High Performance Work Systems and Firm Performance: The Moderator Role of Industry and Organizational Characteristics

Abstract

This thesis examines the impact of High Performance Works Systems (HPWS) on firm labour productivity and innovation. Considerable studies have proved that investment in HPWS is associated with superior organizational performance (Huselid, 1995; Authur, 1994; Delery and Doty, 1996; Guthrie, 2001). However, there is still no agreement on whether High Performance Work Systems are universally applicable or contingent on certain circumstances. This thesis contributes to the universal versus contingency debate by testing the moderating effect of contextual factors on these relationships. Following a theoretical review of HPWS literature, a conceptual framework was developed which introduced moderator variables to explain the HPWS-performance link. This was guided by contingency theory and empirical work related to environmental fit (Burns & Stalker, 1994; Youndt et al., 1996). Industry growth and industry dynamism were chosen as industry level moderators while labour investment represents a firm level moderator. The data used in this study was collected from a national general manager and HR manager survey which was conducted in 2006. A sample of 132 matched responses from both GM and HR managers were used in the analysis. The results show that the implementation of HPWS is associated with an increase in both labour productivity and innovation. Further analysis was conducted to test the moderating effect between HPWS and a number of contextual factors including industry characteristics and organisational characteristics on firms‟ labour productivity and innovation. Regression results show that industry level characteristics have a moderating effect on the HRM-performance link: industry growth moderates the relationship between HPWS and innovation but has no significant moderating effect on HPWS-labour productivity relationship. Industry dynamism was found to have a moderating effect on the relationship between HPWS and labour productivity but no significant interaction effect was found on innovation. At the firm level, results show that firms‟ labour investment moderates the relationship between HPWS and labour productivity. Similarly an effect was found on the relationship between HPWS and workforce innovation. This study provides some indications for further research in the fields of HRM and contextual factors and their interaction effect on performance