High-Performance Work Systems and Innovation Performance Link: How Dynamic Capabilities Mediate

Abstract

In this study, we develop and test a framework that theorizes how high-performance work systems (HPWS) -a set of interrelated HR practices - build dynamic capabilities (i.e., learning, integration, and reconfiguration capabilities), which in turn lead to innovation performance. We also hypothesize that organizations with a stronger innovation culture will be better able to convert resources and capabilities into innovation performance. We test our hypotheses using time-lagged, multisource data from 173 companies in the Iranian pharmaceutical industry, a knowledge-intensive, high-velocity environment highly dependent on human resources to innovate. We found that the relationship between HPWS and innovation performance was mediated by dynamic capabilities. Further, consistent with our prediction, innovation culture moderated the relationship between dynamic capabilities and innovation performance such that innovation culture strengthened the relationship between dynamic capabilities and innovation performance. The theoretical and practical implications of our findings are discussed.