A resource-based perspective on human capital losses, HRM investments, and organizational performance
TL;DR: It is shown that the human capital losses (voluntary turnover rates)-workforce performance relationship takes the form of an attenuated negative relationship when HRM investments are high, and stronger curvilinear effects of voluntary turnover rates on financial performance via workforce productivity under these conditions.
Abstract: Reversing the focus on human capital accumulations in the resource-based literature, the authors examine the issue of human capital losses and organizational performance. They theorize that human capital losses markedly diminish the inimitability of human capital stores initially, but that the negative effects are attenuated as human capital losses increase. They argue further that these effects are more dramatic when human resource management (HRM) investments are substantial. As predicted, Study 1 shows that the human capital losses (voluntary turnover rates)-workforce performance relationship takes the form of an attenuated negative relationship when HRM investments are high. Study 2 shows stronger curvilinear effects of voluntary turnover rates on financial performance via workforce productivity under these conditions. Implications for resource-based theory and strategic HRM are addressed.
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TL;DR: How theory development and testing began in the mid-20th century and dominated the academic literature until the turn of the century is explained and 21st century interest in the psychology of staying (rather than leaving) and attitudinal trajectories in predicting turnover is tracked.
Abstract: We review seminal publications on employee turnover during the 100-year existence of the Journal of Applied Psychology. Along with classic articles from this journal, we expand our review to include other publications that yielded key theoretical and methodological contributions to the turnover literature. We first describe how the earliest papers examined practical methods for turnover reduction or control and then explain how theory development and testing began in the mid-20th century and dominated the academic literature until the turn of the century. We then track 21st century interest in the psychology of staying (rather than leaving) and attitudinal trajectories in predicting turnover. Finally, we discuss the rising scholarship on collective turnover given the centrality of human capital flight to practitioners and to the field of human resource management strategy. (PsycINFO Database Record
431 citations
Cites result from "A resource-based perspective on hum..."
...Regarding boundary conditions, and although some alternative findings exist, recent evidence supports an attenuated-U turnoverperformance relationship, such that the linkage is strongly negative initially, but weakens at high turnover rates (Shaw, Duffy, et al., 2005; Shaw et al., 2013)....
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TL;DR: In sample-level regressions, the strength of the turnover rates-organizational performance relationship significantly varies across different average levels of total and voluntary turnover rates, which suggests a potential curvilinear relationship.
Abstract: The authors conducted a meta-analysis of the relationship between turnover rates and organizational performance to (a) determine the magnitude of the relationship; (b) test organization-, context-, and methods-related moderators of the relationship; and (c) suggest future directions for the turnover literature on the basis of the findings. The results from 300 total correlations (N 309,245) and 110 independent correlations (N 120,066) show that the relationship between total turnover rates and organizational performance is significant and negative ( –.15). In addition, the relationship is more negative for voluntary ( –.15) and reduction-in-force turnover ( –.17) than for involuntary turnover ( –.01). Moreover, the meta-analytic correlation differs significantly across several organization- and context-related factors (e.g., types of employment system, dimensions of organizational performance, region, and entity size). Finally, in sample-level regressions, the strength of the turnover rates–organizational performance relationship significantly varies across different average levels of total and voluntary turnover rates, which suggests a potential curvilinear relationship. The authors outline the practical magnitude of the findings and discuss implications for future organizationallevel turnover research.
414 citations
TL;DR: The theory and findings presented in this article have implications for the way staffing and training may be used strategically to weather economic uncertainty (recession effects) and have important practical implications by demonstrating that firms that more effectively staff and train will outperform competitors throughout all pre- and postrecessionary periods.
Abstract: This study integrates research from strategy, economics, and applied psychology to examine how organizations may leverage their human resources to enhance firm performance and competitive advantage. Staffing and training are key human resource management practices used to achieve firm performance through acquiring and developing human capital resources. However, little research has examined whether and why staffing and training influence firm-level financial performance (profit) growth under different environmental (economic) conditions. Using 359 firms with over 12 years of longitudinal firm-level profit data, we suggest that selective staffing and internal training directly and interactively influence firm profit growth through their effects on firm labor productivity, implying that staffing and training contribute to the generation of slack resources that help buffer and then recover from the effects of the Great Recession. Further, internal training that creates specific human capital resources is more beneficial for prerecession profitability, but staffing is more beneficial for postrecession recovery, apparently because staffing creates generic human capital resources that enable firm flexibility and adaptation. Thus, the theory and findings presented in this article have implications for the way staffing and training may be used strategically to weather economic uncertainty (recession effects). They also have important practical implications by demonstrating that firms that more effectively staff and train will outperform competitors throughout all pre- and postrecessionary periods, even after controlling for prior profitability.
227 citations
Cites background from "A resource-based perspective on hum..."
...More recent theory and research are focusing on understanding how collective turnover interrelates with human capital resources (Nyberg & Ployhart, 2013; Shaw et al., 2013; Sturman, Trevor, Boudreau, & Gerhart, 2003)....
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TL;DR: In this article, the authors analyzed the effect of human resource management practices on a company's innovation capabilities by using structural equation modeling, using the statistical technique of partial least squares (PLS).
Abstract: This paper analyzes the effect of systems of human resource management (HRM) practices on a company's innovation capabilities. To date, few studies have analyzed the way a firm may be more innovative by using specific sets of high-performance HRM practices from an intellectual capital-based view of the firm. From an extensive literature review, a model was established and tested through structural equation modelling, using the statistical technique of partial least squares. The study was applied to a sample of technological firms in Spain and the results show that high-profile personal HRM practices positively influence human capital while collaborative HRM practices influence social capital, which, in turn, affect innovation capabilities by means of, respectively, total and partial mediating effects. Managerial and HRM implications of these results are drawn by the authors, highlighting the idea of paying increased attention to managing firms with a focus on strategic intangible assets in order to gain c...
117 citations
Cites background from "A resource-based perspective on hum..."
...Human capital management is an approach to HRM that considers people as intangible assets (human capital) whose future value can be enhanced through investment (Kong & Thomson, 2009; Shaw et al., 2013)....
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...investments which should not be neglected over time in order their firms not to reach disadvantageous positions (Shaw et al., 2013)....
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...Other papers show that the loss of social capital might be a serious concern for innovative and knowledge-intensive firms (e.g. Morris & Snell, 2011; Shaw et al., 2013)....
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...Hence, HR managers should be aware that competitive advantages based on intangible assets depend on cumulative investments which should not be neglected over time in order their firms not to reach disadvantageous positions (Shaw et al., 2013)....
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...If the most skillful people enjoy high compensation, it will also be more likely that they may be retained by the firm and human capital is not eroded by employee turnover (Shaw et al., 2013; Wilson & Larson, 2002)....
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TL;DR: In this article, the authors empirically examined the economic value to firms of investing in the training of their employees and firm-level factors that influence how much the firms benefit, and they found that these human capital investments are more impactful when combined with complementary assets of R&D, physical capital, and advertising.
Abstract: Research summary: This article empirically examines the economic value to firms of investing in the training of their employees and firm-level factors that influence how much the firms benefit. Event study methodology is used to obtain a measure of the economic impact of information regarding a firm's human capital management investments and policies. Subsequent regression analyses are then used to test hypotheses regarding possible complementary relationships between firm-level factors and human capital investments. Results provide robust support for the proposition that effective investments in human capital and training matter, and that these human capital investments are more impactful when combined with complementary assets of R&D, physical capital, and advertising investments.
Managerial summary: Do firm investments in training and the development of employee human capital matter with regard to financial performance? We find that, yes, these investments do matter. Our results show that managers who view employee human capital as an asset to be invested in and developed can expect to outperform those who view it as a cost to be minimized. In addition, we find that these human capital investments will be of even greater economic value to firms when they have made complementary investments in R&D, physical capital, and advertising. Copyright © 2016 John Wiley & Sons, Ltd.
93 citations
References
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TL;DR: In this article, the authors examined the link between firm resources and sustained competitive advantage and analyzed the potential of several firm resources for generating sustained competitive advantages, including value, rareness, imitability, and substitutability.
46,648 citations
TL;DR: In this paper, the authors explore the usefulness of analyzing firms from the resource side rather than from the product side, in analogy to entry barriers and growth-share matrices, the concepts of resource position barrier and resource-product matrices are suggested.
Abstract: Summary The paper explores the usefulness of analysing firms from the resource side rather than from the product side. In analogy to entry barriers and growth-share matrices, the concepts of resource position barrier and resource-product matrices are suggested. These tools are then used to highlight the new strategic options which naturally emerge from the resource perspective.
18,677 citations
"A resource-based perspective on hum..." refers background in this paper
...fields of strategic management and strategic human resource management (HRM) often through the lens of the resource-based view (RBV) (e.g., Barney, 1991; Wernerfelt, 1984)....
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...…321 19th Avenue South, Minneapolis, MN 55455, U.S.A. E-mail: shawx218@umn.edu Copyright 2012 John Wiley & Sons, Ltd. fields of strategic management and strategic human resource management (HRM) often through the lens of the resource-based view (RBV) (e.g., Barney, 1991; Wernerfelt, 1984)....
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...The resource-based perspective (Barney, 1991; Wernerfelt, 1984) focuses on the value, rareness, non-substitutability, and inimitability of organizational resources, including people....
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TL;DR: Barney as mentioned in this paper showed that the sustainability of a firm's asset position depends on how easily assets can be substituted or imitated, and that imitability is linked to the characteristics of the asset accumulation process: time compression diseconomies, asset mass efficiencies, interconnectedness, asset erosion and causal ambiguity.
Abstract: Given incomplete factor markets, appropriate time paths of flow variables must be chosen to build required stocks of assets. That is, critical resources are accumulated rather than acquired in "strategic factor markets" Barney [Barney, J. 1986. Strategic factor markets: Expectations, luck, and business strategy. Management Sci. October 1231-1241.]. Sustainability of a firm's asset position hinges on how easily assets can be substituted or imitated. Imitability is linked to the characteristics of the asset accumulation process: time compression diseconomies, asset mass efficiencies, inter-connectedness, asset erosion and causal ambiguity.
8,271 citations
"A resource-based perspective on hum..." refers background in this paper
...For competitors, ‘trying to quickly build human capital is unlikely to reproduce the same value it has for units in which the capital has been established for a long time’ (Ployhart et al ., 2009: 1000) because of these time-compression diseconomies (see also Dierickx and Cool, 1989)....
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TL;DR: This study explores the dimensionality of organizational justice and provides evidence of construct validity for a new justice measure and demonstrated predictive validity for the justice dimensions on important outcomes, including leader evaluation, rule compliance, commitment, and helping behavior.
Abstract: This study explores the dimensionality of organizational justice and provides evidence of construct validity for a new justice measure. Items for this measure were generated by strictly following the seminal works in the justice literature. The measure was then validated in 2 separate studies. Study 1 occurred in a university setting, and Study 2 occurred in a field setting using employees in an automobile parts manufacturing company. Confirmatory factor analyses supported a 4-factor structure to the measure, with distributive, procedural, interpersonal, and informational justice as distinct dimensions. This solution fit the data significantly better than a 2- or 3-factor solution using larger interactional or procedural dimensions. Structural equation modeling also demonstrated predictive validity for the justice dimensions on important outcomes, including leader evaluation, rule compliance, commitment, and helping behavior.
4,482 citations
TL;DR: The field of strategic human resource management (SHRM) has been criticized for lacking a solid theoretical foundation as mentioned in this paper, however, contrary to this criticism, the SHRM literature has a strong theoretical foundation.
Abstract: The field of strategic human resource management (SHRM) has been criticized for lacking a solid theoretical foundation. This article documents that, contrary to this criticism, the SHRM literature ...
4,017 citations