Much progress has been made with regard to theory building and application in the field of Strategic Human Resource Management (HRM) since Wright and McMahan's (1992) critical review. While researchers have increasingly investigated the impact of HR on economic success within the Resource Based view of the firm, and have developed more middle level theories regarding the processes through which HR impacts firm performance, much work still needs to be done. This paper examines how future theorizing in SHRM should explore the concepts of time, cause, and individuals. Such consideration will drive more longitudinal research, more complex causal models, and consideration of multi-level phenomena.
Key words: Human Resource Management, Strategic HRM, Firm Performance
"Categorization of data - whether qualitative or quantitative - is not theory. Categorization characterises much of the work...in the realms of business policy / strategy and human resource strategy. "
Samuel Bacharach (1989, 497)
The fact that a firm's people are becoming central to strategic decision-making seems reasonably unarguable. Strategic Human Resource Management (HRM) researchers have devoted considerable effort toward demonstrating that the ways that people are managed, particularly through HR practices, have strong empirical relationships with organizational performance (Delery/Doty 1996; Huselid 1995; MacDuffie 1995).
While this empirical attention continues to increase, many researchers have criticized the theoretical underpinnings of the research and called for more specific theoretical models of the processes through which HR practices impact organizational performance (Becker/Gerhart 1996; Dyer/Reeves 1995; Guest 1997; Wright/Gardner 2003). While some strides have been made in conceptually articulating mediating processes between HR practices and organizational performance (e.g., Truss/Gratton 1994; Becker/Huselid/Pickus/Spratt 1997), this literature still leaves room for improvement.
The purpose of this paper is to provide an overview of the current status of theoretical development in the HR-performance relationship, and to propose 3 important variables that are currently missing in theoretical analyses of the relationship between HRM and economic success: time, cause, and individuals.
Theory on the Relationship between HRM and Economic Success
Theory on the relationship between HRM and economic success has grown significantly over the past 15 years. This theoretical progress can be seen in two different arenas: meta-theories describing broad rationales for why HRM and economic success should be linked, and middle-level process theories describing how this linkage takes place.
In the first arena, Wright and McMahan (1992) critically reviewed the state of theory in SHRM research, noting that much research was at best "borrowing" metatheories from other disciplines, and at worst, almost completely atheoretical. At that time they noted that the existing research in SHRM had predominantly utilized Resource -Based Theory, the Behavioral Approach, Open Systems Theory, and Control Theory with a few authors exploring Population Ecology and Critical Theory. They noted then, that this state of affairs could signal a tremendous obstacle to future research. McMahan, Virick, and Wright (1999) updated the earlier Wright and McMahan (1992) review, and found that the Resource-Based View of the Firm had become almost the universally embraced meta-theory among Strategic HRM researchers, largely because of both its popularity in the broader strategy literature, and its ability to articulate why HRM could be linked to the economic success of firms.
For instance, Wright, Dunford, and Snell (2001) provided a comprehensive Resource Based model depicting the relationship between HRM practices and the stock of human capital, the flow of knowledge, and the dynamic capabilities of firms, all of which have been advocated among strategy researchers as important resources for competitive success. …