The relationships among competitive strategy, human resource management practices and financial performance

Contingency theorists in strategic management argue that the long-term performance of a firm is a function of a number of variables in addition to its strategy. One variable that has received increased attention is the linkage between a firm's strategy and its human resource management practices. The underlying assumption is that effectively linking strategy and human resource management practices will lead to improved firm financial performance. To date, very few empirical studies exist in this area. The studies that do exist have been inconsistent in describing the relationships between strategy and human resource management. Further, none of these studies have empirically addressed the assumption that linking strategy and human resource management will lead to improved financial performance.; The purpose of this dissertation was to provide a more rigorous test of the underlying assumptions of the literature linking strategy and human resource management practices. Specifically, this study addressed two research questions: (1) How, and to what extent, is the nature of a business' competitive strategy related to characteristics of its human resource management practices? and (2) How, and to what extent, do a firm's human resource practices and its competitive strategy interact to affect its financial performance?; The research design employed in this study was survey-based and cross-sectional in nature. The sample was drawn from publicly held, single business firms. Data on human resource management practices and competitive strategy were collected through a survey sent to human resource managers. Additional data on competitive strategy and performance were gathered through publicly available sources of financial information.; The results of this study did not support the proposition that competitive strategy is consistently related to specific types of human resource management practices employed by the firms in the sample. However, there was stronger support for the proposition that specific human resource management practices are more successful in terms of impacting financial performance within specific competitive strategies. Specifically, certain dimensions of staffing, performance appraisal, compensation and training and development were found to moderate the relationship between competitive strategy and various measures of firm profitability.