Flexibility oriented HRM practices and innovation: evidence from China and India

Abstract

The importance of flexibility as a characteristic of HR systems has been long recognized. Yet, very little work has attempted to conceptualize and measure it for examining desirable outcomes such as innovation. We draw from the theory of dynamic capabilities to develop a testable model. We contribute by theorizing and empirically examining the influence of flexibility-oriented HRM (FHRM) systems on intellectual capital, and by examining the mediating role of intellectual capital in the relationship between FHRM and innovativeness. We test our model using samples from China and India and show support for the hypotheses. Our findings show a specific set of relationships between two FHRM components – Coordination-flexibility-oriented HRM and Resource-flexibility oriented HRM – and the three components of intellectual capital – human, social, and organizational capital. We also find that intellectual capital mediates the relationship between FHRM and firm innovativeness. We discuss findings, limitations, and future directions.