The relationship of strategic human resource management practices and business performance considering the mediating role of resource based view of the firm

Abstract

Implementing Strategic Human Resource Management (SHRM) is of equal importance as designing it because it reflects the functionality of SHRM practices. Until recently, there is no definite classification of SHRM practices specifically related to the competitiveness and innovativeness of firms. Thus, it is not evident which of these practices contribute more to the business performance. This thesis focuses on the classification of the SHRM practices namely, Instrumental and Administrative and an investigation on their relationships with the performance of a business. This classification would enable organizations to act proactively rather than being reactive in their decision-makings. The classification of competitiveness and innovativeness as two qualitative parameters to measure business performance can be used fundamentally for long term planning in comparison to quantitative (financial metrics) classifications that are being used in short term orientations. In a knowledge-based economy, the firms need to manage in the forms of established procedures, patents and resources that are considered valuable, rare, inimitable, and non- substitutable. Advanced human capital as a part of SHRM has these features and is significantly related to business performance. Therefore, the current study integrated the Resource-Based View (RBV) of the firms into the relationship of SHRM practices and business performance and investigates RBV as a mediator in this relationship.The study employs Pearson correlation to test the relationship between SHRM practices and business performance, bootstrapping as well as the Sobel test to test the mediation of RBV. The findings depict strong relationship between the investigated SHRM practices and business performance, as the coefficiency was 0.405 and above. In ranking the correlations, recruitment and selection with a coefficiency of 0.551 had the strongest relationship with competiveness and change agent role with a coefficiency of 0.619 had the strongest relationship with innovativeness. The results of mediation analysis showing the connection of SHRM practices to RBV (path a) and the mediator to business performance (Path b) based on Tzelgov and Stern, and Cogenr methods tested the RBV as suppressor. Based on the findings, RBV as a suppressor improved the relationship and predictive validity between SHRM practices and business performance.