BASED VIEW, AND CONTINGENCY
APPROACH OUTDATED?
A CRITICAL REVIEW OF CLASSIC STRATEGIC
MANAGEMENT APPROACHES FROM A HUMAN
RESOURCE PERSPECTIVE
Master Thesis, MscHRM, specialization Human Resource Management University of Groningen, Faculty of Economics and Business
August 14, 2008 NANCY IJNEMA Student number: 1654373 Paulus Potterstraat 37 8932 KK Leeuwarden Tel. 0031618398984 Email: n.a.ijnema@student.rug.nl Supervisor/university
Dr. P.H.van der Meer
Preface
This thesis has been written within the parameters of the Masters education Human Resource Management of the faculty of Economics and Business of the University of Groningen. Since the introduction of the Bachelor/Master system, students can choose a theoretical variant of the Master of Science in Human Resource Management. Besides the general classes and several electives, the writing of a Master thesis is obligatory.
In my thesis I chose to do a qualitative research about the applicability of the best practice approach, resource-based view, and contingency approach. These three strategic management approaches have been mentioned several times during my education which stimulated my curiosity. However, in the orientation phase I started with a very different topic, human resource strategy integration. It was completely altered after several interesting conversations and discussions with my teacher. In the beginning I struggled because of the quality of the available data on this topic and because the used methodology was not one which was explained during Research Methodology classes.
The writing of this thesis was a very challenging and inspiring task. I am grateful to all people that supported me in my ambition to grow, helped me by giving directions when I was lost, and believed in me when I myself did not think I was on the right track. This would not have been possible without the help and support of several people. First, I would like to thank my supervisor Peter van der Meer, who inspired me by giving very useful hints and directions, patiently explained methodology terms, and answered my numerous questions. Second, my gratefulness goes out to the employees of the library and supporting staff of Nestor, which I spoke repeatedly about my problems with the digital library. Finally, to my mother, sister, friends and co-students that listened to all my complaints.
My opinion is that this thesis resembles my academic knowledge and is interesting for future students, teachers, and academics researching the human resource management approaches. It forms a critical basis for future research and extents human resource issues.
Table of contents
ABSTRACT
1. INTRODUCTION 1.1 Background and motive 1.2 Problem statement 1.3 Research approach
2 THEORETHICAL FRAMEWORK
2.1 Human resource practices and management approaches 2.2 Best practice approach 2.3 Resource-based view 2.4 Contingency approach 2.5 Characteristics and critical differences 2.6 Hypotheses 3 RESEARCH METHOD 3.1 Data collection 3.2 Data analysis 4 RESULTS
4.1 Empirical meta analyses review
4.2 The best practice approach
Page
5
8
19
22
4.3 The resource-based view 4.4 The contingency approach 4.5 Results overview
5. CONCLUSION
5.1 The over-simplistic best practice approach 5.2 The hollow resource- based view
5.3 The tough-to-crack contingency approach
Discussion
Limitations and future directions
APPENDIX Front page
Fourth page: Abstract References
Page
ABSTRACT
Purpose – The purpose of this paper is to examine the internal logical consistency, generalizability, falsifiability, and thus applicability of three popular key strategic management approaches used in human resource literature: the Best practice approach, Resource-based view, and Contingency approach.
Design/methodology/approach – Empirical findings of articles that test the influence of human resource practices on performance through one or several of the management approaches were gathered. The study sample consisted of 75 articles. Data were analyzed by employing Popper’s (1959) falsification theory.
Findings – Outcomes of concluding data from articles confirmed the three hypotheses. The results of this study revealed a high falsification for best practice approach, a moderate falsification for the resource-based view, and a low falsification for the contingency approach as an applicable management approach in human resource literature.
Originality/value – This study contributes in advancing human resource management research and to increase understanding of the association between human resource practices and performance within the context of several management approaches.
Keywords Best practice approach, Resource-based view, Contingency approach, Human resource management, Performance, Consistency, Generalizability
1. INTRODUCTION
1.1 Background and motive
Human resource management is a relatively young area of practice, and is still widely researched on trying to discover the critical link of human resource practices and policies on key performance outcomes (Peccei, 2004; Evers, 2004). Human resource management encompasses a wide range of activities, for example: recruitment and selection, training and development, pay, reward, and appraisal systems. In current literature the importance of human resource and strategy is repeatedly emphasized, numerous studies on the relation between human resource management and organizational performance are available (Sels et al., 2006; Arthur, 1994). It has been claimed that “human resource management had a greater impact on production and profits than a range of other factors including strategy, research & development, and quality” (Marchington & Grugulis, 2000: 1105). Furthermore, according to Noe, Hollenbeck, Gerhart & Wright (2006) and Boxall & Purcell (2003), human resource management is becoming increasingly important. All stress the fact that it is becoming more strategic and that strategic human resource management and strategic management are rising.
Much human resource research is conducted through several strategic management approaches. Often research questions and hypotheses are answered in relation to the Best Practice approach also known as the Universalistic approach, the Resource Based View, and the Contingency approach otherwise known as the Best Fit approach (Armstrong & Shimizu, 2007; Marchington & Grugelis, 2000; Purcell, 1999). They are used as normative models to further our theoretical development in human resource understanding (Boxall & Purcell, 2000). These three strategic management approaches are widely accepted and employed, like by the Cranet studies, an organization that proceeds to gather human resource management data on a yearly basis.
Consistency seems to be the cornerstone for effective human resource practices (Bax, 2003; Boxall & Purcell, 2003). Freedom of contradiction is, according to the Dutch
thesaurus de Dikke van Dale, the explanation for consistency
March 2008). Many different types of consistency of human resource practices are mentioned as being crucial, of which internal consistency is mentioned the most. Internal consistency has two definite dimensions: horizontal and vertical consistency that can help increase effectiveness of human resource practices and ultimately boost organizational performance (Myloni, Harzing, & Mirza, 2007; Barette, 2005; Bax, 2003). Furthermore, consistency in time is mentioned on several occasions. It is the consistent use of human resource practices over time, it brings “a stable social climate that is particularly important” (Bax, 2003: 109). Consistency of human resource practices also brings the question of them being more successful when implemented separately or simultaneously as a logical integral whole, because an individual human resource instrument can facilitate or impede other human resource practices (Barrette, 2005). This is thoroughly explained by MacDuffie (1995) which refers to this as the bundling-hypothesis. Furthermore, Horgan and Mühlau (2006: 414 + 425) speak of the “bundling of human resource practices that are complementary to increase employees’ performance”, because “the system as a whole is a more powerful lever of employee performance than the single constituent practices”. Further research supports the bundling hypothesis (Poutsma, Lighthart & Veersma, 2006; Wood & de Menezes, 1998).
In general there are arguments that refute the usefulness of each approach. For the best practice approach Melián-González & Verano-Tocarante (2004: 56) argue that “contingency factors exist that determine human resource management, and therefore do not agree with the universality of best practices”. For the resource-based view Newbert (2007: 121) mentions that “the resource-based view has received only modest support overall and that this support varies considerably with the independent variable and theoretical approach employed”. Purcell (1999: 26) describes a major drawback of the contingency approach, within the “alternative approach of best fit - matching human resource management to the contingent variable of an organization – it remains impossible to model every contingent variable”.
1.2 Problem statement
However, they do not answer the question how applicable the approaches are and how much empirical support they receive. This thesis aims to examine the three key strategic management approaches and their critical differences and empirical support to determine which is most applicable in human resource management. Goal of this research is further to create a foundation for a research proposal for empirical research on testing these three approaches.
What main distinctive characteristics are visible in the best practice approach, resource-based view, and the contingency approach? What are the critical differences between the best practice approach, resource-based view, and the contingency approach? Which approach is most appropriate in the human resource field? In which approach is high internal consistency visible? Which approach allows high generalizability? To what extent are these strategic management approaches empirically falsifiable? The main research question coming forward is:
‘To what extent are the best practice approach, resource-based view, and the contingency approach internally logical consistent? How applicable and generalizable are these management approaches? And finally, do empirical contents support or oppose, and thus falsify, each approach?’
1.3 Research approach
2. THEORETHICAL FRAMEWORK
This chapter discusses characteristics and drawbacks of each classical strategic management approaches. The focus is to explain the best practice approach, resource-based view, and the contingency approach and their internal consistency, generalizability, and falsifiability based on information derived from critical theoretical articles.
2.1 Human resource practices and management approaches
Human resource practices in research are often related to one of the management approaches. To name just a few examples: Rodgers & Wong (1996) discuss the best practice approach in relation to Japanese best practice models of total quality management and lean production, Lockyer & Scholarious (2004) argue on the possibilities of best practice in selecting staff, the resource-based view is thoroughly explained in relation to organizational knowledge by Paiva, Roth & Fensterseifer (2008), in 2006 a research was conducted by Lopez on the resource-based view and succession planning, Malos, Haynes & Bowal (2003) mention the contingency approach in relation to flexible employment, and Beersma et al. (2003) explain the contingency approach in relation to team performance.
As shown there are numerous studies in the field of human resource management that employ the best practice approach, resource-based view, and the contingency approach in relation to human resource areas. These articles often try to discover the critical link between existing human resource practices and their lever on firm and/or individual performance. Sometimes human resource practices are mentioned individually, others are mentioned in relation to each other. However, Horgan & Mühlau (2006) state that investing in just one area does not ensure reaping full benefits. Hereafter, each approach is described.
2.2 Best practice approach
thought of human resource management being a toolkit to which you turn too, to fix an underperforming area (Marchington & Grugulis, 2000). The initial functions of selection, training, and appraisal of human resource management have been developed according the universal way of best practice (Boxall & Purcell, 2003).
If all organizations would use best practice human resource instruments, human resource practices would converge, which means that similarities increase and differences decrease. Eventually, over time one universal package of human resource practices would be used by all organizations (Pudelko, 2005), which would lead to an equilibrium without competitive advantage for any specific best practice (Paauwe & Boselie, 2005). High convergence in human resource management was found, where imitation of global best practice is common (Carr & Pudelko, 2006). Diffusion of best practice in human resource management to the point of convergence is under pressure of cultural factors and globalization, it has tried to adapt to pressures placed upon it by its demanding environment (Hays & Plagens, 2002).
Marchington & Grugulis (2000: 1104) suggest “that there are a number of
problems with the notion of best practice, both in relation to the meaning of specific practices, and their consistency with each other, and the claims that this version of human resource management is universally applicable”. If the ultimate effectiveness of human resource instruments is only reached through consistency, then this would mean that all best practice human resource instruments are unfit. According to Wood and de Menezes (1998) substantial studies demonstrate the lack of consistency in best practice, reporting a ‘quick fix toolbox’ as a human resource management approach with fragmented and short-term human resource instruments, rather than a consistent, integrated whole and long-term use of human resource practices. However, bundling of best practice human resource practices is mentioned by several authors (Marchington & Grugulis, 2000; Purcell, 1999). Bundling seems to invoke consistency on horizontal level between several human resource instruments and/or practices.
Furthermore, consistency in time is not taken into account. Best practices are named best practices in a certain time and context in which it was a successful practice for a superior performing organization. This context in a certain time is difficult to replicate (Little, 2003; Kaplan, 2003). Most research seems to agree on the inconsistency of the best practice approach.
An argument often heard is that contingencies do exist and need to be taken into consideration (Keefe, 2008; Melián-González & Verano-Tacoronte, 2006; Paauwe & Boselie, 2005). For example, it depends on the type of staff if a certain practice is adopted properly (Spath, 2002). Furthermore, a major drawback is that the best practices are not specifically enough described, this evokes own interpretation that can lead to different implementations (Sutton, 2004; Little, 2003; Marchington & Grugulis, 2000). When trying to unravel the best practice, difficulties in understanding arise (Marchington & Grugulis, 2000). Human resource practices are not applied to employees alike, which lead to different human resource practices towards employees. A single best practice is not enacted. Furthermore, similar human resource techniques are perceived different by different groups. Many organizations have different groups of employees, e.g. with fixed term and part time contracts (Melián-González & Verano-Tacoronte, 2006; Purcell, 2000).
trends (Paauwe & Boselie, 2005). Several authors emphasize the refuting statement that one-size-never-fits-all (SCM, 2005; Little, 2003; Wyner, 2002).
Statistically the best practice approach seems sophisticated, but it lacks theoretical rigor (Marchington & Grugulis, 2000). Purcell (1999) and Sutton (2004) both state that causality of the best practice approach for other organizations is not studied, either because it is non existing or very hard to prove. Furthermore, Sutton (2004) emphasizes that ‘correlation is no causation’, so even though it seems that best practices are related to performance, this does not mean that they are the cause of improved performance. Furthermore, longitudinal studies are scarce; the best practice approach needs to be studied in a long term perspective (Marchington & Grugulis, 2000; McCracken, 2001). This is also important to prove consistency in time, to see if a one time effect outcome is reproducible (Purcell, 1999). As some authors rightly explain, best practices that were formerly used as examples by many consultants have, over time, proven not to be so good after all, e.g. Enron´s practices were cited by many consultants (Sutton, 2004; Little, 2003). The best practice analysis is weak by basic scientific standards. Because the best practice approach misses a contextual framework, the possibility to generalize is very modest (Hugh, 2007; McCracken, 2001).
Because generalizability and internal consistency of best practice approach are
low, the best practice approach is falsified theoretically as an applicable management
approach. Therefore, it is expected that the findings of empirical articles, explaining the relation between best practice human resource practices and performance, are negative.
2.3 Resource-based view
According to the resource-based view of Jay Barney (1991), valuable resources that are difficult to imitate and unique have potential to give competitive advantage to an
organization that can result in positive outcomes (Khandekar & Sharma, 2005). In the
human and technical resources that generate enviable levels of performance” (Boxall and Purcell, 2003: 72).
Consistency of human resource management in resource-based view is an important issue, it aligns the soft human part of human resource management with the hard strategic technical part and sees the organization as an integral logical whole of resources, which requires a vertical integration of human resource management policies with business strategy (Roan, Bramble & Lafferty, 2001; MacDuffie, 1995; Hendry & Pettigrew, 1992). The strategic importance of human capital for performance and growth and sustainable competitive advantage in resource-based view “are a function of the unique bundle of
resources that the organization possesses and deploys” (Khandekar & Sharma, 2005:
629). Resource-based view argues that organizations first acquire pivotal human resource and then create human resource instruments to enhance its potential and to become difficult to imitate (Boselie, Paauwe & Jansen, 2001).
However promising the information on the resource-based view is, there are drawbacks. The resource-based view is named to be ambiguous because “there are so many contradictions and tensions inherent in creating and sustaining superior firm performance” (Lado, Boyd, Wright & Kroll, 2006: 115). The resource-based view theory has many paradoxes in it, which are quite relevant and need further research (Lado et al., 2006; Schneider & Lieb, 2004). It is often argued that the resource-based view its inimitable resources are impossible to measure (Arend, 2006; Levitas & Achidi Ndofor, 2006; Priem & Butler, 2001). This is due to the statement that resources that are not readily visible, like tacit knowledge, are higher in sustainability and are less imitable, substitutable, and transferable (Arend, 2006; Priem & Butler, 2001). Furthermore, some articles mention that because humans, and thus managers, suffer from bounded rationality, they have a limited ability to grasp the complex resources that lead to sustained competitive advantage. Furthermore, the resource-based view also seems to lack guidance for managers (Lado et al., 2006; Schneider & Lieb, 2004; Sheehan & Foss, 2007; Priem & Butler, 2001). This can explain the complaints about its practicality, as bounded rationality calls for clear guidance.
(Ketchen, Hult & Slater, 2007; Arend, 2006; Levitas & Achidi Ndofor, 2006; Lado et al., 2006; Boxall & Purcell, 2000; Schneider & Lieb, 2004; Priem & Butler, 2001). If a theory is tautological it cannot be subjected to empirical testing (Ketchen, 2007; Lado et al., 2006; Priem & Butler, 2001). This makes it impossible to understand the relation between resources and performance (Ketchen, 2007, Makadok, Piga, McWilliams & Siegel, 2002). It is agreed that the resource-based view “lacks an agreed, internally consistent, empirically validated body of theory” (Arend, 2006: 416). Lado et al. (2006: 116-119) mention that the resource-based view is “hopelessly irredeemable” and that organizations employing it end up in an “endless and futile search for sustainable competitive advantage”.
The resource-based view is often related to tacit and intangible resources. They are broadly defined and often unobservable, which, in turn, results in inimitability. Practitioners complain that resources should be further specified to understand the current lack of clarity. However, scientists believe that clarity would interfere with the power of inimitability (Armstrong, 2007; Arend, 2006). In general it seems that the broad scope makes it wider applicable, but lacks specifity and understandability (Levitas & Achidi Ndofor, 2006; Rouse & Daellenbach, 2002; Priem & Butler, 2001).
Alike the best practice approach, the resource-based view its generalizability and internal consistency are low and the resource-based view is therefore falsified
theoretically as an applicable management approach. It is expected that findings of
empirical articles, explaining the relation between human resource practices and performance through the resource-based view, are negative.
2.4 Contingency approach
“The contingency or ‘best fit’ approach of human resource management covers a range of models which advocate fitting human resource strategy to its surrounding context” (Boxall & Purcell, 2003: 51). The contingency approach has two dimensions: internal and external. The external fit is mostly focused on human resource activities that fit the organization its stage of development, activities that are related to decentralization for young and small organizations versus coordination in large and mature organizations. Furthermore, it argues that activities like structure and systems should fit the organization its stage of development (Baird & Meshoulam, 1988). The internal fit, on the other hand, is the need for consistency of the mutually supporting and fitting of individual human resource instrument and policies (Boxall & Purcell, 2003). This internal fit is otherwise called horizontal fit or consistency. The bundling hypothesis fits well with the internal fit of the contingency approach. However, it seems that most models first examine external fit after which the internal fit its implications automatically flow-on (Boxall & Purcell, 2000). A peculiar consequence of this automatic flow-on could be that human consciousness of bundled implementation of human resource practices decreases.
Contingency factors which are salient differ for each organization. However, comparable organizations have a common basis of human resource practices and a common environment. The fit of these practices to internal contingencies of the organization causes differentiated human resource processes and human resource content (Barette, 2005). In line with the contingency approach, human resource practices have to be consistent, but the contingency approach is vague and inconclusive about bundling.
contingency factors of Kreps and Baron (1999) are chosen to follow, this would have major consequences as each factor has several sub-contingencies. They mention strategy, technology and organization of work, the environment, culture, and workforce as organizational contingencies that should align. The 5 contingencies have 28 sub-contingencies. Furthermore, many articles mention the lack in understanding the links between contingencies and how they lever effectiveness (Purcell, 1999). In total an organization needs understanding of 5 * 28 = 140 contingency possibilities, and, as Purcell (1999) explained, all their interconnections. It is clear that this is an impossible task. Many organizations elect some contingencies that they see as important. However, there are no guidelines on which contingencies the focus should lay (Shepard & Hougland, 1978). Furthermore, some contingencies are seen as conflicting and paradoxal (Gresov, 1989).
The latter flaw is also due to bounded rationality humans suffer from (Purcell, 1999; Zeithaml, Varadarajan & Zeithaml, 1988), it is too hard to grasp all complex levels of an organization and its environmental contingencies (Boxall & Purcell, 2000; Purcell, 1999; Harrigan, 1983). Many articles are written with very diverse variables which make them hard to compare. Results are inconclusive and unclear, which makes human cognitive decisions processes a dreadful task. The contingency approach seems to have the widest ramifications for the organization its management, but forms the least handhold (Purcell, 1999).
A related argument to this is that the contingency approach is often researched and described in a static setting, as if the variables and organization examined never
change(Marchington, 2000; Boxall & Purcell, 2000; Zeithaml, Varadarajan & Zeithaml,
incomplete, unsophisticated, and is missing enough rigour (Boxall & Purcell, 2000;
Gresov, 1989; Harrigan, 1983). Furthermore, generalizability is low (Harrigan, 1983;
Shepard & Hougland, 1978). Organizations can differ on so many contingencies that it is impossible to take a case of an organization as an example for another.
The contingency approach its generalizability is low, but internal consistency is moderate. Little evidence is found on inconsistencies in the contingency approach. It is unknown if inconsistencies are not found because of lack of information or because of the existing high internal consistency of the contingency approach. However, for now the evidence makes the contingency approach not falsified theoretically as an applicable management approach. Therefore, it is impossible to predict the outcomes of empirical articles explaining the relation between contingency approach and performance.
2.5 Characteristics and critical differences
Distinctiveness of the approaches depends on the behavior the management exposes during the adoption of a human resource instrument. For example, if a best practice is altered to fit the needs of the organization one could argue that the best practice approach is moving towards a resource-based view or contingency approach, depending on the internal and/or external focus that is tied to the alteration process. Furthermore, the resource-based view and contingency approach seem to have a great overlap, e.g. the resource-based view is on occasion extended with several external contingencies (Arend, 2006; Priem & Butler, 2001).
best practice approach seems to practice the reverse; it is a universal human resource instrument or practice that can be altered before implementation.
TABLE 1
Characteristics of the three management approaches Charac./
Approach
Scope Focus Objective Starting point
Best practice approach
Small Imitation human resource
practices superior performer, inside focus
High performance through imitation Human resource instrument or practice Resource-based view
Moderate Internal focus on
developing technological and human resources into sustainable competitive advantage, inside-out focus High performance through development and use of resources The internal organization Contingency approach
Large Maximal internal and
external fit, outside-in focus High performance through fit The internal organization and its external
environment
2.6 Hypotheses
This study attempts to fill the void in information on the relations between management approaches and their usefulness in human resource practices. Very little systematic research has reviewed the actual applicability of all three strategic management concepts together, their internal consistency and generalizability, and their implications on human resource practices and the search for successfulness. This thesis tries to answer the question of which approach is most consistent, generalizable and applicable, and thus has the highest credential value in further use in the field of human resource research. Now, three hypotheses, one for every approach, will be formulated for further research.
Hypothesis 1: If the theoretical findings of paragraph 2.2 are correct, then it is expected that profound negative empirical evidence can be found that will support the falsification of the best practice approach that discards it as an applicable management approach
Hypothesis 2: If the theoretical findings of paragraph 2.3 are correct, then it is expected that profound negative empirical evidence can be found that will support the falsification of the resource-based view that discards it as an applicable management approach
3 RESEARCH METHOD
This chapter explains how the research was carried out. Consecutively, the type of research, the manner of data collection, and an explanation of how the used information was conducted are elucidated.
3.1 Data collection
As formerly explained this research was focusing on characteristics, differences, drawbacks, and empirical findings on each management approach and its relevance. A meta-analysis was done in which theoretical and empirical articles were combined to draw conclusions. Secondary data sources were used to find information on the best practice approach, resource-based view, and contingency approach and their distinctive characteristics, differences, and drawbacks. Findings from articles of Academic Search Premier, Business Source Premier, Web of Science, and Econlit were combined. Articles that were gathered were chosen on the basis of two criteria related to the year of publication: (i) articles in the years after the management approach reached its peak, up to articles (ii) of recent years were chosen to judge on its applicability. Thus, this can differ for each strategic management approach.
Empirical articles of the best practice approach published from 1994 on, resource-based view published from 2000 on, and the contingency approach published from 1978 on were assessed against the criteria internal consistency, generalizability, falsifiability, and ultimately applicability. The samples were identified by searching search engines which cover thousands of full text scholarly journals. The focus was on academic articles with specific keywords in the title, abstract, or in keywords (i.e. universalistic, best practice or best practice approach, resource-based view or RBV, and contingency approach, best fit, or situational approach and human resource management in combination with words like performance, market share, profit, turnover, commitment, loyalty, satisfaction, human resource practices, human resource instruments, selection,
recruitment, etc). The resulting sample consisted of 256 articles for the best practice
approach, of 238 articles for the resource-based view, and 118 articles for the
abstracts, research methods, and conclusions. Of these, only the articles that empirically test the relation between human resource practices and performance were selected. Furthermore, the articles with the highest citations were selected (if availability and accessibility were high) by year to avoid bias due to publication age effects. However, the provision for highly cited articles is of less importance for very recent articles, due to their age the possibility to be highly cited is reduced.
3.2 Data analysis
This working method is directly opposing the standard way of working of gathering inductive and supporting logic. The statements used are often not directly derivable from existing theory and contradict literature. Evidence for falsifying the hypotheses is derived from empirical statements and compared with results of theoretical research. If the evidence of the human resource practice its effect on performance is positive the approach is accepted and verified. However, if the evidence is negative the approach is discarded which also falsifies the theory from which it was gathered. This method is thoroughly explained by Popper (1959).
To interpret the data, a content analysis of the theoretical and empirical data was done. The content of academic research was analyzed to summarize the findings of research on human resource practices and its link with performance through the best practice approach, resource-based view, and the contingency approach. The findings of each empirical article were derived and analyzed to claim if it supports or opposes the theory it examines.
Atheory is only falsified if the statements that contradict it are accepted. This is a
necessary but not solely sufficient step; as “non-reproducible single occurrences are of no
significance to science” (Popper, 1959: 110).If only a few basic statements are found that
contradict the theory it does not lead to rejection of falsification. It is only falsified if a
reproducible effect is discovered that can refute the theory. This type of hypothesis is a
falsifying hypothesis. It requires that the falsifying hypothesis must be empirically
statements in order to obtain a logical characterization of the three approaches, and (ii) the accepted statements are the foundation that affirms the hypotheses. If statements contradict theory, they only provide sufficient reasons for its falsification if they simultaneously affirm a falsifying hypothesis (Popper, 1959).
4 RESULTS
Concerns arise in literature when research does not adequately address the tenets of a major theory. This chapter tries to solve this by addressing the empirical findings on performance by each management approach with the objective to do a solid statement on its applicability.
4.1 Empirical meta analyses review
Earlier meta analyses on the management approaches and performance deviate from this meta analysis in the years the used articles were publicized. Furthermore, unlike this thesis the other articles did not only examine the link between the many different human resource practices and performance. The results are partly coherent with the findings of this meta analysis, like the perceived diversity in researching, and partly divergent. Especially the resource-based view findings of past meta analysis seem more strongly convinced of its low support compared to the findings of this thesis.
The meta analysis of Tharenou, Saks & Moore (2007) examined training and was linked to performance and supported by both the best practice and contingency perspective. They mention that the human resource system is a complex set of practices designed to influence employee outcomes that seem to mediate human resource practice, like training, and organizational performance. However, the diverse research methods, variables, and levels resulted in a fragmented body of research that is lacking direction. There is a “great lack of consistency in how the studies were conducted, how key variables are measured, and how data are analyzed” (Tharenou, Saks & Moore, 2007: 255). Sila & Ebrahimpour (2003) discussed empirical findings through the best practice and contingency perspective in relation to total quality management. They found several total quality management factors that were applied universally. However, no specific patterns were discovered that were critical for one specific country or group of countries. It seems that they do not agree with best practice and prefer the contingency approach.
firms led to a partial body of research in which many interconnections are still undiscovered (Armstrong & Shimizu, 2007). Furthermore, Arend (2006: 417) underlines: “Empirical support for the resource-based view is fragile at best and non-existing at worst.”
4.2 The best practice approach
Hypothesis 1 pertained the empirical data on low consistency and low generalizability, and thus falsifiability of the best practice approach. The empirical findings were categorized in a table and short statements were given.
TABLE 2
Best practice approach empirics
4.3 The resource-based view
Hypothesis 2 pertained the evidence on low consistency and low generalizability, and thus falsifiability of the resource-based view. Results on the resource-based view its empirical data were elucidated hereafter and short statements were given.
Ellinger, Ketchen, Hult, Elmadag & Richey (2008: 363) mention: “Drawing on the resource-based view, empowerment did not significantly influence either relationship of market orientation and employee or organizational performance.” Lau, Yiu, Yeung &Lu (2008: 774+775) argue: “The findings suggest that perceived competencies in research & development and human resource investment have insignificant effects. Managers …. are driven more by environmental opportunities than by organizational competencies”. Aragón-Sánchez & Sánchez-Marín (2005: 16) state: “Contrary to what was expected, cooperation in activities does not manifest itself as an element important for the competitive advantage of small and medium sized enterprises”. Phan, Chan & Lee (2005: 14) argue: “Although the resource-based view perspective suggests that a unique human resource configuration should lead to sustained competitive advantage, we found no significant relationships in this study”. Menguc & Barker (2005: 901) mention: “Despite our expectations, we were not able to find supporting evidence of the link between selling skills and field sales units performance. However, because selling skills are a socially complex and causally ambiguous resource (i.e. path-dependent), they might have little or no demonstrable effect on performance unless they are bundled with other resources”. Chan, Shaffer & Snape (2004: 28) state: “The findings appear, on the face of it, contradictory and inconsistent. However, there is a possibility that the five traits of organizational culture have inherent inter-dependence and counteract each other’s impact on firm performance”.
TABLE 3
Resource-based view empirics
4.4 The contingency approach
Hypothesis 3 pertained the empirical data on high consistency, low generalizability, and unfalsified theory of the contingency approach. Results pertaining the third hypothesis on the contingency approach its empirical data are elucidated hereafter. Furthermore, short statements of articles were mentioned.
Wan-Jing & Tung Chun Huang (2005: 445) argue: “This study supported the contingency perspective indicating that a fit … contributes to firm performance”. Chandler & McEvoy (2000: 55) state: “Our research is consistent with the stream of research and theory proposing "fit" models of human resource and strategy”. Youndt, Snell, Dean & Lepak (1996: 858) argue: “Our results suggest human resource practices designed to professionalize employees … positively influence operational performance when matched with quality manufacturing strategies”. Kim & Bae (2005: 1297) argue: “Guiding principles and basic directions can be universally applicable, but specific practices, functioning and means can be divergent”. And therefore, the contingency approach is more applicable during the implementation of new human resource practices. Michie & Sheehan (2005: 460) state: “Our results suggest that the degree to which the adoption of human resource practices will indeed improve corporate performance - in statistical terms, the size and significance of the effect - will vary according to a range of factors”. Wang, Tsui & Zhang (2003: 528) mention: “Our findings further suggest that the contingency perspective is also necessary for understanding how organizations should design employment relationships with their employees to gain competitive advantage”.
TABLE 4
Contingency approach empirics
4.5 Results overview
In the best practice empirics few articles (15%) find both positive and negative findings. From the articles 30% found only negative evidence and 50% positive evidence. However, after eliminating the articles that were published in the remaining journals (7), only 25% found opposing evidence, 8,5% found both supporting and opposing evidence, and 66.5% found supporting evidence. Interestingly, only little opposing evidence abided that falsified the best practice approach. Longitudinal studies were scarce, only 15% had a longitudinal focus. The overuse of cross-sectional studies results in a low causal direction. No articles were researched in both multi-industry and longitudinal perspective, which results in lower statistical power.
In the resource-based view empirics many articles (51,5%) found both positive and negative findings. From the articles 6% found only opposing evidence and 42,42% found only supporting evidence. However, after eliminating the articles that were published in the remaining journals (7), only 15% found opposing evidence, 38% found both supporting and opposing evidence, and 47% found supporting evidence. Its generalizability is moderate because of the many articles (51%) researching multi industries. Its little longitudinal design (15%) brings concerns to the causal statements that were done and no articles were researched in both multi industry and longitudinal perspective.
5 CONCLUSION
5.1 The over-simplistic best practice approach
The empirical evidence shows a low internal logical consistency and generalizability for the best practice approach. The research methods, variables, performance levels, and mode of analyzing diverge tremendously and its generalizability is low because of the low levels of analysis. Therefore, the best practice approach is often falsified and hypothesis 1 is confirmed, the best practice is falsified as a theory.
It is very important to mention that some articles do not actually test the best practice approach. The articles do not look for best practices used in organizations and test these, they test which practices are effective and mention in the discussion that that type of practice could be a best practice because it increased turnover for all examined organizations. Shih, Chiang & Hsu (2006), for example, mention in their discussion that high performance work systems practices in general lead to enhanced performance. However, they did not actually test organizations that newly implemented high performance work systems for a longer period of time, so it is unknown if higher performance can be maintained in the future.
The flaw of high supporting evidence after eliminating the remaining publication journals may possibly be caused by the extensive use of the term best practice in other fields. The broad variety of fields, which often flank each other, result in many different journals out of which authors can choose. Thus, the publication of best practice findings in other journals can be of equivalent importance. Another possibility could be the bias of publishing only positive results, which would obviously color its conclusions.
To conclude, it is repeated in many articles, “different contexts demand different process choices. Too often companies simply search for missing best practices, and then add these to their already too complex process – an approach that usually leads to disappointment” (Professional engineering, 2001: 65). Because of the lack of guidelines and little theoretical and practical value of the best practice approach it is suggested that the term Best Practice should be altered to merely a practical suggestion or valuable idea.
5.2 The hollow resource-based view
The empirical evidence shows a low internal logical consistency and moderate generalizibility for the resource-based view. The research methods, variables, performance levels, and mode of analyzing differ tremendously, but many articles research on multi industry level. Therefore, hypothesis 2 is moderately confirmed and the resource-based view is moderately falsified.
Bundling is mentioned in nearly half of all articles, but only researched once. This is a staggering discovery, because the resource-based view is the approach in which bundling seems to be of great importance. The article of de Saá-Pérez & García-Falcón (2002) contains cluster analysis and recognizes a significant different relation between clusters, performance, and profitability. The article divided saving banks into 4 sections: banks with (i) no human resource policy that results in contradicting human resource practices, (ii) precarious human resource policy, (iii) effective human resource policy but not strategic, (iv) and strategic coherent human resource policy. Their conclusion states that organizations that better combine human resource practices have greater performance, because the way human resources are managed has a direct effect on its behavior, and therefore on profitability.
the resource-based view as it preaches investment in personnel to develop and gain competitive advantage.
Data on the resource-based view was substantial and considerable- although not universal- in refuting arguments. The resource-based view seems to be in the middle of a disputing discussion of its relevance and applicability. The lack of guidance to find out what exactly is a unique and rare resource or how to obtain it makes the resource-based view quite hollow. Furthermore, the type of performance measures used could be improved. The strong internal focus of the resource-based view on human development results in high costs for its human resource policy, of which the objective is to positively influence attitudinal and behavioral outcomes. Phan, Chan & Lee (2005: 1753) mention that: “The reason for lack of significant relationship between unique human resource configurations and firm performance may be because they have more direct associations with human resource outcomes, such as employee turnover, satisfaction, and productivity rather than on financial performance”.
5.3 The tough-to-crack contingency approach
The empirical evidence shows a moderate internal logical consistency for the contingency approach. The research methods, variables, performance levels, and mode of analyzing also differ profoundly in the contingency approach, but articles with just opposing evidence was quite low in comparison to the resource-based view and best practice. Furthermore, the many longitudinal and multi-industry research designs contribute to generalizability. Therefore, the contingency approach is not falsified as a theory and hypothesis 3 is confirmed.
ongoing challenge and seemingly old debate - the first time this was discussed in one of the found articles stems from the year 1978 by Shepard & Hougland - of the contingency approach seems to wind up in a theory that is very tough to crack.
Discussion
Even though the negative theoretical evidence on the best practice approach and resource-based view were overwhelming, for the wholeness of this thesis empirical evidence was gathered to support their falsification. The empirics of the resource-based view were not as consistent as its theoretical evidence, which is perhaps due to bias of other articles in interpreting the empirics. Furthermore the deviating results for the resource-based view of this meta analysis compared with other meta analysis could be due to the difference in data collecting in other databases and publication years. Because of human nature it is very probable that after these findings, proof or extensions are found and that the claimed falsifiabilities in this thesis are therefore not grounded. This is desirable, because it helps completing theoretical content and further academic knowledge.
Much discussion can be raised on the research method used in this thesis. “Popper's falsificationism can be questioned logically, by asking about statements such as "There are black holes", which cannot be falsified by any possible observation, yet which seems to be a legitimately scientific claim.” (http://en.wikipedia.org/wiki/Karl_Popper,
13th May 2008). However, Kuhn and Lakatos provide enough information on the
implausibility of Popper his theory. The main discussion should not be about the method used to discard the strategic management approaches, but about the applicability of the management approaches themselves. The research method is controversial, but not more or less than all theories as time passes. Famous theories can be discarded with every new generation of scientists. No theory is fully applicable over time as new academic research and theory furthers our knowledge.
Limitations and future directions
statements. Gaining a clearer understanding of the relationships between management approaches, human resource management and performance will require longitudinal analysis. Future research can employ case study thoroughly to explore specific linkages.
Another fundamental limitation of this research is its descriptiveness; no actual empirical research was done. However, empirical research has been employed in the
results section.A window is left open for future empirical research on the resource-based
view and contingency approach, preferably both approaches tested simultaneously. The empirical findings are questionable, it is unknown if the results would offer the same outcomes when researched through a different management approach. No empirical articles have examined the link between human resource management and performance through all three strategic management approaches.
After the former examination some suggestions can be made on the direction of further empirical research. In future research the examination of the effect of bundling of human resource practices on performance should be progressed. Especially in the resource-based view, which is all about development and has a strong internal focus on processes and people. The resource-based view could best be tested by examining several innovative companies that recently have shifted in customer or product markets. Furthermore, in line with the resource-based view attitudinal performance measures as trust, commitment, loyalty, etc. should be examined more than hard objective measures. The contingency approach should be tested in an industry in which companies have many similar contingencies, for example the petrochemical industry, and which recently have endured a change in the external market. These within-industry companies should be divided into two groups, one that has and one that has not responded by changing its human resource policy. Current performance of the two groups should be measured and improvements or declines should be reported.
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