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Handbook of Research in International Human Resource Management

Edited by Günter K. Stahl and Ingmar Björkman

In providing an insightful overview of a wide range of global human resource issues facing MNCs, this pathbreaking Handbook highlights emergent topics and new research findings that could shape the field of future IHRM research. Theoretical discussion of the variables and processes that affect IHRM policies and practices is provided by renowned contributors with widely differing academic backgrounds, paradigmatic orientations, and theoretical and methodological approaches.
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Chapter 6: International Human Resource Management and Firm Performance

Jaap Paauwe and Elaine Farndale


6 International human resource management and firm performance Jaap Paauwe and Elaine Farndale As interest has grown in the strategic dimension of human resource management (HRM), there has been an increasing desire to relate aspects of people management with firm performance. Particularly over the last decade, many popular articles and books appeared on this topic, exploring how organizations can achieve competitive advantage through their people (for a full overview, see Paauwe, 2004). In this chapter we will focus both on the HRM and firm performance relationship in general and on the specifics of the relationship in the context of multinational corporations (MNCs). We broadly take an institutional theory perspective to address issues that arise owing to the diversity of contexts in which MNCs are operating, which include different meanings of the concept of firm performance, and potentially different outcomes of HRM policies and practices. The starting point for much of the work in the area of HRM and firm performance was an article by Huselid (1995) which appeared in the highly acclaimed Academy of Management Journal, arguing that high performance work practices are linked with increased sales and market value per employee for the firm. Equally the work by Pfeffer (1994, 1998) was influential in identifying so-called ‘best practices’ in HRM argued to contribute towards achieving sustained competitive advantage. Empirical work in this area has continued on both sides of the Atlantic since (see, for example, Boselie, 2002; Fey & Björkman, 2001; Guest & Peccei, 1994;...

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