Although market responsiveness and firm innovativeness are important aspects of firm performance, little is known about which human resource management (HRM) systems foster these performance aspects and how. Building on prior research, we delineate flexibility-oriented human resource management (FHRM) systems in terms of resource- and coordination-flexibility-oriented HRM subsystems. In addition, we draw on organizational learning theory and the concept of absorptive capacity (AC) to articulate the mechanisms through which these systems might influence market responsiveness and firm innovativeness. We develop and validate measures of FHRM systems using a series of four independent samples. Our findings based on a sample of high-technology firms indicate that FHRM systems are positively associated with firm-level potential and realized AC and that potential AC, in turn, is positively associated with market responsiveness and firm innovativeness.
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