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HR Management and Employee Creativity

PUBLISHED : Thursday, 30 August, 2018, 12:01pm
UPDATED : Thursday, 30 August, 2018, 12:01pm

[Sponsored Article]

Human Resource Systems, Employee Creativity, and Firm Innovation: The Moderating Role of Firm Ownership
LIU, Dong | GONG, Yaping | ZHOU, Jing | HUANG, Jia-Chi
Academy of Management Journal, 2017, Vol. 60, No. 3

Employee creativity is an obvious and essential ingredient for firm innovation, but it has usually been framed as a product of an employee’s intrinsic (internal) motivation. Now, new research has revealed that something else matters, too: the human resources systems, and the ownership of the firms in which these systems are implemented.

Dong Liu, Yaping Gong, Jing Zhou and Jia-chi Huang looked at how employees’ experienced HR systems – the maintenance-oriented system that provides job security and the protection of equal rights, and the performance-oriented system that focuses more on developing job relevant knowledge and skills – influence creativity. The latter is linked to creativity since “domain-relevant” skills can help in identifying problems and provide cognitive pathways for solving them.

The authors also investigated the effects of these HR systems in private firms versus state-owned enterprises (SOEs), especially given that the latter typically have better access to and thus can rely more on external resources such as innovation from public universities and research institutes. This is particularly true in China, where the authors based their research.

Their study involved 50 metallurgical firms in China, where core knowledge employees (i.e., those who are critical for generating new knowledge and innovation) were asked about their experiences of the maintenance- and performance-oriented HR systems in their firms, and their supervisors were asked to rate their creativity. A year later the authors took note of the number of new products launched by each firm.

The results supported the idea that the two HR systems interacted with each other to enhance creativity through shaping the development of employee domain relevant knowledge and skills. The performance-oriented HR systems enhanced creativity more at the presence of a stronger maintenance-oriented HR systems, because the latter provided employees with the security and protection to reduce the risks and costs associated with, and therefore strengthen the drive for, developing domain relevant knowledge and skills and turning them into creativity.

Interestingly, the maintenance-oriented HR systems amplify the effect of the performance-oriented HR systems to a greater extent in private enterprises than SOEs. Employees from SOEs are provided with greater external safeguards such as job and right protection from local governments, trade unions and the Community Party. Employees in privately-owned firms, on the other hand, are more dependent on the internal maintenance-oriented HR system for such protection and thus react more positively to such HR systems, making the amplifying effect of maintenance-oriented HR systems even stronger in privately-owned firms.

Similarly, because SOE firms also have better access to external resources, they have less need to turn internal employee creativity into firm innovation. So employee creativity turns into firm innovation to a less degree in SOEs than privately-owned firms.

The findings have implications for domestic and foreign investors, and for the study of human resources management.

“Our research shows that HR systems do matter in facilitating employee creativity. With limited resources to expend, firms should maximise the return on their investments in HR systems by taking advantage of systems that promote the development of employee domain relevant knowledge and skills and the protection of job security and equal rights.

“They should also consider firm ownership. Employee creativity does not translate into firm innovation as effectively in SOEs as in privately-owned enterprises. Accordingly, SOE leaders and investors should encourage managers to pay particular attention to their internal HR and create more opportunities for turning internal employees’ creative ideas into firm innovation.

“This practical implication also has a broad application to other countries, such as those in the former Eastern bloc which have a salient presence of SOEs in addition to privately-owned enterprises,” the authors said.