Strategic Hrm

Cornell University ILR School emailprotected CAHRS meltings Paper Series midpoint for pass on gay pick Studies (CAHRS) 4-1-2006 strategicalalalalalalal worry and HRM Mathew R. Allen Patrick M. Wright Cornell University Follow this and redundant surveyings at http//digitalcommons. ilr. cornell. edu/cahrswp This Article is brought to you for free and open access by the touch for forward- manifestationing forgiving Re rise Studies (CAHRS) at emailprotected It has been accepted for inclusion in CAHRS Working Paper Series by an authorized administrator of emailprotectedFor to a greater extent education, please contact emailprotected edu. strategical steering and HRM Abstract Excerpt The take aim of this chapter is to reason this intersection amongst strategic precaution and HRM, what we know, and in store(predicate) straightions for SHRM seek. We go away catch by briefly discussing the excogitation of dodge and the popularization of the vision-based expr ession (RBV) of the immobile. attached we go away address its lineament in creating the wed between HRM and strategical solicitude including delineate un certain(prenominal)tys that the RBV has increase in relation to SHRM.We willing then interpret the catamenia adduce of affairs in SHRM the submit make, and gravestone questions and concerns occupying the attention of SHRM interrogationers. Fin on the wholey, we will finish with our views on future directions for SHRM inquiry. Keywords CAHRS, ILR, center, military man imaging, studies, advanced, think, information technology, pedigree partner, strategic case, competencies, HR, HRM, HR professionals, instruction Comments Suggested Citation Allen, M. R. & Wright, P. M. (2006). strategic solicitude and HRM (CAHRS Working Paper 06-04).Ithaca, NY Cornell University, School of Industrial and drudge Relations, Center for Advanced homo imaging Studies. http//digitalcommons. ilr. cornell. edu/cahrswp/404/ This a rticle is open at emailprotected http//digitalcommons. ilr. cornell. edu/cahrswp/404 CAHRS at Cornell University 187 Ives residence Ithaca, NY 14853-3901 USA Tel. 607 255-9358 www. ilr. cornell. edu/CAHRS WORKING PAPER SERIES strategic wariness and HRM Mathew R. Allen Patrick M. Wright Working Paper 06 04 strategical counsel and HRM CAHRS WP06-04 strategical concern and HRM Mathew R. Allen Patrick M. Wright Department of gentlemans gentleman Resource Studies School of Industrial and Labor Relations Cornell University Ithaca, NY 14853-3901 April 2006 http//www. ilr. cornell. edu/cahrs This paper has not lowgone perfunctory review or approval of the faculty of the ILR School. It is int removeed to impinge on levelnesss of Center look unattached to opposites interested in preliminary form to pull ahead discussion and suggestions. Most (if not any) of the CAHRS Working Papers be available for reading at the Catherwood Library.For information on whats available bring together to the Cornell Library Catalog http//catalog. library. cornell. edu if you wish. knave 2 of 26 strategic caution and HRM CAHRS WP06-04 Abstract scalawag 3 of 26 Strategic counseling and HRM CAHRS WP06-04 Strategic instruction and HRM Introduction It has been said that the most important as primps of any business walk unwrap the door at the end of separately day. Indeed, multitude and the revolve ab forbidden onsing of people ar more than and more seen as key elements of matched favour (Boxall & Purcell, 2003 Pfeffer, 1998 Gratton, Hailey & Truss, 2000).Spurred on by increasing competition, fast paced technological change, globalization and other factors, businesses be seeking to understand how one of the last authentically emulous visions, their expediencyman imagingfulnesss, kitty be managed for hawkish advantage. This idea that the mankind preferences of a securely can play a strategic subprogram in the success of an physical composition ha s led to the formation of a cogitation of research often referred to as strategic pieces imagery wariness (SHRM).This relatively young atomic number 18a represents an intersection of the strategic precaution and piece resource solicitude (HRM) lits (Boxall, 1998 Boxall and Purcell, 2000). Wright and McMahan (1992) specify strategic homophile resource prudence as the pattern of planned benevolent resource deployments and activities intended to alter the self-colored to achieve its goals (1992, p. 298). The purpose of this chapter is to discuss this intersection between Strategic focal point and HRM, what we know, and future directions for SHRM research.We will begin by briefly discussing the fancy of dust and the popularization of the resource-based view (RBV) of the true. Next we will address its role in creating the get in touch between HRM and Strategic oversight including key questions that the RBV has raised in relation to SHRM. We will then examine the cu rrent state of affairs in SHRM the progress made, and key questions and concerns occupying the attention of SHRM researchers. Finally, we will conclude with our views on future directions for SHRM research. appearline And The Resource-Based View Of The regularThe field of system foc parts on how theatres can position themselves to compete, and its popularity began increasing exponentially in the mid eighties with two books. First, Peters & paginate 4 of 26 Strategic focus and HRM CAHRS WP06-04 sailors (1982) In Search of Excellence provided a practitioner-oriented analytic thought work of tenuous companies and the common threads that united them. However, Porters (1980) combative Strategy presented a more than academically based analysis of strategy, entirely in a way that practitioners/executives quickly gravitated toward.This Industrial/Organization Economicsbased analysis chiefly narrowed on industry characteristics, in item the five forces of barriers to ent ry, billet of buyers, power of suppliers, substitutes, and emulous rivalry as the determinants of industry pro shot susceptibility. enchantment this analysis did propose four generic wine strategies (cost, contraryiation, focus, and stuck in the middle), the bulk of the analysis pore on external factors that determined company pro extendted faculty. This framework seemed to obtain strategic caution thinking of the aboriginal 1980s.However, with the advent of the resource-based view of the dissolute (Barney, 1991 Wernerfelt, 1980), strategic perplexity research moved to a more innate focus. Rather than simply developing private-enterprise(a) strategies to address the surround, the resource-based view suggested that business inviolables should look inward to their resources, some(prenominal) physical and intellectual, for sources of emulous advantage. Though others had addressed the concept of the RBV previously, Barney (1991) specialally explicated how menage resou rces break to the keep up hawkish advantage of the libertine.He suggested that resources that are priceless, rare, inimitable and non-substitutable will take aim to hawkish advantage. Value in this place setting is defined as resources either exploiting opportunities or neutralizing threats to the organization and rarity is defined as being a resource that is not currently available to a large number of the organizations current or future competitors (Barney, 1991). Inimitability refers to the fact it is difficult for other unwaveringlys to copy or other reproduce the resources for their own delectation.Finally, non-substitutability means that other resources cannot be used by competitors in order to replicate the bene assure (Barney 1991). When all four of these conditions are met, it is said that the unanimous or organization possess resources which can probablely run away to a sustained competitive advantage over clock time. Page 5 of 26 Strategic caution and H RM CAHRS WP06-04 The resource-based view has become close to the assumed simulacrum within strategic counselling research (Barney and Wright, 2001).It has been the basic notional baseation from which frequently of the current strategic counselling research regarding intimacy-based views of the firm (Grant, 1996), adult male chapiter (Hitt et al. , 2001), and dynamic capabilities (Teece, Pisano, & Schuen, 1997) are derived. In fact, Priem and pantryman (2001) mapped RBV studies against eighteen strategy research topics, demonstrating the breadth of its diffusion within the strategic counselling domain.More importantly from the standpoint of this chapter, the resource-based view has become the guiding paradigm on which virtually all strategic HRM research is based (Wright, Dunford, & Snell, 2001). In cattiness of the wide acceptance of the RBV, it is not without criticism. Priem and Butler, (2001a, b) down leveled the most grievous critique to date suggesting that the RBV does not very seduce a possibility. Their line of merchandise focuses primarily on two basic progenys. First, they suggest that the RBV is basically superfluous in its definition of key constructs.They note that Barneys statement that if a firms invaluable resources are absolutely bizarre among a set of competing and potentially competing firms, those resources will generate at least(prenominal) a competitive advantage (Barney, 2001 102) essentially requires definitional dependence. In other words, without definitional dependence (i. e. valuable resources) the diametrical statement that unique firms possess competitive advantages does not logically follow. Their second major criticism of the RBV as a theory focuses on the inability to essay it (Priem & Butler, 2001b). They note he necessity condition of falsifiability for a theory. In other words, in order for a set of declared births to constitute a theory, the relationships must be able to be thrifty and tried an d true in a way that allows for the theory to be institute to be false. This relates directly to the tautology criticism, but brings the debate into the falsifiable significantm. In suffer of these criticisms, even the critics agree that the concern of the RBV on strategic management research has been epochal and that the confinement to focus on the internal aspects of the organization in justifying competitive advantage has been a useful one (Preim & Butler,Page 6 of 26 Strategic focussing and HRM CAHRS WP06-04 2001b). While the debate skill proceed as to the notional implications of the RBV for strategic management research, it is clear that it has made a crucial contribution to Strategic counselling and, more particularisedally, SHRM research (Wright, Dunford & Snell, 2001). A Brief History Of Strategic HRM Wright and McMahans (1992) definition of strategic world resource management illustrates that the major focus of the field should be on aligning HR with firm s trategies.Jim Walkers (1980) classic book, tender Resource Planning, was one of the first to directly suggest considering a firms business strategy when developing a military man resource plan. Devanna, Fombrum, and Tichys (1981) article, forgiving Resources heed a Strategic Perspective, added to the lay downation. These attempts tended to advantage an equaling strategy typology (e. g. Miles and Snows (1978) prospectors, analyzers and defenders) and delineate the kinds of HRM intrusts that should be associated with each strategy. These attempts to tie HRM to strategy have been referred to as vertical alignment (Wright & McMahan, 1992).Beer, Spector, Lawrence, mill rough and Walton (1984) introduced an preference to the individual HR sub-function framework for HR strategy. They representd that viewing HRM as separate HR sub-functions was a product of the historical development of HRM and current views of HR segments. They proposed a more generalist approach to viewing H RM with the focus on the entire HR clay rather than single HR practices. This led to a focus on how the opposite HR sub-functions could be aligned and work together to accomplish the goals of HRM and a more large view of HRM as whole rather than individual functions.This alignment of HR functions with each other is often referred to as horizontal alignment (see this Handbook, chapter 19. ) The combining of twain vertical and horizontal alignment was a significant amount in explaining how HRM could contribute to the accomplishment of strategic goals. However, given the external focus of the strategic management literature at that time, HR was seen to play provided a secondary role in the accomplishment of strategy with an dialect on the role that HRM Page 7 of 26 Strategic Management and HRM CAHRS WP06-04 layed in strategy instruction execution, but not strategy formulation. Lengnick-Hall and LengnickHall (1988) stated strategic benignant resource management sets emphasize executing over strategy formulation. Human resources are considered means, not part of generating or selecting strategic objectives. seldom are human resources seen as a strategic capacity from which competitive choices should be derived (1988, p. 456). A transplant in strategic management thinking would be required to change that perception and open the door for nurture development of the SHRM literature.The diffusion of the resource-based view into the Strategic HRM literature spurred this paradigmatic shift in the view of the link between strategy and HRM. Because the resourcebased view proposes that firm competitive advantage comes from the internal resources that it possesses (Wernerfelt, 1984 Barney, 1991), the RBV provided a legitimate foundation upon which HRM researchers could argue that people and the human resources of a firm could in fact contribute to firm-level accomplishment and bring strategy formulation.This resulted in a number of efforts to conceptually or the oretically tie strategic HRM to the resource-based view. For instance, Wright, McMahan, and McWilliams (1994) suggested that bandage HR practices expertness be easily imitated, the human working majuscule pool of an organization efficacyiness constitute a source of sustainable competitive advantage. Lado and Wilson (1994) argued that HR practices combine into an overall HR system can be valuable, unique, and difficult to imitate, at that placeof constituting a resource meeting the conditions requirement for sustained competitive advantage.Boxall (1996, 1998) proposed a distinction between human resource advantage (advantage stemming from a outstanding human capital pool) and organisational process advantage (advantage stemming from superior processes for managing human capital). The resource-based view to a fault provided the theoretical rationale for empirical studies of how HR practices might intrusion firm success. One of the early empirical studies of this relationsh ip was carried out by Arthur (1994). Using a sample of steel mini-mills, he found that a limited set of HR practices was significantly related to firm execution of instrument in the form of lower Page 8 of 26Strategic Management and HRM CAHRS WP06-04 scrap rates and lower turnover. Huselid (1995), in his landmark study, show that the use of a set of 13 HRM practices representing a exalted- mathematical operation work system was significantly and positively related to lower turnover, and higher profits, sales, and market time value for the firms studied. In a similar study, MacDuffie (1995), using data from automobile manufacturing plants, demonstrated that diametric bundles of HR practices led to higher death penalty, furthering the argument that the integrated HR system, rather than individual HR practices, shoots to higher effect.Delery and Doty (1996) similarly demonstrated the carry on of HR practices on firm murder among a sample of banks. This stain of research quic kly expanded in the U. S. (e. g. , Batt, 1999 Huselid, Jackson, & Schuler, 1996 Youndt, Snell, Dean, & Lepak,, 1996), the U. K. (e. g. , Brewster, 1999 Guest, 1997 Guest, Michie, Conway, & Sheehan, 2003 Tyson, 1997), elsewhere in europium (e. g. , dArcimoles, 1997 Lahteenmaki, Story, & Vanhala, 1998 Rodriguez & Ventura, 2003) and Asia (e. g. Bae & Lawler, 2000 Lee & Chee, 1996 Lee & Miller, 1999), as soundly as in multinational corporations operating in multiple international environments (Brewster, sparrow, and Harris, 2000). In sum, the RBV, with its focus on the internal resources possessed by a firm, has given the field a theoretical collar of why human resources systems might lead to sustainable competitive advantage and provided the spark to generate empirical research in this vein (Guest, 2001 Paauwe & Boselie, 2005 , Wright et al, 2005). Key Questions Raised By The Application Of RBV To SHRMIn spite of the significant amount of research demonstrating a link between HRM p ractices and firm carrying into action, there are several key questions regarding the RBV and its implications for SHRM research that remain unanswered. First, there is some question as to whether current research on HRM and performance is unfeignedly examination the RBV. Second, there is still a general insufficiency of agreement around the concept of fit, and its role in the link between strategy and HRM. Third, there are still unanswered questions regarding HRM and whether orPage 9 of 26 Strategic Management and HRM CAHRS WP06-04 not HRM defined as systems of HR practices truly constitutes a resource under the conditions outlined by Barney (1991) and, specifically, whether those resources are truly sustainable over time. Finally, there are several measuring rod and methodological emergences that, while not within the direct scope of this chapter, are expense mentioning as they are pertinent to our discussion of this intersection between Strategic Management and HRM researc h. Testing of the RBV within SHRMWhile the SHRM research just discussed has used the RBV as a basis for the assertion that HRM contributes to performance, it has not actually tested the theory that was presented in Barneys (1991) article (Wright, Dunford & Snell, 2001). Most of this research has taken a similar view on how HR practices can lead to firm performance. The amaze generally argues that HRM in the form of HR practices directly invasions the employees either by increasing human capital or motivation or both. This in turn will have an impact on operating(a) outcomes much(prenominal) as quality, guest service, turnover or other operative level outcomes.These operational outcomes will in turn impact firm-level outcomes such as financial performance in the form of revenues, profits or other firm-level measures of performance (Dyer, 1984). In a similar vein, Wright Dunford and Snell, (2001) point out that there are three important components of HRM that constitute a resou rce for the firm that are influenced by the HR practices or HR system. First, there is the human capital pool comprised of the stock of employee cognition, skills, motivation and behaviors.HR practices can befriend build the companionship and skill base as well as elicit relevant behavior. Second, there is the flow of human capital finished the firm. This reflects the movement of people (with their individual knowledge, skills and abilities) as well as knowledge itself. HR practices can certainly influence the movement of people. However, more importantly, the types of reward systems, culture, and other aspects of HRM influence the extent to which employees are willing to create, share, and apply knowledge internally. Page 10 of 26 Strategic Management and HRM CAHRS WP06-04Third, the dynamic processes through and through which organizations change and/or renew themselves constitute the third area illustrating the link between HRM and the resource-based view of the firm. HR pract ices are the primary levers through which the firm can change the pool of human capital as well as attempt to change the employee behaviors that lead to organizational success. There appears to be a general consensus among SHRM researchers around the general model of the HR to performance relationship and the role of HR practices, the human capital pool, and employee motivation and behaviors as discussed by Dyer (1984) and others.The implications of this for RBV and SHRM research is that while separate components of the full HRM to performance model have been tested such as HR practices (Huselid, 1995 McDuffie, 1995) and human capital (Richard, 2001 Wright, McMahan & Smart, 1995), a full test of the causal model through which HRM impacts performance has not (Wright, Gardner, Moynihan, & Allen, 2005 Wright, Dunford & Snell, 2001 Boxall, 1998). Current research has established an empirical relationship between HR practices and firm performance, but more remain to be done.By interrog atory the full model, including the additional components of the human capital pool and employee relationships and behaviors, a more complete test of the underlying assumptions of the RBV could be established, thus adding credibility to the theoretical model of the relationship between HRM and performance. Fit and the Resource-based View of the Firm In the Priem and Butler (2001) critique of the RBV, one of the points brought up as a theoretical weakness of the RBV is want of definition around the boundaries or scopes in which it will hold.They point out that relative to other strategy theories little effort to establish the sequester contexts for the RBV has been apparent (2001 p. 32). The notion of context has been an important issue in the study of SHRM (Delery & Doty, 1996, Boxall & Purcell, 2000). Most often referred to as contingencies (or the idea of fit), contextual arguments center on the Page 11 of 26 Strategic Management and HRM CAHRS WP06-04 idea that the role that H RM plays in firm performance is dependent on(p) on some other variable.We break our discussion of fit into the role of human capital and HR practices. Human Capital and Fit. The most often cited aspect for explaining contingency relationships in SHRM is the behavioral berth (Jackson, Schuler & Rivero, 1989) which posits that unlike firm strategies (other contingencies could be inserted as well) require different kinds of behaviors from employees. Consequently, the success of these strategies is dependent at least in part on the ability of the firm to elicit these behaviors from its employees (Cappelli & Singh, 1992 Wright & Snell, 1998).Going adventure to the distinction between human capital skills and employee behavior, Wright and Snell (1999) noted that skills and abilities tend to be necessary, but not sufficient conditions for employee behavior. Consequently, any fit to firm strategy must first consider the kinds of employee behavior (e. g. , experimentation and discovery) required to successfully execute the strategy (e. g. , focused on offering innovative products), and the kinds of skills necessary to exhibit those behaviors (e. g. , scientific knowledge).Obviously, the workforce at Nordstroms (an upscale retailer) is kinda different from the workforce at Wal-Mart (a discount retailer). Thus, the resource-based application to SHRM requires focusing on a fit between the skills and behaviors of employees that are best suited to the firms strategy (Wright et al. 1995). While this idea of fit focuses on crosswise-firm difference in the workforce, Lepak and Snell (1999) developed a framework that at the same time addresses variation across firms and variations in HR systems within firms (see this Handbook, chapter 11).Their model of human resource computer architecture posits that the skills of individuals or jobs within a firm can be displace along two dimensions value (to the firms strategy) and uniqueness. Their framework demonstrates how differ ent jobs within firms may essential to be managed differently, but it also processs to explain differences across firms. For instance, within Wal-Mart, those in charge of logistics have extremely valuable and unique skills, much more so than the average sales Page 12 of 26 Strategic Management and HRM CAHRS WP06-04 associate.On the other hand, at Nordstroms, because customer service is important, sales associate skills are more critical to the strategy than those of the logistics employees. HR Practices and Fit. The theoretical assumption that the skills and behaviors of employees must fit the strategic need of the firm in order for the workforce to be a source of competitive advantage leads to the exploration of how HR practices might also need to achieve some form of fit. With regard to vertical fit, as noted previously, business strategies require different skills and behaviors from employees.Because HR practices are generally the levers through which the firm manages these di fferent skills and behaviors, one would expect to see different practices associated with different strategies. For instance, one would expect that firms focused on low cost might not pay the same level of wages and benefits as firms focused on innovation or customer service. Horizontal fit refers to a fit between HR practices to ensure that the individual HR practices are set up in such a way that they oppose each other (Boxall & Purcell, 2003 Baird & Meshoulam, 1988, Delery, 1998).An example of this would be a selection process that focuses on finding team players and a compensation system that focuses on team-based rewards. Theoretically, the rationale for horizontal fit suggests that (a) complementary bundles of HR practices can be redundantly reinforcing the development of certain skills and behaviors resulting in a higher likelihood that they will occur and (b) conflicting practices can send mixed signals to employees regarding necessary skills and behaviors that reduce the p robability that they will be exhibited (Becker & Huselid, 1998).There appears to be some agreement in the literature that both types of fit are necessary for optimal impact of HRM on performance (Baird & Meshoulam, 1988 Delery, 1998 Delery & Doty, 1996 Boxall & Purcell, 2003), but not necessarily empirical maintain for these types of fit (see this Handbook, chapter 27 Wright & Sherman, 1999). Potential Pitfalls of Fit. The idea of fit, whether it be vertical or horizontal, raises two important questions for SHRM researchers. The first question focuses on empirical trueise forPage 13 of 26 Strategic Management and HRM CAHRS WP06-04 the idea of fit. Second, even if fit has positive consequences in the short term, does fitting HRM practices with strategy or other contingent variables universally lead to positive results? That is, are there controvert implications of fit? As previously discussed, numerous researchers have argued for fitting HRM to contingent variables. However, the efficacy of fit has not received much empirical hold back (Paauwe, 2004 Wright & Sherman, 1999).Huselids (1995) landmark study sought to test the fit guesswork using a variety of conceptualizations of fit, even so found little support. Similarly, Delery and Doty (1996) save found limited support across a number of fit tests. The lack of empirical support may largely be ascribable to focusing only on a fit between generic HRM practices and strategy, rather than the outcomes, or products (Wright, 1998) of the HRM practices (skills, behaviors, etc. ). Thus, it seems that it may be too early to draw any definite conclusions about the validity of the fit hypothesis.However, while fit between HRM practices and discordant contingency variables might enhance the ability of HRM to contribute to firm performance, there is also the possibility that a near fit between HRM and strategy may inhibit the ability of the firm to remain flexible enough to adapt to changing circumstances. Firms are increasingly required to adapt to environments that are constantly changing, both within and away(p) the firm. A tight fit may appear to be wanted but during times of transition and/or change a lack of fit might make adaptation and change more efficacious (Lengnick-Hall, Lengnick-Hall, 1988).Wright and Snell (1998) developed a framework in which HRM contributes to fit and flexibleness simultaneously without conflict between the two, but this framework has yet to be tested and the question remains as to when and where fit might be more or less appropriate. The second question raised by contextual issues meet SHRM and the idea of fit is related to the efficacy of fit. Regardless of whether or not fit can have a positive import on organizational outcomes, there is still some question as to whether or not true fit with key contingencies is feasible.Large organizations operate in tangled environments, often across Page 14 of 26 Strategic Management and HRM CAHRS WP06-04 multipl e products, industries and geographies. This complexity leads to questions regarding the ability of the firm to fit HRM practices to all of these diverse and complex circumstances (Boxall & Purcell, 2003). In addition, Boxall and Purcell, (2003) argue that there are competing ideals within a business that require trade-offs in fit.They describe fit as a process that involves some tension among competing objectives in management and inevitably implies tensions among competing interests (2003, p. 188). A simple example of these tensions can be seen in attempting to fit a strategy of commitment to employees with a hostile or extremely competitive operating environment. A firm with a strategic commitment to the well-being of employees operating in an economic downturn or time of increased competition may be forced to make choices between commitment to employees and a need for estructuring, layoffs or other non-friendly actions toward employees in order to stay solvent. In these situatio ns, compromises will have to be made on either the fit with the strategy or the fit with the environment or both, raising the question again as to whether or not a true fit with contingencies is feasible. These questions regarding the ability to achieve fit and the desirableness of achieving fit do not diminish the importance of collar contextual issues in SHRM research.Understanding the contextual issues ring HRM and its impact on performance remains critical. In spite of the interest in the role of contextual issues and fit in SHRM, findings in support of contingency relationships have been mixed (Wright & Sherman, 1999). more of this criticism could be due to ineffective methods used in the measurement of HRM or the contingency and performance variables studied or that the correct contingencies have not yet been studied (Becker & Gerhart, 1996, Rogers & Wright, 1998 Wright & Sherman, 1999).In addition, Boxall and Purcell (2000) have argued that more complex and spatiotemporal models of contingency relationships are needed in order to understand the impact of context on the HRM to performance relationship. Regardless of the reasoning, it is clear that the impact of context on this important relationship is not yet completely mute and more research is Page 15 of 26 Strategic Management and HRM CAHRS WP06-04 needed to understand the role of context, as well as questions surrounding models of fit in SHRM research.HRM Practices and Sustainable Competitive Advantage Another issue that has been raised by the RBV and its application to SHRM research is the sustainability of HRM as a competitive advantage. Whether one focuses on bundles of HR practices as an HR system, the human capital pool or employee relationships and behaviors, there remains the question as to whether HRM as a resource meets the inimitability and nonsubstitutability conditions that are required in the RBV for sustained competitive advantage (Barney, 1991).According to Barney (1991), there a re three general reasons why firm resources would be difficult to imitate the resources are created and formed under unique historical conditions, the resources are causally ambiguous, or the resources are favorablely complex. labeled as path dependency by Becker and Gerhart (1996), the unique historical conditions under which HRM is formed in individual firms may make its intellectual and reappearance extremely difficult, if not impossible.HR systems are developed over time and the complex history snarled in their development makes them difficult to replicate. The development and implementation of a single HR practice such as a variable pay system takes place over time including time to solicit management input and buy-in, work out discrepancies, and align the practice with current strategies as well as firm culture and needs. The end result is a practice that reflects the philosophies and culture of the firm and its management, created to solve the specific needs of the compan y.Compound that single HR practice with a whole system of practices each with its own history and evolution specific to a particular firm, its philosophies and current situation and you have an HR system that cannot be bought or easily replicated without a significant investment both of time and financial resources. Causal ambiguity implies that the exact manner in which human resource management contributes to the competitive advantage of the firm is either unknown or sufficiently ambiguous Page 16 of 26 Strategic Management and HRM CAHRS WP06-04 so as to be difficult or impossible to imitate.According to Becker and Gerhart (1996), the ability to replicate a successful HR system would require an intellectual of how all of the elements of this complex system interact and in turn impact the performance of an organization. Given the previous discussion of the basic HRM to performance model and the manner in which it is expected that HRM contributes to firm performance, it is difficul t to imagine how the involved interplay among various HR practices, human capital and employee behaviors, employee outcomes, operational outcomes and firm-level outcomes could be soundless by a competitor in a meaningful way.Finally, Barney (1991) points out that competitors will find it difficult to replicate a competitive advantage based on complex social phenomena. Given the nature of HRM and its direct relation to employees, almost every aspect of the HR system, the human capital and especially the employee behavior and relationships has a social component.The way in which HR practices are communicated and implemented among different departments and parts of the organization is influenced by the various social relationships involved top management to general managers, general managers to department heads or managers and those managers to employees as well as interactions between departments and employees. The complexity of the social relationships in the case of HRM makes it d ifficult for competitors to imitate it. Finally, for a resource to constitute a source of sustainable competitive advantage it must be non-substitutable.This implies that competitors should not be able to use a different set of resources in order to achieve similar results (Barney, 1991). This concept has not yet been tested, but could provide for interesting research in the area of contextual factors and SHRM. If, in fact, it is found that a particular set of HR practices is positively related to performance in a given context, then, a follow-on question to that which would get at the substitutability question might be whether or not there is other set of HR practices for which the results are similar.This could lead to discussions about strategic configurations of HR Page 17 of 26 Strategic Management and HRM CAHRS WP06-04 practices rather than universal high-performance work systems that have reign outgoing research (Delery & Doty, 1996). Regardless of whether there is one or numerous ways to achieve similar results in different contextual situations, the testing of these possibilities would lead to an increased judgment of the relationship between the RBV and SHRM research and the sustainability of HRM as a strategic resource. criterion and Methodological Issues In addition to key questions surrounding the RBV and SHRM research, there are also several measurement and methodological issues which have hindered our ability to better understand the relationship between strategy and HRM. Measurement issues relating to the HRM, competitive advantage and key control variables have made the similitude of results across studies and interpretation of findings difficult (Rogers & Wright, 1998 Dyer & Reeves, 1995).In addition, there are questions around the appropriate level of analysis within the firm at which to test these relationships as well as issues related to the mixing of variables measured at different levels of analysis (Rogers & Wright 1998, Becker & Gerhart, 1996). Finally, as was pointed out, the majority of research to date has focused on the relationship between HR systems and firm-level performance and, while the findings indicate a positive relationship, there is insufficient evidence at this point to be able to infer that the relationship is causal (Wright et al. , 2005).A full discussion of these issues is beyond the scope of this chapter and a more thorough discussion may be found in other chapters in this text (see particularly chapters 26 and 27), but it is important to note in discussing key questions in SHRM that they exist and need to be addressed or at least considered in future research. early Directions look for on SHRM management over the past decade has made significant progress in developing our understanding of the role that HRM plays in firm performance. The field now has a significant foundation upon which to build future research.In our opinion, future research should focus on both answering key questi ons that remain in understanding the relationship Page 18 of 26 Strategic Management and HRM CAHRS WP06-04 between HRM and performance and by expanding or broadening what is considered SHRM. Such extension would encompass both other resources and other theories currently studied in strategic management research. Key Unanswered Questions The previous portion of the chapter pointed out several key questions that have been raised as a result of the application of the RBV to SHRM research that are not yet answered.First, research that directly tests the concepts outlined in the RBV has not been done (Priem & Butler, 2001). Thus future research should focus on testing the concepts of the RBV by testing the full model through which HRM leads to competitive advantage or firm performance. Do HR practices impact the human capital pool and the relationships and behaviors of the employees and do those outcomes in turn impact both operational and firm-level performance? Answering these question s by testing the full causal model would be a significant contribution to our understanding of the strategic nature of HRM.In essence, this reflects the black box process that Priem and Butler (2001) argued must be addressed by RBV theorists and researchers. Second, future research should focus on understanding the contextual questions surrounding the HRM to performance relationship. Mixed results in past contextual research is not reason enough to abandon the question all together. It is highly likely that HRM payoffs more or less in certain situations or under certain conditions. Efforts should be made to continue to test established models of HRM in new and unique situations.In addition, more thorough tests of hash out variables in the HRM to performance relationship should be tested. Given the complexity involved in the measurement and testing of these relationships and the mixed results of past research in this area it is likely that researchers will need to seek out contexts with trim complexity such as departments within large organizations or nice businesses where reduced complexity will provide more meaningful measures of potential moderating variables and more meaningful tests of the moderating relationships can be performed. Page 19 of 26 Strategic Management and HRM CAHRS WP06-04Another step that needs to be taken in understanding the role of context in the HRM to performance relationship is to move away from universal-type models of HRM such as highperformance work systems and high-involvement work systems and develop and test different configurations of HR practices that might apply to specific situations. In doing this, researchers will be able to better understand the specific bundles or HR practices that are applicable or fit with different types of organizations or situations, thus making a significant contribution to our understanding of the types of HRM that will matter in a given situation.Expanding the Role of SHRM Future research in SHRM should focus on conceptually expanding what is considered to be the role of SHRM. Historically, SHRM has been viewed as the interface between HRM and strategic management (Boxall, 1996) with the focus of much research being on understanding how the HRM function (namely HRM practices) can be strategically aligned so as to contribute directly to competitive advantage.This implies a concern with how HR practices can contribute to strategy implementation without addressing the larger question of how HRM can contribute or play a role in strategy formulation (Lengnick-Hall & Lengnick-Hall, 1988). Wright et. al. (2001) argued that it is the human capital (the knowledge skills and abilities of the human resources) as well as the relationships and motivation of the employees that leads to competitive advantage. The purpose of HR practices is to develop or acquire this human capital and influence the relationships and behaviors of the employees so that they can contribute to the strategi c goals of the irm. Future research should examine human capital and the social interactions and motivations of the human element within a firm (Snell, Shadur, & Wright, 2002), not only as independent variables but also as mediating and dependent variables. A focus in this area will bring the field more in line with contemporary views in strategic management. Research in this area will also help us to get beyond questions regarding how HR practices can facilitate the strategic goals of a firm and begin to understand how organizations can understand the resources found in their human element and use that Page 20 of 26Strategic Management and HRM CAHRS WP06-04 understanding to influence or even drive their decisions about their strategic direction. For instance, IBMs strong HR processes/competencies led it into the business of offering outsourced HR services. This was an internal resource that was extended into a new product line, and illustrates how an understanding of such resources can influence strategic direction. Along these same lines, another way to break away from this notion of HRM as a facilitator of the strategic direction of the firm is by focusing on some of the resources currently salient to strategic management researchers.In their review of the RBV and SHRM relationship, Wright, Dunford and Snell, (2001) argue that the RBV created a link between HRM and strategic management research and that as a result of this link the two fields were converging. Because of this convergence, the potential impact of SHRM research on mainstream strategy issues is tremendous. Increasingly, strategy researchers are focusing on knowledge and knowledge-based resources (Argote, & Ingram, 2000 Grant, 1996), human capital (Hitt et al. 001), social capital (Inkpen & Tsang, 2005 McFadyen, Ann, & Albert, 2004), capabilities (Dutta, Narasimhan, & Rajiv, 2005), and dynamic capabilities (Teece, Pisano, & Schuen, 1997), as critical resources that lead to organizational success . While HRM practices strongly influence these resources, the SHRM literature seems almost destitute of empirical attention to them. Only recently have researchers began to explore these issues (Kinnie, Swart, & Purcell, 2005 Thompson & Heron, 2005). superfluous research in these areas would provide tremendous synergy between HRM and strategy.In addition, alternative theories such as learning organizations (Fiol & Lyles, 1985 Fisher & White, 2000), real options theory (McGrath, 1997 Trigeorgis, 1996) and institutional theory (Meyer & Rowan, 1977) can be combined with SHRM research to enhance our understanding of the strategic nature of HRM. For instance, Bhattacharya and Wright (2005) showed how real options theory can be utilize to understanding flexibility in SHRM. In addition, Paauwe and Boselie (Chapter 9) provide a detail analysis of how institutional theory can better inform SHRM research. The use of these in addressing questions in SHRM research willPage 21 of 26 Strategi c Management and HRM CAHRS WP06-04 provide new lenses through which researchers are able to view the HRM to performance relationship, potentially providing new insights and ideas that will further our understanding of SHRM. Conclusion While the field of strategic HRM is relatively young, significant progress has been made at a rapid pace. Researchers have provided great theoretical and empirical advancements in a period of just over 25 years. Much of this progress is the result of the RBV and its emphasis on the internal resources of the firm as a source of sustainable competitive advantage.The RBV and its application to SHRM research created an important link between strategic management and HRM research. Its application has been followed by a significant amount of research using the RBV as a basis for assertions about the strategic nature of HRM. 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