It is often assumed that firms have freedom of choice over their HR policies and practices, however, the networks within which they operate suggest that the HR practices themselves may be influenced by clients, suppliers, partners and other collaborators. This paper aims to examine the development of HR policies and practices as a consequence of the exercise of strategic choice within the network. The influence of networks on competitive advantage is particularly evident in knowledge intensive firms (KIFs) that rely solely on their human capital to generate intellectual capital. We present three software firm case studies to illustrate various types of influences that the network may have on the HR Advantage of a firm. Key words: Network Influences, Human Resource Advantage, Knowledge Intensive Firms, Strategic Choice, Network Advantage Introduction Knowledge intensive firms (KIFs) typically operate in networks which include clients, suppliers, partners and other collaborators (Grugulis et al. 2003; Nohria/Eccles 1992). Their success depends vitally on how effectively knowledge flows within the firm and the network so that it is transformed into innovative products and services. This competitive advantage is built upon the human and social capital which makes up the unique trading assets of the firm (Alvesson 2001; Frenkel et al 1999; Lei et al 1999; Newell 2001; Purvis et al 2001, Starbuck 1992; Swart/Kinnie 2003). Successful firms are likely to posses a Human Resource Advantage where superior HR policies, practices and processes support this competitive advantage (Mueller 1996; Boxall 1996; 1998; Boxall/Steeneveld 1999; Boxall/Purcell 2003). Our aim in this paper is to examine the influences on and impact of the development of this HR advantage in knowledge intensive firms. In particular we focus on the interactions between the focal firm and other members of its network and see the development of HR advantage as a consequence of the exercise of strategic choice within the context of external constraints (Child 1997)1. We draw on research conducted into three software firms as part of a project sponsored by the Chartered Institute of Personnel and Development (CIPD) in the UK. Previous Research Much of the previous research in the field suggests that managers have a high degree of choice when selecting the appropriate HR policies. The exercise of choice by managers is seen as central to the strategic HRM approach which has been defined as a process involving planning, analysis, debates, the exercise of power and learning (Boxall/Purcell 2003:36). The way in which choice over HR is exercised has been the subject of extensive debate in the field (Child 1997; Purcell 1999). The 'best fit' approach implies that managers are able to choose the most appropriate HR architecture (Lepak/Snell 1999) which either fits with their external competitive strategy or with their internal structures and policies. This view has been subject to extensive criticism and debate and Purcell (1999) described this as a chimera. The alternative view suggests that managers will select a set of best practices which have been proven elsewhere to have a beneficial effect on the performance of the organisation. Indeed, various authors (Pfeffer 1998) have sought to identify the practices which are applicable in all circumstances. Purcell (1999) described this approach as a 'cul-de-sac.' More recently attention has shifted to the resource based view of strategy which argues that competitive advantage is gained from resources which are valuable, scarce, inimitable, non-substitutable and appropriate (Boxall/Purcell 2003). In the HRM arena this has promoted a discussion of what has been referred to as the acquisition of HR advantage (Mueller 1996; Boxall 1996 1998; Boxall/Steeneveld I999; Boxall/Purcell 2003). This is comprised of the human capital advantage (HCA) and organisational process advantage (OPA). …
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Dec 1, 2005
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