Models of Strategic Human Resource Management

The SAGE Handbook of Human Resource Management
Models of Strategic Human Resource Management
Contributors: Saba Colakoglu & Ying Hong & David P. Lepak Editors: Adrian Wilkinson & Nicolas Bacon & Tom Redman & Scott Snell Book Title: The SAGE Handbook of Human Resource Management Chapter Title: "Models of Strategic Human Resource Management" Pub. Date: 2010 Access Date: October 19, 2013 Publishing Company: SAGE Publications Ltd City: London Print ISBN: 9781412928298 Online ISBN: 9780857021496
DOI: http://dx.doi.org/10.4135/9780857021496.n3 Print pages: 31-51 This PDF has been generated from SAGE knowledge. Please note that the pagination of the online version will vary from the pagination of the print book.
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Chapter 3: Models of Strategic Human Resource Management Introduction

The field of strategic human resource management (HRM) has been defined as the pattern of planned human resource deployments and activities intended to enable an organization achieve its goals (Wright and McMahan, 1992: 298), or organizational systems designed to achieve competitive advantage through people (Snell et al., 1996: 62). Both definitions reinforce the notion that HRM practices create valuable resources within the firm that are capable of producing competitive advantage through people. Indeed, more than two decades of research has accumulated a vast body of knowledge which suggests that HRM practices that impact the motivation, knowledge, skills, and behaviors of employees lead to better employee, organizational, and financial outcomes (e.g., Arthur, 1994; Batt, 2002; Boselie et al., 2005; Collins and Clark, 2003; Dyer and Reeves, 1995; Datta et al., 2005; Huselid, 1995; Youndt et al., 1996). In order to explain such linkages between HRM practices and various dimensions of organizational effectiveness, strategic HRM researchers have drawn on theories that originated in fields as diverse as strategy, sociology, psychology, and economics, reflecting, in part, the multi-disciplinary nature of this field (Schuler and Jackson, 2005; Wright and McMahan, 1992). In this chapter, we first review an organizing logic of theoretical perspectives related to the universalistic, contingency, and configurational perspectives. Second, we briefly review two of the dominant theoretical frameworks used to inform the HRM firm performance linkage: the resource-based view and the behavioral perspective. Third, we highlight emerging perspectives in strategic HRM research, zooming in to the employee cognitive and social dimensions. Finally, we examine the burgeoning research [p. 32 ] models focusing on international aspects of strategic HRM.
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Modes of Theorizing in Strategic HRM Research

Conceptually, one of the pervasive questions in strategic HRM literature focuses on understanding the ways and conditions under which HRM practices contribute to firm performance. A taxonomy approach, first proposed by Delery and Doty (1996), has been widely taken to categorize and organize strategic HRM research into universalistic, contingency, and configurational perspectives (Delery and Doty, 1996; McMahan et al., 1999). These three alternate perspectives guide most thinking and research in this field up to this day.
Universalistic Perspective
The universalistic perspective suggests that there is a set of practices which are regarded as best practices in HRM and work in all organizations regardless of context. Essentially, this perspective suggests that some HR practices are simply good practices and all firms should use them. Practices such as selectivity in recruiting and selection, employee involvement, teams, flexible work assignments, job security, training and development, and incentive programs are argued to be beneficial for any organization that uses them. Selective recruiting, for example, conveys the message that the company values outstanding employees and contributes to the attraction and retention of strategic talent in firms (Koch and McGrath, 1996; Pfeffer, 1995). According to the universalistic perspective, such intermediary outcomes benefit all organizations, despite differences in strategy, technology, industry, and the like. In line with this thinking, empirical research that examines the universal effects of HRM practices study their individual and direct linkages with organizational outcomes. Researchers have shown that certain staffing practices such as conducting validation studies, structured interviews and intelligence tests are positively related to company profit (Terpstra and Rozell, 1993). Similarly, certain practices associated with training (Russell et al., 1985) and compensation (Gerhart and Milkovich, 1990) are associated with important organizational outcomes across different contexts.
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Contingency Perspective
The contingency perspective holds that the impact of HRM practices on firm performance depends on their fit, congruence, or alignment with firms respective internal (i.e., business strategy, life cycle/developmental stages, culture, technology, structure) and external (i.e., industry) contingencies (Baird and Meshoulam, 1988; Jackson and Schuler, 1995; Jackson et al., 1989; Lado and Wilson, 1994; Lepak et al., 2002). The guiding logic in this perspective is that HRM practices can elicit needed role behaviors for given organizational contingencies (Jackson et al., 1989; Schuler and Jackson, 1987) and affect firm performance through manipulating employees attitudes and behaviors (Jackson and Schuler, 1995). Organizations therefore need to focus on designing HRM systems that develop employee skills, knowledge, and motivation such that employees behave in ways that are aligned with such contingencies.
Strategy
Within the field of strategic HRM, it is proposed that a firm's strategy has important implications for its HRM practices. To find support for this proposition, strategic HRM scholars have typically drawn from generic strategy typologies such as that of Miles and Snow (1984) who differentiate between prospector, defender, and analyzer companies and that of Porter (1990) who differentiates between a cost leadership and a differentiation strategy. These different types of strategies are often matched with varying degrees of emphasis on HRM practices that foster either reliable or creative employee behavior and competencies (Jackson et al., 1989; Lado and Wilson, 1994; Tsui et al., 1995). For instance, Arthur (1992) reported the matching of a control or cost reduction [p. 33 ] HRM system with cost leadership strategy and the linkage of a commitment HRM system with differentiation/flexibility strategy in steel minimills. Jackson et al. (1989) examined the pursuing of a differentiation strategy through an HRM system that supports employee innovation. They found that in order to encourage innovation, companies tend to provide less incentive compensation and more job security so that failures will not be punished and tend to provide more training to meet both current and future needs. Similarly, Osterman (1994)
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found that companies undertaking a high road strategy are more likely to implement innovative work practices such as quality circles, job rotation schemes, and team-based production, compared to companies with a low road strategy. However, empirical support for the performance benefits relating to the contingency perspective that the alignment between strategy and HRM practices result in enhanced organizational performance remains mixed (e.g, Huselid, 1995; Rodriguez and Ventura, 2003, Youndt et al., 1996). Yet, several researchers found support for the crux of the strategic contingency argument. For example, MacDuffie (1995) showed that flexible HRM systems contribute to productivity and quality when coupled with a flexible production strategy. Youndt et al. (1996) reported that the use of administrative HRM systems for a standardized production strategy reduces cost and controls behavior while the use of human-capital-enhancing HRM systems for a quality manufacturing strategy results in higher operational performance. Delery and Doty (1996) found that companies using a prospector strategy received greater financial performance from using results-oriented appraisals and providing internal career opportunities, while companies adopting a defender strategy performed better with more employee participation in decision making. At the same time, however, Huselid (1995) failed to find support for a contingency perspective. Nevertheless, the alignment between HR practices and business strategy retains a considerable spot in much of strategic HRM theorizing.
Industry Sector
Significant distinctions between manufacturing and service industries have been noted by researchers and practitioners with service industries being characterized by their intangible nature, involvement of customers in the production of services, as well as the simultaneity of their production and consumption (Bowen and Schneider, 1988). Such industry characteristics have substantial implications for managing service employees (Jackson et al., 1989). For example, employees should be self-committed to quality, attend closely to customer needs, and possess appropriate discretion to deal with customer problems. Indeed, Jackson et al. (1989) found that service sector companies were more likely to utilize customer input as part of the performance appraisal process and use the results to determine employee compensation, compared to companies
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in the manufacturing industry. In relation, Baron et al. (1988) examined the divisions between mass-production, service, and other sectors and found that mass-production industries tend to follow scientific management procedures and use centralized personnel functions with formal job analysis and employee record keeping. Industry characteristics, such as capital intensity, industry growth, industry product differentiation, and industry dynamism were also shown to impact the relationships between HRM practices and firm outcomes (Datta et al., 2005). Datta et al. (2005) suggested that industries that are capital-intensive, have a high demand growth, and have more differentiated products, tend to require highly-skilled employees and reported that the impact of high-performance HRM systems on labor productivity is especially salient in these types of industries.
Technology
Technology may be defined as a system's processes for transforming inputs into usable outputs (Jackson and Schuler, 1995: 244). Corresponding to the standardization and customization product typologies, the technology used for manufacturing those [p. 34 ] products can be categorized into mass production (i.e., for standardized products) and flexible specialization (i.e., for customized products). Research shows that organizations using flexible specialization or advanced manufacturing technologies require highly-skilled employees, more diverse employee skills, tend to link performance appraisal results with compensation and training needs, and use innovative work practices such as teams, job rotation, and quality circles. Possibly due to the complexity involved in managing flexible specialization technology, companies that utilize such technologies were also found to be more willing to pay managerial employees premiums in order to attract and retain them (Jackson et al., 1989; Osterman, 1994; Snell and Dean, 1992).
Organizational Structure
Organizational structure refers to the allocation of tasks and responsibilities among individuals and departments (Jackson and Schuler, 1995: 244). One categorization
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of organizational structure is to differentiate between centralized (i.e., decisions made by upper management) and decentralized (i.e., decisions made by lower levels) organizations (Tsui et al., 1995). Tsui et al. (1995) argue that centralized organizations tend to use job-focused employment relationships defined as having explicit tasks and requirements whereas decentralized organizations are more likely to use organization-focused relationships that are geared towards broadly-defined tasks and employee involvement. In relation, Jackson et al. (1989) noted the inferences for HRM that are derived from an organization's structure of departmentalizing by product or departmentalizing by function. They reason that compared to functional departmentalization, product-based departmentalization requires more emphasis on result-orientation, external-orientation, and integration-orientation. Their findings confirm that companies that are structured along product lines are more likely to provide stock options and bonuses based on firm-level productivity.
Configurational Perspective
It is not sufficient, however, to address the vertical fit of HRM practices with contingencies internal and external to the organization. The congruence of HRM practices within the system is equally important (Baird and Meshoulam, 1988; Delery and Doty, 1996; Wright and McMahan, 1992). Such an inter-practice alignment is also referred to as horizontal fit, internal fit, complementarity, or bundling. This perspective suggests that it is the overall configuration of a set of internally aligned HRM practices that impact organizational outcomes rather than single HRM practices taken in isolation (Delery, 1998). The guiding logic in this approach is that complementary clusters of HRM practices create multiple paths and opportunities that impact the skills, abilities, behaviors, and motivation of employees, which in turn results in increased firm performance (McDuffie, 1995; Ichniowski et al., 1997). Conceptually, there are two forms of configurational approaches. First is the traditional configurational approach. This configurational approach extends the universalistic perspective and suggests that the combination of HRM practices, rather than any single practice, is what drives organizational performance. The central tenet of the configurational perspective is that a bundle of HRM practices must be adopted that complement each other to achieve greater performance. The degree of this internal or
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horizontal alignment among HRM practices influences whether or not companies realize a synergistic effect on firm effectiveness (Baird and Meshoulam, 1988). For example, Huselid (1995) found that high-performance work systems were related with turnover rate and labor productivity, which in turn, were related to two financial indicators of firm performance. Way (2002) and Batt (2002) found significant relationships between high performance work systems and labor productivity and turnover rate for small companies and service companies, respectively. Similarly, Ichniowski et al. (1997) found a positive relationship [p. 35 ] between innovative work practices and labor productivity for steel-finishing lines. Similarly, McDuffie's (1995) results support the synergistic effects of HRM practices on organizational outcomes. Second, some researchers adhere to a contingent configurational approach. Essentially, researchers may extend the configurational perspective and examine whether or not the benefits of internally aligned systems or bundles of HRM practices depend on some contextual factor (Lepak et al., 2006). For example, in one of the earliest strategic HRM studies, Miles and Snow (1984) proposed three different HRM systems that are internally aligned: building, acquiring, and allocating. Moreover, these three distinct HRM systems were argued to be used within companies pursuing different strategies. Essentially, within each system, HRM practices tend to have a coherent pattern corresponding to the major theme or objective of the organizational system (McMahan et al., 1999). Baird and Meshoulam (1988) proposed six major components of the HRM system: management awareness, management of the function, portfolio of programs, personnel skills, information technology, and awareness of the environment. They posit that the six components should be consistent with each other and aligned with developmental stage in order to reach maximal effectiveness and efficiency (Baird and Meshoulam, 1988). Lepak and Snell (1999; 2002) identify four configurations of HRM practices: commitment-, productivity-, compliance-, and collaborative-based HR systems corresponding to four different employment modes. Lepak and Snell (2002) found support for the matching of employee modes and HR configurations. In their study, a commitment-based HR configuration was matched with knowledge-based employees; a productivity based HR configuration was used for job-based employees; and a compliance-based HR configuration was used for contract employees.
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Despite differences in the terms used to denote which practices comprise an HRM system, a consistently positive relationship between high performance work systems (Becker and Huselid, 1998; Huselid, 1995), high involvement (Guthrie, 2001), human capital enhancing (Youndt et al., 1996), commitment-based HRM systems (Arthur, 1994), or innovative employment practices (Ichniowski et al., 1997) and aggregate performance measures such as plant (e.g., Arthur, 1994; Ichniowski et al., 1997; Youndt et al., 1996), business-unit (e.g., Delery and Doty, 1996; Koch and McGrath, 1996) and corporate performance (e.g., Becker and Huselid, 1998; Huselid, 1995) has been found.
Summary
To date, these distinct modes of theorizing have and continue to dominate strategic HRM research. Our review shows that there is empirical support for all the three perspectives, albeit at varying degrees. While the universalistic perspective tends to have gained considerable empirical support, the support for the contingency perspective can be described as mixed at best. The configurational perspective remains widely accepted and adopted in strategic HRM research in which researchers tend to examine systems of HRM practices rather than single and isolated ones. One final note on the mixed support for the contingency perspective is warranted. This perspective continues to keep its conceptual allure for strategic HRM scholars. Thus, some researchers have shifted their attention to finding alternative conceptualization of, especially, the strategy HRM fit. For example, it is suggested that HRM systems that researchers study should be targeted toward more specific strategic objectives such as service, innovation, or safety rather than generic strategy typologies (Bowen and Ostroff, 2004; Lepak et al., 2006). That is, these scholars argue, the focus and content of HRM practices researchers study can be derived from more concrete strategic objectives that firms might have rather than the generic strategy typologies that are readily available. Thus, we expect a trend in this direction in future studies. [p. 36 ]
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Theoretical Frameworks in Strategic HRM Research

While the previous discussion highlights different modes of theorizing researchers have emphasized in the study of the HRM firm performance relationship, Figure 3.1 reflects a review by Wright and colleagues of various theories that have been used to provide greater insights into the different theories and their focus and assumptions of how HRM systems operate. Because there have been numerous reviews of the traditional theories that are available to strategic HRM scholars (e.g., McMahan et al., 1999; Jackson and Schuler, 1995; Schuler and Jackson, 2005), in this section we will only be covering two of the more established or at least most widely used theories that have been highly influential in this field of research: 1) the resource-based view of the firm that equips strategic HRM research with a strategic orientation; and 2) the behavioral perspective which offers a more psychological insight to understanding the impact of HRM on firm performance. These perspectives have also been categorized under strategic theories (Wright and McMahan, 1992) or proactive theories of strategic HRM (McMahan et al., 1999) which we believe are better aligned with the raison d'tre for this line of research (Becker and Huselid, 1998). A detailed description of other theories of strategic HRM can be found in Schuler and Jackson (2005), Wright and McMahan (1992) and McMahan et al. (1999).
Resource-Based View
The resource-based view (RBV) of the firm has undoubtedly dominated strategic HRM research in recent years as the main theoretical foundation that explains the linkage between HRM and firm performance. Two main assumptions underlying this view are that first, firms are heterogeneous with respect [p. 37 ] to the strategic resources (i.e., physical, organizational, or human) that they control and second, that these resources are imperfectly mobile within factor markets (Barney, 1991). Based on these assumptions, companies that control valuable, rare, imperfectly imitable, and non-
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substitutable resources are able to generate sustained competitive advantage (Barney, 1991). Figure 3.1 Sources: McMahan et al. (1999); Wright and McMahan (1992); Wright and Snell
In strategic HRM research, the RBV has mainly been used to establish the rationale for empirical research rather than directly testing the theory (Boselie et al., 2005; Wright et al., 2001). Strategic HRM researchers have based their research on arguments derived from RBV, that the knowledge, skills, and abilities of a firm's workforce are instrumental in creating strategic value. Assuming that human resources are normally distributed in the labor market, this theory suggests that firms which possess rare human resources are more advantaged competitively compared to other firms. Such rare and valuable human resources can be developed through, for example, selective hiring and extensive training practices, that serve as key foundations for high investment HRM systems. Another path by which human resources can contribute to competitive advantage is their in imitability (Lado and Wilson, 1994; Wright and McMahan, 1992). Inimitable human resources often arise from unique historical conditions, where the events that shape a firm's culture and norms do not happen in other firms. Also, causal ambiguity that the causal relationship pertaining to the firm's competencies is intangible can render human resources inimitable. Related, human resources can be inimitable because of their social complexity/interconnectedness the idiosyncratic social relations among human resources or among the tacitness, complexity, and specificity of assets (Dierickx and Cool, 1989; Reed and DeFillipi, 1990). Finally, for human resources to create sustained competitive advantage, they should be non-substitutable
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by other strategic assets (Barney, 1991). This may be more applicable in knowledgeintensive industries than labor-intensive industries, where it is very hard to replace the innovative nature of human resources by other assets (Jackson and Schuler, 1995; Wright et al., 1994). Empirical research drawing from RBV has typically placed emphasis on examining the impact of a configuration of internally and externally aligned HRM practices, assuming that it is the complexity of alignments that makes human resources a source of competitive advantage. Based on this logic, researchers have demonstrated that high performance work systems (Huselid, 1995), innovative employment practices (Ichniowski et al., 1997), commitment HRM systems (Arthur, 1994), or high involvement HRM practices (Batt, 2002) have direct effects on market based performance (Huselid, 1995), productivity (Ichniowski et al., 1997), lower scrap rates (Arthur, 1994), lower quit rates (Arthur, 1994; Batt, 2002), and higher sales growth (Batt, 2002). While these findings provide strong evidence for the HRM-firm performance relationship within the RBV framework, we would argue that it is not the system of HRM practices that have the qualities of a resource capable of generating sustained competitive advantage. Rather, it is the human and social capital that they create which may be valuable, inimitable, rare, and non-substitutable (Boselie et al., 2005; Wright et al., 2001). For example, Hitt et al. (2001) found a positive, curvilinear relation between the quality of education and tenure of a firm's workforce and financial performance as measured by return on sales. Similarly, Hatch and Dyer (2004) found that investments in firm-specific human capital (education requirements and screening) increased learning-by-doing performance as measured by the lowering of manufacturing costs as manufacturing experience increases. Yet, research that explicitly examines whether or not certain HRM systems are associated with valuable, rare, inimitable, or non-substitutable resources is lacking. Rather, researchers often invoke this logic but limit their empirical examinations to a direct relationship between HRM systems [p. 38 ] and relevant outcomes. Moving forward, we would argue that strategic HRM research grounded in RBV needs to shift its focus from testing the linkages between a set of HRM practices and performance to testing its core concepts as well as contributing factors associated with time
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compression diseconomies, causal ambiguity, and social complexity (Wright et al., 2001).
Behavioral Perspective
Complementing the previous theory, the behavioral perspective argues that although human capital is essential, employees need to exhibit appropriate role behaviors in order to contribute to the achievement of organizational goals. The central tenet of behavioral perspective, therefore, is that HRM practices affect firm outcomes through managing employees displayed behavior (Jackson and Schuler, 1995; Schuler and Jackson, 1987). There are, in fact, different types of behaviors that are more appropriate depending on organizational strategy and other relevant contingencies. For instance, behaviors vary along repetitive versus innovative, risk taking versus risk averse, flexible versus inflexible, or competitive versus cooperative. The role for organizations is therefore to determine which behaviors are appropriate for their strategy, and which HRM practices are effective in eliciting these behaviors (Schuler and Jackson, 1987; Wright and McMahan, 1992). For instance, different types of rent sharing practices (organizational-, group-, and individual-level) that correspond to different strategic focus can elicit fundamentally different employee behaviors (Coff, 1997). By placing emphasis on needed role behaviors, the behavioral perspective complements the human capital theory by recognizing that employee behaviors are also instrumental in organizational effectiveness in addition to employee knowledge and skills. However, despite the obvious importance of how employees actually act while at work, direct empirical tests are limited that examine the role of behaviors in the HRMperformance relationship.
Emerging Perspectives
Having reviewed the theoretical underpinnings of the HRM-performance relationship and the dominant theories and their empirical evidence, we now explore more recent attempts to uncover the mediating mechanisms through which HRM practices impact
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performance. We believe that the current developments around the cognitive and social domains take the field one step closer to developing strategic HRM-specific models.
A Cognitive Perspective in Strategic HRM

While the traditional perspectives summarized above have focused on the rationales and different paths through which HRM can influence organizational performance, one limitation they have in common is that they implicitly assume universality and predictability of employee behaviors and attitudes that stem from exposure to HRM practices. In other words, they do not explicitly recognize subjective and natural human processes such as cognitions mental processes of perceiving, recognizing, conceiving, judging, and reasoning as processes that employees go through before reacting to those practices. Thus, the cognitive paradigm, which focuses on how people structure their experiences and how they make sense of them (Cacioppo et al., 1981), may inform strategic HRM research further. Taking a cognitive strategic HRM perspective suggests that employees are not merely passive responders to events but make active judgments regarding the causes of events which they observe or are exposed to (Heider, 1958). For example, Bowen and Ostroff (2004) pointed out that the effect of HRM practices depends on the ways in which employees interpret and respond to them. They suggest that the HRM-firm performance linkage can be best understood by analyzing the psychological and collective climates that HRM systems create as the mediating mechanisms in this relationship. [p. 39 ] Accordingly, when employees share a common interpretation of what behaviors are important, expected, and rewarded, such a strong organizational climate collectively guides the behaviors of individuals towards the objectives of the firm resulting in firm performance. These scholars also propose that the strength of the HRM system is what creates such shared interpretations. That is, unless the HRM system stands out in the organizational context, sends consistent massages, and results in agreement
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among employees about its meaning, employees will go though different cognitive cycles, inhibiting the intended effects of the HRM system. Closely related to the psychological and collective climate view (Bowen and Ostroff, 2004), other researchers examined the role of attributions in the HR-employee outcome relationship. For example, Koys (1988; 1991) distinguished between internal attributions of HRM practices made by employees (i.e., viewed as within the control of the company) and external attributions of HR practices (i.e., viewed as out of control of the company). Internal attributions were argued to be more strongly related to employee attitudes and behaviors than external attributions. Extending this argument, Nishii (2003) distinguished between positive and negative internal attributions. Positive internal attributions that is employee beliefs that their company uses HR practices because employees are viewed as an asset or because their company cares about their well-being were argued to be related to positive attitudes and behaviors such as satisfaction, commitment, and organizational citizenship behaviors. Other theories and constructs such as social exchange theory, perceived organizational support, and psychological contracts can also be categorized under a cognitive perspective since they deal with subjective and idiosyncratic perceptions or interpretive processes that employees go through to make sense of their relationship with their organizations. For example, social exchange theorists (e.g., Gouldner, 1960) examine the exchanges that take place between employers and employees regarding perceptions of reciprocity. According to the norms of reciprocity, employees feel obliged to respond equitably to organizational inducements. These feelings of obligation, in turn, are associated with positive attitudes and more productive behaviors (Eisenberger et al., 1986; Shore and Wayne, 1993). Closely related to social exchange theory and perceived organizational support, psychological contracts are expressed or implied promises made by the organization i.e., job security, benefits, and pay and the subjective perceptions of these promises by employees that lead to feelings of either their fulfillment or breach (Rousseau, 1995). Consistent with this perspective, Takeuchi et al. (2007) found that the relationship between high-performance work systems and establishment performance was mediated by both the level of human capital among employees as well as the quality of the organization's social exchange relationships with employees.
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Based on these emerging developments in the cognitive domain, at least from a strategic HRM standpoint, we argue that this perspective is necessary to contour the strategic HRM picture. In fact, recent research has started to integrate the macro HRM research with the more micro perspectives such as industrial/organizational psychology and organizational behavior literature (Wright and Boswell, 2002). Thus, we encourage additional and multi-level research that examines the role of various cognitive processes in the HRM-performance relationship.
The Role of Social Capital

Our previous discussion centered on how HRM affects human capital, cognitive processes, and behaviors of individuals as isolated entities in an organization. However, employees do not exist in isolation; instead, they are embedded in social relationships with supervisors, coworkers, subordinates, clients, and the like (Brass, 1995). The growing field of social capital research, in turn, centers on [p. 40 ] how these relationships among individuals affect employee and work outcomes and has recently started to receive attention from strategic HRM scholars (e.g., Youndt et al., 2004; Collins and Clark, 2003). Social capital is a perspective that targets the linkages between actors, rather than the actors themselves (Brass, 1995). As opposed to human capital which resides in individuals, social capital is defined as the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit (Nahapiet and Ghoshal, 1998: 243). There are three pivotal dimensions of social capital in the literature. The structural dimension concerns the patterns or configurations of relationships among a group of individuals (Nahapiet and Ghoshal, 1998). Two types of social structures, strong ties and weak ties, for example, have been noted to contribute to different types of knowledge transfer and learning. Strong ties among individuals enable the transfer of fine-grained and tacit knowledge; whereas weak ties are more amenable for gathering non-redundant information and stimulating novel knowledge creation (Hansen, 1999). The relational/ affective dimension of social capital addresses the motives, expectations, and norms of the actors in the network (Coleman, 1988; Kang et al., 2007; Nahapiet and Ghoshal, 1998). Trust, for example, is a key element in the affective relations among networking
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parties. Trust embedded in social relationships is essential for interaction efficiency because it not only saves times from decision-making processes but also provides access to otherwise unattainable information and resource (Uzzi, 1997). Finally, the cognitive dimension of social capital refers to the shared understanding, language, culture, and norms among individuals (Nahapiet and Ghoshal, 1998). The common understanding of norms and sanctions are particularly useful for groups to motivate members to act for the interests of the collective entity instead of private interests (Coleman, 1988). A switch of focus from the actors to their relations has meaningful implications for strategic HRM research. Burt (1997), for example, posits that the value of human capital is meaningless without social capital. He states that (w) hile human capital refers to individual ability, social capital refers to opportunity (p. 339). In other words, social capital acts as a catalyzer of human capital. As noted by Subramaniam and Youndt (2005: 459), unless individual knowledge is networked, shared, and channeled through relationships; it provides little benefit to organizations in terms of innovative capabilities. Thus, it may be appropriate to move beyond traditional definitions of human capital that revolve primarily around educational and functional skills to include competencies surrounding interpersonal skills and networking and examine the ways in which HRM practices can build those competencies (Collins and Clark, 2003). Indeed, attributes of social capital have significant implications for facilitating individual, group, and organizational performance. As mentioned above, social capital is a critical facilitator of the development and utilization of human capital the benefits of human capital can not be unleashed without the opportunities provided by social capital (Coleman, 1988). Besides, there are numerous benefits that could be brought in by social capital. The most immediate benefits are facilitating fast and fluid information and resource exchange (Uzzi, 1997), encouraging exploitative and exploratory learning and innovation (Kang et al., 2007, Subramian and Youndt, 2005, Lepak et al., 2007), and cultivating individual members attitudes and behavior (Leana and Van Buren, 1999).
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Cultivating Social Capital

Given the potential benefits of social capital, it is important to understand how social capital emerges within organizations. As Leana and Van Buren (1999) noted, three major ways that organizational practices can develop social capital are building stable relationships among organizational members; developing organizational reciprocity norms; and defining specified roles and establishing bureaucracy to a certain extent. Stable relationships [p. 41 ] in organizations are usually established through a longterm orientation. Time within the organization is important because it creates stable relationships among members that market transactions could not have created. HRM practices such as job security, internal labor markets, training, and collaborative work are all contributive to the development of such stable relationships that are essential for social capital. Second, various motivating mechanisms can be used to establish organizational reciprocity norms, including the use of selection, promotion, and reward mechanisms to encourage reciprocity behavior, and the employment of socializing to foster such an atmosphere. Employing the framework of development of human capital, Adler and Kwon (2002) propose that social capital is actualized by employees abilities, motivation, and opportunities to build social capital. Therefore, HRM practices can be geared towards a specific function to develop social capital. For instance, recruitment and selection are often used to select diverse or similar employees according to strategic needs (Brass, 1995). Training and socialization are useful ways to not only build social connections among employees (Brass, 1995), but also to prepare individuals (such as TMTs) with relationship-building skills (Collins and Clark, 2003). Performance appraisals and incentive compensation tied to the development of social capital are useful for motivating them to display such effort (Collins and Clark, 2003). Indeed, it is shown that network-building HRM practices affects firm performance through the development of TMT's social capital (Collins and Clark, 2003), and that HRM investments are associated with higher general human and social capital of organizations (Youndt et al., 2004). Finally, related to the aforementioned organizational structure, bureaucracy and specified roles are related to the structural aspect of social capital, where the collective
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norms are developed through the positions of members (Leana and Van Buren, 1999). Interdependence among members through embedded relationships in the organization may be beneficial for the development of social capital. Moreover, as opposed to markets, organizations establish network closure where explicit boundaries separate within-organization members from external entities. Such network closure may enable social capital to develop (Coleman, 1988; Nahapiet and Ghoshal, 1998). The actual structure of the organization may also play an important role. Two types of position arrangement, vertical differentiation (positions are differentiated by administrative hierarchy) and horizontal differentiation (positions are differentiated by work flow, job design, technology etc.), are essential in determining the work relationships of employees (Brass, 1995). The former is often the characteristic of mechanistic organizations, where rigid structures and rules are set. The later, in contrast, often exists in organic organizations, where rules and procedures are flexible and the structure is decentralized (Brass, 1995). Brass argues that social networks often overlap in mechanistic organizations but are often denser and more connected in organic organizations. In addition, the physical proximity and on-going interactions between members in the organization further reinforce the relationships established. Given this, choices organizations make regarding the organizational structure will influence the likelihood that they are able to cultivate and capitalize on the benefits of social capital. Organizations, consisting of interrelated actors, are conducive to the creation of social capital in the organization (Nahapiet and Ghoshal, 1998). At the same time, actors make conscious decisions regarding how to use their social capital in organizations. As a result, we would encourage research that focuses not only on the creation of social capital, but how it operates and how employees use their relationships to facilitate (or hinder) individual and organizational performance. So far we have elaborated the evolution of the field from those covered in Wright and colleagues comprehensive model, to the recognition of the unique effect of social relationship beyond traditional understanding [p. 42 ] of individual human capital and behavior in isolation, which shines much light on the field of strategic HRM as it was, is, and will be. These perspectives, however, were positioned in a general context, vastly based on the US experience. Yet, there is increasing attention to the global context and
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its implication for strategic HRM. In what follows, we will extend our vision to a global context and review the development of strategic HRM in other countries.
Strategic HRM in the Global Context

We focus on two aspects of strategic HRM within the global context. First, we review some of the studies that were conducted outside the US to look for external validity evidence for the HRM-firm performance linkage. Second, we review strategic HRM models pertaining to organizations that are operating globally.
Strategic HRM Outside the US

Since the mid-1990s, the majority of the high-impact developments and research in the field of strategic HRM have come from North America and in particular, the US (Arthur, 1994, Batt, 2002; Bowen and Ostroff, 2004; Collins and Clark, 2003; Datta et al., 2005; Huselid, 1995; Lepak and Snell, 1999). As a result, some researchers have questioned whether theories of strategic HRM developed in the US generalize to other regional and cultural contexts that are significantly different from that of the US (Brewster, 2007; Wright et al., 2005). Although there has been a considerable amount of strategic HRM related research in other parts of the world (Bae and Lawler, 2000; Fey and Bjorkman, 2001; Guthrie, 2001; Li, 2003), these studies have not been reviewed collectively to increase our understanding of the generalizability of strategic HRM theories to other national and cultural contexts. Thus, one of the major issues facing the strategic HRM field remains to be the external validity and the generaliz ability of the semodels (Wrightetal., 2005). Our purpose in this section is to focus on research conducted outside the North American context to shed some light on this gap. In order to come up with a preliminary observation on the external validity of strategic HRM theories, we reviewed 17 studies. Out of the 17 studies we reviewed, three were conducted in Russia, three in Singapore, three in Korea, two in China, two in Spain, one in Belgium, one in Netherlands, one in New Zealand, one in Taiwan, one in Thailand, one in Australia, one in India, and one in Hong Kong. According to this distribution, the
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regional clusters that were represented in these studies were Southern Asia (India, Thailand), Confucian Asia (China, Hong Kong, Korea, Singapore, Taiwan), Latin Europe (Spain, Belgium), Germanic Europe (Netherlands), Eastern Europe (Russia), and the Anglo cluster (New Zealand and Australia) (House et al., 2004). Thus, while the number of studies conducted in a single country is low, the empirical evidence that has accumulated on a regional cluster level is considerable; thus enabling generalizability inferences for strategic HRM models. In line with the mainstream strategic HRM studies, studies outside the North American context have relied primarily on RBV (Barney, 1991) to explain the linkages between HRM practices and firm performance (e.g., Fey and Bjorkman, 2001; Park et al., 2003). While all these studies discuss the idiosyncrasies of the national or institutional contexts in which the studies were conducted, few have explicitly incorporated cultural theories and cultural values that may impede or enhance the impact of HRM practices that were mainly developed in the US. For example, Bae and Lawler (2000) questioned whether being high on the cultural dimensions of collectivism and power distance would limit the ability of firms to implement high-involvement work systems in Korea. They suggested that in hierarchical cultures, the empowerment aspects of high-involvement HRM strategies may not be readily accepted by managers or subordinates. [p. 43 ] Further, they argued that employees may be more fatalistic in collectivist cultures and be less prone to have the self-efficacy requisite for independent action. Similarly, Ngo et al. (1998) adopted a cultural values framework and argued that some HRM practices could be more acceptable in some countries due to differences in cultural values such as uncertainty avoidance and power distance (Hofstede, 1980). Given that cultural values are significant determinants of whether certain organizational practices are accepted and effective in a given society (Hofstede, 1980; House et al., 2004), we suggest that future studies further elaborate on the cultural context. Despite the importance of unique cultural and institutional forces that may dictate whether HRM-performance relationship holds in different countries, the empirical studies we reviewed reveal that such practices may indeed be effective regardless of the national context. For example, Guthrie (2001) found high performance work systems to be positively related to productivity for firms in New Zealand, De Saa Perez and Garcia-Falcon (2002) found a positive relation between HRM practices and managerial, input-based, output-based, and transformational capabilities and overall
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firm performance in the Spanish banking industry, and Bae and Lawler (2000) found a positive relation between high-involvement HRM practices and subjective measures of organizational performance in Korea. Collectively, these findings may provide initial support for the external validity of US born strategic HRM theories and models. While the main effects seem to be similar across countries, interesting contingency effects emerge when both local companies and subsidiaries of foreign multinational enterprises are included in the same study (Bae and Lawler, 2000; Bae et al., 2003; Ngo et al., 1998). For example, Ngo et al. (1998) argued and found some support that the relation between HRM practices and firm performance would be stronger for local firms in Hong Kong compared to the subsidiaries of American, British, and Japanese multinationals. Their findings indicated that training and development practices and retention-oriented practices were more strongly related to employee retention and satisfaction levels despite the lower availability of such practices in local firms. Similarly, Bae et al. (2003) found that the relation between high-involvement work practices and subjective measures of performance were stronger for local firms compared to subsidiaries of foreign firms in a sample of companies in Thailand, Taiwan, Singapore, and Korea. Although such findings are preliminary at best, they may suggest that local firms are better able to align the delivery of HRM practices with the cultural values and norms of the local workforce. They may further indicate the liability of foreignness costs (Zaheer, 1995; Miller and Eden, 2006) related to managing HRM in the subsidiaries of multinational enterprises; costs that are incurred due to unfamiliarity with the foreign environment. Although there is some evidence that multinational companies respond to pressures for local isomorphism by tailoring some of their HRM practices to the local context (Myloni et al., 2004; Rosenzweig and Nohria, 1994), these practices are mostly those that are in contrast to local employee regulations such as pay and benefit practices. More strategic practices such as selection methods, performance appraisals, training and development practices, or participation in decision-making may more closely resemble the headquarters orientation that may not be perfectly aligned with the cultural context. Therefore, future studies may try to uncover the subtle differences between the ways in which certain HRM practices are delivered by local and multinational companies to understand this contingency effect.
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Models of Strategic International HRM

Understanding strategic HRM within the context of multinational enterprises (MNEs) continues to grow in importance (Schuler and Jackson, 2005; Schuler et al., [p. 44 ] 2002; Sparrow and Braun, 2007). Due to the complexity and heterogeneity of the context in which MNEs operate, unique strategic HRM issues emerge in such organizations; the most salient one being the opposing pressures for global integration on one hand, and local responsiveness on the other (Rosenzweig and Nohria, 1994; Schuler et al., 1993; Stroh and Caligiuri, 1998). As such, a common influence in these models has been Perlmutter's (1969) work that identifies three distinct attitudes of top managers in MNEs towards building their worldwide operations. The distinction between ethnocentric, polycentric, and geocentric international orientations that differ on the extent to which global integration and local sensitivity is desired or achieved is a recurrent theme in most of the strategic international HRM models. Besides these similarities among the models, they can be categorized under two major themes: 1) Evolutionary models that were typically introduced during the early years of the field's development (e.g. Adler and Ghadar, 1990; Edstrom and Lorange, 1984; Perlmutter, 1969) and 2) integrative models (e.g. Schuler et al., 1993; Taylor et al., 1996) that are more intricate and that recognize the simultaneous need to integrate and differentiate international HRM practices (Sparrow and Braun, 2007).
Evolutionary Models of Strategic International HRM

Evolutionary models of strategic international HRM are based on the notion that HRM practices of an MNE depend on the various ways of classifying the evolution of the MNE such as organizational or product life cycles (Adler and Ghadar, 1990; Milliman et al., 1991) or the evolution of the strategic management process from local to global (Edstrom and Lorange, 1984). For example, Adler and Ghadar (1990) examined the stages in a product's life cycle as the firm advances in to an increasingly global mode of operation. Their model predominantly focuses on the link between four stages of
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internationalization domestic, internationalization, multinationalization, globalization and expatriate management practices, such as who will be assigned to expatriate positions (i.e. parent country nationals and third country nationals), what impact will international assignments have on individuals careers, and how they will be rewarded and compensated based on these four stages. Milliman et al. (1991) extended the Adler and Ghadar (1990) model based on an argument that product life cycles are too short and that many MNEs have multiple products that go through different stages in their life cycles. Their model, which represents the transition from evolutionary models to more intricate integrative models, focused on four organizational life cycle stages based on Baird and Meshoulam (1988) organizational initiation, functional growth, controlled growth, and strategic integration. These researchers further argue that, different from purely domestic organizations, there are essentially two levels of analysis in an MNE within subsidiary/headquarters level of analysis and between subsidiaries and headquarters and that both need to be paid attention to in strategic international HRM models. The evolutionary models of strategic international HRM may be criticized on the grounds that they focus only on one variable that the HRM system needs to be aligned with i.e., product life cycle and do not take into consideration other possible variables (Sparrow and Braun, 2007). They also fall short of explaining how an MNE can implement different international policies and practices while accounting for different contingencies in multiple host countries (Sparrow and Braun, 2007). The complexity of the context and the integration-differentiation issues are addressed in-depth in the integrative models of strategic international HRM.
Integrative Models of Strategic International HRM

These models can be distinguished from the evolutionary models by their focus on a complex set of contingency relationships among the various components of an MNE's [p. 45 ] structure, environment, and its HRM practices (Schuler et al., 1993; 2002; Taylor et al., 1996). Such a focus on the organizational structure and strategy of the MNE in these models reflects the developments in the field of ideal-type MNEs such
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as the transnational organization of Bartlett and Ghoshal (1988) and the heterarchy of Hedlund (1986). These ideal-type structures are presented as a solution to the global integration-local responsiveness dilemma faced by MNEs. Integrative models in international HRM posit that HRM practices can simultaneously integrate the various units of the MNE together based on informal control mechanisms and also differentiate these different units by tailoring HRM practices according to local needs. A significant feature of the integrative frameworks has been an explicit recognition that the multiple alignments between people practices, MNE's structure, and strategy result in better organizational outcomes such as performance (Carpenter et al., 2001; Peterson et al., 1996; Schuler et al., 1993; Stroh and Caligiuri, 1998). Schuler et al. (1993), for example, identified strategic components of an MNE as inter-unit linkages and internal operations, which have an impact on strategic international HRM issues, policies, and practices. In their model, exogenous (i.e. type of global industry, nature of competitors, political, legal, socio-cultural and economic conditions) and endogenous (i.e. MNE structure, international orientation, experience in running international operations) factors moderate the relation between strategic MNE components and HRM issues, functions, policies, and practices having an impact on the goals and concerns of the MNE such as global competitiveness, efficiency, and organizational learning. Taylor et al. (1996) extend the previous models by drawing from RBV and the resource dependence theory. These scholars view MNE's home HRM system as a resource for building the global HRM system and explicitly explore how the global strategic HRM system evolves over time. Accordingly, resources may be found at the national, firm, or the subsidiary level dictating what kind of strengths the resulting HRM system will have and also which HRM competencies will be context-specific or context-generalizable. In the Taylor et al., (1996) model, parent's international strategy and top management beliefs determine the orientation of the HRM system. The orientation of the HRM system thus can be exportive, adaptive, or integrative, having an impact on the degree of similarity of the subsidiary's HRM system to the parent's HRM system. These models have carried the international strategic HRM models to a more advanced level and the frameworks developed in these models had major impact on future strategic international HRM studies (Park et al., 2003; Peterson et al., 1996; Stroh and Caligiuri, 1998). Yet, these models may be criticized on several grounds (Edwards and
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Kuruvilla, 2005; Kiessling and Harvey, 2005; Schuler et al., 2002; Sparrow and Braun, 2007). First, it is suggested that the accumulation of independent variables makes these integrative frameworks almost untestable (Sparrow and Braun, 2007). Indeed, studies of strategic international HRM test only parts of the developed models and use a variety of measures, limiting our capability to develop consistent and coherent empirical evidence in this area. Second, the independence of a number of variables in these models can be questioned (Sparrow and Braun, 2007). The abundance of conceptual categorizations that refer to the global integration-local responsiveness framework (Perlmutter, 1969; Bartlett and Ghoshal, 1989; Porter, 1986) makes some of the propositions in these frameworks and studies tautological. Moreover, the same conceptualizations are used differentially in different studies to refer to strategy, industry, or international orientation, contributing to the limitation of developing a coherent body of knowledge. Finally, some argue that the conceptualization of national effects is inadequate culture being an unsatisfactory catch-all phrase for national differences (Edwards and Kuruvilla, 2005). In sum, there is still much room for conceptual and empirical development in the study of strategic HRM in MNEs. [p. 46 ]
Conclusion
Strategic HRM is a dynamic field, evolving quickly from its early focus on understanding the patterns of impact of HRM practices and systems on performance to embracing the mediating mechanisms associated with individuals and the social context in which HR systems operate. We can view the theoretical models in strategic HRM as adhering to one of several dominant perspectives the universalistic, contingency, or configurational perspectives. At the same time, researchers in this area continue to push the boundaries of what we know and are engaging in exciting research that delves deeper into the mediating mechanisms of how HRM systems work. And while most of the dominant strategic HRM theories have been developed and tested in North America, outstanding research is conducted internationally. Given the increasing globalization of companies, customers, labor, and stake holders, we encourage more research into understanding how different facets of the internationalization of business impact on how people are managed within different cultures, as well as how companies
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balance the simultaneous management of a globally diverse workforce and customer base.
Note
1 Mainly, we gathered these studies from Academy of Management Journal, Journal of International Business Studies, and International Journal of Human Resource Management, for the period of 19952006. Saba Colakoglu, Ying Hong and David P. Lepak
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The SAGE Handbook of Human Resource Management

Models of Strategic Human Resource Management

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Chapter 3: Models of Strategic Human Resource Management Introduction

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Modes of Theorizing in Strategic HRM Research

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Theoretical Frameworks in Strategic HRM Research

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A Cognitive Perspective in Strategic HRM

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The Role of Social Capital

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Cultivating Social Capital

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Strategic HRM in the Global Context

Strategic HRM Outside the US

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Models of Strategic International HRM

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Integrative Models of Strategic International HRM

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