Strategic flexibility, innovative HR practices, and firm performance

Abstract

PurposeThe purpose of this paper is to examine the role of innovative HR practices as an important mechanism through which strategic flexibility affects firm performance as well as the role of female leadership in this relationship.Design/methodology/approachData were gathered from a sample of 113 firms in China. The authors collected information on organizational strategy, HR practices, CEO information, corporate social responsibility and other firm characteristics in terms of firm age, location, and financial performance. Conditional procedural analysis was conducted to test the model.FindingsThe authors found strong evidence in support of the mediation relationship in which organizations with a strong focus on strategic flexibility are more likely to adopt Innovative HR Practices. Furthermore, the authors found that the extent to which firms have adopted innovative HR practices has a strong effect on employee productivity. In addition, the authors found that female leadership enhances strategic flexibility-performance relationship.Research limitations/implicationsInformation on strategic flexibility, HR practices and firm performance was collected at the same time. Future studies based on panel data would be helpful to establish the causal relationships in the model.Practical implicationsThe authors’ findings suggest that practitioners should put more emphasis on developing innovative HR practices, as they are required by strategic flexibility.Social implicationsFirms pursuing strategic flexibility should feel more confident when appointing a female CEO, because the results show that female leadership may enhance the positive impact of strategic flexibility on firm performance.Originality/valueThis research study is the first empirical examination of the mediating influence of innovative HR practices on the relationship between strategic flexibility and firm performance. The study also shows that female leadership benefits an organization in implementing strategic flexibility. The results are of value to researchers, human resource management managers, employees, and executives who are seeking to develop practices that are flexible and innovative in order to stay competitive in dynamic environments.