Navigating Uncertainty with Certain Systems: Longitudinal Analysis of HPWS and New Firm Performance

Abstract

Although a few published firm-level empirical studies have linked HR systems, or a set of systematic HR practices, such as high-performance work systems (HPWS), to the superior organizational performance of new firms, our understanding of this association is rather limited, and not many new firms are adopting such HR systems in reality. In this study, I use a longitudinal sample of new private sector South Korean firms to examine the impact of HPWS on new firm performance by focusing on the moderating effects of environmental uncertainty and technological change. My findings indicate that firms that are operating in high levels of environmental uncertainty and technological change benefit from implementing HPWS because HPWS lead to increased product sales, thus affecting firm profitability. That is, the positive effects of HPWS on new firm performance are stronger in uncertain environments than in static ones. These results contribute to ongoing efforts to understand how new firms might optimize their workforce and achieve superior performance. In particular, this investigation provides empirical insights into how formalized and routinized management practices, such as HPWS, may help new firms overcome the liability of newness.