How Do Investments in Human Resource Management Practices Affect Firm-Specific Risk in the Restaurant Industry?

Abstract

Despite the importance of achieving a competitive advantage in human resources in the restaurant industry, restaurant firms often hesitate to make significant investments in human resource management (HRM) practices because of outcome uncertainty, operational issues, and limited financial resources, among other issues. Building upon the strategic human resource management (SHRM) literature, the current study attempts to better understand the HRM issues in the restaurant industry and investigate the effects of HRM practices on a firm’s risk. More specifically, we explore the separate effects of positive and negative HRM practices on firm-specific risk (i.e., unsystematic risk) in the restaurant industry. Our findings demonstrate that positive HRM practices have a nonsignificant relationship with firms’ unsystematic risk, but negative HRM practices have an inverted U-shaped relationship with unsystematic risk, supporting the stakeholder theory, theory of desensitization, and slack resource theory.