion; focused approach to meeting or exceed-ing all stakeholder expectations; reduced ab-senteeism; organizational citizenship;enhanced employee integrity and commit-ment; employee engagement; lower attritionrate; and enhanced employee loyalty.

It is worth noting that only half of thefirms that were in the high innovativenesscategory were ranked high in the effective-ness of their HR practices. This suggests that

there is still plenty of room for improvement.Informants gave a number of reasons thathighlight the causes of ineffectiveness ofHRM practices and areas for improvement.These can be classified into three dimen-sions: namely, the role of the HR depart-ment/officers, gaps in HR initiatives, andpoorly implemented HR initiatives. Theseare discussed below.

Areas for Improvement in HRM

The Role of the HR Department/Officers

Some managers saw the lack of professionalstandards for the HR department/personnelas the stumbling block for effectively manag-ing people. HR professionals are criticized forbeing remote from business realities and fall-ing behind dynamic business needs. As onemanager depicted, The HR department isnot professional enough. The HR officers arenot open-minded enough, not efficient and

lack business understanding to lead changes(Manager 26, state-owned manufacturingcompany). Other managers revealed that HRinitiatives are sometimes implemented withinsufficient input from the HR people, lead-ing to slippage in implementing policies atthe operational level because the line manag-ers do treat people management issues seri-ously and professionally.

Gaps in HR Initiatives

Managers identified a number of HR areasfor improvement in order to provide moreeffective support to the companys innova-tion-oriented business strategy (Table V).These seem to fall into four main strands.

One relates to the need for greater democ-racy and fairness in workplace management.This area has attracted the most criticismsand demands for improvement. In particu-lar, managers highlighted the need forgreater flexibility and autonomy in workand empowerment in making decisions, notjust in taking responsibility. More transpar-ency in feedback, more communication,more and quicker feedback on decisionsregarding suggestion schemes, and a higherlevel of fairness and transparency in rewardswere also highlighted. Given that the vastmajority of the informants were mid-juniorranking managers at the operational level,this outcry for autonomy may indicate thatorganizational power may still be central-ized in most of the Indian companiesstudied.

A second area for improvement relatedto rewards. Performance/merit-based pro-motion, more incentives for good perfor-mance, and more rewards for suggestion

schemes were commonly cited. A third arearelated to job enrichment and satisfaction. Job rotation or cross-functional workingwas suggested by a significant number ofmanagers for employees to better under-stand the totality of the business unit inorder to work better as a team and providecreative thinking for business improvement.This would also help enrich individualsjobs and enhance satisfaction. A fourth areafor improvement, which received much less

attention from the managers than the firstthree strands, related to better recruitment,development, and deployment of talent.This takes the form of recruiting creative/talented employees, providing career devel-opment for employees, and more effectivelydeploying talent. In short, a better align-ment of HR strategy and business strategy isneeded.


15/25



Implementing HR Initiatives

Poorly implemented HR initiatives were seenas another main reason for HR ineffective-

ness. Managers, particularly those from SOEs,reported that new HR initiatives were oftenimplemented as a fashion without any realunderstanding of what they are and howthey could be implemented to the benefit offirm employees. Below are a few quotes thathighlight the main causes of the problem:

The adopted HR practices haveproved effective up to a certainlevel. These have been success-ful in reducing the attrition rate of

qualified and experienced engineersand technicians. In fact, implemen-tation of the innovative policies byHR people in the Company has notbeen adequate, thus falling short toachieve their desired goals. (Manager25, state-owned chemical company)

New HR initiatives are implementedas a fashion and yield no benefits.

Employees are not always engagedwith the new HR initiatives. (Man-ager 33, state-owned manufacturingcompany)

Employee Suggestion Scheme is onthe Intranet and employees cangive paper suggestions, but is notthat effective due to fear of beingtransferred to another site or otherpolitics in the organization. Moreo-ver, there is no feedback mecha-nism and employees [are] not awarewhether the suggestion was noticedby the management or not. Moreo-

ver, there is no encouragement fromthe management for the employeesto give more suggestions. (Manager20, state-owned energy company)

Some weight should be given tonumber of contributions in theknowledge bank and the suggestionsgiven by an employee. (Manager 5,state-owned aerospace company)

T A B L E V Major HR Areas That Need Improvement to Support Innovation-Oriented Business Strategy

Types of HR Practices No. of Responses (N= 54)

Greater democracy and fairness

Greater flexibility 13

More autonomy 15

More empowerment 12More communication 18

More transparency in feedback and communication 16

More fairness and transparency in rewards 8

More performance-based rewards

Performance/merit-based promotion 15

More incentives for performance 16

More rewards on suggestion schemes 13

Better psychological outcome

Job rotation and enrichment 15

Job satisfaction 6Better talent management

Recruitment of creative/talented employees 2

Career development 5

More effective deployment of talent 6

Better alignment of HR strategy and business strategy 13


16/25



The Company has resources, takescare to adopt/adapt new HR develop-ments, but is generally able to reapthe fruits only to [a] limited extent.Reasons are lack of trust, rigour, andgoal orientation. (Manager 3, state-

owned oil company)

What firms need to do, then, was sum-marized succinctly by a manager from one ofthe top private Indian-owned MNCs, whichhas an aggressive business strategy, has a highperformance culture, and is highly competi-tive. This need to do list includes a sense offreedom in decision making, the opportunityto participate, a positive organizational cli-mate, care about employee welfare and well-being, and an organizational culture basedon trust, honesty, openness, and integrity(Manager 28, private energy company).

Conclusions

This exploratory study contributes to thesmall but growing body of literature on HRMin India in general and the role of HR strategyin supporting an innovation-oriented busi-ness strategy more specifically. It is a responseto the call for more qualitative studies to so-

licit views from informants below senior man-ager/executive level. It is also a response to thecall for adopting an institutional-political ap-proach to interpreting organizational practices(e.g., Child & Tsai, 2005; Edwards et al., 2007;Farndale & Paauwe, 2007). In doing so, thispaper has adopted an inside out approach(Tsui, 2004) to studying the issue from theperception of mid-ranking Indian managerson HR policies through a qualitative study.This has enabled us to identify the key charac-

teristics of HRM practices that Indian firmshave adopted to support their innovation-oriented business strategy. It highlights theIndian institutional context for strategic HRMand reveals the extent to which the HRM prac-tices adopted in Indian firms (as reported bythe Indian managers) resemble that prescribedin the Western literature on strategic HRM andinnovation. The combination of this qualita-tive method of data collection and a multi-perspective analytical approach has contrib-

uted to our empirical and theoreticalunderstanding on the topic, which, despite itsimportance, remains relatively under-investi-gated. Through detailed answers from the in-formants and other sources of informationsuch as company Web sites and media reports,

we are able to identify a number of the insti-tutional and organizational factors that influ-ence our sample firms ability to deploy HRMpractices effectively to support their innova-tion-oriented business strategy.

This is, to the best of our knowledge, thefirst study that investigates the role of HRMin supporting an innovation-oriented busi-ness strategy in the Indian context. In addi-tion, previous studies on HRM and innova-tion have focused mainly on technical and toa lesser extent administrative innovations,thus being internal oriented. This approachoften excludes firms that are outside themanufacturing and research and develop-ment sectors. Given that business strategyand HRM both play an important role incompetitiveness, and that innovations cantake many forms with or without the in-volvement of technology and technical staff,it is important that when we study HRM andinnovation, we broaden our scope to includeall types of innovations that might involve

employees of all levels. By exploring the roleof HRM practices in supporting innovation-oriented business strategy, we have been ableto include firms in various industrial sectors,including those in the commercial sector,and assess the likely impact of HRM practiceson employees at the firm/operational level.Based on our findings, we echo the argumentthat the strategic management approach, no-tably that of RBV, is too simplistic to under-stand firms adoption of HR strategy to sup-

port their business strategy. Instead, acombined theoretical approach (i.e., institu-tional, strategic management, micro-levelpolitical economy) is needed to identify op-portunities and barriers firms are facing.

It is interesting to note that what Indianmanagers see as effective HRM practices thatwill support innovation and organizationalperformance appear to be in line with thoseprescribed in Western HRM literature and whathas been found being practiced by firms to


17/25



various degrees in different parts of the world.This suggests either the universality of the stra-tegic HRM principles as Kim and Bae (2005)suggest or that these EMBA graduate managershave been heavily influenced by Western busi-ness and management education materials

and actually believe that these are the bestpractices. Given the eagerness of Indian firmsto catch up with the global firms as latecomersand the growing number of Western MNCsoperating in the country, we cannot rule outthe normative isomorphic effect facilitated byWestern MNCs, HR consultants, and HRM/HRD professional networks and associations.

This study also has a number of practicalimplications for HR professionals and orga-nizations in the Indian and global contexts.First, while firms may be more proactive andinnovative in their business strategy, theirHR strategy is often lagging behind in sup-porting the strategic development of theformer. As shown in this study, innovation-oriented Indian firms are adopting certainhigh-commitment/performance HRM prac-tices consciously to support their businessstrategy. But not all of them have managedto do so in a strategic way. Some firms maybe adopting Western HRM practices to beseen as progressive, modern, and innovative

but do so without examining the utility ofthese practices to their firm. Firms thereforeneed to develop their HR competence, de-sign HR policies and practices that are suit-able to their firm, and raise the strategic roleof the HR function to develop and harnesstheir employees creativity.

Second, this study reveals a mismatchbetween the HR practices firms adopted andthose employees desire if the level of em-ployee engagement and creativity is to be

maximized. The most fundamental differ-ence is manifested, perhaps, in the short-term performance-oriented HR strategy firmspursue and employees desire for more hu-manistic HRM practices, although the twoorientations may share certain common as-pects. On the one hand, HRM practices thatfirms adopt are largely organizational goal-driven and control-oriented. HRM practicesare used to better control the employeesand to align the individuals goals with that

of the company, as reported by informants.It is worth noting that Japanese-style qualitymanagement techniques appear to be highlypopular among Indian firms; a large propor-tion of managers reported having adoptedsome form of quality initiatives. In pursuing

greater efficiency, employee involvement hasbeen implemented primarily in the form ofsuggestion schemes that mainly benefit thecompany and not necessarily the well-beingof the workforce. There is little real empower-ment of employees and their participation indecision making. Autonomy is allowed, butquality is the main determinant and aslong as it aligns with business goals, as re-ported by informants. On the other hand,employees and managers interviewed de-mand more empowerment, autonomy, de-mocracy, fairness, and return (both financialand psychological) from the company in ex-change for their efforts. This is indicative ofthe changing cultural values in Indian soci-ety, that has traditionally emphasized socialhierarchy and obedience. This suggests thatfirms need to adjust their management ap-proach to reflect the changing culture. Howto align employee outcomes with organiza-tional outcomes is therefore a key issue.

A third implication is that while the

causes of ineffectiveness in implementing HRinitiatives are often generic and have beenidentified by studies located in the Westerncontext, some of the causes may be unique tothe Indian context and specific to the publicsector. State-owned companies, particularlythose in a monopoly position, appear to bemore bound by organizational inertia and,taken together with their monopoly position,lead to the lower levels of HR effectivenessand customer-oriented innovations. These

institutional characteristics appear to be com-mon in emerging economies (e.g., Boisot &Child, 1996; Peng et al., 2004; Shenkar & VonGlinow, 1994; Tan, 2002).

Fourth, firms seem to be more likely toinitiate product innovations and productionprocess innovations but appear to be less pro-active in developing business process innova-tions and customer service innovations. Thisis at least the case in the companies in ourstudy, the majority of which are involved in


18/25



manufacturing/engineering activities as partof their business. Yet, business process andcustomer services innovations are not onlyless constrained by the firms technologicalpath and therefore arguably easier to imple-ment than product and production processinnovations in the manufacturing environ-ment, but also crucial in todays competitiveenvironment, as cogently argued by Prahaladand Krishnan (2008).

This paper contains a number of limita-tions. First, the sample size of the study isrelatively small with 54 firms that are mostlyvery large firms, though the study took placeat the workplace level. No small and me-dium-sized firms were included in the sam-ple; indeed, their business environment, in-novation capacity, and management style

may be significantly different from largefirms, particularly those in the state sector.Second, a relatively large proportion (ap-proximately two-thirds) of the sample firmsin this study are SOEs, which might haveskewed the aggregate findings, on the onehand, and made it difficult to identify dis-tinctive patterns of innovations and HRMpractices, if any, across different ownershipforms, on the other. Third, the wide spreadof industries within a relatively small sample

size also made it impossible to establish in-dustry-specific patterns, if any existed.Fourth, only one manager participated in thestudy from each company. This person maynot have been able to provide a full pictureof what is occurring in the company. Thevast majority of respondents, however, weremid-ranking managers who are arguably thekey layer of management at the operationallevel. If they are unaware of what HRM prac-tices and innovations are taking place attheir workplace, then perhaps these activities

may not have really taken root despite es-poused strategic intent at the higher level.On the other hand, information revealed bymanagerial informants may be positively bi-ased toward their firm for various reasons,

such as social desirability, and the resultanttendency for informants to report theirfirms practices more favorably than the real-ity. To eliminate the potential bias, cautionswere taken when we analyzed the surveydata. Survey responses that sounded toogood to be true or claims made without sup-porting examples were discarded. The factthat the informants have all been throughtheir EMBA education means that they wereaccustomed to analyzing organizationalstrategy and management practices in a criti-cal way to identify how problems may betackled and improvements can be made.

A fifth and related limitation is that nonon-managerial employees were included inthis study, and the managers view may notbe representative of those held by their sub-

ordinates, particularly regarding the employ-ees perception of the impact of the HRMpractices and the level of support from theirline managers. Future studies should adoptan in-depth case study approach to investi-gate more fully what seem to be the most ef-fective HRM practices in supporting firmsinnovation-oriented business strategy acrossfirms of different sizes, ownership forms, andindustrial sectors in the Indian context. Inparticular, the systematic use of multiple in-

formants in each company studied will helpincrease the validity and reliability of thedata. Cross-country comparative studiesshould also be conducted to identify similari-ties and differences in these orientations indifferent institutional and cultural environ-ments to deepen our conceptual understand-ing and to inform management practices.

Acknowledgments

We would like to thank the guest editors and three

anonymous reviewers for their constructive com-ments on the earlier version of the paper. This re-search was supported by a grant from the Project211(Phase III) of the Southwestern University ofFinance and Economics, Chengdu, China.


19/25



FANG LEE COOKE is deputy head (Research) and professor of HRM and Chinese stud-

ies at the School of Management, RMIT University, Australia. She completed an MSc in

Personnel Management and Industrial Relations and a Ph.D. from the University of Man-

chester. Previously, she was a chair professor at Manchester Business School, Univer-

sity of Manchester, UK. Her research interests are in the area of employment relations,

gender studies, strategic HRM, knowledge management and innovation, outsourcing,

Chinese outward FDI, and employment of Chinese migrants. Fang is the author of HRM,Work and Employment in China (2005) and Competition, Strategy and Management in

China (2008). She is currently a visiting professor at the School of International Business,

Southwestern University of Finance and Economics, China.

DEBI S. SAINI (Ph.D, Delhi; GPHR, USA) studied at the Delhi School of Economics and

the Faculty of Law, University of Delhi. He is a professor of HRM at the Management

Development Institute (MDI), Gurgaon, India. His research interests include strategic

HRM, global HRM, new industrial relations, and employee relations law. He has edited

or authored seven books in these areas. He has been published in, among others, Jour-

nal of World Business, Asia-Pacific Business Review, Asia Case Research Journal, ACRC

Hong Kong Cases, Indian Journal of Labour Economics, Vikalpa, and Economic & Po-

litical Weekly. He is editor of Visionthe Journal of Business Perspective, the journal

of MDI.Among others, he has consulted with the International Labor Organization, the

German Government Agency for Technical Cooperation, and the Society for Human Re-

source Management, USA.

References

Amba-Rao, S., Petrick, J., Gupta, J., & Von der Emb-

se, T. (2000). Comparative performance appraisal

practices and management values among foreign

and domestic firms in India. International Journalof Human Resource Management, 11(1), 6089.

Astill, J. (2008, December 11). An elephant, not a

tiger: A special report on India. The Economist.

Retrieved June 25, 2009, from http://www

.economist.com/specialreports/displayStory

.cfm?storyid_=12749735

Bae, J., & Lawler, J. (2000). Organizational and HRM

strategies in Korea: Impact on firm performance in

an emerging economy. Academy of Management

Journal, 43(3), 502517.

Barney, J. (1991). Firm resources and sustained com-petitive advantage. Journal of Management, 17(1),

99120.

Bhatnagar, J. (2007a). Talent management strategy of

employee engagement in Indian ITES employees:

Key to retention. Employee Relations 29(6), 640663.

Bhatnagar, J. (2007b). Predictors of organizational

commitment in India: Strategic HR roles, or-

ganizational learning capability and psychological

empowerment. International Journal of Human

Resource Management, 18(10), 17821811.

Biswas, S., & Varma, A. (2007). Psychological climate

and individual performance in India: Test of a medi-

ated model. Employee Relations, 29(6), 664676.

Boisot, M., & Child, J. (1996). From fiefs to clans and

network capitalism: Explaining Chinas emerging

economic order. Administrative Science Quarterly,

41(4), 600628.

Bowen, D., & Ostroff, C. (2004). Understanding

HRM-firm performance linkages: The role of the

strength of the HRM system. Academy of Man-

agement Review, 29(2), 203221.

Brown J., & Duguid P. (1991). Organizational learning

and communities-of-practice: Toward a unified view

of working, learning, and innovation. Organization

Science, 2(1), 4057.

Buchanan, D., & Badham, R. (1999). Power, politics

and organizational change: Winning the turf game.London: Sage.

Budhwar, P. (2009). Managing human resources in

India. In J. Storey, P. Wright, & D. Ulrich (Eds.),

The Routledge companion to strategic human

resource management (pp. 435446). London:

Routledge.

Budhwar, P., & Boyne, G. (2004). Human resource man-

agement in the Indian public and private sectors:

An empirical comparison. International Journal of

Human Resource Management, 15(2), 346370.


20/25



Budhwar, P., & Khatri, N. (2001). A comparative study

of HR practices in Britain and India. International

Journal of Human Resource Management, 12(5),

800826.

Camelo-Ordaz, C., Fernndez-Alles, M., & Valle-Ca-

brera, R. (2008). Top management teams vision

and human resources management practices

in innovative Spanish companies. International


620638.

Cano, C., & Cano, P. (2006). Human resource manage-

ment and its impact on innovation performance

in companies. International Journal of Technology

Management, 35(1), 1128.

Chan, L., Shaffer, M., & Snape, E. (2004). In search of

sustained competitive advantage: The impact of

culture, competitive strategy and human resource

management practices on firm performance. Inter-

national Journal of Human Resource Management,

15(1), 1735.

Chand, M., & Katou, A. (2007). The impact of HRM prac-

tices on organizational performance in the Indian

hotel industry. Employee Relations, 29(6), 576594.

Chen, C. C., Chen, Y., & Xin, K. (2004). Guanxi practices

and trust in management: A procedural justice per-

spective. Organization Science, 15(2), 200209.

Chen, Y. F., & Tjosvold, D. (2006). Participative leader-

ship by American and Chinese managers in China:

The role of relationships. Journal of Management

Studies, 43(8), 17271752.

Child, J., & Tsai, T. (2005). The dynamic between firmsenvironmental strategies and institutional con-

straints in emerging economies: Evidence from

China and Taiwan. Journal of Management Studies,

42(1), 95125.

Chiu, W. (2002). Do types of economic ownership mat-

ter in getting employees to commit? An exploratory

study in the Peoples Republic of China. Interna-

tional Journal of Human Resource Management,

13(6), 865882.

Conner, K. (1991). A historical comparison of resource-

based theory and five schools of thought within

industrial organizational economics: Do we have anew theory of the firm? Journal of Management,

17, 121154.

Cooke, F. L. (2002). The important role of maintenance

workforce in technological changea much ne-

glected aspect. Human Relations, 55(8), 963988.

DiMaggio, P., & Powell, W. (1983). The iron cage

revisited: Institutional isomorphism and collective

rationality in organizational fields. American Socio-

logical Review, 48(2), 147160.

DiMaggio, P., & Powell, W. (1991). Introduction. In W.

Powell & P. DiMaggio (Eds.), The new institutional-

ism in organizational analysis (pp. 138). Chicago:

University of Chicago Press.

Ding, D., & Warner, M. (1999). Re-inventing Chinas

industrial relations at enterprise-level: An empirical

field-study in four major cities. Industrial Relations

Journal, 30(3), 243260.

Edwards, T., Colling, T., & Ferner, A. (2007). Conceptual

approaches to the transfer of employment prac-

tices in multinational companies: An integrated

approach. Human Resource Management Journal,

17(3), 201217.

Farndale, E., & Paauwe, J. (2007). Uncovering com-

petitive and institutional drivers of HRM practices

in multinational corporations. Human Resource

Management Journal, 17(4), 355375.

Glaser, B., & Strauss, A. (1967). The discovery of

grounded theory. Chicago: Aldine.

Guest, D., Conway, N., & Dewe, P. (2004). Using se-

quential tree analysis to search for bundles of HR

practice. Human Resource Management Journal,

14(1), 7996.

Guthrie, J., Spell, C., & Nyamori, R. (2002). Correlates

and consequences of high involvement work prac-

tices: The role of competitive strategy. International

Journal of Human Resources Management, 13(1),

183197.

Hoskisson, R., Hitt, M., Wan, W., & Yiu, D. (1999). Theo-

ry and research in strategic management. Journal

of Management, 25(3), 417456.

Huselid, M. (1995). The impact of human resource

management practices on turnover, productivity

and corporate financial performance. Academy of


Jimnez-Jimnez, D., & Sanz-Valle, R. (2008). Could

HRM support organizational innovation? Interna-

tional Journal of Human Resource Management,

19(7), 12081221.

Kanter, R. (1989). The new managerial work. Harvard

Business Review, 89(6), 8592.

Katou, A., & Budhwar, P. (2006). Human resource man-agement systems and organizational performance:

A test of mediating model in the Greek manufac-

turing context. International Journal of Human

Resource Management, 17(7), 12231253.

Khanna, T. (2007). Billions of entrepreneurs: How

China and India are reshaping their futures and

yours. Boston: Harvard Business School Press.

Kim, D. O., & Bae, J. (2005). Workplace innovation,

employment relations and HRM: Two electronics


21/25



companies in South Korea. International Journal

of Human Resource Management, 16(7), 1277

1302.

Lam, A. (1997). Embedded firms, embedded knowl-

edge: Problems of collaboration and knowledge

transfer in global co-operative ventures. Organiza-

tion Studies, 18(6), 973996.

Lau, C., & Ngo, H. (2004). The HR system, organiza-

tional culture, and product innovation. International

Business Review, 13(6), 685703.

Laursen, K., & Foss, N. (2003). New human resource

management practices, complementarities and

the impact on innovation performance. Cambridge

Journal of Economics, 27(2), 243263.

Lawler, J., Chen, S., & Bae, J. (2000). Scale of opera-

tions, human resource systems and firm perform-

ance in East and Southeast Asia. Research and Prac-

tice in Human Resource Management, 8(1), 320.

Legge, K. (1978). Power, innovation and problem-solving in personnel management. London, UK:

McGraw-Hill

Leonard-Barton, D. (1995). Wellsprings of knowledge:

Building and sustaining sources of innovation.

Boston: Harvard University Press.

Mazzanti, M., Pini, P., & Tortia, E. (2006). Organizational

innovations, human resources and firm perform-

ance: The Emilia-Romagna food sector. Journal of

Socio-Economics, 35(1), 123141.

Miles, M., & Huberman, A. (1994). Qualitative data

analysis: An expanded sourcebook. Thousand Oaks,

CA: Sage Publications.

Mumford, M. (2000). Managing creative people: Strat-

egies and tactics for innovation. Human Resource

Management Review, 10(3), 313351.

Myers, C., & Davids, K. (1992). Knowing and doing:

Tacit skill at work. Personnel Management, Febru-

ary, 4547.

Ngo, H. Y., Turban, D., Lau, C. M., & Lui, S. (1998). Hu-

man resource practices and firm performance of

multinational corporations: Influences of country

origin. International Journal of Human Resource

Management, 9(4), 632652.

Nishii, L., Lepak, D., & Schneider, B. (2008). Employee

attributions of the why of HR practices: Their effects

on employee attitudes and behaviors, and customer

satisfaction. Personnel Psychology, 61(3), 503545.

Nonaka, I., & Takeuchi, H. (1995). The knowledge-creat-

ing company. New York: Oxford University Press.

Nonaka, I., & Teece D. (Eds.). (2001). Managing indus-

trial knowledge: Creation, transfer and utilization.

London: Sage.

Oliver, C. (1997). Sustainable competitive advantage:

Combining institutional and resource-based views.

Strategic Management Journal, 18(9), 697713.

Paul, A., & Anantharaman, R. (2003). Impact of people

management practices on organizational perform-

ance: Analysis of a causal model. International


12461266.

Peng, M., Tan, J., & Tong, T. (2004). Ownership types

and strategic groups in an emerging economy.

Journal of Management Studies, 41(7), 11051129.

Porter, M. (1980). Competitive strategy. New York: Free

Press.

Powell, W., & DiMaggio, P. (Eds.). (1991). The new

institutionalism in organizational analysis. Chicago:

University of Chicago Press.

Prahalad, C. K., & Hamel G. (1990). The core compe-

tence of the corporation. Harvard Business Review,

MayJune, 7991.

Prahalad, C. K., & Krishnan, M. S. (2008). The new age

of innovation: Driving co-created value through

global networks. New Delhi, India: Tata McGraw-

Hill.

Rao, S. (2007). Effectiveness of performance manage-

ment systems: An empirical study in Indian com-

panies. International Journal of Human Resource

Management, 18(10), 18121840.

Rouse, M., & Daellenbach, U. (1999). Rethinking re-

search methods for the resource-based perspective:

Isolating sources of sustainable competitive advan-tage. Strategic Management Journal, 20(5), 487494.

Schuler, R., & Jackson, S. (1987). Linking competi-

tive strategies with human resource management

practices. Academy of Management Executive,

1(3), 207219.

Seale, R., & Ball, K. (2003). Supporting innovation

through HR policy: Evidence from the UK. Creativ-

ity and Innovation Management, 12(1), 5062.

Selvarajan, T., Ramamoorthy, N., Flood, P., Guthrie, J.,

MacCurtain, S., & Liu, W. (2007). The role of human

capital philosophy in promoting firm innovative-

ness and performance: Test of a causal model.International Journal of Human Resource Manage-

ment, 18(8), 14561470.

Shenkar, O., & Von Glinow, M. (1994). Paradoxes of

organizational theory and research: Using the case

of China to illustrate national contingency. Man-

agement Science, 40(1), 5671.

Shipton, H., West, M., Dawson, J., Birdi, K., & Patter-

son, M. (2006). HRM as a predictor of innovation.

Human Resource Management Journal, 16(1), 327.


22/25



Singh, K. (2003). Strategic HR orientation and firm

performance in India. International Journal of Hu-

man Resource Management, 14(4), 530543.

Som, A. (2007). What drives adoption of innovative

SHRM practices in Indian organizations? Interna-

tional Journal of Human Resource Management.

18(5), 808828.

Storey, J., Quintas, P., Taylor, P., & Fowle, W. (2002). Flex-

ible employment contracts and their implications for

product and process innovation. International Jour-

nal of Human Resource Management, 13(1), 118.

Storey, J., & Salaman, G. (2005). Managers of inno-

vation: Insights into making innovation happen.

Oxford, UK: Blackwell.

Tan, J. (2002). Impact of ownership type on environ-

ment-strategy linkage and performance: Evidence

from a transitional economy. Journal of Manage-

ment Studies, 39(3), 333354.

Teece D., Pisano G., & Shuen, A. (1997). Dynamic

capabilities and strategic management. Strategic


Thompson, M. (2007). Innovation in work practices: A

practice perspective. International Journal of Hu-

man Resource Management, 18(7), 12981317.

Tsai, C. (2006). High performance work systems and

organizational performance: An empirical study of

Taiwans semiconductor design firms. International


15121530.

Tsui, A. (2004). Contributing to global managementknowledge: A case for high quality indigenous

research. Asia Pacific Journal of Management,

21(4), 491513.

Tsui, A., Zhang, Z., Wang, H., Xin, K., & Wu, J. (2006).

Unpacking the relationship between CEO leader-

ship behavior and organizational culture. Leader-

ship Quarterly, 17(2),

HRM and Innovation Strategy

Documents

Transcript of HRM and Innovation Strategy