New HRM Practices, Complementarities, and the Impact on Innovation Performance

New HRM Practices, Complementarities, and the Impact on Innovation Performance

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Institut for Industriøkonomi og Virksomhedsstrategi Working Paper 2000-5 New HRM Practices, Complementarities, and the Impact on Innovation Performance Keld Laursen and Nicolai J. Foss Department of Industrial Economics and Strategy, Copenhagen Business School, Howitzvej 60, 2000 Frederiksberg, Denmark E-mail: [email protected], [email protected] 2 nd draft, this version: 22 February 2000 Paper prepared for the 3 rd Applied Econometrics Conference, Alicante, Spain, 20 –21 April 2000 Acknowledgements We are grateful to Bengt-Åke Lundvall, Torben Pedersen and Ammon Salter for comments made on an earlier version of this paper. In addition, wish to thank the participants in the DISKO project for allowing us to use the data applied in this paper. In particular, we wish to thank the persons responsible for carrying out the survey, including project leader Bengt-Åke Lundvall, Allan Næs Gjerding, Kenneth Jørgensen, Frank Skov Kristensen, Reinhard Lund, Poul Thøis Madsen, Peter Nielsen and Søren Nymark.
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New HRM Practices, Complementarities and the Impact on Innovation Performance Abstract Although organisational structure has sometimes been mentioned in evolutionary economics as well as in the innovation literature as a possible determinant of innovation performance, very little systematic theoretical and empirical work exist on this issue. In this paper, we take our theoretical point of departure in recent work in organisational economics and elsewhere, on systems of human resource management practices. We put and develop the argument that just as complementarities between new HRM practices positively influence financial performance, they will also positively influence innovation performance. We examine this overall hypothesis by estimating an empirical model of innovation performance, using data from a Danish survey of 1900 business firms. Using principal components analysis we identify two HRM systems which are conducive to innovation. The first is one in which all of our nine HRM variables matter (almost) equally for the ability to innovate. The second system, which is found to be conducive to innovation is dominated by performance related pay and to some extent by firm-internal training. Of our total of nine sectors we find that the four manufacturing sectors correlate with the first system, while also firms located in ICT intensive service sectors are associated with the first system. Firms belonging to the wholesale trade sector tend to be associated with the second system. JEL classification : C25, D23, O32 Keywords Innovation, human resource management practices, organisational complementarities, evolutionary economics.
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1 I. Introduction: New HRM Practices and Innovation The ongoing re-structuring of management practices designed to cope with an increasingly complex and rapidly changing knowledge-based economy has received increasing attention from scholars from a diversity of disciplines and fields (Bowman and Singh, 1993; Zenger and Hesterly, 1997). In particular, much attention has been given to the restructuring of the
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  • Fall '09
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