High performance work systems and export performance

The International Journal of Human Resource Management, Vol. 20, No. 3, March 2009, 633–653 High performance work systems and export performance Inma...
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The International Journal of Human Resource Management, Vol. 20, No. 3, March 2009, 633–653

High performance work systems and export performance Inmaculada Martı´n-Tapiaa*, J. Alberto Arago´n-Correaa and James P. Guthrieb a

School of Business & Economics (FCCEE), University of Granada, Granada, Spain; bSchool of Business, University of Kansas, Lawrence, USA Invoking the resource-based view (RBV), this study argues that a set of human resource practices collectively referred to as high performance work systems (HPWS) will positively impact firms’ export performance. We also suggest that this relationship will be moderated by the uncertainty levels in firms’ general business environments. We test these relationships using a sample of 145 exporting firms in Spain’s food processing sector. Results indicate a direct positive effect for HPWS on export performance, with the effect moderated by perceived environmental uncertainty. Keywords: environmental uncertainty; export performance; HPWS; human resources

Measured in trillions of dollars, export trade has grown substantially in recent years, and now accounts for more than 20% of world gross domestic product (World Bank 2006). Internationalization through exporting is often the first step in a firm’s globalization – especially for small and medium-sized firms (Dhanaraj and Beamish 2003). From a macroeconomic perspective, expanding a country’s exports can enhance national productivity, job creation and economic growth. At the firm level, exporting can help leverage production capacity, enhance product and operational innovation and improve the bottom line (Piercy, Kaleka and Katsikeas 1998). Thus, understanding determinants of export success is important for both owners/managers and government institutions. As a direct corollary, there has been growing academic interest in identifying factors predicting export activity and success (e.g., Piercy et al. 1998; Zou and Stan 1998; Sto¨ttinger and Holzmu¨ller 2001; Cadogan, Dianamtopoulos and Siguaw 2002; Dhanaraj and Beamish 2003). Scholars have studied both external and internal/organizational determinants of export performance (Zou and Stan 1998; Baldauf, Cravens and Wagner 2000). Consistent with the resource-based view (Barney 1991), recent works have emphasized the particular importance played by firms’ internal organizational capabilities (e.g., Autio, Sapienza and Almeida 2000; Zahra, Ireland and Hitt 2000; Cadogan et al. 2002; Dhanaraj and Beamish 2003). In this paper, we incorporate parallel developments in the strategic human resource management (SHRM) literature to explore the contribution of high performance work systems (HPWS) to export performance success. As reviewed below, while studies have empirically demonstrated the potential for these HR systems to contribute to a range of organizational performance metrics, no studies to date have examined the HPWS – export performance linkage. As such, this paper centers on the following research question: Is greater use of a system of high performance work practices positively associated with superior export performance? In addition, we investigate whether or not a firm’s task

*Corresponding author. Email: [email protected] ISSN 0958-5192 print/ISSN 1466-4399 online q 2009 Taylor & Francis DOI: 10.1080/09585190802707417 http://www.informaworld.com

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environment moderates the HPWS – export performance relationship. In the pages that follow, we briefly review the SHRM and HPWS literature and develop hypotheses relating HPWS use with export performance. We next describe our research method, present results and conclude with a discussion of study implications. SHRM, HPWS, and export performance Two primary theoretical perspectives for explaining competitive advantage have been prominent in recent years. Gaining momentum in the 1980s, the industrial organization framework (Porter 1980) focused on the external environment as the key determinant of strategies for achieving competitive advantage. Competitive advantage in this perspective is the outcome of a firm’s ability to position itself successfully within an attractive industry or industry segment. A second, more recent theoretical perspective is the resource-based view (RBV). The RBV argues that a firm represents a pool of resources and capabilities that may serve as sources of competitive advantage (e.g., Wernerfelt 1984; Barney 1991; Grant 1996). Beginning in the mid-1990s, scholars in human resource management began to make arguments consistent with the RBV perspective. Jeffrey Pfeffer (1994), for example, argued that a firm’s ability to meet market demands for innovation, speed, and adaptability depends on the quality of its workforce and HR policies and practices. Pfeffer (1994, 1998) and others (e.g., Kochan and Osterman 1994; Levine 1995; Lawler 1996; O’Reilly and Pfeffer 2000; Becker, Huselid and Ulrich 2001) strongly advocate that firms adopt a set of management practices collectively referred to as high performance or high involvement human resource systems. These arguments and research on the impact of high performance HR practices are central to the SHRM literature. Strategic human resource management is defined by Wright and McMahan (1992, p. 298) as ‘the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals.’ SHRM studies have focused on explicating the strategic role that HR can play in organizational functioning. More specifically, much of SHRM research has focused on establishing a link between strategic HR policies and practices and organizational level measures of performance. As part of this latter perspective, human resource systems are considered as part of the organizational ‘architecture’ impacting organizational effectiveness. Unlike traditional research in the HR literature, SHRM research is typically conducted at the business unit- or organizational-level of analysis. In addition, scholars within the SHRM literature stream (e.g., Huselid 1995; MacDuffie 1995; Guthrie 2001; Datta, Guthrie and Wright 2005) have often focused their studies on ‘bundles’ of HR practices, arguing for the existence of reinforcing, synergistic performance effects. Reflecting this orientation, recent HR research has focused on high performance work systems (HPWS), a term1 used to denote a system of HR practices designed to enhance employees’ skills and commitment such that employees become a source of sustainable competitive advantage (Levine 1995; Pfeffer 1998). While there is no precise definition of a high performance work system, based on conceptual/prescriptive (e.g., Lawler 1992; Levine 1995; Pfeffer 1998) and empirical work (e.g., Arthur 1994; Huselid 1995; MacDuffie 1995; Guthrie 2001), these systems would include practices such as: rigorous selection procedures; internal merit-based promotions; grievance procedures; high levels of training; information sharing; participatory mechanisms; performance management systems; and group-based rewards. Although not all discussions and empirical work on HPWS have been uniformly supportive (e.g., Wood and de Menezes 1998; Cappelli and Neumark 2001), a growing body of research has demonstrated the positive influence exerted by HPWS on different

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firm performance modalities, including: financial performance (Huselid 1995; Delaney and Huselid 1996; Becker and Huselid 1998; Bae and Lawler 2000; Evans and Davis 2005); operational performance (Ichniowski, Shaw and Prenushi 1997; Ichniowski and Shaw 1999; Guthrie 2001; Bartel 2004; Datta et al. 2005; Larraza-Kintana, UrtasunAlonso and Garcı´a-Olaverri 2006); new product launching (Ahmad and Schroeder 2003); occupational safety (Zacharatos, Barling and Iverson 2005); and higher motivation and commitment levels among firms’ workers (Arthur 1994; Tsui, Pearce, Porter and Tripoli 1997; Whitener 2001; Gould-Williams 2003). According to the AMO framework (Boxall and Purcell 2003), HPWS positively affects performance via its impact on workers’ ability, motivation and opportunity (AMO). Workforce AMO plays a mediating role as ‘employee capability sets the upper limit of performance, motivation influences the degree to which this capability is turned into action, and opportunity refers to enhancing avenues for the capability of motivated employees to be expressed and/or to the removal of barriers that may prevent otherwise motivated workers from utilizing their capability for labour’ (Macky and Boxall 2007, p. 539). The AMO framework is consistent with other reviews and theoretical treatments (e.g., Delery and Shaw 2001). Internationally, evidence suggests that HPWS can positively influence foreign-owned subsidiary performance by affecting absorptive capacity and the transfer of knowledge (Fey and Bjorkman 2001; Minbaeva, Pedersen, Bjorkman, Fey and Park 2003). Building on this previous work, we suggest that HPWS can also positively influence a firm’s export performance. While prior research has shown positive effects for HPWS on a range of employee and firm outcomes, only limited research has addressed HPWS and international performance, with existing work focusing primarily on multinationals. The HPWS literature has not specifically focused on export performance. This study contributes to the strategic HRM and international management literatures by addressing this important issue. Studying HRM effects on this form of firm performance is important because exportation is by far the most widespread form of internationalization (Leonidou and Katsikeas 1996), and this is especially the case for small to medium-sized firms (Dhanaraj and Beamish 2003). Moreover, research suggests that small and growing firms are wellserved by greater attention to HRM (e.g., Welbourne and Andrews 1996; Way 2002). Our belief is that HPWS can trigger and enhance workforce capabilities and skills that may be critical for the export performance of SMEs. We also examine the possibility that environmental uncertainty moderates the HPWS – export performance relationship. Failure to consider the implications of environmental variables has been specified as a significant deficiency in the literature on resources and capabilities (e.g., Barney 2001; Priem and Butler 2001a, b). In accordance with a contingency perspective (e.g., Burns and Stalker 1961; Lawrence and Lorsch 1967), analysis of the general or business environment gives the resource-based view a contingent touch (Brush and Artz 1999; Arago´n-Correa and Sharma 2003). Studying the moderating effects of the environment is consistent with recent work in the SHRM literature (e.g., Datta et al. 2005). In sum, we contribute to the management literature in a number of ways. First, by examining the importance of human resource management and human capital, our paper augments the literature on the resource-based view (RBV) and the SHRM perspective. Second, we provide results examining the impact of HPWS on export performance, a relationship previously neglected in the SHRM and export literatures. Finally, we address previous criticisms (e.g. Barney 2001; Priem and Butler 2001a, b) and examine the implications of the external environment for the impact of organizational capabilities on firm performance.

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Hypothesis The resource based view (RBV) considers the personnel of a firm as one of its key elements (e.g., Prahalad and Hamel 1990; Barney 1991). Formalized by Barney (1991), the RBV perspective is, in part, derived from the work of Penrose (1959, p. 9), who defined a firm as ‘a collection of physical and human resources’ and noted the heterogeneity of these resources across firms. As with Penrose, many RBV scholars identify human resources (e.g., employee skills, knowledge, and behavior) as an organizational resource capable of offering competitive advantage (Colbert 2004). Human resources, and an appropriate capacity to manage them, fulfill RBV’s four requirements for sustained competitive advantage: they are rare, valuable, inimitable and difficult to replace (Barney 1986, 1991). By extension, human resource management policies and practices (e.g., selection, performance management, rewards, training, participation and communication mechanisms) are a value-adding resource because they affect firms’ human and social capital and, in turn, firms’ capacities for innovation, adaptability and productivity (Colbert 2004). Assuming that employee competencies and attitudes are distributed normally, high levels of these workforce characteristics are, by definition, rare (Wright, McMahan and McWilliams 1994). Imitation, or even substitution, requires a thorough understanding of how these mechanisms work (Becker and Gerhart 1996). Human resource systems and their effects are both socially complex and ambiguous, making their causal mechanisms difficult to decipher, rendering imitability difficult. As noted previously, recent studies have shown that bundles of human resource practices known as HPWS positively influence business results. Although most evidence is US-based, these results have been established in other countries as well, including the Ukraine (e.g. Buck, Filatotchev, Demina and Wright 2003), Spain (e.g., Rodrı´guez and Ventura 2003), France (e.g., Guerrero and Barraud-Didier 2004), Ireland (Guthrie, Flood, Liu and MacCurtain 2009), China (e.g., Law, Tse and Zhou 2003), East and Southeast Asian (e.g., Bae, Chen, Wan, Lawler and Walumbwa 2003; Tsai 2006), and New Zealand (e.g., Guthrie, Spell and Nyamori 2002) among others. While positive HPWS effects have been found in different geographic contexts, researchers have not yet examined whether the use of these HR systems can positively support and enhance firms’ attempts to internationalize via exporting. Scholars have emphasized that exporting (i.e., selling goods and services in international markets) is more complicated than selling to the domestic market (e.g., Christensen, Rocha and Gertner 1987). The primary challenge in this undertaking often does not lie in the need for extraordinary technological or financial resources (although these resources certainly can be important at times), but more in the skills and knowledge required of firms’ managers and employees to successfully serve a foreign market (Piercy et al. 1998). According to Evans and Davis (2005, p. 758), HPWS positively influences a firm’s internal social structure by facilitating bridging network ties, generalized norms of reciprocity, shared mental models, role making, and organizational citizenship behavior. Studies have shown that enhanced HPWS use increases the involvement and commitment of workers (Rogg, Schmidt, Shull and Schmitt 2001; Whitener 2001; Guest 1999), and this may increase the potential for success for exporting firms (Huarng, Horng and Chen 1999). HPWS can also help firms meet the need to develop a ‘global mindset’ that is critical for international competition (Gupta and Govindarajan 2001). Successful exporting firms have been found to require a higher capability for innovation and knowledge creation (Knight and Cavusgil 2004), for the development of competencies specific to exporting (Piercy et al. 1998), and the ability to exploit

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employees’ tacit knowledge (Knight and Cavusgil 2004). Because these organizational capabilities are central to successful export performance, human resource practices that help engender these qualities should improve export performance. By encouraging higher levels of AMO, high performance work systems should help create the kinds of organizational capabilities that are important for export performance. Thus, our first hypothesis is: Hypothesis 1: Greater use of high performance work systems will be associated with higher levels of export performance. While the resource-based view of the firm (RBV) incorporates a contingency perspective, scholars have criticized extant research for not empirically examining the implications of the business environment for the impact of organizational resources on performance (e.g., Barney 2001; Priem and Butler 2001a, b). As stated by Barney (1995, p. 52): ‘Firm resources are not valuable in a vacuum, but rather are valuable only when they exploit opportunities and/or neutralize threats.’ Thus, the notion of ‘fit’ is embedded in the RBV perspective – organizational resources contribute more or less value depending on a firm’s competitive environment. In the SHRM literature, Fombrum, Tichy and Devanna (1984) argued that changes in the general environment may affect the human resource strategy. Batt (2002) and Datta et al. (2005) invoked RBV contingency notions in their exploration of the moderating effects of markets and industry environments on the HR – firm performance relationship. Environmental uncertainty is the extent to which an environment is dynamic (the degree of variability of elements and the extent to which it can be predicted) and complex (heterogeneity and diversity of the elements present in the general environment) (Miller and Friesen 1983). Within the SHRM literature, arguments have been made that environmental uncertainty should signal a greater need for HPWS as a means to respond to doubts about the future (e.g., Roche 1999; Sheppeck and Militello 2000). It has been argued that uncertainty may magnify the potential impact of high performance HR bundles. Ulrich and Lake (1990), for example, have argued that human resources practices have a reduced influence under stable environments, but could create more of a competitive advantage under dynamic conditions. Empirically, Miller and Lee (2001) found that the HPWS contributed more to financial performance under uncertain environments. Ordiz and Ferna´ndez (2005) demonstrated that there is a main (positive) relationship between HPWS and performance regardless of uncertainty levels, but this relationship is especially strong as the environment becomes more dynamic. Drawing upon these arguments, we posit that HPWS systems will be more beneficial for export success in some environments relative to others. By engendering broad repertoires of skill and behavior, many HPWS elements promote organizational flexibility. Broad perspectives and experience sets, coupled with aligned interests, information sharing and participatory mechanisms, will enhance prospects for spontaneity, innovation and alternative strategy-generation throughout the organization (Wright and Snell 1998). Thus, high performance work systems seem particularly well suited for competitive environments requiring a ‘dynamic fit’ and an adaptive, innovative workforce. As such, we propose: Hypothesis 2: Environmental uncertainty will moderate the relationship between the use of high performance work systems and export performance; the positive association between high performance work systems and export performance will increase as environmental uncertainty increases.

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Method Sample and data collection In order to meet the objectives of this study, we chose a single geographically delimited manufacturing sector as our population – the food industry in Spain. This removed contaminating artifacts associated with the peculiarities of different sectors or the biases that various regulations or national aid and subsidy policies could introduce. Firms within the food processing industry in our sample typically convert raw commodity or semitransformed inputs into various types of food products such as canned or frozen foods, dairy products such as cheeses, fats and oils, beverages, chocolates, spices, and prepared or cured meats. Products such as these form the basis for exportation within this industry. The food sector suited our research requirements for a number of reasons. First, this sector provided a sufficient number of firms with the defined characteristics. Second, firms in this industry are labour intensive so that human resources should be relatively more important (Datta et al. 2005). Third, this sector plays a prominent role in exporting, accounting for 14.8% of all Spanish exports2 and plays a similarly important role in both the European Union and the United States. Firms were identified through the Dun and Bradstreet (D&B) database at the end of 2004. This population included 1,556 firms. Of these, a random sample of 414 firms was drawn for the purposes of survey administration. Multiple data sources were consulted for this study. First, we obtained the names and contact data of the CEOs, number of employees and year of foundation of each company through a special order purchase from D&B. Second, we used a survey questionnaire targeting CEOs, which included questions obtaining data on variables of interest to the study. In addition, we obtained confirmatory data where possible from the D&B and Amadeus databases. Finally, when possible, we consulted information published by the firms on their own web pages. This helped us to understand some of the practices and approaches investigated in this study more thoroughly. In order to construct and refine the questionnaire, we carried out a series of interviews and pre-tests with firm managers of six different firms belonging to the food sector (these executives/firms were not included in the final sample). The coordinated development of this project in collaboration with a group of 12 researchers from three universities made possible a large number of working sessions in which the suitability of the questionnaire was examined with the help of experts and scholars specialized in the issues under analysis. We amended the draft survey based on the pilot interviews and generated the final questionnaire. Relevant questionnaire items are presented in the Appendix3. The questionnaire was completed by the CEO during personal interviews carried out between December 2004 and January 2005. CEOs were deemed the appropriate survey respondent because our sample is comprised of relatively small firms and the ‘simple management structure of a smaller organization implies that (a general/business) manager often has a clear view of the various management practices’ (Sels et al. 2006, p. 89).4 Of the 414 firms initially contacted, usable survey data were obtained from 145 firms, representing a response rate of approximately 35%.

Measures High Performance Work Systems (HPWS) We based our measure of HPWS on the work of Huselid (1995), Delaney, Lewin and Ichniowski (1989) and the US Department of Labor (1993). We utilized 13 items, in which respondents were asked the percentage of non-management workers covered by the

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human resource practices, using a 7-point Likert scale. Per the Appendix, the Likert scale was constructed to represent percentage categories, where a value of ‘1’ indicated that 0– 15% of the workers were covered and a value of ‘7’ corresponded with 86 –100% of the workers covered by a practice. HR practices covered by these survey items provided a fairly robust description of firms’ HR systems, covering staffing, training, compensation, performance management, communication, and participation. Our focus on nonmanagerial employees is consistent with the views of Lawler (1992, p. 28), who believes that the use of high performance HR practices at lower levels is the true sign of a high involvement or high performance work organization: ‘The fundamental difference between the control-oriented approach and the involvement-oriented approach concerns how work is organized and managed at the lowest level in the organization’ (emphasis added). These views are empirically supported by Guthrie (2001). An exploratory principal components analyses with varimax rotation of the HR practices suggested that the 13 items represented three sets of HR practices, with each factor’s eigenvalue exceeding 1.00. The first factor contains formal HR practices such as formal training, evaluation and job analysis, which might be labelled administrative HR practices. The second one contains HR practices linked to performance management, including salary decision-making, promotions, and merit-based evaluations. Finally, the third factor has HR practices more oriented toward increasing job-satisfaction, and included practices such as participating in the benefits of the company or participation in decision-making processes. The degree to which these three components represented a latent HPWS factor was tested using LISREL 8.50. The single factor model fitted the data well (x2 ¼ 129.26, df. ¼ 62, p ¼ 0.00; RMSEA ¼ 0.085; NNFI ¼ 0.99; CFI ¼ 1.00). Consequently, these three components were treated as indicators of a general HPWS construct in the analyses described below. The use of a single HPWS system index is supported by arguments made by Becker and Huselid (1998) and is consistent with the approach used in previous works (e.g., Guest, Michie, Conway and Sheehan 2003; Datta et al. 2005). It is also consistent with the aims of this study: Examining whether or not a system of HR policies and practices positively impacts export performance in our sample firms resulted in a Cronbach’s alpha for this scale was .83. Environmental uncertainty Survey respondents also provided their perceptions of the degree of uncertainty perceived in their firm’s environment. This subjective measurement is consistent with approaches found in the strategic management literature (e.g., Miller and Lee 2001; Tan and Tan 2005), which highlight the importance of decision-makers’ perceptions. Our scale was composed of four items adapted from a scale used by Tan and Litschert (1994) in which the interviewee was asked to express his or her degree of agreement or disagreement with respect to the different statements using a 7-point Likert scale (see Appendix). Cronbach’s alpha for this scale was .76. Export performance Katsikeas, Leonidou and Morgan (2000) reviewed the literature related to the different ways of measuring export performance and concluded that the two most frequently employed approaches are either to assess the absolute volume or proportion of total sales derived from international sales or to assess top management’s perception of export success. A number of scholars recommend the use of perceptual ratings of export success as providing a more holistic, robust assessment of export performance (e.g., Cavusgil and Zou 1994;

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Matthyssens and Pauwels 1996; Shoham 1998). Further, recent work by Wall et al. (2004) reports strong support, in the form of convergent and discriminant validity evidence, for the equivalence of subjective and objective measures of firm performance. In this study, we used the three items comprising Zou, Taylor and Osland’s (1998) ‘financial export performance’ scale. The respondents used a 7-point Likert scale to express their level of satisfaction with their firm’s sales volume achieved in external markets, export profitability, and growth of sales in external markets. Similar to Zou et al.’s (1998) results, Cronbach’s alpha for this scale was .82. For a portion of our sample (i.e., 59% of our firms) we were able to obtain ‘objective’ export intensity data from D&B. Consistent with Wall et al. (2004), within this sub-sample we observed a positive and significant association (r ¼ .51, p , .001) between our perceptual measure and the D&B export intensity measure. These results, while restricted to a sub-sample of our firms, provide support for the reliability of our informants’ performance perceptions. Moreover, in some ways perceptual measures of performance may actually be superior to ‘objective’ measures since not only are they informed by objective outcomes, but also they subsume other contextual factors, such as firms’ objective performance relative to anticipated goals or targets (e.g., Cavusgil and Zou 1994; Matthyssens and Pauwels 1996; Shoham 1998). Control variables Based on previous work, we chose to include several variables in our models as controls, including firm size, firm age, competitive strategy, and innovativeness. Size and age have been included previously in studies of export intensity and performance (e.g., Zou and Stan 1998; Baldauf et al. 2000; Verwaal and Donkers 2002; Dhanaraj and Beamish 2003). In addition, these factors have been included as controls in studies on the performance effects of high performance work systems (e.g., Arthur 1994; Huselid 1995; Guthrie 2001; Way 2002; Datta et al. 2005). Firm size was operationalized as the number of employees whereas firm age was calculated based on the founding year of sample firms. Due to skewness, both variables were transformed via their Neperian logarithms. Information on number of employees and founding date were both obtained from the D&B database. We also controlled for firms’ competitive strategy and relative emphasis on innovativeness, both of which have been included in previous work on export performance and/or high performance work systems (e.g., Baldauf et al. 2000; Dhanaraj and Beamish 2003; Knight and Cavusgil 2004; Datta et al. 2005). The innovativeness scale consisted of two items (on a 7-point Likert scale) that asked for respondents’ opinions regarding the firm’s relative emphasis and receptivity to new ideas (Cronbach’s alpha ¼ .87). The strategy measure consisted of two items measuring firms’ relative ‘prospector’ orientation (Miles and Snow 1978) (Cronbach’s alpha ¼ .62). Results Consistent with previous published studies of export performance (e.g., Cadogan et al. 2002; Knight and Cavusgil 2004), we rely upon a single source (the CEO) for much of our data. While use of a single source is typical in this research, and among studies of small firms, the use of a single source also presents threats of bias arising from common method variance. Previous works (e.g., Crampton and Wagner 1994), have demonstrated that measures of micro-organizational practices (e.g., HR practice data) are relatively free of effect-size inflation. However, in order to check on possible response bias, we followed the recommendations of Podsakoff and Organ (1984). Using Harman’s one-factor test, we assessed the degree to which intercorrelations among study variables might be an artifact

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of common method variance in item responses. In this technique, all of the survey study items were entered into a factor analysis to examine how many factors are necessary to account for the variance in the items. If either (a) a single factor emerges or (b) a ‘general’ factor emerges accounting for a majority of variance, then the threat of common method bias increases. Accordingly, we conducted a principal component analysis. Using an eigenvalue greater than 1 resulted in a seven factors solution, accounting for 66.4% of the variance, where the first factor accounted for 20.9% of the variance. Factor loadings indicated that the items loaded quite cleanly on their respective conceptual constructs (i.e., the underlying HPWS, export performance, uncertainty, innovativeness, and competitive strategy constructs). These results suggest that common-method bias is an inadequate explanation for study results. Table 1 presents the descriptives and intercorrelations among study variables. We tested study hypotheses using hierarchical multiple regression. We first verified that variables conformed to the necessary assumptions (linearity, variance consistency, and variable normality) for these analyses. To avoid a problem of multicollinearity with the introduction of the interaction term, we mean-centered both independent and moderator variables prior to creating the cross-product interaction term (Cronbach 1987; Jaccard, Turrisi and Wan 1990). Table 2 shows the results of the regression analysis. Consistent with previous work (e.g., Storey, Quintas, Taylor and Fowle 2002), the correlations results indicate a positive association between HPWS and innovation. In addition, both the correlation and regression results indicate that innovation plays a role in export performance. There is also a strong bivariate correlation between greater use of HPWS and positive export performance (p , .001). The primary test of the first study hypothesis occurs in model 3 of the regression results, where we introduce the HPWS index. The addition of the HPWS index accounted for an additional 3.9% (p , .01) of variance beyond the predictors included in the more restricted model (model 2). Overall, model 3 explained approximately 13% of variance in sample firms’ export performance (F ¼ 3.161; p , .001). These results support Hypothesis 1: greater use of HPWS is associated with higher levels of perceived export performance. In model 4, the inclusion of the interaction term of HPWS uncertainty accounts for an additional 3.5% of variance in export performance (p , .05). This suggests that environmental uncertainty does, in fact, moderate the relationship between HPWS and export performance. In order to interpret this interaction, we divided the cases or observations into ‘low’, ‘medium’ and ‘high’ using the mean and standard deviation of the uncertainty variable. Uncertainty is considered ‘high’ when the uncertainty value was more than one standard deviation above the mean, ‘low’ when the value was less than one standard deviation below the mean, and ‘medium’ for all cases in between (Jaccard et al. 1990). We estimate the relationship between HPWS and export performance for each degree of uncertainty following the instructions of Jaccard et al. (1990). We present the HPWS coefficients for each of three levels of uncertainty in Table 3. As can be seen, results indicate a finding that is strikingly the opposite of predictions – greater use of HPWS has a stronger impact on export performance when uncertainty is lower and has no impact when uncertainty is highest. These results are displayed graphically in Figure 1. Discussion By examining the impact of high performance work systems on export performance, this study fills an important void in both the strategic HRM and international business literatures. While the HPWS literature has studied the impact of HR systems on a wide range of performance factors, scholars in this field have not studied effects on export performance.

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Table 1. Intercorrelations and descriptives of study variables.

1. Size (Ln number of employees) 2. Age (Ln age of the firm) 3. Strategy 4. Innovation 5. Uncertainty 6. HPWS 7. Export Performance

N

Mean

Standard deviation

1

2

3

4

5

6

7

143 145 144 145 145 143 143

3.1993 3.3321 4.2778 5.6241 3.8914 3.1465 4.3707

1.2435 .6993 1.3725 1.2283 1.2832 1.2430 1.2368

1.000 .370*** 2.013 .028 2.001 .001 2.129

1.000 2 .067 .026 2 .044 2 .152† 2 .136

1.000 .248** .187* .081 .113

1.000 .183* .199* .203**

1.000 .139† .154†

1.000 .273***

1.000

***p , 0.001 **p , 0.01 *p , 0.05 †p , 0.10.

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Variable

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Table 2. Regression results: HPWS, environmental uncertainty and export successa. Variable Constant Age Size Strategy Innovation Uncertainty HPWS HPWS £ Uncertainty R2 Change in R2 F

Model 1

Model 2

Model 3

Model 4

4.503*** (.700) 2 .119 (.155) 2 .09l (.088) .041 (.076) .209** (.084)

3.834*** (.733) 2.113 (.155) 2.096 (.088) .029 (.077) .194* (.086) .086 (.080)

3.301*** (.752) 2 .074 (.155) 2 .110 (.087) .028 (.075) .153† (.086) .070 (.079) .207** (.082)

3.178*** (.741) 2 .068 (.152) 2 .098 (.086) .019 (.074) .146† (.084) .111 (.080) .208** (.081) 2 .192* (.061)

.078 .078* 2.869*

.085 .007 2.500*

.125 .039** 3.161***

.16 .035* 3.584***

a

Export performance is the dependent variable. The values represent standardized regression coefficients with standard errors in brackets; ***p , 0.001 **p , 0.01 *p , 0.05 †p , 0.10.

Table 3. HPWS and export success under different environmental uncertainty levels. Environmental uncertainty Variable HPWS

High

Medium

Low

.000 (.197)

.288** (.103)

.440* (.185)

The values represent the regression coefficients with the standard errors in brackets. ***p , 0.001 **p , 0.01 *p , 0.05 †p , 0.10.

Similarly, while previous international management research has emphasized the importance of organizational capabilities, the impact of HPWS on export performance has been neglected.

Figure 1. HPWS and export success under different environmental uncertainty levels.

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Our results add to the growing evidence suggesting the important role played by human resource management in achieving competitive advantage. Findings suggest that exporting companies should be conscious of the fact that progressive and innovative human resource practices can improve their international sales efforts. Use of high performance work practices likely yields these results due to their impact on the skills, knowledge, motivation, creativity, and opportunities afforded to organizational members (Wright, Dunford and Snell 2001), capabilities that are necessary for improved export performance. This result is consistent with previous work on related subjects. For example, Li (2004) showed the importance of knowledge in export success, and Wood and Berge (1997) suggested a link between having a skilled labor force and export capability. However, a delineation of the precise way in which HPWS affects exportation processes should be examined in future research. Our analysis also suggests that uncertainty moderates the link between the use of HPWS and the firm’s export performance. Greater use of HPWS was more effective in more certain environments. Although contrary to our expectations, these results can be linked with previous findings. For example, Panayotopoulou, Bourantas and Papalexandris (2003) explored contingencies between environmental characteristics and HRM ‘orientations’. They demonstrated that a control-oriented HR approach, emphasizing discipline and hierarchical status, is associated with sales growth and market performance in complex environments. They speculate that complex external environments increase the need to be able to establish control over internal factors. This is consistent with those who argue that when firms find themselves in highly uncertain environments, they will tend to adopt an internal organization emphasizing simple, general routines that help orient the firm (Burgelman 1994 1996; Eisenhardt and Martin 2000; Eisenhardt and Sull 2001). Similarly, Tan and Litschert (1994) demonstrated that as managers’ perceptions of uncertainty increased, they were less like to utilize proactive organizational strategies and more likely to adopt defensive strategies. Moreover, Lukas, Tan and Hult (2001) showed a firm that adopts proactive practices can get better performance when the level of uncertainty is low. In this sense, our results are consistent with ‘threat-rigidity theory’ (Staw, Sandelands and Dutton 1981; Ocasio 1995). This theory suggests that when managers perceive higher levels of uncertainty or risk in the external environment over which they have little control, internal control of managerial processes may become relatively more important. In terms of management implications, this study tentatively suggests that the HR policies and practices associated with an HPWS can lead to increased export performance. This is an important message since human resource policies and practices have received little attention in previous studies of exporting firms. As has been shown with regard to other organizational performance areas, policies and practices regarding staffing, performance management, rewards, training, and participation can make a significant difference for performance. We also demonstrate that while the use of HPWS ‘matters’, it matters more in some contexts than others. It may be that other organizational capabilities or factors become relatively more important as a firm’s environment becomes increasingly uncertain. Again, this issue awaits further research. In terms of public policy, national authorities should also be conscious of the important role played by human resources practices and human capital. Internationalization and export success can be promoted via programs encouraging firms to introduce the types of human resource policies and practices found in high performance systems. Government programs focusing on export success are important – especially for small and medium-sized firms that may lack expertise, resources or competitive intelligence.

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The results of this study should be considered in the context of a number of design limitations. First, any generalizations beyond the specific context of the study – firms in the food sector domiciled in Spain – should be applied with caution. For example, the moderation effect detected in this study may reflect peculiarities of the food processing industry. Because they have been the basis for a number of significant problems in recent years (e.g., severe illnesses such as mad cow disease, bluetongue disease and the avian flu), this industry is very sensitive to food-borne health risks. As uncertainty and risk increase in this particular environment, a more control-oriented approach to people management may allow firms to successfully navigate potential threats associated with these issues. This may be less true in other industries. Second, while Harman’s one-factor test reduces concerns regarding common method variance, it does not rule out this problem. Third, our models are under-specified and lacked, for example, assessments of other organizational factors or capabilities such as product features and/or marketing activities. Fourth, although we showed reliability with an objective export intensity measure for a sub-sample of our firms, our measurement of export performance is subjective, proxied by the level of satisfaction of the CEO with his or her firm’s export performance. While this subjectivity can be considered a limitation, the advantage of this measure is that it contextualizes performance relative to a firm’s strategic objectives or aspirations. Finally, we cannot rule out the possibility of reverse causality – that firms that export more successfully are subsequently more likely to adopt HPWS. In fact, Osterman’s (1994) study found that a firm’s presence in international markets (a dichotomous variable in his study) predicted the adoption of innovative HR practices. Despite the above limitations, we believe our results suggest a role for HPWS in explaining export performance. This is especially true when these results are considered in the context of the growing body of work suggesting the positive impact of HRM on other measures of organizational performance. Consistent with other recent work, we also identified evidence suggesting a contingency effect imposed by environmental conditions. We hope this study informs and stimulates continued work on the role played by HRM in international success.

Acknowledgements We thank the managers in our sample for their participation and responses. Project SEC 2003-07755 (European Union) and FBBVA partially supported this research.

Notes 1. 2. 3. 4.

Other related terms would include ‘high involvement’ (Lawler 1992), ‘high commitment’ (Arthur 1992), and ‘innovative’ or ‘sophisticated’ work practices (Koch and McGrath 1996). INE Instituto Nacional de Estadı´stica (Spain’s National Statistics Institute). The questions were originally presented in Spanish. The Appendix contains the English language translation. In terms of size, responding firms had a mean of 55 employees (with the median value being 25 employees).

References Ahmad, S., and Schroeder, R.G. (2003), ‘The Impact of Human Resource Management Practices on Operational Performance: Recognizing Country and Industry Differences,’ Journal of Operations Management, 21, 19 – 43.

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Arago´n-Correa, J.A., and Sharma, S. (2003), ‘A Contingent Resource-based View of Proactive Corporate Environmental Strategy,’ Academy of Management Review, 28, 71 – 88. Arthur, J.B. (1992), ‘The Link between Business Strategy and Industrial Relations Systems in American Steel Minimills,’ Industrial and Labor Relations Review, 45, 488– 506. Arthur, J.B. (1994), ‘Effects of Human Resource Systems on Manufacturing Performance and Turnover,’ Academy of Management Journal, 37, 670– 687. Autio, E., Sapienza, H.J., and Almeida, J.G. (2000), ‘Effects of Age at Entry, Knowledge Intensity, and Imitability on International Growth,’ Academy of Management Journal, 43, 909– 924. Bae, J., Chen, S.J., Wan, T.W.D., Lawler, J.J., and Walumbwa, F.O. (2003), ‘Human Resource Strategy and Firm Performance in Pacific Rim Countries,’ International Journal of Human Resource Management, 14, 1308– 1332. Bae, J., and Lawler, J.J. (2000), ‘Organizational and HRM Strategies in Korea: Impact on Firm Performance in an Emerging Economy,’ Academy of Management Journal, 43, 502– 517. Baldauf, A., Cravens, D.W., and Wagner, U. (2000), ‘Examining Determinants of Export Performance in Small Open Economies,’ Journal of World Business, 35, 61 – 79. Barney, J.B. (1986), ‘Types of Competition and the Theory of Strategy: Toward and Integrative Framework,’ Academy Management Review, 11, 791– 800. Barney, J.B. (1991), ‘Firm Resources and Sustained Competitive Advantage,’ Journal of Management, 17, 99 – 120. Barney, J.B. (1995), ‘Looking Inside for Competitive Advantage,’ Academy of Management Executive, 9, 4, 49 – 61. Barney, J.B. (2001), ‘Is the “Resource-based View” a Useful Perspective for Strategic Management? Yes,’ Academy of Management Review, 26, 41 – 56. Bartel, A.P. (2004), ‘Human Resource Management and Organizational Performance: Evidence from Retail Banking,’ Industrial & Labor Relations Review, 57, 181– 203. Batt, R. (2002), ‘Managing Customer Services: Human Resource Practices, Quit Rates, and Sales Growth,’ Academy of Management Journal, 45, 587– 597. Becker, B., and Gerhart, B. (1996), ‘The Impact of Human Resource Management on Organizational Performance: Progress and Prospects,’ Academy of Management Journal, 39, 779– 801. Becker, B.E., and Huselid, M.A. (1998), ‘High Performance Work Systems and Firm Performance: A Synthesis of Research and Managerial Implications,’ in Research in Personnel and Human Resource Management, ed. G.R. Ferris, Greenwich, CT: JAI Press, pp. 53– 101. Becker, B.E., Huselid, M.A., and Ulrich, D. (2001), HR Scorecard: Linking People, Strategy and Performance, Boston, MA: HBS Press. Boxall, P., and Purcell, J. (2003), Strategy and Human Resource Management, New York: Palgrave Macmillan. Brush, T.H., and Artz, K.W. (1999), ‘Toward a Contingent Resource-based Theory: The Impact of Information Asymmetry on the Value of Capabilities in Veterinary Medicine,’ Strategic Management Journal, 20, 223– 250. Buck, T., Filatotchev, I., Demina, N., and Wright, M. (2003), ‘Insider Ownership, Human Resource Strategies and Performance in a Transition Economy,’ Journal of International Business Studies, 34, 530– 549. Burgelman, R.A. (1994), ‘Fading Memories: A Process Theory of Strategic Business Exit in Dynamic Environment,’ Administrative Science Quarterly, 39, 24 – 56. Burgelman, R.A. (1996), ‘A Process Model of Strategic Business Exit,’ Strategic Management Journal, 17 (Special Issue), 193– 214. Burns, T., and Stalker, G.M. (1961), The Management of Innovation, London: Tavistock Publications. Cadogan, J.W., Dianamtopoulos, A., and Siguaw, J.A. (2002), ‘Export Market-oriented Activities: Their Antecedents and Performance Consequences,’ Journal of International Business Studies, 33, 615– 626. Cappelli, P., and Neumark, D. (2001), ‘Do “High-performance” Work Practices Improve Establishment-level Outcomes?,’ Industrial & Labor Relations Review, 54, 737– 775. Cavusgil, S.T., and Zou, S.M. (1994), ‘Marketing Strategy-performance Relationship – An Investigation of the Empirical Link in Export Market Ventures,’ Journal of Marketing, 58, 1 – 21. Christensen, C., Rocha, A., and Gertner, R. (1987), ‘An Empirical Investigation of the Factors Influencing Exporting Success of Brazilian Firms,’ Journal of International Studies, 18, 61 –77.

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Appendix HUMAN RESOURCE PRACTICES IN YOUR FIRM Please answer as accurately as possible the following questions related to human resource practices implemented by your organization in relation to your EMPLOYEES/WORKERS (managers not included) TAKING AS A REFERENCE THE LAST TWO YEARS. Consider the scale given to you as a guide by Percentage of employees/workers who participate: Very low 0 – 15%

Very high 16– 30%

31 –45%

46 – 54%

55 – 70%

71 – 85%

86 – 100%

Very low 1. What percentage of employees get a promotion giving more importance to their performance than to other factors such as seniority, qualifications, skills, etc.? 2. What percentage of employees have joined your firm during the last two years? 3. What percentage of the total number of employees hired by your firm in one year receive formal training during their first year in your organization? 4. What percentage of employees receive formal training after the first year working for your organization? 5. What percentage of employees are subject to a formal evaluation of their working performance? 6. What percentage of employees receive a pay rise linked to the evaluation of their performance? 7. What percentage of employees have jobs where performance evaluation is made using an objective measure (e.g. sales volume, number of requests attended, objective fulfilment, etc.)? 8. What percentage of employees have available incentive plans linked to the organization’s profits? 9. What percentage of employees own shares or stocks of your company? 10. What percentage of employees receive formal information (for example, through an information bulletin or regular meetings) about a wide range of issues relevant for the firm and its operations? 11. What percentage of employees regularly have to answer a questionnaire about work climate, attitude or satisfaction? 12. What percentage of employees has jobs which are subject to a formal analysis of the workplace and its characteristics? 13. What percentage of employees is included in some system or program (e.g. quality circle) in order to be able to participate in the firm’s decision-making processes?

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Specify the level of agreement or disagreement with each one of the following statements: I totally disagree

I totally agree 1. The environment factors affecting our organization (such as technology, customer preferences, suppliers, regulation, etc.) change very often. 2. The changes in our business environment affecting the organization make it quite difficult for the organization to obtain positive results. 3. The business environment factors affecting our firm are very numerous. 4. The business environment factors affecting the operation of our organization are very varied.

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1 My firm is rarely the first one introducing new products/services, administrative techniques, operations technique, etc.

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INNOVATION Please value the degree of agreement or disagreement with the next sentences from 1 (total disagreement) to 7 (total agreement). Total agreement

Total disagreement 1. My firm is receptive to the adoption of inside and outside new ideas. 2. In my opinion, the executives of this firm appreciate and actively look for new ideas.

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The International Journal of Human Resource Management

653

EXPORTS Specify the level of satisfaction in your firm regarding the following aspects: Very satisfied

Not satisfied at all 1. Sales volume achieved in external markets 2. Export profitability 3. Growth of your firm’s sales in external markets

1 1 1

2 2 2

3 3 3

4 4 4

5 5 5

6 6 6

7 7 7