Human Resources Management and Firm Performance: The ...

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Journal of Applied Psychology 2009, Vol. 94, No. 1, 263–275

© 2009 American Psychological Association 0021-9010/09/$12.00 DOI: 10.1037/a0013116

Human Resources Management and Firm Performance: The Differential Role of Managerial Affective and Continuance Commitment Yaping Gong

Kenneth S. Law and Song Chang

The Hong Kong University of Science and Technology

The Chinese University of Hong Kong

Katherine R. Xin International Institute for Management Development (IMD) In this study, the authors developed a dual-concern (i.e., maintenance and performance) model of human resources (HR) management. The authors identified commonly examined HR practices that apply to the middle manager level and classified them into the maintenance- and performance-oriented HR subsystems. The authors found support for the 2-factor model on the basis of responses from 2,148 managers from 463 firms operating in China. Regression results indicate that the performance-oriented HR subsystems had a positive relationship with firm performance and that the relationship was mediated by middle managers’ affective commitment to the firm. The maintenance-oriented HR subsystems had a positive relationship with middle managers’ continuance commitment but not with their affective commitment and firm performance. This study contributes to the understanding of how HR practices relate to firm performance and offers an improved test of the argument that valuable and firm-specific HR provide a source of competitive advantage. Keywords: strategic human resource management, affective commitment, continuance commitment, social exchange, resource-based view

The first objective of this study is to advance the understanding of the link between systems of HR practices and firm performance by examining middle managers’ affective and continuance commitment to a firm. Affective commitment refers to an emotional attachment to a firm such that the committed individual identifies with, is involved in, and enjoys membership in the firm, whereas continuance commitment refers to the tendency to stay in a firm on the basis of the potential loss or costs associated with leaving the firm (e.g., N. J. Allen & Meyer, 1990; Mowday, Steers, & Porter, 1979). Affective commitment is a higher order commitment because it has an affective component and increases motivation to produce, not just stay (March & Simon, 1958). Drawing upon Katz and Kahn (1978), who suggested that all open systems have maintenance and production subsystems, we developed a dualconcern model of HR systems. The performance-oriented HR subsystem focuses primarily on developing HR and providing motivation and opportunities for the productive use of such resources. The maintenance-oriented HR subsystem focuses primarily on employee protection and equality. We propose that maintenance-oriented HR subsystems are positively related to continuance commitment. Performance-oriented HR subsystems are positively related to affective commitment, which in turn enhances firm performance. The second objective of this study is to test social exchange theory (e.g., Blau, 1986; Gouldner, 1960) and the resource-based theory (e.g., Barney, 1991) that explore the link between systems of HR practices and firm performance. Social exchange theory takes as its particular focus the resources that people obtain from, and contribute to, social interactions (Blau, 1986; Molm, 2001). Exchange parties follow the principles of reciprocity (i.e., the

Although extensive research has generally documented a positive relationship between systems of human resources (HR) practices and firm or unit performance, the black box in-between has received less attention (Combs, Liu, Hall, & Ketchen, 2006). Arthur (1994) argued that HR practices may affect firm performance through developing “committed employees who can be trusted to use their discretion to carry out job tasks in ways that are consistent with organizational goals” (p. 672). Scholars have repeatedly called for a better understanding of how HR practices relate to firm performance (e.g., Batt, 2002; B. E. Becker & Huselid, 1998; Delery & Shaw, 2001; Takeuchi, Lepak, Wang, & Takeuchi, 2007). Recently, Collins and Clark (2003) examined network ties as the mediator between network-building HR practices and firm performance. Important employee attributes, such as commitment, have yet to be fully examined (Meyer & Allen, 1997; Ostroff & Bowen, 2000). Yaping Gong, Department of Management of Organizations, The Hong Kong University of Science and Technology, Hong Kong Special Administrative Region (SAR), China; Kenneth S. Law, Department of Management, The Chinese University of Hong Kong, Hong Kong SAR, China; Song Chang, School of Hotel and Tourism Management, The Chinese University of Hong Kong; Katherine R. Xin, International Institute for Management Development (IMD), Lausanne, Switzerland. This article was supported by Research Grants Council of Hong Kong Grant HKUST6249/03H. Correspondence concerning this article should be addressed to Yaping Gong, Department of Management of Organizations, School of Business and Management, The Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong SAR, China. E-mail: [email protected] 263

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recipient is obligated to return a benefit to the party who furnishes such a benefit) and equivalence (i.e., the recipient returns benefits of equivalent value; Gouldner, 1960). Systems of HR practices shape the nature of a firm’s exchanges with its employees (e.g., Morrison, 1996), and employees may reciprocate with different types of commitment to the firm (e.g., D. G. Allen, Shore, & Griffeth, 2003; Blau, 1986). A maintenance-oriented HR subsystem exchanges resources that are at the lower preference order of managers (e.g., security; Cohen, 1992; England, 1967) and is likely to induce lower order continuance commitment. A performance-oriented HR subsystem exchanges resources that satisfy managers’ primary needs (e.g., skill development; Cohen, 1992; England, 1967; Meyer & Allen, 1997) and thus is likely to elicit higher order affective commitment. The resource-based theory suggests that valuable and firmspecific HR enhance firm performance (e.g., Barney, 1991; Barney & Wright, 1998). Affective commitment by managers should increase firm performance because it is valuable and specific to a particular firm. Continuance commitment by managers may not increase firm performance because it is negatively or unrelated to job performance and thus considered undesirable (Sinclair, Tucker, Cullen, & Wright, 2005). Although strategic HR researchers have utilized the resource-based theory, few have explicitly tested its key tenet (Barney, 2001). In particular, the firm-specific nature of HR has not been examined. By examining commitment of managers to a firm, we hope to provide an improved test of the theory. Our study provides a test of social exchange theory in the context of strategic HR research because employee commitment, as a social exchange variable (e.g., Blau, 1986; Wayne, Shore, & Liden, 1997), has not been empirically examined as the link between systems of HR practices and firm performance. We conducted the study in China. Traditional Chinese personnel management has been characterized by employment security (or the “iron rice bowl” as some Chinese employees refer to it) and egalitarianism (Ding, Lan, & Warner, 2001). The ongoing marketoriented economic reforms have led to a greater performance orientation among Chinese firms (Ding & Warner, 2001). With the backdrop of the economic reforms, we examine how performanceand maintenance-oriented HR subsystems may affect firm performance in China. This study therefore contributes to theory testing in a non-Western context.

A Dual Concern Model According to Katz and Kahn (1978), all open systems include maintenance and production subsystems. The maintenance subsystem preserves the system as a whole, whereas the production subsystem yields productive outcomes. The maintenance subsystem is concerned with preserving stability and equilibrium in the system, and rewards are provided for membership in the system. The production subsystem is concerned with task requirements and develops a dynamics of proficiency. Extending Katz and Kahn’s conception to the HR function, we suggest that an HR system serves two overarching functions of performance and maintenance in managing HR, and therefore it may evolve into two distinct subsystems: the performance- and maintenance-oriented HR subsystems. We define the performance-oriented subsystem as a set of HR practices that primarily develop HR and provide motivation and

opportunities for their productive use. We define the maintenanceoriented subsystem as a set of HR practices that primarily ensures employee well-being and equality and is decided in terms of values that are unrelated to input– output ratios. Similar to Katz and Kahn’s (1978) open systems theory, a maintenance-oriented HR subsystem ensures stability of HR, whereas a performanceoriented HR subsystem promotes the productive potential of such resources. A maintenance-oriented HR subsystem is based on the principle of equality and signals that employees have equal value and rights as members of a firm. The maintenance-performance subsystem typology is consistent with leadership theories that prescribe two primary types of leader behavior: initiating structures (e.g., setting performance standards, evaluating, and rewarding performance) and consideration (e.g., caring about employee well-being, and treating them as equals; Stodgill & Coons, 1951). Firms may design their performance-oriented HR subsystems to promote performance and their maintenance-oriented HR subsystems to protect employee well-being and equality. Performance- and maintenance-oriented HR subsystems play relatively distinct roles in managing the participation and production problems that firms face (March & Simon, 1958). In the work setting, all employees confront two fundamental decisions: the decision to participate and the decision to produce (March & Simon, 1958). The decision to participate determines whether employees choose to continue their membership with the firm; the decision to produce determines whether they work hard and produce as the firm demands (March & Simon, 1958). Although maintenance-oriented HR practices, such as employment security, may induce the employee to stay, performance-oriented HR practices provide motivation and enabling mechanisms (e.g., through training and participation) so that employees can produce as firms demand. We focus on maintenance- and performance-oriented HR practices among middle managers—a core employee group in firms (Lepak & Snell, 2002). Middle managers play a critical role in the formulation and execution of a firm’s strategy (Floyd & Wooldridge, 1992). They serve as the linking pin between top managers and the operating core (D. Wang, Tsui, Zhang, & Ma, 2003). The opening of the Chinese economy (e.g., through World Trade Organization membership) and the continuous strong economic growth in China have created a huge demand for skilled managers (Schafer, 2005). Management education, however, is lagging behind the surging demand for trained managers (J. M. Wang, 2006). Middle managers, therefore, are well-sought-after strategic assets in China. Given the shortage of the strategically important middle managers, how firms manage them through systems of HR practices may have important implications on their bottom lines.

Hypotheses Development We propose that the commitment of middle managers serves as the link between systems of HR practices and firm performance on the basis of social exchange theory (e.g., Blau, 1986) and the resource-based theory of the firm (e.g., Barney, 1991). We focus on the affective and continuance commitment of middle managers but not on normative commitment. Conceptually, affective and continuance commitment correspond closely to decisions to produce and to stay (March & Simon, 1958). The strength of the manager’s identification with the goals and values of a firm (i.e.,

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affective commitment) leads to a decision to produce, and the low desirability for movement (on the basis of a concern for loss or continuance commitment) leads to the decision to stay (March & Simon, 1958). We exclude normative commitment based on social exchange theory because “. . . [normatively] committed individuals may exhibit certain behaviors not because they have figured that doing so is to their personal benefit, but because they believe that it is the ‘right’ and moral thing to do” (Wiener, 1982, p. 421). Social exchange refers to “actions of individuals that are motivated by the returns they are expected to bring and typically do in fact bring from others” (Blau, 1986, p. 91). Blau (1986) therefore explicitly suggested that it is “preferable to exclude conformity with internalized norms from the purview of the concept of social exchange” (p. 91).

tinuance commitment is negatively or unrelated to attendance, task performance, and helping behaviors (Meyer, Stanley, Herscovitch, & Topolnytsky, 2002). Continuance commitment is also negatively related to supervisor-rated employee promotability and managerial potential (Shore, Barksdale, & Shore, 1995). At the firm level, continuance commitment does not reduce operating expenses (e.g., Angle & Perry, 1981). Overall, we expect that the maintenance-oriented HR subsystem may increase managerial continuance commitment, which may not enhance firm performance. Hence, we hypothesize the following:

Maintenance-Oriented HR Subsystem, Continuance Commitment, and Firm Performance

Performance-Oriented HR Subsystem, Affective Commitment, and Firm Performance

According to social exchange theory, the exchange benefit includes not only tangible goods and services but also capacities to provide socially valued outcomes, such as prestige, approval, status, and recognition (Blau, 1986; Molm, 2001). Exchange parties follow the principles of reciprocity and equivalence (Emerson, 1976; Gouldner, 1960). The exchange domain refers to a class of outcomes of similar nature (i.e., providing similar functions) and is scalable in relative value for the actors in question (Emerson, 1987). The value of an exchange domain varies across occupational groups because these groups have different value systems, and the value system is a critical element in understanding the nature of commitment (H. S. Becker, 1960). The nature of middle managers’ commitment as a repayment to the firm is therefore contingent on the value of the exchange domain, which varies with the intensity of their needs (H. S. Becker, 1960; Gouldner, 1960). The exchange domain associated with the maintenance-oriented HR subsystem offers factors that are relatively low on the preference order of managerial employees (e.g., security and equality; Cohen, 1992; England, 1967; Ronen & Sadan, 1984; Starcevich, 1972) and are thus likely to elicit the lower order continuance commitment (Mayer & Schoorman, 1998). Managers generally have a strong need for power (Winter, 2002), and status equality is unlikely to satisfy this need. The principle of equivalence in social exchange suggests that middle managers may reciprocate the exchange of lower order factors with continuance commitment to ensure stable but not necessarily high quality service for the firm. Research suggests that job security increases continuance commitment (e.g., Mayer & Schoorman, 1998). In China, where employment security and equality are gradually decreasing (Ding & Warner, 2001), discontinuing one’s current membership creates uncertain prospects of regaining such benefits or protection. From the practical standpoint, middle managers may be induced to have a sense of continuance commitment when the employing firm provides basic protections, such as employment security and equality. Continuance commitment “often is assumed to be undesirable, because studies frequently show that it is negatively or unrelated to job performance and citizenship behavior” (Sinclair et al., 2005, p. 1280). Those who stay on the basis of continuance commitment may not have the motivation to work hard to produce for the firm (March & Simon, 1958). Meta-analytic findings reveal that con-

Managers tend to attach a greater value to opportunities for self-expression, prestige, challenges, responsibilities, skill development, career advancement, recognition, and a sense of personal importance (Cohen, 1992; England, 1967; Meyer & Allen, 1997; Winter, 2002). These factors are valued by managerial employees in China as well (Hulme, 2006; Melvin, 2001). Managers develop affective commitment to a firm to the extent that it allows them to achieve important goals and to satisfy their primary needs (Angle & Perry, 1981; Meyer & Allen, 1997). A performance-oriented HR subsystem may foster managerial affective commitment through exchange factors that satisfy managers’ primary needs. For example, through participative decision making in teams, a firm offers middle managers opportunities for self-expression and influence, charges them with greater responsibilities, and increases their sense of personal importance. High selectivity conveys recognition and approval of the competence of those being selected. Managers also obtain prestige through association with a selective firm (Blau, 1986). Training constitutes a firm’s investment in middle managers’ skill development (Takeuchi et al., 2007). Career development practices signal a firm’s care for and commitment to middle managers’ futures in the firm. To summarize, the exchange domain associated with the performance-oriented HR subsystem offers factors at the higher preference order of managers. The principle of equivalence would suggest that middle managers are likely to reciprocate such exchange factors with the higher order affective commitment. Affectively committed middle managers represent a valuable, relatively rare, and firm-specific resource that is difficult for competitors to copy and, thus, should enhance firm performance (Barney, 1991). Affectively committed middle managers are valuable because they identify with a firm and its goals—an important factor in the decision to produce for the firm (March & Simon, 1958). Research suggests that affectively committed employees have lower tardiness rates and absenteeism, have higher task performance, and are ready to help others (Meyer et al., 2002; Shore & Wayne, 1993). Affective commitment is also positively related to supervisor-rated promotability and managerial potential (e.g., Shore et al., 1995). At the firm level, affective commitment enhances administrative efficiency and effectiveness (Ostroff, 1992).

Hypothesis 1: The maintenance-oriented HR subsystem is positively related to continuance organizational commitment of the middle managers.

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Affectively committed managers are relatively rare in the face of declining commitment to employing firms (Nussbaum, 1986; Stroh & Reilly, 1997). In the age of protean careers, managers have become more self-directed and willing to change firms to fulfill their career desires (e.g., Stroh & Reilly, 1997). There is a severe shortage of middle managers in China (J. M. Wang, 2006). Many managers have relatively low psychological attachment to their employing firms, which often experience double-digit turnover rates (Hulme, 2006; Leininger, 2004). A recent Gallup Poll indicates that among the urban-dwelling Chinese employees, 12% reported that they were engaged (i.e., felt a profound connection to their firm and worked with passion), whereas 88% felt they were not engaged or were actively disengaged (Coffman, 2005). Affectively committed middle managers are difficult-to-imitate resources for three reasons. First, managerial affective commitment is specific to a particular firm. Second, although it is easy to entice one or two managers to leave a firm, it is difficult to hire away a whole group of committed managers. Finally, when a group of managers is committed to the same firm and its goals, they may engage in facilitative and synergistic interactions among themselves—activities that are socially complex (e.g., Barney & Wright, 1998). In sum, the performance-oriented HR subsystem induces the higher order affective commitment. Affectively committed managers are valuable, relatively rare, and firm-specific resources that are difficult for competitors to copy, and they should, according to the resource-base theory (e.g., Barney, 1991), enhance firm performance. Hence, we hypothesize the following: Hypothesis 2: The relationship between a performanceoriented HR subsystem and firm performance is mediated by affective organizational commitment of the middle managers.

Method Sample and Procedure We surveyed 1,054 firms and obtained usable responses to three surveys (i.e., a president/vice-president survey, an HR manager survey, and a middle manager survey) from 463 firms in China. The first source of our sample included 554 firms whose presidents or vice-presidents attended training courses at a major business school in Shanghai. Katherine R. Xin, the instructor of the courses, delivered a package of the three-version surveys to the senior executives who were informed that their participation was voluntary and that their responses were anonymous. The senior executives completed the president/vice-president survey in class and were instructed to distribute the HR manager survey to the HR manager and to select at least two middle managers to complete the middle manager survey. The middle manager survey had 3 copies, and additional copies were furnished upon request. The survey instructions to the HR and middle managers stated that their participation was voluntary and that their responses were anonymous. Each survey was accompanied by a return envelope with prepaid postage for returning the completed surveys to Katherine R. Xin directly. The response rate was 43%. The second source included corporate clients of a large HR consulting firm in Shenzhen. Yaping Gong’s connection provided access to the consulting firm’s client database, from which 500 firms were randomly selected for the study. A 15-member project

team led by Yaping Gong administered the surveys. A package of the three-version surveys identical to the one administered to the Shanghai participants was distributed to the president or vicepresident of the sample firms. Participants from each firm returned completed surveys separately to the project team’s office, which was occupied by Yaping Gong. Although team members assisted the survey administration, they had no access to the completed surveys. The response rate was 45%. The president/vice-president survey focused on industry, firm size, ownership, unionization, and firm performance. The HR manager survey assessed HR practices for middle managers. The middle manager survey assessed HR practices for middle managers, and affective and continuance commitment of middle managers as a whole. The three survey versions were color coded. A total of 2,148 managers (463 presidents or vice-presidents, 580 HR managers, and 1,105 middle managers) provided usable responses. We assigned a unique code to each firm to match surveys from the same firm. The matching process led to a sample of 463 firms for regressions involving firm performance. We relied on the HR managers’ ratings of HR practices, the middle managers’ ratings of affective and continuance commitment, and senior executives’ ratings of firm performance because of their knowledge of the respective areas being assessed.

Measures HR practices. To identify commonly examined HR practices that apply to middle managers, we reviewed 48 strategic HR studies published at nine major journals and research volumes, the list of which are available from Yaping Gong upon request. The review revealed nine HR practices that are examined in multiple studies: employment security, reduction of status distinctions, selective hiring, participation in decision making through teams, performance appraisal, comparatively high pay contingent on performance, extensive training, career planning and advancement, and information sharing. We excluded information sharing as an HR practice for managers. First, information sharing is more significant to the workforce that has little or no access to key information about the firm. Second, it is not an HR practice per se. Rather it is the outcome of HR practices, such as participation in decision making. Employment security and reduction of status distinctions fit into the maintenance-oriented HR subsystem because they protect employee well-being and equality and are decided in terms of values unrelated to input– output ratios. Employment security and status equality are decreasing in China because of the market-oriented economic reforms. Employees may choose to stay because of a concern for losing such protections. Both practices therefore may induce employees to stay and ensure a stable supply of HR. The remaining six HR practices were classified into the performanceoriented HR subsystem, which develops a firm’s HR and motivates and enables their productive use. Selective hiring and extensive training develop a firm’s human resource pool. Comparatively high pay contingent on performance, career planning and advancement, and performance appraisal for pay and promotion purposes motivate employees to produce. Participation in decision making through teams provides a structural mechanism that enables employees to produce for the firm. For nonmanagerial employees, such a practice may suggest an egalitarian and protective orienta-

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tion. We focus on managers who make decisions on a routine basis. Participation in decision making through teams does not suggest an equality and protection focus but is instead mainly used to collect diverse input so that higher quality decisions can be made. We thus classify such participation into the performanceoriented HR subsystem. We developed six items for each of the eight HR practices. We used items from existing studies (e.g., Delery & Doty, 1996) when available. To ensure equivalence of the measures in the Chinese and the English versions, we performed a standard translation and back-translation procedure (Brislin, 1980). Respondents rated the items on a 7-point scale (1 ⫽ strongly disagree, 7 ⫽ strongly agree). Following Hinkin (1998) and Fabrigar, Wegener, MacCallum, and Strahan (1999), we initially conducted an exploratory factor analysis (EFA) with maximum likelihood extraction and promax rotation in the middle manager sample. Results indicate nine factors. Table 1 presents the full set of items and factor loadings. Six items did not load high (⬍.40) on the eight HR practices and were subsequently dropped. We performed confirmatory factor analysis (CFA) to test the hypothesized two-factor (i.e., maintenance and performance) structure for the eight HR practices in the HR manager sample. On the basis of the EFA results for the eight HR practices, we parceled together the two items with the highest and lowest loadings, and two items with the second highest and lowest loadings, and so forth. This method is appropriate because the EFA results indicate the unidimensionality of each HR practice (Landis, Beal, & Tesluk, 2000). The CFA results indicate an acceptable fit: ␹2(243, N ⫽ 580) ⫽ 1,135.12, p ⬍ .01, root-mean-square error of approximation (RMSEA) ⫽ .06, normed fit index (NFI) ⫽ .91, nonnormed fit index (NNFI) ⫽ .92, comparative fit index (CFI) ⫽ .93, goodness-of-fit index (GFI) ⫽ .92. All the first-order factors (i.e., the eight HR practices) loaded on the corresponding second-order factors (i.e., the maintenance- and performance-oriented HR factors) with loadings at .50 or higher. We compared the one- and two-factor models for the HR practices. The two-factor model fit the data significantly better than the one-factor model, ⌬␹2(1, N ⫽ 580) ⫽ 43.30, p ⬍ .01. The Cronbach’s alphas were .70 and .93 for the maintenance- and performance-oriented HR factors, respectively. We calculated rwg (James, Demaree, & Wolf, 1984, 1993) to assess the agreement of the HR and middle managers’ ratings. The mean rwg values for the maintenance- and performance-oriented HR practices were .90 and .91, respectively. We also calculated an intraclass correlation (ICC [1]) to assess the reliability of the HR manager’s ratings. ICC (1) values for the maintenance- and performance-oriented HR scales were .44 and .46, respectively, higher than the median value of .12 observed by James (1982). Finally, ICC (2) values for the maintenance- and performanceoriented HR practices were .61 and .64, respectively. Overall, rwg, ICC (1), and ICC (2) were comparable with the median or recommended values reported in the literature (George & Bettenhausen, 1990; Glick, 1985; Schneider, White, & Paul, 1998), suggesting that HR managers provided reliable assessment of HR practices. Affective and continuance commitment. We adopted Meyer, Allen, and Smith’s (1993) measure, which was translated into Chinese and validated by Chen and Francesco (2003). We followed the referent shift model (e.g., Chan, 1998) by asking respondents to rate the affective and continuance commitment of

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middle managers as a whole on a 7-point scale. We assessed rwg, ICC (1), and ICC (2) before we aggregated the respondents’ ratings. We mainly relied on the rwg statistic because justification for aggregation is based on agreement within groups rather than on differences across groups (George, 1990; Schneider & Bowen, 1985). The mean rwg value was .82 for affective and continuance commitment, indicating support for aggregation. On the other hand, Gerhart, Wright, McMahan, and Snell (2000) recommended ICC (1) for strategic HR research. The ICC (1) values were .35 and .30 for affective and continuance commitment, respectively. Finally, Bliese (2000) recommended ICC (2) in addition to rwg and ICC (1). ICC (2) values were .50 and .40 for affective and continuance commitment, respectively. ICC (2) is highly dependent on the number of raters from each group, and the small number of middle managers per firm may have adversely affected the ICC (2) values obtained in our sample (Bliese, 1998; James, 1982). The ICC (2) values were very similar to those reported, for example, by Schneider et al. (1998). The ICC (2) values did not “. . . seem low enough to prohibit aggregation” (Schneider et al., 1998, p. 155), especially given the rwg and ICC (1) values. The Cronbach’s alphas were .87 and .79 for affective and continuance commitment, respectively. As a further check of construct-related validity, we compared the four-factor baseline model (i.e., maintenance- and performance-oriented HR factors, and affective and normative commitment) with four alternative models, all using the middle managers’ ratings. Table 2 summarizes the model comparison results. The four-factor model had the best fit. The two HR factors are distinct from each other and from the mediators. Affective and continuance commitment were also distinguishable from each other and thus more appropriately treated as different variables rather than an overall commitment variable. Firm performance. The president or vice-president rated firm performance relative to competitors in the industry (ranging from 1 ⫽ the lowest 20% to 5 ⫽ the highest 20%) on seven aspects: (a) profit, (b) total sales growth, (c) market share, (d) total asset growth, (e) after-tax return on total assets, (f) after-tax return on total sales, and (g) labor productivity. Theoretically, we were interested in competitive advantage accruing to firms on the basis of their HR practices, and “relative performance is ultimately what is of the greatest interest” (Fulmer, Gerhart, & Scott, 2003, p. 971). Practically, objective performance data are difficult to obtain and are often inaccurate in China. Chinese accounting standards are still emerging, and firms may use different accounting standards, which makes it impossible to obtain comparable financial performance information. Because of the cross-industry nature of our sample, it is difficult to interpret and compare the absolute objective performance of the sample firms. Prior strategic HR studies (e.g., Delaney & Huselid, 1996; Harel & Tzafrir, 1999; Youndt, Snell, Dean, & Lepak, 1996) have used relative firm performance measures similar to ours. The EFA (maximum likelihood extraction and promax rotation) results reveal that the seven items loaded clearly on one factor, indicating that they capture the general firm performance construct underlying the dimensions. We therefore averaged the seven items. We asked the HR and middle managers the same firm performance questions. The correlations among the three sources ranged from .62 to .66, indicating high interrater reliability. The mean rwg, ICC

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Table 1 Exploratory Factor Analysis Results of HR Practices (Middle Manager Rating) Factors Type of HR practice Employment security 1. Managers in our firm can expect to stay for as long as they wish. 2. Our firm tries to avoid dismissing managers. 3. Job security is almost guaranteed to managers in our firm. 4. If our firm were facing economic problems, managers would be the last to get cut. 5. Our firm has offered managers a pledge of employment security. 6. Compared to our close competitors, our firm offers higher employment security to managers. Reduction of status distinction 7. In our firm, managers at different levels share the same cafeteria. 8. In our firm, managers at different levels have a common uniform. 9. In our firm, managers at different levels use the same company vehicles for business purposes. 10. In our firm, managers at different levels stay in hotels of similar standards on business trips. 11. The rights of managers at different levels are equally respected in our firm. 12. Compared to our close competitors, our firm respects more the equal rights of managers at different levels. Selective hiring 13. For the five managerial positions that our firm hires most frequently, we have many qualified applicants per position. 14. All newly hired managers in our firm had been selected based primarily on the results of validated selection tests. 15. All managers are administered many assessment tools—including personality, aptitude, and skill tests—prior to employment in our firm. 16. A strict selection procedure was used in our firm to hire new managers. 17. It is difficult to pass our managerial selection process. 18. Compared to our close competitors, our firm is more selective in hiring managers. Participation in decision making through teams 19. A majority of managers participate in highly decentralized work groups in our firm. 20. A majority of managers in our firm are involved in formal or informal management committees or other related problem-solving activities. 21. A majority of managers receive training in group problem solving. 22. Managers in our firm meet on a regular basis in management committees to discuss critical company matters. 23. Management committees in our firm can exert significant influence on major company decisions. 24. Compared to our close competitors, our firm relies more heavily on decentralized management committees to make major decisions.

1

2

3

4

5

6

.08 .00

.05 .02

⫺.12 ⫺.07

⫺.09

.08

.01

7

8

9

.03 ⫺.01

.00 .05

.53 .62

⫺.16 ⫺.06

.06 .03

⫺.10 .03

.01

⫺.02

⫺.02

.73

.03

⫺.01

.01

⫺.02

⫺.05

.08

.02

.44

⫺.08

.01

⫺.07

⫺.04

⫺.07

.15

.02

.03

.53

.22

⫺.02

⫺.08

.04

⫺.07

.05

.02

.06

.60

.08

⫺.07

.16

⫺.09

.27

⫺.07

.05

⫺.06

.08

⫺.10

.47

.07

.08

.10

⫺.13

.05

⫺.01

.02

⫺.04

.43

.02

.05

⫺.10

.00

.01

⫺.01

⫺.03

.11

.71

.04

.05

⫺.11

.08

⫺.03

.01

.01

.14

.59

.03

.00

⫺.07

.09

⫺.04

⫺.05

⫺.02

⫺.01

.11

.85

.10

.07

⫺.04

⫺.07

⫺.03

⫺.03

⫺.07

⫺.01

.88

.20

⫺.02

.47

⫺.06

⫺.12

.16

.04

⫺.02

⫺.06

⫺.01

.01

.74

⫺.12

⫺.05

.01

.09

⫺.11

.10

.10

⫺.03

.77

⫺.02

⫺.08

⫺.02

⫺.01

⫺.06

.00

⫺.05

.05

.83

⫺.04

.09

⫺.12

⫺.06

.01

.00

⫺.13

.11

.58

.11

.11

.01

⫺.11

.12

⫺.09

⫺.04

⫺.02

.58

.18

.07

⫺.10

.01

⫺.01

.05

.09

.00

.17

.10

.17

.08

.00

⫺.01

.16

.24

⫺.08

.10

⫺.02

.42

.04

.02

.04

⫺.03

.37

.16

.16

⫺.03

.29

.02

⫺.12

.03

⫺.07

⫺.06

.07

.05

⫺.09

.88

.04

⫺.04

.00

⫺.07

⫺.06

⫺.03

⫺.06

.01

.86

.02

.08

⫺.04

⫺.01

.18

⫺.08

.01

.15

.42

⫺.02

⫺.01

⫺.04

.15

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Table 1 (continued ) Factors Type of HR practice Comparatively high pay contingent on performance 25. Compensation for managers in our firm is above the market average. 26. A large proportion of our managers’ total compensation is accounted for by cash plus deferred bonuses. 27. Managers are eligible for annual deferred incentive plans, profit-sharing plans, and/or gain-sharing plans in our firm. 28. Managers own a large amount of the shares of our firm. 29. The incentive pay of managers in our firm matches well with our firm’s financial performance. 30. Compared to our close competitors, the average total employment cost per manager is larger in our firm. Extensive training 31. New managers in their first year of employment typically receive long hours of training in our firm. 32. Experienced managers (i.e., those employed more than one year) typically receive long hours of training per year in our firm. 33. A large proportion of managers in our firm are qualified to perform more than one job through training or job rotation. 34. Managers often participate in cross-functional training or job rotation in our firm. 35. Managers in our firm often receive training outside their own functional areas. 36. Compared to our close competitors, our firm offers more extensive training to managers. Career planning and advancement 37. Many managerial positions in our firm are filled from within. 38. Managers are promoted based on merit rather than seniority in our firm. 39. Managers have clear career paths within our firm. 40. Managers have a very bright future within our firm. 41. Managers’ career aspirations within our firm are known by their superiors. 42. Compared to our close competitors, managers in our firm have better career prospects within the firm. Performance appraisal 43. Managers regularly receive formal performance appraisals in our firm. 44. Managers’ performance appraisals are based on objective, quantifiable results in our firm. 45. Managers often receive development-focused appraisals in our firm. 46. Managers often receive appraisals for pay purposes. 47. Managers often receive appraisals for promotion purposes. 48. Compared to our close competitors, our firm has a better-designed performance appraisal system. Eigenvalue Percentage of variance explained Note.

1

2

3

4

⫺.09

⫺.09

.20

.62

⫺.05

.11

.00

.04

.01

.19

6

7

8

9

⫺.09

.07

.04

.09

.02

.59

⫺.04

.05

⫺.18

.08

⫺.08

⫺.02

.61

.12

⫺.03

.02

⫺.04

⫺.09

⫺.14

⫺.17

.45

.06

⫺.05

.18

⫺.07

⫺.04

⫺.09

.20

⫺.08

.53

.15

⫺.11

.01

⫺.05

.06

.06

⫺.07

.04

.63

⫺.17

.11

.05

.01

.00

.51

.02

.20

.08

⫺.06

⫺.02

⫺.05

⫺.05

.08

.65

.02

.07

.14

⫺.04

⫺.02

⫺.01

.02

⫺.04

.50

.08

.02

⫺.04

.00

.05

.07

.01

.05

.83

⫺.01

⫺.03

⫺.08

.01

.02

⫺.03

.01

.00

.88

⫺.01

⫺.10

⫺.06

.04

⫺.03

.00

.11

⫺.02

.48

.01

⫺.05

.02

⫺.08

⫺.03

⫺.04

⫺.03

.12

⫺.04

.26

⫺.16

.08

.12

.09

⫺.08

.03

.16

⫺.11

.22

.00

.02

.14

⫺.07

.15

.08

.27

.06

.01

.06

⫺.06

.04

⫺.08

.78

.07

⫺.09

⫺.09

.11

.01

.00

.02

.03

.71

.06

.04

⫺.03

.02

.00

.02

.01

⫺.04

.85

.03

⫺.06

.03

.21

⫺.12

.07

⫺.05

.03

.60

⫺.10

.10

⫺.06

.89

.00

⫺.06

.02

.06

⫺.07

⫺.01

.01

⫺.04

.84

.09

⫺.13

.04

.01

.04

.06

⫺.01

.07

.56

.06

⫺.05

.03

⫺.02

.25

⫺.02

⫺.05

.10

.64

.04

.15

⫺.09

⫺.04

.00

.07

⫺.07

.23

.50

.04

.07

⫺.07

⫺.01

.12

⫺.02

⫺.08

.15 9.01 28.19

.55 9.03 5.73

.01 8.86 4.62

.11 7.64 4.18

⫺.06 7.47 3.55

⫺.01 3.14 3.28

.04 9.94 3.07

⫺.12 1.92 2.72

.11 7.23 2.40

N ⫽ 1,105. The nine factors explained 57.74% of the variance. HR ⫽ human resources.

5

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Table 2 Comparison of Measurement Models (Middle Manager Rating) ␹2

Model

No. of factors

Baseline model Model 1

Four factors Three factors: Maintenance HR ⫹ Performance HR; AC; CC Three factors: Maintenance HR; Performance HR; AC ⫹ CC Two factors: Maintenance HR ⫹ Performance HR; AC ⫹ CC One factor: Maintenance HR ⫹ Performance HR ⫹ AC ⫹ CC

Model 2 Model 3 Model 4

df

⌬␹2

632.86 703.18

71 74

939.86

RMSEA

NFI

NNFI

CFI

GFI

70.32ⴱⴱ

.08 .09

.90 .88

.88 .87

.91 .90

.92 .91

74

307.00ⴱⴱ

.10

.85

.82

.86

.89

998.80

76

365.94ⴱⴱ

.11

.84

.82

.85

.89

2,032.16

77

1,559.81ⴱⴱ

.17

.64

.59

.65

.74

Note. RMSEA ⫽ root-mean-square error of approximation; NFI ⫽ normed fit index; NNFI ⫽ non-normed fit index; CFI ⫽ comparative fit index; GFI ⫽ goodness-of-fit index; HR ⫽ human resources; AC ⫽ affective commitment; CC ⫽ continuance commitment. ⴱⴱ p ⬍ .01.

whole are satisfied with their jobs in this organization” (1 ⫽ strongly disagree, 7 ⫽ strongly agree). In a recent meta-analysis, Judge, Thoresen, Bono, and Patton (2001) concluded that the satisfaction–performance relationship “does not appear to be a correlation that should generally be dismissed” (p. 389). The average number of employees was 865 in the sample firms. The sample included 40% manufacturing firms, 34% service sector firms, 15% high technology firms, and 11% unclassified firms. In terms of ownership, the sample included 46% domestic private firms, 21% wholly foreign owned firms, 15% joint ventures, 13% state-owned firms, and 5.5% unclassified firms. The average unionization rate was 34.84% in the sample of firms.

(1), and ICC (2) values were .89, .59, and .82, respectively. The Cronbach’s alpha was .86. Control variables. We controlled for firm size (i.e., number of employees), industry, ownership, and unionization (i.e., percentage of employees who are union members; Guthrie, 2001; Huselid, 1995; Youndt et al., 1996). Larger firms may have a greater market power and a larger resource base (Barney, 1991; Collins & Clark, 2003). Industries vary in their attractiveness (i.e., opportunities and threats) and that variability affects the performance of firms (Porter, 1985; Scherer, 1980). In China, firms of different ownership types have different access to financial capital and different exposure to market forces. Unions may lead to inflexible operations, but they provide a channel for voice and thus stabilize employment relationships and improve morale (Freeman & Medoff, 1984). Finally, we controlled for middle managers’ job satisfaction (i.e., managerial job satisfaction) as rated by the president or vicepresident. The scale has one item, “Overall, middle managers as a

Results Table 3 presents the means, standard deviations, and correlations of the study variables. To test the hypotheses, we followed

Table 3 Means, Standard Deviations, and Correlations of the Study Variables Variable 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

a

Firm size Unionization Manufacturing High-tech Service Unknown ownership Joint venture Private firm State-owned firm Managerial job satisfaction Maintenance-oriented HR Performance-oriented HR Affective commitment Continuance commitment Firm performance

M

SD

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

5.45 34.84

1.46 83.17

— .16 .32 ⫺.07 ⫺.26 .02 .08 ⫺.29 .21 .02 ⫺.01 ⫺.03 .10 .04 .18

— ⫺.06 .10 ⫺.08 .08 .02 ⫺.16 .27 .01 ⫺.03 ⫺.05 .06 .02 .10

— ⫺.34 ⫺.58 ⫺.09 .12 ⫺.24 ⫺.09 ⫺.02 ⫺.03 ⫺.01 ⫺.01 ⫺.06 .01

— ⫺.30 ⫺.02 .00 .06 ⫺.06 ⫺.01 .08 ⫺.02 .03 ⫺.05 .12

— .03 ⫺.09 .27 ⫺.04 .01 ⫺.01 .09 ⫺.06 .07 ⫺.20

— ⫺.11 ⫺.26 ⫺.10 .04 .04 ⫺.07 .09 .05 .05

— ⫺.38 ⫺.16 .06 ⫺.05 .04 .07 .00 .03

— ⫺.35 ⫺.07 ⫺.08 .06 ⫺.09 ⫺.02 ⫺.14

— ⫺.01 .16 ⫺.03 .11 .10 .09

— .12 .33 .51 .24 .14

— .35 .21 .30 .11

— .35 .22 .14

— .45 .23

— .06



5.02 4.30 4.45 4.04 4.16 3.26

1.28 0.89 0.84 0.99 0.95 0.73

Note. N ⫽ 463 (listwise). Correlations with the absolute value greater than .09 are significant at p ⬍ .05; correlations with the absolute value greater than or equal to .12 are significant at p ⬍ .01 (two-tailed test). HR ⫽ human resources. a Logarithm of total number of employees.

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271

2004). The results indicate that the relationship between the performance-oriented HR subsystem and firm performance was mediated by affective commitment (zsobel ⫽ 2.71, p ⬍ .01) but not by continuance commitment (zsobel ⫽ 0.72, ns). Finally, we used LISREL 8.3 (Jo¨reskog & So¨rbom, 1993) to conduct structural equation modeling. On the basis of the CFA results for the HR practices, we specified employment security and status equality as indicators for the maintenance-oriented HR factor, and the rest as indicators for the performance-oriented HR factor. For affective and continuance commitment, we parceled together the two items with the highest and lowest loadings (on the basis of the EFA), and the two items with the next highest and lowest loadings, and so forth (Landis et al., 2000). For firm performance, we followed the same approach to form the first and second parcels, but we combined together the remaining three items for the third parcel. Affective and continuance commitment were allowed to be correlated because of their significant correlation. Finally, we specified paths from the control variables to the mediators and the dependent variable. We tested a full and a partial mediation model following James, Mulaik, and Brett (2006) and Schneider, Ehrhart, Mayer, Saltz, and Niles-Jolly (2005). Figure 1 presents the results for the full mediation model. The fit of the model was adequate: ␹2(181, N ⫽ 463) ⫽ 467.84, p ⬍ .01, RMSEA ⫽ .06, NFI ⫽ .89, CFI ⫽ .92, GFI ⫽ .91. The performance-oriented HR system was positively related to affective commitment (␤ ⫽ .34, p ⬍ .01). The maintenance-orientated HR system was positively related to continuance commitment (␤ ⫽ .55, p ⬍ .01). Affective commitment was positively related to firm performance (␤ ⫽ .19, p ⬍ .01), and continuance commitment was not. The partial mediation model, which included direct paths from the performance- and

Baron and Kenny’s (1986) procedure to estimate three regression equations: (a) affective and continuance commitment regressed on the two HR factors, (b) firm performance regressed on the two HR factors, and (c) firm performance regressed on the two HR factors plus affective and continuance commitment. We controlled for industry, firm size, unionization rate, ownership, and managerial job satisfaction in all analyses. Table 4 presents the regression results for testing the two hypotheses. The results indicate that the performance-oriented HR subsystem was positively related to affective commitment (␤ ⫽ .30, p ⬍ .01; 95% CI ⫽ .24 –.46) and continuance commitment (␤ ⫽ .13, p ⬍ .01; 95% CI ⫽ .04 –.26). The maintenanceorientated HR subsystem was positively related to continuance commitment (␤ ⫽ .25, p ⬍ .01; 95% CI ⫽ .16 –.36) but not to affective commitment, supporting Hypothesis 1. The Wald F test that used Stata 8.0 showed that the performance-oriented HR subsystem had a stronger relationship with affective commitment than did the maintenance-oriented HR subsystem: F(1, 467) ⫽ 10.25, p ⬍ .01. Model 2 in Table 4 indicates that the performance-oriented HR subsystem was positively related to firm performance (␤ ⫽ .14, p ⬍ .05; 95% CI ⫽ .02–.19), but the maintenance-oriented HR subsystem was not. When the two commitment variables were added to the equation in Model 3, the relationship between the performance-oriented HR subsystem and firm performance was no longer significant. Affective commitment was significantly related to firm performance (␤ ⫽ .16, p ⬍ .01; 95% CI ⫽ .05–.20), whereas continuance commitment was not. Overall, the results indicate that affective commitment is a mediator for the performance-oriented HR subsystem (Hypothesis 2). We further conducted a Sobel test (Sobel, 1982; see also Preacher & Hayes,

Table 4 Regression Analyses for Hypotheses Testing Firm performance Predictor Control variables Manufacturing High-tech Service Joint venture Private firm State-owned firm Unknown ownership Firm sizea Unionization Managerial job satisfaction HR practices Maintenance-oriented HR Performance-oriented HR Managerial commitment Continuance commitment Affective commitment ⌬R2 dfs n

Affective commitment

Continuance commitment

⫺.10 (.15) ⫺.04 (.17) ⫺.15ⴱ (.15) .13ⴱ (.14) .08 (.12) .15ⴱ (.17) .16ⴱⴱ (.19) .07 (.03) .01 (.00) .10ⴱ (.04)

⫺.09 (.15) ⫺.09 (.17) ⫺.02 (.15) .06 (.14) .08 (.12) .06 (.17) .08 (.18) .06 (.03) .01 (.00) .01 (.04)

.07 (.05) .30ⴱⴱ (.05)

.25ⴱⴱ (.05) .13ⴱⴱ (.05)

ⴱⴱ

ⴱⴱ

.12 12,464 477

Model 1

Model 2

Model 3

⫺.20ⴱ (.12) ⫺.01 (.13) ⫺.26ⴱⴱ (.12) ⫺.02 (.11) ⫺.06 (.09) ⫺.01 (.13) .02 (.15) .16ⴱⴱ (.03) .04 (.00) .15ⴱⴱ (.03)

⫺.22ⴱⴱ (.12) ⫺.03 (.13) ⫺.29ⴱⴱ (.12) ⫺.02 (.11) ⫺.07 (.09) ⫺.03 (.13) .02 (.15) .16ⴱⴱ (.02) .05 (.00) .10ⴱ (.03)

⫺.22ⴱⴱ (.12) ⫺.03 (.13) ⫺.27ⴱⴱ (.12) ⫺.04 (.11) ⫺.08 (.09) ⫺.05 (.13) ⫺.00 (.15) .15ⴱⴱ (.02) .05 (.00) .08 (.03)

.05 (.04) .14ⴱ (.04)

.05 (.04) .08 (.04)

ⴱⴱ

.10 12,464 477

10,452 463

.03 12,450 463

Note. Standardized regression coefficients are presented. Standard errors are in parentheses. HR ⫽ human resources. a Logarithm of total number of employees. ⴱ p ⬍ .05. ⴱⴱ p ⬍ .01.

⫺.05 (.04) .16ⴱⴱ (.04) .03ⴱⴱ 14,448 463

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272 PerformanceOriented HR

.34**

Affective Commitment

.19**

-.02 .58**

Firm Performance

.54** .12

MaintenanceOriented HR

.55**

Continuance Commitment

-.01

Figure 1. Structural equation modeling results for the full mediation model. Control variables were included in the analysis but are not shown for simplicity. N ⫽ 463; ⴱⴱ p ⬍ .01; HR ⫽ human resources.

maintenance-oriented HR subsystems to firm performance, did not improve fit, ⌬␹2(2, N ⫽ 463) ⫽ 3.1, ns. The full mediation model was thus preferred. Overall, the results support Hypotheses 1 and 2. Finally, we obtained the indirect effects using LISREL 8.3 (Jo¨reskog & So¨rbom, 1993). The indirect effect of maintenanceoriented HR practices on firm performance through affective and continuance commitment was .02 (t ⫽ 0.44, ns), whereas that of performance-oriented HR practices was .07 (t ⫽ 2.32, p ⬍ .02).

Discussion The objectives of this study were to examine how HR practices relate to firm performance and to test the resource-based theory and social exchange theory in such an examination. To achieve the objective, we theoretically derived a dual-concern model of HR subsystems. Results from factor analyses and measurement models comparison support the two-factor structure of HR practices. Regression results indicate that the performance-oriented HR subsystem was positively related to firm performance, and the relationship was mediated by affective commitment. In contrast, the maintenance-oriented HR subsystem had no significant relationship with firm performance. It had a significant and positive relationship with continuance commitment but not with affective commitment. In what follows, we discuss the current findings in relation to those from other studies, and we also discuss the implications of the findings for strategic HR theory and research. In this study, performance- and maintenance-oriented HR practices explained 12% and 10% of the variance in affective and continuance commitment, respectively, in a sample of firms operating in China. The amount of additional variance explained is comparable with, if not larger than, that found in studies conducted in the West. For example, employee perception of three employment practices explained 10% additional variance in affective commitment in Gaertner and Nollen’s (1989) study. Familyfriendly human resource practices explained 1.4% additional variance in affective commitment in Grover and Crooker’s (1995) study. In this study, HR practices explained 3% additional variance in firm performance, which is similar to that found in a number of studies that used similar firm performance measures. For example, HR practices explained 3% additional variance in perceived firm performance in Delaney and Huselid’s (1996) study and Harel and Tzafrir’s (1999) study. Because these studies used a single source to rate HR practices and firm performance, which tends to inflate the obtained effect size, the 3% variance explained in the current

study is at least comparable. The implication is that HR practices are just as important, if not more important, in shaping employee commitment and firm performance in China as they are in the West. This study provides the first empirical examination of managerial commitment as a link between systems of HR practices and firm performance, and the results are consistent with the resourcebased theory and social exchange theory. Strategic HR researchers have noted that the mechanism by which HR practices affect firm performance has not received much research attention. The insufficient attention is problematic because it limits the understanding of how HR practices relate to firm performance, and it renders theory testing inadequate. The current study, together with a number of recent empirical studies (e.g., Collins & Clark, 2003; Takeuchi et al., 2007), moves the field a step forward in understanding how HR practices may relate to firm performance. This study provides an empirical test of strategic HR models proposed by scholars (e.g., B. E. Becker & Huselid, 1998; Ostroff & Bowen, 2000). Ostroff and Bowen (2000) have proposed that HR practices shape employees’ collective attitudes, such as organizational commitment, which in turn influences firm performance. In view of this study’s findings, their model may be refined to accommodate the different roles of affective and continuance commitment. Because affective commitment reflects the motivational aspect of HR, this study also provides support for theoretical models that posit that motivation is a potential mediator between systems of HR practices and firm performance (e.g., B. E. Becker & Huselid, 1998; Delery & Shaw, 2001). The current study adds to the empirical tests of the resourcebased theory. Affectively committed employees represent a valuable, relatively rare, and difficult-to-imitate resource. Affective commitment is also specific to a particular firm. Prior strategic HR research generally did not measure the firm-specificity of resources. The examination of affective commitment thus provides an improved way to test the resource-based theory. Furthermore, our findings suggest that firm-specific resources do not always enhance performance. Although managerial affective commitment may enhance firm performance, continuance commitment may not. Finally, in this study we tested the basic tenet of social exchange theory, which is that employees reciprocate exchange resources offered by a firm with commitment to the firm. Consistent with the exchange principle of equivalence, employees return commitment of different natures on the basis of the resources offered in the exchange process. This study offers empirical contributions to strategic HR research. First, we focused on HR practices for middle managers. HR practices vary considerably across employee groups (Lepak & Snell, 1999). By focusing on one relatively homogeneous group that is likely to be covered by similar HR practices, our measure of HR practices should be more reliable than those for the whole unit or firm, which may include multiple employee groups covered by different HR practices (e.g., Huselid, 1995). Second, few prior studies cross-validated their HR measures in different samples within the same study design. In this study, we generated the factor structure for HR practices in the middle manager sample and cross-validated it in the HR manager sample. The size of the middle manager sample is large and therefore likely to give a stable factor structure. Third, prior studies typically relied on a single source to rate HR practices (e.g., Arthur, 1994; Batt, 2002;

RESEARCH REPORTS

Delery & Doty, 1996; Guthrie, 2001; Huselid, 1995), which may lead to significant measurement errors (Gerhart et al., 2000). In this study, we used two different sources to rate HR practices, and we obtained good interrater agreement. Finally, we used three different sources to rate HR practices, managerial commitment, and firm performance, respectively. The multisource design tapped into respondents’ information about respective variables. It also reduced the potential consistency bias, which may have occurred in prior studies that relied on a single respondent (e.g., Bae & Lawler, 2000; Batt, 2002; Delaney & Huselid, 1996; Harel & Tzafrir, 1999). This study is not without limitations. First, we focused on a firm-specific attitudinal attribute of managers. Future research may empirically examine firm-specific human capital as a mediator. We also recognize that measuring firm-specific human capital is a thorny issue for strategic HR researchers. Because affectively committed employees have the motivation to develop firm-specific human capital, affectively committed employees may provide a proxy for firm-specific human capital and thus hold the key to understanding the role of HR in firm performance. Second, we used a subjective firm performance measure. Future research may also include objective measures, particularly when a study is conducted within a single industry or in countries where such measures are reliable. Third, we did not establish causality among HR practices, managerial commitment, and firm performance in this cross-sectional study. Although the relationships were grounded in theory, a longitudinal design is desired for the empirical test. Finally, we conducted the study in China, which may limit the generalization of some of our findings to other places. We found that the maintenance-oriented HR subsystem consisting of employment security and status equality was unrelated to firm performance. Employment security has gradually lost its appeal in China after decades of economic reforms. Status equality may not be preferred by managers in China because of the relatively high power distance culture. Future research may replicate this study in other countries. Despite the limitations, this study contributes to the current understanding of the link between HR practices and firm performance, and it provides an improved test of the resource-based theory of the firm. It shows that HR practices can be meaningfully classified into the performance- and maintenance-oriented subsystems. The performance-oriented HR subsystem can increase firm performance through enhancing managerial affective commitment. The maintenance-oriented HR subsystem increases continuance commitment but does not enhance firm performance. Future theory building may benefit from considering the nature of commitment. With limited resources, firms may benefit more from investing in their performance-oriented HR subsystem.

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Received September 27, 2007 Revision received May 23, 2008 Accepted June 2, 2008 䡲

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