Investigating Alignment Between HRM Configurations and Innovation Strategy Modes in Iranian Knowledge-Based Service Firms

Document Type : Research Paper


1 Faculty of Management, Allameh Tabataba’i University, Tehran, Iran

2 Faculty of Management, Kharazmi University (KhU), Tehran, Iran


This study aims to establish a relationship between HRM and innovation studies through human capital characteristics in order to achieve a better understanding of HRM’s supportive role in innovation realization aligned with knowledge-based services. The study provides a new model of coordination between innovation modes of service sector firms and HR configuration adopted for managing people in these firms. By gathering data about the main variables from 132 Iranian knowledge-based service firms with more than 30 employees, all located in Tehran province (selected through systematic sampling), the status of every firm in the field of innovation mode and HR configuration was determined. The hypotheses were tested using contingency tables and binomial test. After testing hypotheses, it was found that the strongest alignment exists between market-oriented innovation and productivity-based HR configuration (at about 53%). The average value for the human capital characteristics in firms that had two mentioned statuses were more than another three statuses. To achieve ideal human capital management, managers of KBSFs need to pay more attention to the compatibility of their HR configurations with innovation modes of KBSFs in order to approach the satisfactory productivity level seen in such firms.


Main Subjects

Adla, L., Gallego-Roquelaure, V., & Calamel, L. (2020). Human resource management and innovation in SMEs. Personnel Review49(8), 1519-1535.
Alshekaili, S. A. R., & Boerhannoeddin, A. (2011). Human capital approach towards enhancing innovation performance in Omani industrial firms: The role of knowledge management. Progress in Business Innovation & Technology Management, 1, 23-33.
Adla, L., Gallego-Roquelaure, V., & Calamel, L. (2020). Human resource management and innovation in SMEs. Personnel Review49(8), 1519-1535.
Arthur, J. B. (1992). The link between business strategy and industrial relations systems in American steel minimills. Industrial and Labor Relations Review, 45(3), 488-506.
Arvanitis, S., Loukis, E. N., & Diamantopoulou, V. (2016). Are ICT, workplace organization, and human capital relevant for innovation? A comparative Swiss/Greek study. International Journal of the Economics of Business23(3), 319-349.
Ayoko, O. (2021). SMEs, innovation and human resource management. Journal of Management & Organization, 27(1), 1-5.
Baranskaitė, E., & Labanauskaitė, D. (2020). The concept of innovation in the approach to novelty, value creating, interaction processes and social progress. Regional Formation & Development Studies, 31(2), 50-58.
Baycan T., & Stough, R. R. (2013). Bridging knowledge to commercialization: The good, the bad, and the challenging. The Annals of regional science, 50(2), 367–405.
Becker, G. (1964) Human Capital .New York: Columbia University Press,
Capponi, G., Martinelli, A., & Nuvolari, A. (2022). Breakthrough innovations and where to find them. Research Policy51(1), 104376.
Capozza, C., & Divella, M. (2019). Human capital and firms’ innovation: Evidence from emerging economies. Economics of Innovation and New Technology, 28(7), 741-757.
Ceylan, C. (2013). Commitment-based HR practices, different types of innovation activities and firm innovation performance. The International Journal of Human Resource Management, 24(1), 208-226.
Corrocher, N., Cusmano, L., & Morrison, A. (2009). Modes of innovation in knowledge-intensive business services evidence from Lombardy. Journal of Evolutionary Economics, 19(2), 173-196.
Creswell, J. W. (2005). Research design qualitative quantitative and mixed methods approaches (4th ed.). Sage.
Dakhli, M., & De Clercq, D. (2004). Human capital, social capital, and innovation: A multi-country study. Entrepreneurship & regional development, 16(2), 107-128.
Diaz-Fernandez, M., Bornay-Barrachina, M., & Lopez-Cabrales, A. (2017). HRM practices and innovation performance: A panel-data approach. International Journal of Manpower, 38(3), 354-372.
Diebolt, C., & Hippe, R. (2022). The long-run impact of human capital on innovation and economic growth in the regions of Europe. In:  C. Diebolt & R.Hippe … (Eds.), Human capital and regional development in Europe (pp.85-115).Springer.
Easa, N. F., & El Orra, H. (2020). HRM practices and innovation: An empirical systematic review. International Journal of Disruptive Innovation in Government, 1(1), 15-35. Filippetti, A. (2011). Innovation modes and design as a source of innovation: A firm‐level analysis. European Journal of Innovation Management14(1), 5-26
European Commission. (2015, February 2). "What is an SME? Small and medium sized enterprises(SME).Enterprise and Industry.
Fowler, F. J. (2009). Survey research methods (4th ed.). Sage.
Frenz, M., & R. Lambert (June 2012). Mixed modes of innovation: An empiric approach to capturing firms’ innovation behaviour (OECD science, technology and industry working papers, No.  2012/06).
Goodman, L. A. (1981). Association models and the bivariate normal for contingency tables with ordered categories. Biometrika, 68(2), 347-355.
Hollenstein, H. (2003). Innovation modes in the Swiss service sector: A cluster analysis based on firm-level data. Research Policy32(5), 845-863.
 Huang, P. C., Yao, C. L., & Chen, S. (2019). Development of the Organizational Resources towards Innovation Strategy and Innovation Value: Empirical Study. Revista de Cercetare si Interventie Sociala64,108-119
Huselid, M.A.(1995).The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance. Academy of Management Journal, 38(3): 635-672.
Ichniowski, C., Shaw, K., and Prennushi, G. 1997. The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines. American Economic Review, 87(3): 291-313.
Iqbal, A., Latif, F., Marimon, F., Sahibzada, U. F., & Hussain, S. (2019). From knowledge management to organizational performance: Modelling the mediating role of innovation and intellectual capital in higher education. Journal of Enterprise Information Management, 32(1), 36-59.
Isa, E. S. A. I., & Muafi, M. (2022). Human capital, organizational learning and their effects on innovation behavior and performance of banking employees. International Journal of Finance & Banking Studies11(1), 01-18.
Jiménez‐Jiménez, D., & Sanz‐Valle, R. (2005). Innovation and human resource management fit: an empirical study. International journal of Manpower, 26 (4), 364-381
Laursen, K., & Foss, N. (2014). Human resource management practices and innovation. In  M. M. Dodgson, D. Gann, & N. Phillips (Eds.), Handbook of Innovation Management (pp. 506-529). Oxford University Press.
Lenihan, H., McGuirk, H., & Murphy, K. R. (2019). Driving innovation: Public policy and human capital. Research Policy, 48(9), 103791.
Lepak, D. P., & Snell, S. A. (1999). The human resource architecture: Toward a theory of human capital allocation and development. Academy of Management Review, 24(1), 31-48.
Lepak, D. P., & Snell, S. A. (2002). Examining the human resource architecture: The relationships among human capital, employment, and human resource configurations. Journal of Management, 28(4), 517-543.
Luo, B. N., Sun, T., Lin, C.-H. (V.), Luo, D., Qin, G., & Pan, J. (2021). The human resource architecture model: A twenty-year review and future research directions. The International Journal of Human Resource Management32(2), 241-278.
MacDuffie, J. P. (1995). Human resource bundles and manufacturing performance: Organizational logic and flexible production systems in the world auto industry. Industrial and Labor Relations Review48(2), 197-221.
Melian-Gonzalez, S., & Verano-Tacoronte, D. (2006). Is there more than one way to manage human resources in companies? Personnel Review, 35(1), 29-50.
Michie, J., & Sheehan, M. (1999). HRM practices, R&D expenditure and innovative investment: evidence from the UK's 1990 workplace industrial relations survey (WIRS). Industrial and Corporate Change8(2), 211-234.
Miller, I., & Miller, M. (2014). John E. Freund’s mathematical statistics with applications (8th ed.). Pearson Education, Inc.
Moldaschl, M. (July 2010). Why innovation theories make no sense (the Department of Innovation Research and Sustainable Resource Management, Chemnitz University of Technology, working paper No. 9/2010].
Nieves, J., & Quintana, A. (2016). Human resource practices and innovation in the hotel industry: The mediating role of human capital. Tourism and Hospitality Research, 16(1), 3-99.
Nieves, J., & Quintana, A. (2018). Human resource practices and innovation in the hotel industry: The mediating role of human capital. Tourism and Hospitality Research, 18(1), 72-83.
OECD (2005). Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data (3rd ed.). OECD Publications.
Pavitt, K. (1984). Sectoral patterns of technical change: Towards a taxonomy and a theory. Research policy13(6), 343-373
Pavitt, K., Robson, M., Townsend, J. (1989). Technological Accumulation, Diversification and Organisation in UK Companies, 1945-1983. Management Science, 35(1), 81–99
Pearson, K. (1900). Mathematical contributions to the theory of evolution. VIII. On the correlation of characters not quantitatively measurable. Proceedings of the Royal Society of London66(424-433), 241-244.
Pizarro, I., Real, J. C., & de la Rosa, M. D. (June 2009). The role of entrepreneurial culture and human capital in innovation (Universidad Pablo de Olavide working paper No. 09.02).
Pradana, M., Pérez-Luño, A., & Fuentes-Blasco, M. (2020). Innovation as the key to gain performance from absorptive capacity and human capital. Technology Analysis & Strategic Management32(7), 822-834.
Sandri, P., & Widodo, W. (2020). Innovative performance development model based on human capital and network quality toward improved marketing performance. Management Science Letters, 10(3), 659-664.
Seeck, H., & Diehl, M. R. (2017). A literature review on HRM and innovation–taking stock and future directions. The International Journal of Human Resource Management, 28(6), 913-944.
Shipton, H., West, M. A., Dawson, J., Birdi, K., & Patterson, M. (2006). HRM as a predictor of innovation. Human resource management journal, 16(1), 3-27.
Srholec, M., & Verspagen, B. (2012). The Voyage of the Beagle into innovation: explorations on heterogeneity, selection, and sectors. Industrial and corporate change21(5), 1221-1253.
Stock, R. M., Totzauer, F., & Zacharias, N. A. (2014). A closer look at cross-functional R&D cooperation for innovativeness: Innovation-oriented leadership and human resource practices as driving forces. Journal of Product Innovation Management, 31(5), 924-938.
Tajeddini, K., Martin, E., & Altinay, L. (2020). The importance of human-related factors on service innovation and performance. International Journal of Hospitality Management85, 102431
United Nations Development Program. (2019). Human development report.
United Nations Development Program. (2020). Human development report.
Wixe, S., Nilsson, P., Naldi, L., & Westlund, H. (2023). The role of collaboration and external knowledge for innovation in small food firms. The Annals of Regional Science,70 (1), pages135–155
Zhou, Y., Hong, Y., & Liu, J. (2013). Internal commitment or external collaboration? The impact of human resource management systems on firm innovation and performance. Human Resource Management, 52(2), 263-288.