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RESOURCE MANAGEMENT
Author(s): BRUCE E. KAUFMAN and BENJAMIN I. MILLER
Source: ILR Review, Vol. 64, No. 3 (April 2011), pp. 526-557
Published by: Sage Publications, Inc.
Stable URL: http://www.jstor.org/stable/41149478
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remains limited
despitehuman
the fact that potenmanagement departments
study
gains from
tradethey
are large
(Mitchell
resource management tial
(HRM),
but
use
200 1).1
Economists pride
themselves
on havquite different theories,
methods,
and
tools.
ing strong theory
and typically and
regard the
As a result, the intellectual
exchange
management HRM literature as light on sub-
view article on Strategic Human Resource ManageDeloitte Tax LLR An economist specializing in labor
Industrial and Labor Relations Review, Vol. 64, No. 3 (April 2011). by Cornell University.
0019-7939/00/6403 $05.00
526
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competition,
and the success of Jap
pride themselves on developing
theories
George Strauss, and Dale Yoder (Kaufman ship between the use of "advanced" HRM
2002). In the 1960s, however, labor econom- practices and the achievement of higher
ics and management began to drift apart - profitability and other related organizational
and industrial relations to hollow out - and
performance outcomes (Combs et al. 2006;
Boxall and Purcell 2008).
by the 1980s contact and interchange between the two became minimal.
By wide agreement, a pioneering contriLabor economics and human resource
interest in these topics, as did contemporaconclusion Huselid reaches is that "the mag-
Performance Work Practices [HPWP] is substantial" (p. 667) and that this positive "main
even
different
school at the University of Kansas, observed
in when
the early
factors
are introduced.
1930s, "Labor economics men . . . disdain
personnel
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In particular,
we re-examine the central
employment model, contributes,
on averquestion that
underlies
SHRM research age, to higher firm performance.
Thus,
the
whatthe
is thecenter
firm's optimal
testable hypothesis that lies at
of (performance
choice of HRM practices? SHRM empirical research is, maximizing)
"more HPWP
andThis
endeavor
to seriously engage the SHRM
- higher firm performance."3
proposiliterature on this
At the same time, we
tion, however, is often generalized
to topic.
apply
this matter(e.g.,
a theoretical and empirito all types of investment bring
in toHRM
cal approach
solidly grounded in economWright et al. 2005) . This expansive
statement
ics. field
Relative to
research, the
of the central hypothesis of the
inmanagement
part
model is of
indeed
simple and abstract; noneemanates from the very definition
"HRM."
we believe
That is, a number of writerstheless,
(e.g.,
Beerit deserves
and attention because it and
yields a Stodd
number of important insights
Spector 1984; Dulebohn, Ferris,
1995) have claimed that the HRM
field Inthat
and implications.
particular, it suggests
that the from
standard HRM-firm
performance
emerged in the 1980s is distinct
the
regression
model
used in management is
earlier personnel administration
and
industrial relations fields because it is based on
most likely mis-specified; the predicted effect of "more HRM" on firm performance is
both an alternative view of employees (capinot reliably positive and, indeed, should be
tal assets rather than expenses) and a differzero in a situation of long-run competitive
ent approach to management (involvement
equilibrium; and that a better-specified emrather than control) . Hence, this view posits,
pirical tool for SHRM research is what we
at least as a first order approximation, HRM
an HRM demand function. We then proHPWP and one may therefore writecall
the
ceed to estimate the parameters of an HRM
central proposition of the field as "more
demand function using cross-section data
HRM - > higher firm performance." Finding
for several hundred American firms. Aldefinitive empirical and theoretical evidence
the theoretical model, data set, and
for this proposition has been called though
the
equations can be validly criticized
"Holy Grail" of the field (Boselie, Dietz,regression
and
Boon 2005: 67) because it demonstrates that
on various grounds, the end-product is dis"HRM matters" (Gerhart 2005: 175).
tinctly new and charts a considerably differSome labor economists have also used a
two.4
"analytical HRM" and explained that its central mission is "not to propagate perceptions
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<D
'
3
/
'
O"
/
'
'
/
I
/
'
Firms with Few Firms with Many 0 2000 4000 6000 8000 10000
Advanced HRM Advanced HRM Per Capita Expenditures on HRM
Practices Practices
Panel
(a)
Panel
(b)
Source: Freeman and Rogers (1999: 124) Source: Bureau of National Affairs (2006)
happens in practice." These authors identi- tices, some of which were simple whereas
fied "what happens in practice" as the ob- others were of increasingly greater complexserved outcomes and behaviors associated
ity or sophistication. Example practices inwith the practice of HRM; the purpose
of a personnel/HR department, an
cluded
HRM research, in turn, is to develop explanopen-door dispute resolution policy, and an
atory theory of these empirical practices.employee involvement program. The au-
distribution in Panel (a) comes from data These data were collected for the years
collected in a 1994 national survey of sev-
were asked to indicate whether their organiof HRM practices among British firms, although
zation had each of ten different HRM prac-considerably less so in the right-hand tail.
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skewed
agement
on these matters as they are princithis sample, the annual HRM
expenditure
pally developed
in the SHRM literature. This
ranged from a low of $36 to a high
of $7,392
also helps
per employee; approximately section
one-half
of puts
thein context our alternative
theory and
empirical model.
firms spent between $475 and
$1,842.
The
Researchers from economics are conmedian was $932.
fronted
certain challenges when engag
These frequency distributions
helpwith
frame
ing
the theoretical
the mission and objectives of
HRM
theory,literature in managemen
on HRM
(and vice versa). According to
particularly in the case of SHRM.
Consistent
with Boselie, Dietz, and Boon's
Lazear
(2005)
anddefiShaw (2007: 110), personnel
economics
draws largely from microeco
nition quoted above, the goal of
HRM theory
and
is to explain why individual nomic
firmstheory
choose
a models in the financ
In management,
particular expenditure level field.
and package
of however, the most important disciplinary
HRM practices. It follows as matter
of logic, influence is psychology
and its business
school offshoot organiza
then, that the firm's choice regarding
HRM
tional
behavior
(OB)
practice and expenditure becomes the cen-(Weber and Kabst
2004; models
Gerhart 2007)
- terra incognita to most
tral explanandum in theoretical
and
the task of these models is (or
economists.
should Accompanying
be) to
psychology is
also
a focus on individual
differences in psyidentify the set of independent
variables
that
influence the firm's choice of HRM. Looked
chological variables (e.g., motivation, cogniat in terms of the frequency distributions intion) that are abstracted (or ignored) in the
Figure 1, the core mission of HRM theorystandard economic model of the rational
actor {homo economicus). Further, most theocan be interpreted as predicting and explainretical work in personnel economics employs
ing where individual firms are located in
these distributions - that is, at a low, meconsiderable mathematics; in management
dium, or high HRM level - along with corol- research on HRM, however, mathematics is
distributions also handily summarize the re-other reasons, the editor wrote, "the majority of your
arguments are based on equations. . . . While it is cersearch issue facing HRM scholars at both thetainly acceptable to model one's ideas via equations, it is
theory and empirical level. Although these not an approach that fits well with Journal X." In the
distributions have not been utilized in the
realm of economics, the equations used in this paper
SHRM literature, they nevertheless highlight are considered both few and elementary.
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nizational size, industry, production technology, workforce/job skills, and state of the
labor market (Datta, Guthrie, and Wright
non-USA researchers have also embraced it, but many fit"). An "internal" contingency factor is the
different national-level cultural, social, and political and "uniqueness" to derive four different tycontexts. These can be thought of as additional contin- pologies of best performing HRM practices
gencies. In practice, most SHRM writers make the con-
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Theamainline
of management theorizing
practices whereas those pursuing
differenin SHRM
movedatoward a synthesis
tiation strategy are more likely
tohas
adopt
commitment system.9
and integration of these three perspectives
(Boselie, emphaDietz, and Boon 2005; Becker and
The configurational perspective
Huselid 2006)congru, stimulated in part by growing
sizes the roles of complementarity,
skepticism
of a "universalistic-only" position
ence, and synergy as important
influences
(Boxali Although
and Macky 2009). Following Huselid
on a firm's optimal HRM choice.
(1995), this in
integrative
approach maintains
to varying degrees implicit or explicit
the
that therehypotheis a core of "best practice" HRM
other two perspectives, the central
techniques
and policies,
sis here is that the performance
effect
of typically associated
with anon
HPWS-type
employment system,
HRM practices depends critically
assembling the right combination or which
system
in most
of to
pracnearly all organizations rein improved
performance. The exact
tices such that all the separate sults
HRM
elements
(e.g., selection, compensation,specification,
training, delineation,
benand organizaof both the performance and
efits, and employee relations)tional
fit level
together,
HRM variables
remain unsettled, however.
support each other, and develop
the maximum attainable synergy (an idea
For example,
often the
called
specific set of HRM practices variesperforconsiderably across studies,
"horizontal fit"). Here, the potential
in general they are intended
mance effects of HRM choice although
are multiplica-
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tices are implemented in a synergistic packinvested in HRM practices and should there-
widely acknowledged that both the HRM field in universities and the HRM function in industry have long
been regarded as marginal, low status players; a major
motive in SHRM research, therefore, is to change this
perception by demonstrating that HRM is a large and
under-appreciated contributor to firm success. Wright
et al. (2005: 409-10) remarked, for example, "In response to these longstanding and repeated criticisms
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cally significant positive main effect - one hundred years (Baron, Jennings, and
provides seemingly powerful evidence of Dobbin 1988; Kaufman 2008; 2010c).
results are systematically biased by the career, identity, 10-20% of a firm's market value."
taking."
(2006: 907), who concluded after an empirical study
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HRM academics.
hazard the prediction that both sides probamaking (Godard 2004; Boxall 2007).
(Kaufman 2010a). Nevertheless, for the pur- HRM). Where this is not possible, or the exposes of this paper we put on our "econoercise unduly strains credulity, then economists' hats" and critically examine SHRM mists will argue that abstracting from these
theory and empirical methods from the per- other goals is usually a good trade-off since
spective of economic theory. Rather than endoing so promotes more analytical modelgage purely in criticism, however, in what ing (which HRM scholars say they want more
follows we also present an alternative model, of, as quoted above) and most likely does
an alternative estimating equation, and new not alter major predictions and hypotheses.
empirical evidence on the factors that shape Regarding other intermediate organizational
observed HRM frequency distributions.
outcome variables, a virtue of the theory developed here is that it makes intermediate
goals such as turnover reduction and proModeling the Firm's Demand
for HRM Practices
quest for maximum profit; a corollary beneWe seek to explain the individual firm'sfit is that it also demonstrates that some
decision regarding the extent of investment
SHRM studies have indeed mis-specified the
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chines,
and
tools typically aggregat
produced by capital, labor, and
HRM
practices. HRM is used, therefore, because it
converting them into a dollar amoun
boosts productivity; however, it also carries a similarly aggregate the diverse HRM
cost since HRM must itself be internally pro- tices into dollars of expenditure. I
bought in external markets (e.g., HR consultants or vendors). Thus, the firm's optimal
expenditure on HRM is determined by the
profit, keep investing in more HRM as long model. Other means of informal or unstrucas the marginal revenue gained exceeds the tured labor coordination, typically performed as a general part of management by
marginal cost incurred and stop when the
two become equal. This basic insight is not employers and line managers, is subsumed
new. In the HRM literature, Jones and Wright as part of total work hours devoted to pro(1992) discussed an economics-based ap- duction (L).16
The model indicates that firms adopt
proach along this line and Kaufman (2004;
2010d) has further developed it. Our contri- HRM because it helps produce more output
bution is to take the model to the next level.
and profit. But how does HRM do this? This
To do so, we begin with the firm's ex- subject is the much debated "black box"
issue in the literature (Becker and Huselid
panded production function:
2006; Boxali and Purcell 2008). We suggest
the following approach, which is not only
(2) Q = f(K, L, HRM),
analytically tractable and insightful but also
of the three links in the causal
where Qis output, J^is capital, L is inclusive
labor, and
identified
by SHRM writers (knowlHRM is HRM practices. Since thechain
model
is
edge, skills,
intended to explain firms' investment
in abilities; empowered to act;
motivated
to act) .
HRM practices, we must be clear on
how the
HRM construct is defined in equation (2).
The definition of "HRM practice" given by
(Kaufman
2008, 2010c). Our two-part specification of
instance by including in the variable
HRM
the"simple"
HRM variable captures both aspects.
the entire range of practices - from
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on workplace
may increase Q by reThe first revision of equation
(2) is to safety
exaccidents and production
pand the labor term from L ducing
to Le.workplace
This efdowntime.
The direct effect is independent
fectively transforms labor from
a commodity
of of
the "human"
of labor.
input (like a machine or lump
coal) toaspect
a
Thenumber
second channel
human input. The L term is the
of by which additional
influence production is the
persons/ hours of labor; the inputs
termofe HRM
repreindirect referred
HRM effect (the middle term). The
sents what Appelbaum et al. (2000)
to as "effective labor." It is broadly
indirect
defined
effect captures
to
the influence that
include the combined effect of more motivamore HRM practices have on output as they
indirectly change the effective amount of labor,
tion, effort, empowerment, and skill/knowl-
theories.18
17 In the early years of the personnel/IR field, employertribute to increased effective labor either by
employee cooperation and unity of interest were viewed as
noted but modest-to-peripheral role. SHRM thus mirHere arises an important insight regarding the causal transmission mechanism rors
be-its opposite - neoclassical labor economics - in
that more units of an HRM practice (repreincluding its prominent management wing - strongly
sented by the right-hand term in the producemphasized that fairness is crucial to economic performance; fairness, in turn, requires that all competing intion function) have on output, holding
terests get voice, due process, and reasonable outcomes.
constant the amount of labor and capital
This is a stakeholder (not shareholder) model of the
in HRM
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captures
the is
direct
effect (the effect of
The choice problem for the
firm
toHRM
se-
more HRMthat
on Q holding
lect the level of HRM practices
best constant L) and
first termthis,
captures the
the indirect HRM effect
achieves its profit objective.theGiven
(the effect of (4):
more HRM on Q as it creates
firm's challenge is to solve equation
more effective labor) . If labor were a com-
fore, VHRM. Although the wage Wis generi- mized further HRM investment necessarily
Our contention is that this model is not
"manufactured" HRM, so Wand Vare sepa- but, rather, is a vehicle that yields a number
rately distinguished. Just as the price of labor of new and useful insights.20 Consider the
(W) is assumed a "given" for this exercise
(set by the market), so too is the cost of pur- 19 This model is extended in several ways in Kaufman
( V) . This simplification makes the model far disaggregated into i individual HRM practices (i =
more tractable, does not materially affect staffing, training, compensation, etc.), the profitthe results, and broadly accords with reality maximizing configuration of HRM practices is derived
(horizontal fit), complementarities among HRM prac(e.g., a firm can obtain additional trainers, tices are introduced, and the horizontal fit dimension
job evaluations, payroll processing, and so of HRM strategy is modeled.
on, at a going market price) .
The optimal level of HRM is determined pattern of human resource deployments and activities
intended to enable an organization to achieve its goals"
by differentiating equation (4) with respect (Wright and McMahan 1992: 298). Our model
to HRM and solving for the first order condi- reveals this is simply a verbal re-statement of the stan-
3Q de ] L
an =p{de dHRM) =y
dHRM dQ
+ dHRM
dard profit maximization equation in economics, illustrated by equations (4) and (5) . This is a surface insight;
via markets and prices and the latter theorizes the same
dition (the bracketed term) is the marginal thing but through organizations and command/
administration with Commons/ Coase transaction cost
revenue product (MRP) of HRM practices.
It is composed of two parts: the second term theory determining the boundary. (Modern personnel
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Onesome
implication
of this model, accordfollowing. Figure 1 illustrates that
firms
ingly, is the
following: each firm's place in
invest little in HRM practices whereas
others
practices, just as it does in many parts of less"applied labor economics" and subsumed with human
countries today (Kaufman 2008;
relations as the management wing of industrial developed
relations (Kaufman 2000). Our model implies that manage2010c; Tessema and Soeters 2006).
ment is one side of the economics coin; history does as
A third revisionist implication concerns
well. Bossard and Dewhurst (1931) state that for busithe
predicted effect of more HRM on firm
ness subjects like management, "economics ... is
the
performance.
Taking profitability as the perfoundation or basic subject to be studied" (p. 325)
and
many management historians (e.g., Holbert 1976:formance
31)
measure, most SHRM studies preconsider Henry Towne's article, "The Engineer as dict
Econa positive effect. If it is positive, however,
omist" (1886), to have founded the field of manage-
(Scarpello 2008).
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researchers
given in study after study to increased competition
in the
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Price (V)
Vi .--'E^'^/C'^C
vented from getting anywhere close to maximum profit (per the large estimated shortfall
holds
Extensions of the model yield further
in-true.
sights and implications, as well as a new tool
Figure 2 shows that a firm's use of HRM
for empirical HRM analysis. The place
to
practices
follows the law of demand, just as
start is a derivation of the HRM demand
its use of other factor inputs does. Thus, a
curve.
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(6) HRMl=f(Ql,Wl,Vl,Xl).
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relationship
is uniformly found in
firm-level adoption rates This
of HRM
practices.
To give the model greaterpirical
explanatory
studies (Boselie,
con- Dietz, and Boo
A theoretical
rationale for this rel
tent, it is next necessary to2005).
identify
the spetionship
is factors)
that larger in
sized organizations
cific independent variables
(shift
the demand function that cause this variatail both more people to manage and grea
distance
tion. The first two we discuss (Q and W)
are between executives and workers,
use of more staff and resources
explicitly identified in equation (6)necessitating
and
come directly out of microeconomic producto coordinate production efficiently. Altion theory; the remainder are subsumed
though
in totalHKM rises with firm size, due to
the vector X and are suggested by theeconomies
ecoof scale (arising from spreading
that follows is suggestive, not definitive; isemployee base) expenditure on HRM per
tailored to the American context; and is inemployee probably declines on average for
tended to help motivate the specification of many firms (Brewster et al. 2006).
the empirical HRM input demand function
Wage Rate. The second variable in the
estimated in the next section of the paper. HRM demand function in equation (6) is
Certain important determinants of HRM de- the wage rate W. The wage may be either a
mand, such as employment laws and social/ substitute or complement for HRM practices
political institutions, are omitted because (Ichniowski, Shaw and Prennushi 1997). In
they do not significantly vary among firms in
a national cross-section and thus do not
In high performance
work systems,
for example, a high wage and
in pursuit of other sub-goals, such as enhanced
em-
high
level
ployee satisfaction and loyalty. We have no data
on firm-
in the standard SHRM regression model (e.g., the deProduction Technology. Internalization of
pendent performance variable could well be related to
is encouraged by production
most or all of the HRM independent variables employment
as well as
unionism).
complex; feature greater worker interdepen26 The neoclassical production theory utilized
for this
dences
(e.g., team forms of production);
model assumes as a "given" that firms exist and largely
allow greater
takes market structure and the size distribution and
of firms
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organizations
with more women and minor
characteristics potentially affect
the demand
ity employees
for HRM, although the predicted
signshave
area smaller demand fo
HRM
practices. Another
relevant variable i
not always clear-cut (Datta,
Guthrie,
and
educational
attainment
of A
the firm's workWright 2005; Sun, Aryee, and
Law
2007).
force. Education
is part of company's stock
case in point concerns differences
in HRM
of human capital
and SHRM theory predicts
demand between goods-producing
(e.g.,
that firms with a more
educated workforce
manufacturing) and service-producing
orgain broad
greater HRM
to get higher producnizations. Heterogeneity in invest
these
catthis valuable
asset (Becker and
egories is possibly so large tivity
as tofrom
preclude
a
Huselid2006).
meaningful prediction; alternatively,
one
Economic/
Market Conditions. Firms operatcould reasonably argue that
on average,
ing in more
stablepracproduct markets and ecomanufacturing firms use more
HRM
nomic environments
have a greater incentive
tices to boost productivity indirectly
through
Ferndez 2005).
ILMs involve greater emreasonable to expect that for-profit
organizaployee investment
expense, transform labor
tions may have a different demand
for HRM
into a quasi-fixed
cost, and introduce greater
than not-for-profit organizations;
governorganizational
These conditions bement organizations are possibly
alsorigidity.
a discomeBegin
progressively
less economic in the face
tinct entity. According to
(1991),
of greater
volatility
of sales and employment
not-for-profit organizations
make
greater
use of cultural and social norms as control
and shorter product life-cycles. ILMs and extensive
HRM practices are also promoted
and motivational devices, thus suggesting
a
increase the pressure to carefully select, demay be hypothesized to have a greater develop, and retain employees (due to scarcity
of qualified labor in the external market) ,
greater bureaucracy and formal procedures;
but it also reduces the ability of firms to use
however, formal procedures are not necessarily expensive per se and expenditure levels the threat of unemployment as an effective
and less costly motivation or discipline deon HRM practices (e.g., training, employee
vice (thus enhancing the indirect HRM efrelations) may actually be more intensive
in some for-profit firms (Brewster et al.fect). HRM demand, therefore, should be
2006).
positively associated with the employee turnover rate (e.g., necessitating more expendiWorkforce/Training Characteristics. Internalmand for HRM to the extent that it entails
Rubery 2007) . Specific OJT creates a form offirm, or the threat of unionization, can have
asset specificity, thus raising market transac-contradictory effects on HRM demand simi-
larly, the effect may well differ across nation cost. Work systems that provide more
tional industrial relations systems. A union
opportunity for workers to develop and
apply new knowledge for improvements inin the American context endeavors to
processes and products will also have anegotiate more formalized, structured, and
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standardized employment
management
variation
in HRM practices but also a tool for
practices, thus suggesting aempirically
positiveanalyzing
relationthis issue. Using a
of a personnel/HRM function.
The (WERS)
more
Relations Survey
in the United
penditures (Lepak, Bartol, and Erhardtpenditures), the BNA survey data also in-
concentration is Services.
Our theoretical model offers not only inThe estimating equation, given in equasights and implications regarding inter-firm tion (7), is a linear version of the HRM
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/i
Production
_...
+4^+5X,+ei.
The dependent variable is the log of HRM
expenditures per employee (or "per capita")
in firm i. HRM expenditures include "costs
of labor, materials and equipment, overhead,
and administration incurred by HR in performing its core function and duties" (BNA
2006: 114), where "HR" is defined broadly to
include expenditures attributed to both the
human resource department per se and to
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analysis,
course,
also require addiemployee involvement methods
butofone
is would
a
tional variables.
low-level suggestion box system
while the
The HRM
demand function is estimated
other is a high-level team system.
A "count"
with
ordinary
least squares (OLS). Alternaspecification may well weight
both
equally
tive better
estimation
methods were performed
whereas an expenditure measure
captures the underling difference
but, in
as we
scale
report
and
below, the results did not
expenditure
We were able to develop datathe
for
nineteendata into nine HRM subindependent variables in the
functions,
regression
as specified in the BNA survey,
and re-estimate
the demand function for
model. The variable definitions,
hypothe-
each. The
sub-functions
are recruitsized sign, and source are given
in nine
Table
1
(the hypothesized signs come ment,
fromtraining,
the discompensation, benefits a
cussion of the previous section);
summary
ministration,
employee relations, externa
statistics are given in Tablerelations,
2. We discuss
personnel management, heal
these variables in more detail in the next secand safety activities, and strategic plannin
tion on results. Note here, however, that sev- This disaggregation provides insight on th
eral variables contained in the theoretical
extent to which the independent variable
model are not included in the regression
have consistent, stable relationships acros
HRM sub-functions.
equation, such as the cost of capital (r)different
and
cost of HRM practices (V) . Data on each are
Empirical Results
critical on the reasonable assumption that
the per capita cost of producing/buying
Table 3 reports the coefficient estimates
and standard errors for all of the model
HRM practices (e.g., an employee training
class, a job evaluation) is most likelyspecifications.28
relaThe first column shows the
estimated coefficients for the "total" or
tively uniform across firms, particularly
within an industry (and thus captured in
the
"aggregate"
HRM demand function (using
industry dummies). Data for several potentotal firm level HRM expenditures); coltially important control variables are
not 2-10 show the results for disaggreumns
available in the BNA data set; hence, wegated
con- HRM demand functions. We initially
structed measures from other sources, but
they are measured at a higher level of aggre-
introduced when HRM expenditure is deflated by emtion; our problem is that they are notployment
given that employment is also an indepen-
27 Another large problem in the standard HRM-firm neity between employment and HRM expenditure,
performance regression model is that effectiveness of since in equation (4) the firm is assumed to solve for
HRM implementation is a significant but largely unob- both together. To do so, we re-estimated the equations
servable variable intervening between practices and using two-stage least squares and instrumented the
performance. Since our model explains HRM expendi- firm's employment level using the state/industry level
ture, not firm performance, the issue of effectiveness of employment. The results did not change. Finally, we
(or management quality) does not affect the estimated also included regional dummies, but these had no dis-
cause-effect relationships.
cernible effect.
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Per
Per
Per
Per
Per
(dummy variable = 1 ) [for-profit sector = omitted group] 0.04 0.19 0.00 1.00
(dummy variable = 1) [for-profit sector = omitted group] 0.35 0.48 0.00 1.00
(dummy variable = 1) [goods producing = omitted group] 0.39 0.49 0.00 1.00
variation employment, 1991-2005), by industry and state -2.16 0.50 -4.47 -1.62
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capital and other non-labor inputs find it admand have a different size of quantitative vantageous
efto "leverage" or "safeguard" this
fect across sub-functional areas.
investment by also investing extra in HRM in
firm's work force is associated with an ap- more strategically involved makes greater
proximate 0.3% decrease (on average) in per per capita HRM expenditures, particularly
capita HRM expenditures. The marginal ef- in those firms that cite a high level of involve-
pret this finding to indicate that the level ofmodels. A second possibility is that HRM
compensation is a complement with other asstrategy affects HRM expenditure but that
ductivity advantages.
The next variable represents the capitalous variables external and internal to firms
intensity of the firms' production process,(Kaufman 2010d). The fact that the emmeasured by the non-labor operating costs
ployee relations sub-function equation is the
of the firm per employee (i.e., the capital/
only one with a significant positive sign
labor ratio). The coefficients are positive in
raises the interesting possibility that emall equations and statistically significant in
ployee relations, among all HRM functional
all but two. This finding indicates that firmspractice areas, is the one most at the center
with more capital-intensive production proof SHRM (suggesting, in turn, the strategic
effect).
greater amount of HRM services per capita.
This result may be interpreted as revealing The second strategy-related question conthat those firms spending large amounts on
cerns the reporting level of the chief HRM
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Health
rather than, say, a vice-president
ofsub-functions
finance, this variable would be
on the presumption that thispositive,
indicates
whichthat
it is in both cases, but not significantly
so.
employees are a larger strategic
concern.
This variable is also not statistically
The different
survey also categorized firms into
different
broad industries/sectors: manufrom zero, with the exception of
the benefits
facturing,
non-manufacturing or service,
administration equation. Again,
therefore,
strategy - or at least these measures
government,
- seems
and non-profit. We treated
manufacturing
as the excluded category and
not related to HRM expenditures
across
firms.
satisfaction.
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tion
as a center of research
A plausible hypothesis is that
industries
with attention and
then develops
a formal
model capable of exunstable sales and production
would
have
less developed internal labor
plaining
markets
this distribution.
and The model treats
marginal
revenues and costs of HRM practries might, however, need to spend more
on
tices of
lead to systematic differences in HRM
HRM for recruitment and training. None
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and causes
of potentially larg
appreciation for the fruitfulness
of formal
market
failure
economic models, important
economic
con-and disequilibriu
pose
of industrial relations is to
cepts such as equilibrium and
competition,
integrate
these disparate viewpo
and the general economic way
of thinking.
the
process, meld theories of m
Similarly, we hope our in-depth
presentation
theories
of
organizations into a w
of SHRM theory and empirical
work
motigreater
than the sum of the par
vates economists to give more
consideration
to this extensive literature, a to
richer
model
of
have
modestly
pushed forwar
and,and
in so
doing, leave the
firms and management, the ect
human
disstronger
than when we arrived.
cretionary aspects of labor, and
the existence
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