THE IMPACT HIGH PERFORMANCE WORK SYSTEMS, IMPLEMENTATION EFFECTIVENESS, AND ALIGNMENT WITH STRATEGY ON SHAREHOLDER WEALTH.

Mark A. Huselid · Brian E. Becker

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Human Resource and Talent Management Employee Performance and Management Management and Organizational Practices

Abstract

We estimate the impact of the presence of a High Performance Work System and its effectiveness and alignment with firm competitive strategy on shareholder wealth in 702 firms. We find that a one standard deviation increase in these factors is associated with a $42,000 per employee increase in market value. The nature and pace of recent changes in the economic environment have motivated both managers and scholars to look for new sources of competitive advantage and profitability. As many of the traditional sources of competitive advantage (technology, economies of scale, patents, etc.) have diminished in value, the role of a skilled, motivated and flexible workforce has become more prominent (Pfeffer, 1994). Within that context a broadly defined High Performance Work System (HPWS) can be viewed as a key strategic lever, both as a means to develop and sustain core competencies and as a necessary condition for strategy implementation. This study focuses on a recurring theme in this literature; namely, to what extent is the HRM-firm performance relationship contingent upon the degree to which such systems have been implemented effectively, the

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2004Firm resources and sustained competitive advantage 1985Competitive Advantage: Creating and Sustaining Superior Performance 1995THE IMPACT OF HUMAN RESOURCE MANAGEMENT PRACTICES ON TURNOVER, PRODUCTIVITY, AND CORPORATE FINANCIAL PERFORMANCE.1993Strategic assets and organizational rent 1998Competitive advantage: creating and sustaining superior performance 1994Competing for the Future 1996MODES OF THEORIZING IN STRATEGIC HUMAN RESOURCE MANAGEMENT: TESTS OF UNIVERSALISTIC, CONTINGENCY, AND CONFIGURATIONS. PERFORMANCE PREDICTIONS.1995Human Resource Bundles and Manufacturing Performance: Organizational Logic and Flexible Production Systems in the World Auto Industry

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2002Linking top management team age heterogeneity to firm performance: juxtaposing two mid-range theories 2005Strategy alignment between HRM, KM, and corporate development 2005Managing human resource capabilities for sustainable competitive advantage 2010Perceived Labor Productivity in Small Firms—The Effects of High–Performance Work Systems and Group Culture through Employee Retention 2011

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