The dynamic capability view in exploring the relationship between high-performance work systems and innovation performance

Abstract

In this study, we develop and test a framework that theorizes how high-performance work systems (HPWS)—a set of interrelated HR practices—build dynamic capabilities (i.e. learning, integration, and reconfiguration capabilities), which in turn lead to innovation performance. We also hypothesize that organizations with a stronger innovation culture, where employees share a common understanding of the value and importance of innovation, will be better able to convert capabilities into innovation performance. We test our hypotheses using time-lagged, multisource data from 173 companies in the Iranian pharmaceutical industry, a knowledge-intensive, high-velocity environment highly dependent on HRs to innovate. Our results show that the relationship between HPWS and innovation performance is mediated by dynamic capabilities (DCs). Further, alongside finding support for the moderating effect of innovation culture in the relationship between DCs and innovation performance, we find that innovation culture moderates the indirect effect of HPWS on innovation performance via DCs such that innovation culture strengthens the mediated relationship. The theoretical and practical implications of our findings are discussed.