The application of HRM systems to enhance the innovation activities of foreign SMEs

Abstract

Human resource management (HRM) systems can substantially influence an organization’s innovation and internationalization activities. This paper investigates the application of different HRM systems amongst foreign-owned, internationally-operating small to medium enterprises (SMEs) and how they relate to different innovation activities. We draw on qualitative data from 33 Australian SMEs doing business in China. Our findings illustrate that most SMEs utilize commitment-based HRM practices, closely aligned with SMEs’ product, process, organization, service, and marketing innovations. Some SMEs used collaboration-based HRM practices which tended to be more aligned with organizational and process innovation activities. Some SMEs also exhibited a combination of commitment- and collaboration-based HRM systems focused on developing an internal workforce with innate capability, creativity, and commitment, while building external relationships, collaborative networks and strategic partnerships. We argue that the configuration of HRM systems appears important in supporting foreign SMEs to enhance innovative activities which are important for survival in complex contexts.