Ricardo flies Ryanair: Strategic human resource management and competitive advantage in a Single European Aviation Market

Geraint Harvey,Peter Turnbull

doi:10.1111/1748-8583.12315

Abstract

AbstractHow and why are some firms, such as Ryanair, able to consistently record industry‐leading profitability that sustains a competitive advantage over their rivals? Human resource management (HRM) plays a critical role in four widely recognised profit‐generating mechanisms, albeit not always in ways predicted by mainstream strategic HRM. Studies of HRM → performance grounded in the resource‐based view of the firm invariably focus on the human resources already controlled by the firm—specifically, resources that are rare, inimitable, non‐substitutable and can be exploited through organisation—rather than strategic factor markets where firms acquire their human resources. In doing so, these studies overlook the industrial relations and wider institutional context that might variously promote, permit or preclude particular HR policies and practices. It is only when different profit‐generating mechanisms, either in isolation or combination, are activated under the auspicious conditions of a particular time and place that HRM contributes to sustained competitive advantage.

Highlights

In order to explain whether, when and most importantly how and why human resource management (HRM) creates high(er) performance, we need to look outside as well as inside the firm
As we demonstrate in the case study that follows, it is only by reconnecting industrial relations and strategic HRM that it is possible to explain how strategic factor markets (SFMs) and RINO interact to enable firms to generate and appropriate traditional and non‐traditional Ricardian rents
Ryanair's competitive advantage is rooted in its SFMs for labour and the law, which ‘permits’ a particular configuration of HRM that reinforces the airline's product market position and labour market power

Summary

Introduction

In order to explain whether, when and most importantly how and why human resource management (HRM) creates high(er) performance, we need to look outside as well as inside the firm. In the context of a Single European Aviation Market (SEAM), all airlines registered in the European Union (EU) enjoy equal access to a single (product) market. They experience distinctly unequal access to different labour markets. Every EU member state has its own distinct employment laws, trade union recognition and organisation, collective bargaining arrangements, dispute resolution procedures and other institutional features of the industrial relations system. These different systems condition the cost, compliance and contribution of labour to the firm's business strategy and profitability. To say the least, that the field of strategic HRM has only ‘become successful by developing a narrow [closed] focus on economic performance’, divorcing itself from cognate fields such as industrial relations ‘with which it should be closely connected’ (Beer, Boselie, & Brewster, 2015, p. 428)

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