HRM system strength – HRM harnessed for innovation, appropriability and firm performance

Abstract

HRM systems and practices can have a notable impact on a firm's performance. Employees exchange and co-utilize innovation-generating knowledge, leading often to improvements in the firm's financial performance, but they may also (unintentionally) give out valuable information. In this study, we discuss how HRM practices can be designed to foster innovation and at the same time maintain appropriability of innovations. We introduce the concept of HRM Strength to explain how the HRM system may affect people's vision of what is important in a company. Questionnaire data from 89 Finnish firms were utilized. The results indicate that HRM Strength is related to financial performance, both directly and indirectly. Implications of these results are discussed and future work is suggested.