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IJM
26,6 Strategic human resources,
innovation and
entrepreneurship fit
544
A cross-regional comparative model
Zhongming Wang and Zhi Zang
Center for Human Resources and Strategic Development, Zhejiang University,
Hangzhou, People’s Republic of China
Abstract
Purpose – Strategic human resource management (SHRM) is seen as crucial for innovation and
entrepreneurship in China. An empirical research was carried out to investigate main dimensions of
the model of human resources management (HRM), practices and their effects on organisational
performance in relation to innovation and entrepreneurship.
Design/methodology/approach – The research has two parts. The first part is a field survey on
human resource management practices and its main dimensions. The study was conducted in the
Chinese local companies and joint ventures across different partnerships. The second part is an
in-depth case-set analysis of Chinese entrepreneurship models from a strategic HRM perspective.
Findings – The results showed that both functional and strategic dimensions of HRM could be
identified which had differential effects upon organisational performance and that the most successful
local entrepreneurial firms were among the collective-based and globally-oriented ones.
Originality/value – This study demonstrated that the fit between strategic HRM practices,
innovation strategy and entrepreneurship model was significantly contributed to entrepreneurial
performance. A regional comparative model of SHRM and entrepreneurship was proposed for
sustainable business developments and organisational change.
Keywords Innovation, Human resource management, Organizational performance, China,
Entrepreneurs
Paper type Research paper
1. Introduction
Under the new challenges from China entering WTO, developing IT, promoting
organisational reform, and encouraging innovation and entrepreneurship in the recent
years, the focus of manpower practices has shifted from employee-level of personnel
management to the core-employee and managerial levels of strategic human resources
management (HRM) (Wang, 2000; Tsui and Lau, 2002). There has been an increasing
demand for more integrated strategies of HRM practices, innovation, and
entrepreneurship in Chinese organisations (Wang, 2003).
Among recent developments in China, several significant changes need to be
noticed in order to understand the key issues in strategic HRM, innovation and
entrepreneurship. First, international entrepreneurship has become one of the major
International Journal of Manpower approaches to business development. While international companies are increasingly
Vol. 26 No. 6, 2005
pp. 544-559
q Emerald Group Publishing Limited
0143-7720
The research work was supported by the Chinese NSF Key Project No. 70232010 and the GRC
DOI 10.1108/01437720510625458 grant. Thanks for graduate students/colleagues, and entrepreneurs from 180 Chinese companies.
entering China with a figure of more than 450,000 foreign invested enterprises (FIEs), Strategic HR,
the international entrepreneurship approach is an effective strategy not only for innovation and
expending new markets and introducing overseas funds and managerial skills for
enhancing competitiveness but also for more and more local companies to introduce entrepreneurship
and recruit foreign knowledge-managers and technicians for their joint ventures and/or
key local facilities for their business development. Meanwhile, companies are
establishing their business branches overseas as a competitive entrepreneurship 545
strategy. So far, more than 6600 overseas ventures from Chinese companies were
formally established. Therefore, both strategic and cross-cultural HRM has become a
crucial supporting approach.
Second, technological innovation and entrepreneurial networking are among the
most popular strategies for business development in China through a variety of
cross-regional mergers, acquisitions, joint ventures, and business alliances. There is a
significant shift in mergers and acquisitions from the SOEs’ acquisition of private
companies in 2002, to the private company’s acquisition of SOEs in 2003. Many of them
incorporated with company-level technological innovations. However in many cases of
mergers, HRM was a bottleneck for effective integration. Therefore, strategic human
resource management (SHRM) strategies were urgently needed for supporting
organisational change, technological innovation and entrepreneurial development.
Third, for most of the Chinese firms, the secondary entrepreneurship
transformation is the main business-driven strategy in connection with
intrapreneurship, corporate entrepreneurship and strategic entrepreneurship (Wang,
2003a). However, among most Chinese companies, there is a lack of strategy-level
integration of SHRM with entrepreneurship and therefore the intrapreneurship was
often less effective in terms of sustainability (Wang and Mobley, 1999). Most of recent
studies called for strategic planning to be used to identify and improve those
organisational decisions and actions for integrating human resource functions into the
organisational and innovation strategy in order to support and implement the strategic
plan to achieve a competitive advantage (Wofford, 2002).
Because of the recent developments in international entrepreneurship, technological
innovation, multi-business strategy and intrapreneurship, strategic HRM becomes a
crucial approach for small and entrepreneurial firms in China. The purpose of this
study is to review recent research findings about the key dimensions of Chinese
entrepreneurship and to differentiate SHRM practices and their effects upon
organisational performance. Then a multi-level model of strategic HRM and Chinese
entrepreneurship is built on the basis of recent in-depth studies across regions and
ownerships.
5.2 Measurement
A check-list scale of HRM practices was then developed. Each practice item is scored 1
and scaled by 1-5 points to measure the degree of application. The total score of each
practice is 20. Twenty-two HR managers and supervisors generated a list of 56 typical
HR practices which are categorized into ten areas of HR practices. Table I presents the
ten-category list of HR practices.
Also, a five-point scale of HRM practice check-list was developed with a scale of
organisational performance by the following seven indicators:
(1) Market performance: How does the company have a higher market share
compared with other companies in the similar industrial sector?
(2) Profitability: How is this company profitable in comparison with other
companies in the similar industrial sector?
(3) Competitiveness: How is this company competitive in comparison with other
companies in the similar industrial sectors?
IJM
Category Indicators
26,6
Personnel selection and placement Actions for adaptation of formal procedures
Use of tests in personnel selection and placement
Development of job descriptions for key positions
Specific job requirements for applicants
550 Personnel training and development Specific orientation training programs
Periodic training needs analysis
Regular evaluations of training programs
Evaluations on training results and outcomes
Performance appraisal and management Regular performance appraisal activities
Formal procedures and evaluation forms
Tailor-made criteria for performance appraisal
Specific rules for rewards by performance
Career development and promotion Regular promotion planning
Developmental opportunities for employees
Periodic internal employee position transfer
Regular channels for external transfer
Pay and bonus systems management Specific pay link with performance
Bonus link with monthly performance
Pay link with company profits
Bonus link with different position
Employee participation program Formal regulations for employee participation
Regular meeting by trade union participation
Employee participation program in management
Regular communication with employees
Quality control program Organizing formal quality control teams
Regular quality circle activities
Quality as performance indicator
Regular quality control training programs
Specific work/performance goals
Management by objectives program Employee participation in goal setting
Specific plans for implementing objectives
Formal appraisal for goal accomplishment
Procedures for role specification in teams
Team management Specific team goal setting
Formal evaluation on team performance
Team selection and training
Corporate culture development Inter-departmental coordination meetings
Table I. Conflict resolution meetings
Ten category of HR Regular cultural activities
practices Meetings to discuss company vision
(4) Task accomplishment: What is the company’s task fulfilment compared with
other companies in the similar industrial sectors?
(5) Personnel turnover: How high is the personnel turnover in this company
compared with other companies in the similar industrial sectors?
(6) Employee satisfaction: How do employees satisfy in comparison with
employees in other companies in the similar industrial sectors?
(7) Innovation performance: How is the performance under technological and Strategic HR,
managerial innovation in comparison with other companies in the similar innovation and
industrial sectors?
entrepreneurship
These indicators of organisational performance were first tested by industrial bureau
officials, using both ratings and coding from the business performance. These ratings
and coding were highly correlated and proved to have high internal consistency 551
reliability, average correlation coefficients was 0.86.
firms were good at selection and quality control activities, Japanese firm were higher in
terms of quality control and performance.
Chinese township companies had more practices in job requirements while Chinese
state-owned companies used very fewer test instruments. Again, both Chinese
township companies and Japanese joint ventures had more formal HRM practice
especially in terms of orientation training and results evaluation. Western joint
ventures were similar to Chinese township companies. It is important to note that the
sub-samples of the township companies were those large and more productive
township firms around Wenzhou area, the hometown of Chinese entrepreneurship
firms (both township and private companies).
The results showed that the use of performance appraisals in the Chinese companies
focused more on positions and the whole company, whereas performance appraisal in
the joint ventures was more focused on actual performance. The results of career
development and promotion further informed that both western joint ventures and
Japanese joint ventures had more HR practices in terms of regular promotion, new
opportunities and turnover while the Chinese state-owned companies appear relatively
weak on these career development aspects of HRM.
In terms of compensation practices, Chinese township companies showed lower
level of practices in regularity and formality while other joint ventures had more
formal practices, with Japanese joint ventures again revealing higher means. The
results showed that the Taiwan and Hong Kong joint ventures had the lowest level of
employee participation whereas both western- and Japanese-joint ventures had the
highest levels of participation in management. In the Chinese state-owned enterprises
and township companies, although the formality of participation, the trade union
organisation, and the knowledge of the company were all relatively high, actual
participation was low. Quality control was formal in both Japanese and township firms Strategic HR,
and relatively low in the Chinese state-owned companies and western joint ventures. innovation and
Management by objectives is more formal in the Japanese companies and township
companies whereas it was very low in the Taiwan and Hong Kong enterprises. entrepreneurship
Corporate culture development practices were shown to be at a similar level
across-partnership, except that western and Japanese joint ventures had more
emphasis on company vision. 553
5.4 Relationships between organisational performance and HRM practices
The results showed that there is a close relationship between the HRM practice
indicators evaluated by HR managers and the organisational performance
independently rated by industrial bureau officials. Figure 1 presents the results of
multiple regression analysis of the effects of both functional and strategic HRM on
organisational performance.
Figure 1 presents the relationships between the different HRM practices and
performance. As it is shown, the higher levels of functional HRM practices lead to
superior performance on all seven indicators. At this stage of development, functional
HRM seemed playing a crucial role on general performance whereas strategic HRM
affected more innovation performance and task accomplishment. The results largely
supported the hypothesis that functional and strategic HRM practices influenced
organisational performance.
Figure 1.
Effects of HRM on
organizational
performance (b)
IJM 6. Study 2: SHRM, innovation and entrepreneurship modelling
26,6 The development of HRM practices has been closely related to innovation and
entrepreneurship activities in Chinese companies. However, there is a lack of models
for representation of the relationship between SHRM, innovation and entrepreneurship
strategies. An in-depth multi-case study was conducted to investigate the models of
Chinese entrepreneurship and innovation as it is related to key dimensions and HRM.
554 Field structured interview was carried out among CEOs and HR managers from
24 local companies in the Yangtze Delta Region (Zhejiang, Shanghai and Jiangsu
provinces). Altogether 52 people were interviewed. The interview guide includes
questions relating to key issues in entrepreneurship. Here are the main questions:
(1) General background of business development and services.
(2) What are the context, process and key events of the business development?
(3) What are the key KSAOs for successful and failure of the business?
(4) HRM practices and business strategies in the context of Chinese culture?
(5) How do innovative activities facilitate and enhance entrepreneurship?
(6) What are the entrepreneurial performance in relation to HRM and innovative
strategies?
6.1 Wahaha group growth: International entrepreneurship model
Many successful companies in China adopted an international entrepreneurship model,
i.e. developing new business ventures through joint-venturing with foreign firms and
competing well-known international brands through similar business approach and
strategy. We interviewed CEO and HR managers of the famous local company Wahaha
group. Transferred and grown from a small and local nutritional food school factory,
the Wahaha group has now more than 10,000 employees and is ranked as No. 1
beverage producer in China. With a progressive cross-regional entrepreneurial
strategy, 40 subsidiary companies across 16 provinces or cities in China are developed
by Wahaha group with approaches of acquisitions, mergers, JVs and alliance
partnerships. Two kinds of important international entrepreneurial actions were made
in the last ten years by the Wahaha group: one action was to develop five subsidiaries
of Danone Group joint venture (1996) with a cross-regional corporate culture strategy;
the other was to produce so-called “Future Cola” (2000) to compete with multinationals
such as Coca Cola with a national brand strategy. We therefore proposed that the
Chinese international entrepreneurship model may represent a combination of local
ownership with international approach to culture and national/international business
strategies.
These practices have brought into the group innovative managerial practices and
technology transfer.
Figure 2.
An
entrepreneurship-SHRM
model
p , 0:01Þ which functional HRM practices had marginal effects on performance Strategic HR,
indicators. However, if we take technological innovation indicator as a joint predictor, innovation and
the relationship between HRM practices and performance indicators are largely
enhanced. entrepreneurship
7. Conclusion 557
The results of the above-two studies largely supported or modified the four
hypotheses. The results showed that there are mainly two dimensions among HRM
practices in most Chinese companies: functional HRM practices and strategic HRM
practices. The former proved to be more related with most of performance indicators
while the later was more linked with innovation performance and task accomplishment
across levels. Also, HRM practices showed to be differentiated across business
ownerships and joint venture partnerships particularly among strategic HRM such as
career development, team compensation, quality control activities and corporate
culture. Both functional and strategic HRM practices significantly influence
organisational effectiveness, especially the innovation performance by strategic
HRM. Entrepreneurship could be categorized into two dimensions: functional versus
strategic HRM and individualistic versus collectivistic entrepreneurship. Among the
different types of entrepreneurship models, companies under collective
entrepreneurship has a closest link between strategic HRM and organisational level
performance whereas under individual entrepreneurship, individual level performance
indicators are more closely related to functional HRM practices.
These results have several important implications to HRM strategies, innovation
and entrepreneurship. First, team- and career-based strategic HRM practices have
long-term effects on organisational performance among the Chinese companies.
Second, culture plays a crucial role in formulating HRM practices such as team and
corporate culture activities. Third, collective entrepreneurship modelling is more
suitable to the Chinese context of both manpower and business development. Fourth,
technological innovation could moderate the effects of HRM on entrepreneurship. In
this aspect, more empirical research and case study are underway to find out the key
mechanism in relation to the rapid growth of the Chinese entrepreneurship.
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