The Impact of Collaboration between Human Resources Management and Innovation Management in Crisis Situation in Strategies’ Performances of the Firm
Introduction
With the growing literatures analyzing innovation and organizational changes, there is still concern about the contributions of such changes to the general employees’ performances (Costa and Sergey 16). Most organizations are concerned about system compatibility, and therefore find reasons to conduct research with the interest of identifying how best they can improve their innovative activities, or determining the internal and external factors that have positive effects on the behaviors of employees (Costa and Sergey 18). With the knowledge variation among employees, the critical question worth investigating is “what kind of organizational resource will lead to sustainable competitive advantage?” This means exploring the key human resources like employees’ knowledge (Arvanitis 77), skills and abilities, which can equally be used to improve existing products and services, or create new products that will meet the consumption expectations of new markets (Costa and Sergey 20). The research will also assume that product and service improvement, or development of new products and services is coherent to the collaboration between the organizational human resource management practices and the strategies adopted, which link to the organizational innovation strategies (Kyriakopoulos 88).
It is therefore sufficient stating the existence of a close relationship between HRM practices and Innovation Management practices as the leading factors towards improved performance and competitive advantage (Kochan, Thomas and Lee 101). There is a knowledge gap in most of the studies conducted over the subject of human resource management and its application in product and service innovation. Even though some of these studies recognize valuable employees’ knowledge as a necessary factor in product development (Kochan, Thomas and Lee 103), it is however insufficient information as to why such knowledge cannot count as conditions for developing product innovation. This means that in addition to taking advantage of employee’s valuable knowledge, the unexplored features like creativity, entrepreneurship, and uniqueness are still fundamental towards developing new products and services (Kochan, Thomas and Lee 105). These arguments lead to the following study hypotheses:
H1: valuable employee’s knowledge has a positive relationship with innovation
The first hypothesis retails around the fact that the unique knowledge of employee can result in competitive differentiation of products and services (Kyriakopoulos 89). Uniqueness in this context is associated with content specificity, which an organization cannot transfer to other organizations unless there is labor transfer. Because organizations can never be innovative on the basis of generic knowledge, they attach significance to the part of employees they consider rainmakers since the employees’ specialized knowledge contributes immensely to the creation and development of new production ideas (Laursen and Foss 27).
H2: there is a close positive association between employee’s unique knowledge and innovation
This would mean that through proper search and recruitment services, the human resource management remains the facilitator of knowledge required by the organization for product and service innovation (Laursen and Foss 27). The firm’s human resource should always be valuable and unique for the purposes of facilitating superior performances. The firm should also be appropriately organized or structured to control and take advantage of the available resources (Moosa and Patiwat 48).
H3: there is a positive association between knowledge-based human resource management practices and innovative knowledge
H4: there is a positive association between collaborative human resource management practices and innovation management practices
This hypothesis is based on two major propositions that describe the contributions of human resource management and innovation management to the general performance of the organization (Moosa and Patiwat 49). The first proposition is that the human resource management practices may facilitate valuable and unique knowledge relevant for innovation activities. The second proposition is that the valuable and unique knowledge can mediate the growing relationships between human resource management practices and employees’ innovative capabilities (Nieves, Rodríguez 225). This would mean exploring the possibilities of having a direct impact of human resource management practices on employees’ innovative actions independent of individuals’ knowledge characteristics (Nieves, Julia, Agustín Quintana and Javier Osorio 228). We will therefore explore the suggested capabilities of human resource management practices influencing the strategic decisions and directions taken by resource managers in job design, training, development, performance appraisal, and employees’ compensation with the aims of creating a competitive innovative environment.
Literature Review
Contemporary HRM practices focus on human capital and its contribution to organizational performance as part of the firm’s resource-base (Nieves, Julia, Agustín Quintana and Javier Osorio 228). For most firms, human resources have always remained key ingredient towards the success or failure of operations, including successes and failures of the organization to meet its innovative goals (Nieves, Julia, Agustín Quintana, and Javier Osorio 229). As a contribution to this research, it is highly important for organizations and human resource managers to understand the importance of human resource capital as a factor that encourages and makes innovation possible (Nieves, Julia, Agustín Quintana and Javier Osorio 230), and the specific deployment practices within the firm that can create a foundation for the desired innovation performance standards.
Studies have attached higher levels of significance to particular attributes of individual employees, business founders, and company executives (Bondarouk, Tanya and Miguel R. Olivas-Luján 142). This is because these groups of individuals directly link to the company’s superior innovation performances, especially for the case of innovative genius. The values encrypted in human capital are substantially above average when it comes to innovative capacities (Peters, Melanie 161), which employees can acquire through training efforts or by innate. For example, entrepreneurial start-ups exemplify the knowledge and provide direct link between human capital and innovative performance (Revilla, Antonio and Zulima Fernández 289). From the studies conducted, it is also clear from the fact that superior innovative activities find their roots within individual capabilities, and this stems from the interactions within the pool of human capital.
The organizational set-up of a company as defined by the HRM practices significantly contributes to human capital innovation performance, and it is this effect that most researchers address in their studies (Revilla, Antonio and Zulima Fernández 239). With the presented concepts, the management must deploy proper training arrangement, make appropriate decisions on rewards systems, set up innovative teams, and allocate each employee decision-rights since these arrangements can have both positive and negative implications for the contributions of human capital innovation (Revilla, Antonio and Zulima Fernández 239).
The human resource practices can therefore be modelled in terms of mediators (how human capital mediates the influence of Human Resource Management innovative activities) and moderators (the practices that can weaken or reinforce the connections between human resources and innovation activities) models (Bondarouk, Tanya and Miguel R. Olivas-Luján 143). Based on the factors mentioned, there are several suggestions made about the mechanisms through which organizational HRM practices can influence the observed relationships between human capital and overall innovation performances (Sastre, Juan Fernández 56). This means employing communication networks within the organizations following the changes in organizational structures, which can influence innovation.
According to motivational researchers, employees’ creative behaviors underlie successful innovation and are stimulated by rewards. On the side of managerial styles, the focus is pegged on process feedback, setting of goals, use of teams for project development as the main factors affecting creativity and innovative behaviors (Sastre, Juan Fernández 56). In other words, innovative organizational practices revolve around employees’ sourcing, deployment and human capital upgrade as the most precise factors that can lead to improved performance.
The relationships between Human Resource Management and Innovation management provide wider understanding about the roles of particular employees (Sastre, Juan Fernández 59). With respect to growing number of literatures, current studies focus on what is considered new, or rather on modern practices that can lead to higher performances and its link to innovation performance (Sastre, Juan Fernández 61). The relationships between Human Resource Management practices and Innovation Management can be studied under specific subheadings as presented below based on the research objectives.
Human resource practices and innovation performance
The notions of modern Human Resource Management practices have been in many occasion used to define instances of process delegation, extensive lateral and vertical communication methods, high organizational rewards systems and multiple performance indicators (Schuler, Randall, and Susan, Jackson 64). These elements according to studies conducted are bundles that can be deployed to allow the company achieves high levels of organizational performance. From the numerous investigations, we posit five important areas of human resource operations that are crucial to the general innovation performance of the company (Schuler, Randall, and Susan, Jackson 64). The five areas include the delegation functions of managers like team building and production, knowledge incentive like revenue sharing, improved internal communication linkages to encourage positive practices related to knowledge sharing and job rotation, employee training for both internal and external organizational functions, and employees’ recruitment and job retention (Schuler, Randall, and Susan, Jackson 69). Empirical literatures on the subject of employees’ innovative capacity suggest two important approaches that can enhance productivity; interaction approach and systems approach. The interaction approach maintains that the influence of particular organizational practices have relative performance outcomes as suggested by the set of variables like knowledge, level of experience and willingness (Schuler, Randall, and Susan, Jackson 76). On the other hand, the system approach is the most dominant factor even though is sometimes confers to the indirect tests of performance complementarity.
The role of innovation in organizational performance
The streams of literatures presented in this study consider innovation from the perspectives of and indirect factor (Shankar, Kameshwari, and Suman Ghosh 101). On the indirect perspectives, the studies consider Human Resource Management practices as explanatory variables that help researchers to define independent variables like productivity levels and profitability growth (Shankar, Kameshwari, and Suman Ghosh 103). This means that the behaviors of company’s workforce have value in ensuring organizational performance. The HRM, through the company’s policies, stand a chance of influencing the employees’ skills and motivating them in a way that improves the way employees perform their jobs (Shankar, Kameshwari, and Suman Ghosh 110).
The investigation under this subheading adopts a cross-sectional method based on empirical hypothesis. The empirical hypothesis as tools of investigation made it possible to identify the links between the sets of Human Resource Management practices and company’s economic performances (Tan 17). While earlier investigations showed little connections between economic performances like productivity, current data and information are developed on a tended relationship, and confirms that indeed, there are set of complementary Human Resource Management practices that can either have positive impact on the company’s economic performance or may create opportunity for negative business operations. Improving productivity and profitability, which are directly linked to innovation management are the main factor under discussion (Tan 17).
The link between Human Resource Management and Innovation Management
The set of literatures established direct theoretical and empirical links between Human Resource Management and Innovation management, especially for the different forms of product and process innovation (Theriou, George, and Prodromos, Chatzoglou 93). In several occasions, process managers have paid little attention to the Human Resource Management practices and their influence through workforce and process organization to the general performance of the company. Safe for the Japanese understanding of skill distribution in product and process engineering, most countries seemed to treat innovation as separate process that requires certain level of uniqueness (Theriou, George, and Prodromos, Chatzoglou 97). The Japanese manufacturing management gave new insights into process and product definition, making engineers and workers to grow exponentially with the mind set on new production ideas. The enabling systems were then thought to be important in ensuring proper product design and process design following the increase in market demands.
This initial insight gave process and product managers across organizations better understanding about the favorable innovative activities of Human Resource Managers (Tokar, Travis, John, Aloysius, and Matthew 302). One major link between HRM and Innovation management is that the two processes are concerned with decentralization of activities by allowing each employee an opportunity to develop distinct problem solving models that can aid in organizational performance (Tokar, Travis, John, Aloysius, and Matthew 302). The implementation of the two management policies ensures that the cited rights co-exist alongside the relevant performance knowledge. A greater part of this relationship becomes an inherent tactic that will require service decentralization for any growth to be realized (Tokar, Travis, John, Aloysius, and Matthew 304). This argument is support by observed experiences where managers tend to explore teamwork as important component of Human Resource Management practice. This means that managers appreciate the group decision when it comes to local knowledge (Tokar, Travis, John, Aloysius, and Matthew 307), leading improvements in product and service production. The innovative teams in this case must comprise direct human resource inputs, which can potentially result into process improvements with little costs attached to the innovation performances.
Methodology
Research design and sampling strategy
To maximize our study on innovative capabilities of human resource departments, we will need to sample firms that are involved in innovative activities (Bondarouk, Tanya and Miguel R. Olivas-Luján 145). The study will start with a sampling frame of firms whose operations retail around employees’ innovation like the motor vehicle companies, radio and TV manufacturers, and telecommunication providers (Bondarouk, Tanya and Miguel R. Olivas-Luján 145). The population selection criteria will help the researcher to determine whether a particular firm falls within the innovative industries and the minimum number of employees involved in production. As a secondary source of data for companies with more than 50 employees, the researcher will use 2010 edition of the database from Edgar Listings and the DUNS 50,000 database (Bondarouk, Tanya and Miguel R. Olivas-Luján 148). The research will consider a population of 620 companies, and their respective R&D departments used as the units of analysis.
The researcher will adopt the methodology of direct contact with the firms, mailed questionnaires and follow up activities (Evans, Paul, Yves L. Doz, and André Laurent 137). This will mean identifying each company’s R&D departments in the population, establishing a direct telephone interview with the respective managers to determine instances of collaboration requires and discuss the mailed questionnaire (Evans, Paul, Yves L. Doz, and André Laurent 139). The research targets response from 88 firms, with at least 86 valid results for the hypothesis to be tested against the collaboration theories. This means that the researcher will be working on a 14 percent response rate from the targeted population (Evans, Paul, Yves L. Doz, and André Laurent 143).
To determine nonresponse bias, the researcher will compare the respondents with non-respondents using mean difference following the common features like industry membership, employees’ population and revenues collected over the engagement period (Evans, Paul, Yves L. Doz, and André Laurent 147). Since the researcher expects unbiased nonresponse, the hypotheses will only turn to be true or otherwise if the test showed no significant difference between the respondents and non-respondents.
Measurements
As already stated, the researcher will use questionnaire with more than 40 items to collect data from the companies in the sample. The response for the enumerated items will be obtained using a 7-point Likert scale safe for the performance, for which the research will explore objective data through direct questions (In Dodgson, M., In Gann, D and In Phillips 201). The study will also require the researcher to assess content validity after intensively reviewing the literature. Through a panel of 10 experts, the research will require each individual to present his or her suggestion on the type of questions to be included in the questionnaire (In Dodgson, M., In Gann, D and In Phillips 209). The final questionnaires will be sent to respective company’s manager both in soft or hard copies.
Variables
Organizational performance will be assessed based on how effective the firms can achieve the various financial benchmarks, which the research considers and objective measure. The assessment for effectiveness will also be based on the subjective measure like the firms’ positions on effective indicators, and successes relative to competitor’s ratings for the same indicators (Dodgson, Mark, David Gann, and Nelson Phillips 36). The objective measure in this case will be used to eliminate variance errors that may result during the comparison stages. The objective measure of profits will involve diving the firms’ total revenues for the specific sales period by the total assets (Dodgson, Mark, David Gann, and Nelson Phillips 39). Essentially, the researcher will conduct literature review to measure organization’s product innovation activities, then will adopt the measure of valuable and knowledge uniqueness. In general, the dependent variable in this research will include product and service innovative activities to be measured on the devised eight-scale item of measurement.
Independent variables
The independent variables of the study will be Human Resource Management practices adopted from the selected companies like the analysis of human capital and the population of workforce (Dodgson, Mark, David Gann, and Nelson Phillips 56). This means identifying specific items like knowledge-based employment structures as well as their collaborative systems in relation to group functions. The Human Resource Management practices were selected as independent variable for this study because they are the generators of innovative behaviors and highly link to the value and uniqueness of a company’s human capital (Dodgson, Mark, David Gann, and Nelson Phillips 57).
Control variables
The study will use the size, internal and external expenses on the human resource factors as control variable. This is because the size of the company has a close link to the need for innovation, and while small companies relies heavily on human capital, large companies have the tendency to fuse production technologies with human capital (Dodgson, Mark, David Gann, and Nelson Phillips 69). It is also noticeable that an expansion in the size of the company becomes an incentive for higher number of human resources, which create opportunity for potential innovation. On the same note, it is widely argued that small organizations always tend to remain innovative by becoming more flexible, adaptable and ready to accept and implement changes that can improve production levels (Bondarouk, Tanya and Miguel R. Olivas-Luján 147). The size of the organization will be measured following the number of employees, and their distribution in the various areas of production. Other than the size of the company, the study will also include internal and external expenditures as other control variables since they affect the ability and willingness to adopt new production systems (Bondarouk, Tanya and Miguel R. Olivas-Luján 159). The internal and external variables will be measured using two items in which the respondents will give information concerning the company’s internal and external expenditure on factors of production.
Conceptual model
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The conceptual model above summarizes the links between Human Resource Management practices and Innovation Management according to important areas of investigation in this research. The elements reflected above primarily reflect that both Human Resource Management and Innovation Management are considerably expanded fields that have significant impacts on the overall performance of organizations (Hertog, Den, Faïz, and Jeroen 70). The model also gives a reflection of trends in the field of business that facilitate the emerging integration of Human Resource Management and innovation for the purpose of improving business activities. In other words, the model provided a theoretical relationship between HRM and Innovation Management in which case we can temporarily argue that as firms increasingly adopt or apply open innovation models in their operations and engage with sources of external knowledge, they finds it compelling to add to the existing workforce new groups of employees with diverse knowledge and innovative skills.
Analysis of the result
The research findings will be tested against the hypothesis based on the concepts of structural equation modelling (Hertog, Den, Faïz, and Jeroen 71). The analysis will follow two fundamental procedures as suggested most scholar. After the exploratory factor analysis, it would be prudent for the researcher to estimate the measurement models using the confirmatory factor analysis for the goodness of fit (Hertog, Den, Faïz, and Jeroen 71). The confirmatory factor analysis will be performed to test employees’ psychometric properties based on the scales of measurements stated earlier. The main idea here is for the researchers to determine construct validity and reliability of the subjective measurements (Hertog, Den, Faïz, and Jeroen 73), test the variables and eliminate unreliable items. After listing the individual measurement items to be included in the study as dependent, independent and control variables, it will be necessary for the researchers to establish the scale of dimensionality by analyzing the factorial structure of the functional relationships (Heskett 15). The researcher will then proceed to test the scale reliability for all the indicators and composite reliability for the factors. Content validity will be analyzed based on the reviewed previous literatures, while the convergent validity will be accepted for factorial loads not higher than 0.5, meaning that the t-test coefficients are significant (Heskett 15).
Academic and managerial implications, limitations of the study
The concern for quality products and better service delivery is rapidly increasing following the introduction of new systems of operation (Djeflat 23). Employees have become highly innovative, impacting processes with organization and making firms to become more competitive that before (Djeflat 23). With the introduction of technologies in various industries, there are higher possibilities that firms will even find it more competitive to operate in a market with significantly increasing number of firms (Ebbers, and Nachoem 121). The inclusion of innovative ideas in the field of Human Resource Management can add to the performance level of employees. Employees’ eligibility, capability, skills and experiences in areas of production still remains the driving force for better performances even after the introduction of new technologies (Ebbers, and Nachoem 121).
Based on the discussion above, it is quite convincing that this research will add to the value of human resource management (Ebbers, and Nachoem 123). The production processes outlined within the organization can be used to define performance levels and each employee’s contribution to the success of the company. This means that other processes like compensation, rewards and motivation can be done based on employees’ productivity (Ebbers, and Nachoem 125).
Factors like organizational ethics and business culture may act as barriers to the process of data collection. Some organizations are bound by policies that restrict employees and managers from giving information about managerial issues to an external party (Eriksson, Zhihua and Wenjing 108). The study may also be limited by time and cost of study since there is need to interact with managers from all the sample companies. The information required following the hypothesis are intensive in nature and may require a longer time of study before analysis. Based on these limitation (Eriksson, Zhihua and Wenjing 110), which may prevent the researchers from obtaining sufficient data for analysis, the need to conduct other studies on the same topic in future is optimal.
Discussion
The research literatures point to the general fact that managerial knowledge is rapidly changing, and innovation is becoming more critical to sustained business growth and success (Eriksson, Zhihua and Wenjing 110). The research is follows the basic understanding of the importance of human capital and how individual skills can lead to product and process innovation. The studies are distinctively embedded on human resource management practices as one of the strategies that can be used to facilitate innovation processes (Foss and Keld 221). The four dimensions of human resource management practices like staffing, structure, strategy and operational support are considered fundamental to successful innovation. In addition to ensuring successful innovation (Foss and Keld 223), organizational managers through the human resource management practices ensure that the organization has the right skills and number of staffs capable of meeting the performance objectives of company (Foss and Keld 227).
The literature review findings substantially contribute to the understanding of the relationship between Human Resource Management practices and innovation, especially within manufacturing firms (Fox and Stuart 214). The contingency theory and its models suggest that organizational characteristics like size, external and internal environment, and industry are potential factors that determine appropriate Human Resource Management practices for innovation strategies. (Fox and Stuart 217) In general, process organization is highly valued among organizations since it provides managers with the opportunity to identify the right combination of human capital that can give the desired results (Fox and Stuart 219). This study therefore finds strong support from the literatures, and based on current business activities that are more technologically integrated, innovation is considered part of labour force (Gennard and James 30). The main idea here if for the human resource managers to create environments that facilitate individual growth alongside enhancing employees’ process and product innovation capabilities (Gennard and James 35). The variables highlighted in this research will allow the researchers to determine the relationships between Human Resource Management and Innovation Management stated under the literature review (Gennard and James 36).
Conclusion
This research will test the relationship between Human Resource Management and Innovation Management practices (Abouzeedan and Busler 23), and how these two areas of knowledge influence development of innovative capabilities for improved performance during crisis situations (Bondarouk, Tanya and Miguel R. Olivas-Luján 172). This study is developed from a specific assumption that Human Resource Management practices may not have direct association with innovation unless the two practices take into consideration employees’ knowledge and performance distribution.
Precisely, this study finds its grounds on the mediating roles for the uniqueness of skills and knowledge collaboration between the HRM practices and employees’ innovative activities (Abouzeedan and Busler 23). The knowledge impact through innovation is considered to have a positive influence, or rather positive contributions to the company’s profits even at times of economic crisis. The hypotheses for the study will be tested in a sample of firms from the most innovative industries through structural equation modelling (Abouzeedan and Busler 23). This study will provide managers with information on employees’ best practices that can create positive environment for innovation performance.
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