Identify your topic of interest for a Literature Review? Answer is: The negative effect of Gossip culture in work placeQ1: Explain why are you interested in investigating this topic?Q2 : The following article is attached in the VLE.Tang, G., Wei, Li-Qun., Snape E., and Ng Y.C (2015) How effective human resource management promotes corporate entrepreneurship: evidence from china, The International Journal of Human Resource Management, Vol. 26, No.12, 1586-1601Answer the following questions based on the above article. 1. Is there one dominant theory on which this paper is based?2. What methodology is used in this article?3. List one practical application of this research.4. List one limitation of this research?
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The International Journal of Human Resource Management, 2015
Vol. 26, No. 12, 1586–1601, http://dx.doi.org/10.1080/09585192.2014.953973
How effective human resource management promotes corporate
entrepreneurship: evidence from China
Guiyao Tanga, Li-Qun Weib*, Ed Snapeb and Ying Chu Ngc
a
b
School of Management, Shandong University, Jinan, People’s Republic of China;
Management Department, Hong Kong Baptist University, Kowloon Tong, Hong Kong, People’s
Republic of China; cEconomics Department, Hong Kong Baptist University, Kowloon Tong,
Hong Kong, People’s Republic of China
Strategic human resource management (SHRM) represents a set of HRM practices that are
aligned with firm strategies. The relationship between SHRM and organizational
performance has been extensively examined; however, whether and how SHRM
influences corporate entrepreneurship remains unknown. Based on the resource-based
perspective, this study examined a model linking SHRM with corporate
entrepreneurship. The importance of HRM people’s political skill for a firm’s development
of devolved management through SHRM implementation was also examined. Data from a
survey of 201 Chinese manufacturing firms confirm a significant relationship between
SHRM and corporate entrepreneurship and that the relationship is partially mediated by a
devolved management style. The relationship between SHRM and devolved management
was shown to be stronger for firms with more politically skillful HRM people.
Keywords: corporate entrepreneurship; devolved management; political skill;
strategic human resource management
Introduction
Effective management of HRs plays an important role in enhancing performance and
building competitive advantage for a firm, so maintaining effective practices can pay big
dividends (e.g. Delaney & Huselid, 1996; Den Hartog & Verburg, 2004; Guthrie, 2001;
Michie & Sheehan-Quinn, 2001). Scholars taking a resource-based view of the firm have
suggested that firms should design their human resource management (HRM) policies and
practices based on their firms’ strategies – what could be termed strategic human
resources management (SHRM) (e.g. Guest, 1987; Martı́n-Alcázar, Romero-Fernández, &
Sánchez-Gardey, 2008; Wei, Liu, & Herndon, 2011). SHRM is thus a set of strategyaligned HRM practices including staffing, compensation systems and employee
development programs (Bae & Lawler, 2000; Truss & Gratton, 1994). Research has
shown that SHRM practices are helpful in enhancing both individual and organizational
performance in different contexts, including China (e.g. Gong, Chang, & Cheung, 2010;
Hayton, 2005; Huselid, 1995; Iverson & Zatzick, 2011; Kaya, 2006; Michie & SheehanQuinn, 2001; Wei & Lau, 2008). Despite the large volume of research on the relationship
between SHRM and firm performance, little attention has been paid to how SHRM
influences corporate entrepreneurship, which can be a key driver of firm competitiveness,
and if there is such an influence, as any process or contextual factors which may predict the
effectiveness of SHRM.
Corporate entrepreneurship refers to activities such as product innovation, business
venturing and strategic renewal efforts (Zahra, 1993). Increasing competition in the business
*Corresponding author. Email: [email protected]
q 2014 Taylor & Francis
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world and the rapid development in information technology make creation and innovation
even more important nowadays. Corporate entrepreneurship can then become a key to firms’
sustainable development and competitiveness. It is therefore important to understand any
factor that influences the development of corporate entrepreneurship in organizations. For
example, previous research has examined leadership and structure (e.g. Miller, 1983; Zahra,
1996), resource availability (e.g. Nohria & Gulati, 1996) and strategic management (e.g.
Barringer & Bluedorn, 1999) as antecedents of corporate entrepreneurship. However, the
role of firms’ internal management practices such as HRM practices has received little
attention, although prior research on corporate entrepreneurship has implied that giving
employees more scope to pursue opportunities within the firm is of vital importance to
nurturing corporate entrepreneurship (e.g. Schmelter, Mauer, Borsch, & Brettel, 2010;
Zhang & Jia, 2010). It is employees who make such entrepreneurial activities succeed,
which suggests the relevance of HRM practices to corporate entrepreneurship.
According to the resource-based view, competitive advantage stems from a firm’s
unique resources which are valuable, rare and inimitable (Barney, 1991). Such resources
are often inimitable because they are deeply embedded in a firm’s routines, making them
difficult to imitate in other contexts (Day, 1994). SHRM practices can be developed as
such a unique resource, as it nurtures employees’ skills and capabilities according to the
firm’s strategic needs, exploiting the talents of a firm’s unique workforce ‘latent with
productive possibilities’ (Boxall, 1996, p. 67). For example, supporting learning among
the employees can promote innovation, venturing and an emphasis on strategic renewal.
Employees can be encouraged to be entrepreneurial through training and reward programs
which emphasize enhancing their knowledge, skills and abilities in support of corporate
entrepreneurship (e.g. Schmelter et al., 2010).
It has been shown that HRM practices can shape management approaches (Budhwar,
1998; Wei & Lau, 2008). This study was designed to extend that reasoning by linking
SHRM with a devolved management style and to test whether or not such a style might
promote corporate entrepreneurship. Devolved management involves empowering
subordinates, working with them and encouraging communication (Budhwar, 1998;
Jackson & Alvarez, 1992). SHRM practices can stimulate devolved management by
encouraging the empowerment of employees, improving information flow and supporting
the delegation of decision-making power (Messersmith & Guthrie, 2010; Zacharatos,
Barling, & Iverson, 2005). Such practices would be expected to stimulate employees’
abilities and motivation in support of the firm’s strategic goals (Bornay-Barrachina, RosaNavarro, López-Cabrales, & Valle-Cabrera, 2012). The resulting improved performance
should ideally give managers more confidence in the employees and encourage them to
continue delegating decision-making authority (Hakimi, van Knippenberg, & Giessner,
2010). The decentralization of authority and participation in decision-making inherent in
devolved management are also the main antecedents of corporate entrepreneurship
(Hayton, 2005), suggesting that devolved management may mediate the relationship
between SHRM and corporate entrepreneurship.
The context plays an important role in determining the effectiveness of SHRM practices
(Bowen & Ostroff, 2004). Research has examined various contextual factors influencing the
effectiveness of SHRM, such as firm strategy, organizational culture and the business
environment (e.g. Chan, Shaffer, & Snape, 2004; Wei et al., 2011). And of course, the
people staffing the HRM department play an important role in the effective implementation
of SHRM practices (Dyer, 1999; Guth & Macmillan, 1986; Schilit, 1987; Wright &
McMahan, 1992). Employees’ acceptance of the way they are managed depends on their
understanding of the firm’s policies and practices, and to establish such understanding,
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G. Tang et al.
personnel department staff may need to persuade or negotiate with employees, or at least
socially influence them. Political skill can thus be useful for HR people as they help
employees understand and persuade them to implement the firm’s policies and practices.
Politically skillful personnel department staff will be better able to make a favorable
impression and build high-quality relationships with employees (Wei, Liu, Chen, & Wu,
2010; Wei et al., 2011). They can help employees perform their jobs better, and this usually
involves encouraging managers to devolve more power to their subordinates. The political
skill of a firm’s HRM people may thus be a moderator in the relationship between SHRM
practices and the implementation of a devolved management style.
Some prior research has linked HRM practices with corporate entrepreneurship, but
most of it has been carried out in Western cultures and mature market economies. Culture
and government regulations influence HRM practices, so there is a question as to whether
those findings apply in other contexts. This study therefore relied on data from China.
China’s emerging economy is characterized by a complex and dynamic competitive
environment. Especially since 2008, labor costs have risen rapidly, which has highlighted
the need for effective personnel management (Gunnigle, Lavelle, & Monaghan, 2013).
Employees have been required to assimilate new knowledge to remain competitive, with
non-innovative activities becoming less important (Camelo-Ordaz, Garcı́a-Cruz, SousaGinel, & Valle-Cabrera, 2011). This recommends China as a useful context for elucidating
how SHRM practices influence corporate entrepreneurship. The conceptual model of this
study is summarized in Figure 1.
Theoretical background and hypotheses
SHRM, devolved management and corporate entrepreneurship
The concept of corporate entrepreneurship emphasizes the pursuit of opportunities through
producing new products, creating new businesses and/or organizational renewal
(Schmelter et al., 2010; Stevenson & Jarillo, 1990; Zahra, 1996). Corporate
entrepreneurship requires a firm to explore new knowledge and exploit the knowledge
base it already has as effectively as possible (e.g. McGrath, 2000). This depends heavily on
a firm’s HRs, specifically whether they have the ability and are well motivated to pursue
entrepreneurial initiatives (e.g. Hayton, 2005).
Effective HRM practices attempt to improve employees’ attitudes, abilities and
motivation in support of the firm’s strategic goals (e.g. Wright & McMahan, 1992).
Employees’ knowledge and skills are difficult to acquire and replace (Boxall, 1996; Wei
et al., 2011). According to the resource-based view of the firm, employees’ knowledge,
skills and abilities are among the firm resources most difficult to imitate (Armstrong &
Shimizu, 2007; Barney, 1986, 1991; Barney and Wright, 1998). Properly managed,
Devolved
Management
Strategic Human
Resource Management
HRM people’
Political Skill
Figure 1. Theoretical model.
Corporate
Entrepreneurship
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1589
employees can be the main drivers of promoting corporate entrepreneurship (BadenFuller, 1995; Bornay-Barrachina et al., 2012; De Sáa-Pérez & Garcı́a-Falcón, 2002;
Wright, Dunford, & Snell, 2001). This has been demonstrated in prior empirical research
(e.g. Bornay-Barrachina et al., 2012).
Exactly how SHRM enhances corporate entrepreneurship, however, remains poorly
understood. It has been suggested that fostering corporate entrepreneurship demands an
enlightened approach to management including decentralization of authority, employee
participation and cooperation and the encouragement of risk taking (Luchsinger & Bagby,
1987). Devolved management involving empowering employees and giving them more
autonomy is such a management approach, so it should benefit corporate entrepreneurship
(Jackson & Alvarez, 1992). Devolved management requires delegating much decisionmaking to lower level employees. This involves, among many other things, better
communication between employees and managers (Budhwar, 1998). A devolved
management style is usually characterized by a less hierarchical structure, less centralized
decision-making and greater empowerment for the employees. But empowerment and
delegation will improve performance only if the employees are capable of understanding
and working toward the firm’s strategic goals. This may require improving their
competence in certain areas. Firms with effective, strategy-aligned HRM practices should
be better able to build the competence required by such a devolved management approach.
Enhancing the capabilities and motivation of the workforce involves strategy-aligned
practices in recruiting, training, evaluating performance and rewarding employees
appropriately. Employees with such enhanced capability and motivation will then be
better able to accept delegated responsibilities (Wright & Nishii, 2006). This should lead
to rapid personal growth and strong work motivation, which should in turn give managers
confidence about sharing their authority and responsibility (Hakimi et al., 2010).
Implementing such practices effectively relies on all managers becoming involved,
communicating and delegating (Schuler, Jackson, & Storey, 2001; Tzafrir, Harel, Baruch,
& Dolan, 2003). So, SHRM gradually shapes an organization’s entire management
culture, encouraging managers to provide their subordinates with more resources and
greater autonomy in carrying out their jobs. Once managers see an improvement in their
employees’ working ability and performance generated by such practices, they are also
more willing to delegate. Also, employees are better motivated to communicate with their
managers, and they feel more empowered to make decisions and to put forth ideas
(Budhwar, 1998). Their greater autonomy and confidence in solving problems should tend
to make their jobs more meaningful, all of which is conducive to an entrepreneurial
outlook (Kirkman & Rosen, 1999; Mayer, Davis, & Schoorman, 1995; Truss & Gratton,
1994). Since evidence shows that the level of autonomy that employees experience is
positively related to their creative behavior (Srivastava, Bartol, & Locke, 2006), we
propose the following hypothesis:
Hypothesis 1:
The relationship between SHRM and corporate entrepreneurship is
mediated by the extent to which a firm’s management is devolved.
The moderating role of HRM people’ political skill
In recent decades, personnel staff have changed from being bureaucratic administrators to
become proactive influencers (Novicevic & Harvey, 2004). A firm’s HRM department
now stands in a position where it articulates the business’ strategic vision, communicates
that vision to the employees and mobilizes them to realize it (Westley & Mintzberg, 1989).
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G. Tang et al.
An effective personnel department plays an important role in implementing the
organization’s strategies and achieving its objectives (Huselid, 1995). A recent study led
by Den Hartog has shown that good communication is essential for enhancing HRM
effectiveness (Den Hartog, Boon, Verburg, & Croon, 2013). HRM people able to influence
others can more effectively convey the firm’s strategic objectives to both managers and
other employees, and they can smooth the implementation of specific policies by
persuading, bargaining and negotiating with others within and outside the firm.
For purposes of this study, political skill can be defined as ‘The ability to effectively
understand others at work and to use such knowledge to influence others to act in ways that
enhance one’s personal and/or organizational objectives . . . ’ (Ferris, Treadway, et al., 2005,
p. 127). It is an important ability for HRM people. Their political skill will influence how
effectively the firm’s HRM policies, and to a certain extent all of its policies, are implemented.
Political skill can be viewed as having four dimensions: social astuteness, interpersonal
influence, networking ability and apparent sincerity (Ferris, Davidson, & Perrewe, 2005).
These dimensions describe the key aspects of a person’s political skills – the ability to read
and understand people, the ability to act on that knowledge in influential ways, the ability to
interconnect and cooperate with others and the ability to influence and network in a seemingly
genuine and sincere manner (Ferris, Treadway, et al., 2005). The four dimensions help explain
how political skill determines to what extent SHRM can promote devolved management.
First, it is likely that HRM people with political skills are better able to convince line
managers to devolve authority and responsibility in implementing the firm’s strategy.
A politically skillful personnel specialist can read people correctly and thus apply the
HRM practices most appropriately for improving each employee’s skills and abilities in
line with the firm’s strategy (Bowen & Ostroff, 2004; Evans & Davis, 2005). A better fit of
personal capabilities with the firm’s strategy will tend to motivate employees and make
them more confident about their performance. This also empowers line mangers to further
delegate to their employees (Ferris, Treadway, et al., 2005).
Because politically skillful HRM people are good at building social relations (Ferris et al.,
2005), they can help build effective communication among other employees, building trust in
the process (Schuler, 1990). Frequent communication facilitates establishing connections,
building friendships and maintaining high-quality relationships in the workplace. This should
further motivate line managers to empower their subordinates (Wei et al., 2011). With
trusting and friendly relationships, the likelihood of sharing, exchanging and combining
resources among employees and managers is increased (Bradach & Eccles, 1989), and line
managers are more likely to delegate responsibility for decision-making to their subordinates.
And because politically skillful HRM people appear sincere and genuine when persuading
others (Ferris, Treadway, et al., 2005), the policies and practices they endorse are more
readily accepted. Accordingly, the association between SHRM and devolved management is
likely to be stronger when a firm’s HRM people are politically skillful.
Hypothesis 2:
The more politically skillful are the staffs of a firm’s personnel
department, the stronger will be the relationship between SHRM and the
extent of devolved management.
Methodology
Sample and data collection
These propositions were tested using data from a questionnaire survey of enterprises in
China. Companies were selected based on the following criteria: (1) the company’s main
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business was manufacturing, (2) having 20 or more employees and (3) having been in
business for more than two years. These criteria excluded tiny, new-born firms to focus on
corporate entrepreneurship in established manufacturing organizations. An initial list of
4000 firms was randomly selected from a database of all firms registered with Chinese
local governments. After applying the exclusion criteria, 10 research assistants were
responsible for contacting companies, explaining the purpose of the research and assuring
the respondents of the confidentiality of their responses. This resulted in 750 companies
from 20 provinces which agreed to participate in the survey, a participation rate of 77%.
After contacting the companies’ CEOs and obtaining their approval, questionnaires
were mailed or personally delivered to the firms, and 576 eventually responded. The CEO
and the chief finance manager (CFO) from each company were surveyed. They responded
to different questionnaires in order to obtain distinct perspectives on the companies’
operations. For instance, the CEO instrument asked questions related to SHRM practices
and the political skill of the firm’s personnel specialists. The CFO questionnaire asked
about corporate entrepreneurship and devolved management. Each respondent was
instructed in a covering letter about how to complete the survey and return the
questionnaire in a pre-addressed envelope.
The 576 packages distributed included 1152 questionnaires, one for the CEO and one
for the CFO. Eventually, 663 completed questionnaires were retu …
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