Linking human resources management and innovation through knowledge capacity as mediator and market sensing as moderator

Abstract

Effective innovation is possible when one has the ability to innovate. Firms' competitiveness and economic performance suffer when they are unable to expand and maintain their innovation capabilities. Malaysia's innovation capacity remains low. Furthermore, the lack of research and development (R&D) and innovation capabilities in the country shows significant hindrance. The ability of information and communications technology (ICT) enterprises to innovate is understudied despite the number of studies on the issue, specifically on ICT SMEs in Malaysia. Small and medium-sized enterprises (SMEs) in developing countries have received little attention in previous studies on Malaysian innovation because those studies have mostly focused on the manufacturing sector and include only large corporations from the West. The Knowledge-Based View (KBV) is use to develop a conceptual framework. A quantitative strategy is employed to meet the study's goals. A survey technique is applied to gather information from the owners, CEOs, and managers of ICT SMEs. This study received and evaluated 200 responses in total. The research models and hypotheses were evaluated using the Partial Least Squares (PLS) method. This research addresses the gap between Innovative Centric Human Resource Management (ICHRM) and innovation, as well as the connection between HRM and knowledge management in the context of innovation. To answer the research question, the study's goal is to improve and evaluate a theoretical framework that connects HRM and inventive potential. The study's objective is also to enhance and test a theoretical framework linking HRM and innovative capability. Relationships are drawn between the study's theoretical framework's four constructs, namely ICHRM practices (Acquisition; Development; Egalitarian; Collaborative; Documentation, Information System) KM capacity; market sensing capability; and innovative capability (Radical; Incremental). Development, egalitarianism, and collaboration are ICHRM practices that have a significant impact on knowledge management capacity. No significant relationships were found between ICHRM practices (acquisition, documentation, and information systems) and knowledge management capacity. In relation to mediation analysis, knowledge management capacity does not mediate the relationship between human resource practices and radical innovation. Knowledge management only mediates the relationship between egalitarian and collaboration and incremental innovation. In relation to moderation, market sensing capability does not moderate the relationship between knowledge management capacity and innovation (radical and incremental). This study shows that most HRM practices are applicable and relevant to SMEs' incremental innovation capability. In addition, this study also provides empirical evidence of ICHRM on knowledge management capacity's impact on innovation, concentrating on the impact of each dimension in ICHRM aspects was linked to organizational processes, with a focus on the influence on incremental and radical innovation.