HUMAN RESOURCE MANAGEMENT

Human Resource Management

Human Resource Management

Introduction

This study investigates the relationship between human resource management (HRM) and the performance of 101 foreign-owned subsidiaries in Europe. The study's results provide support for the assertion that investments in HRM practices can substantially assist a firm in improving performance. Further, different HRM practices for managerial and non-managerial employees are found to be significantly related to firm performance. Only limited support, however, is obtained for the hypothesized relationship between efforts at aligning HRM practices with firm strategy and subsidiary performance.

It is now commonly accepted that employees constitute an important source of competitive advantage for firms (Barney, 1991; Pfeffer, 1994). As a result, it is important for a firm to adopt human resource management (HRM) practices that make the best use of its employees. The above realization has led to increased interest in the impact of HRM on organizational performance, and a number of studies have found a positive relationship between so called "high performance work practices" (Huselid, 1995) and different measures of company performance. Furthermore, some empirical evidence supports the hypothesis that firms that align their HRM practices with their business strategy will achieve superior outcomes (for recent reviews, see Becker and Gerhart, 1996; Becker and Huselid, 1998).

The implications of these findings for multinational corporations, however, remain to be investigated. Most studies of the relationship between HRM and organizational performance have been conducted on the domestic operations of US firms, with a smaller number of studies carried out in Europe (e.g., Guest and Hoque, 1994) and Asia (Ngo et al., 1998). Scholars of international business have so far focused on the extent to which HRM practices within multinational corporations are globally standardized and/or locally adapted (Rosenzweig and Nohria, 1994; Taylor et al., 1996) and largely ignored the relationship between HRM and firm performance (for an exception, see Ngo et al., 1998). The review of the literature indicates a serious lack of large-sample empirical studies designed to investigate whether extensive use of "high performance" HRM practices and a good alignment between HRM and firm strategy have positive effects on the performance of foreign subsidiaries located in transition economies like China or Europe. To fill some of the above-mentioned voids, this study will examine the relationship between HRM and foreign subsidiary performance in Europe.

While business performance of foreign companies in Europe to a large extent depends on external macro factors like general legislation and its frequent change, individual firms can do little to affect the external environment. This study aims to investigate an important area which firms can influence, their HRM practices. Several authors have pointed to the importance of HRM in Europe and provided anecdotal discussions about HRM or discussed one dimension in depth (e.g., Juplev et al., 1998; Laurence and Vlachoutsicos, 1990; Longenecker and Popovski, 1994; May et al., 1998; Magura, 1998; Puffer, 1997; Radko and Afansieva, 1999; Shekshnia, 1994, 1998; Vikhanski and Puffer, 1993; Welsh et al., 1993). However, little systematic Europen-language research exists on HRM issues and the ...