Unpacking the black box: understanding the relationship between strategy, HRM practices, innovation and organizational performance
The links between HRM practices and organizational performance have received considerable research attention as significant contributors to sustained competitive advantage. However, the processes that link HRM practices and organizational performance are not fully understood. This study examines the relationships between skill enhancing, motivation enhancing and opportunity enhancing bundles of practices, innovation and organizational performance, and looks at the mediating effect of innovation over time at the workplace level. The results indicate that the temporal pathway from skill enhancing practices to innovation to organizational performance is positive and significant even after controlling for reverse causality. Strategic activity is also explored and is found to be a significant moderator. This is an indication of the importance of aligning strategy with HRM practices and innovation to achieve improved organizational performance outcomes.