Localization HRM practices and financial performance: evidence from the Sultanate of Oman

Abstract

PurposeThe purpose of this study was to explore the relationship between localization (Omanization) practices and financial performance in Oman.Design/methodology/approachFirms listed in the Muscat Securities Market were surveyed. Data were obtained from 73 firms. Financial performance data (average ratio of market value to book value) were obtained from published records.FindingsResults indicated that localization practices were related to financial performance after controlling for size, type of firm, average price earnings ratio of the industry and Omanization levels.Research limitations/implicationsThe measure of localization did not specify the level at which Omanization practices are focused on. This is a limitation of this study, and future research must measure localization practices for different levels in the organization.Practical implicationsFrom a practical perspective, the results of this study suggest that organizations in the Arabian Gulf can enhance their performance by implementing systematic localization human resource management practices. The authors believe that this study makes a significant preliminary contribution to the understanding of localization practices and financial performance in the Arabian Gulf region.Social implicationsThese results are encouraging for managers who argue for integrating locals into the workforce rather than engaging in localization practices for public relations purposes. Sincere localization efforts develop local human capital.Originality/valueStudy was conducted in the Sultanate of Oman, an Arabian Gulf country. To the authors’ knowledge, this is the first study of localization practices and financial performance in the Arabian Gulf. This study therefore contributes to and extends the growing literature on localization practices in the Arabian Gulf in general and Oman in particular.