Intellectual Capital–Enhancing HR, Absorptive Capacity, and Innovation

• Published date: 01 May 2017
• DOI: http://doi.org/10.1002/hrm.21783
• Date: 01 May 2017

Human Resource Management, May–June 2017, Vol. 56, No. 3. Pp. 431–454

© 2016 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI:10.1002/hrm.21783

Correspondence to: Christine Soo, UWA Business School, University of Western Australia M261, 35 Stirling

Highway, Crawley, Perth, Western Australia, 6009, Australia, Phone: +61 6488 2829, Fax: +61 6488 1055,

E-mail: christine.soo@uwa.edu.au.

SHRM literature (Colbert, 2004; Wright, Dunford,

& Snell, 2001). Wright etal. (2001, p. 702) note

that: “… though the field of SHRM was not

directly born of the resource-based view, it has

clearly been instrumental to its development.”

More recently, SHRM researchers have also drawn

on the (related) knowledge-based view of the

firm, identifying important links between SHRM

and various knowledge sharing and learning pro-

cesses within organizations (Kang & Snell, 2009;

Lepak & Snell, 2002; Wright etal., 2001). A grow-

ing body of researchers (e.g., Cabrera, Collins,

& Salgado, 2006; Foss, Minbaeva, Pedersen, &

Reinholt, 2009; Minbaeva, Pedersen, Björkman,

Fey, & Park, 2003) have identified human resource

(HR) practices as having the potential to facilitate

(or constrain) effective firm-level knowledge shar-

ing and creation. This has led to calls for research,

Wright and McMahan (1992) defined

strategic human resource manage-

ment (SHRM) as “the pattern of

planned human resource deploy-

ments and activities intended to

enable the firm to achieve its goals” (p. 298).

SHRM research has typically focused on the

links between different HR practices and firm

performance, and substantial empirical evidence

has been amassed over the past two decades to

support the argument that such patterns have

a significant impact on a range of performance

criteria (Combs, Liu, Hall, & Ketchen, 2006;

Huselid, 1995; Huselid & Becker, 2011; Lepak,

Liao, Chung, & Harden, 2006).

Historically, the resource-based view (RBV) of

the firm has played a fundamental role in shap-

ing both theory and empirical research within the

INTELLECTUAL CAPITAL–

ENHANCING HR, ABSORPTIVE

CAPACITY, AND INNOVATION

CHRISTINE SOO, AMY WEI TIAN, STEPHEN T. T. TEO,

ANDJOHN CORDERY

This study investigates the role of intellectual capital (i.e., human, social, and

organization capital)–enhancing human resource (HR) practices in the develop-

ment of a fi rm’s absorptive capacity, as well as the mediating role of absorptive

capacity in its relationship to the fi rm’s innovation performance. Results show

that while human capital–enhancing HR (acquisition and developmental HR)

is positively related to absorptive capacity, social capital–enhancing HR affects

absorptive capacity through egalitarian HR practices. Organization capital–

enhancing HR practices contribute to absorptive capacity through effective infor-

mation systems. Finally, our fi ndings confi rm that the various intellectual capi-

tal–enhancing HR practices affect innovation performance through their impact

on the fi rm’s absorptive capacity. © 2016 Wiley Periodicals, Inc.

Keywords: absorptive capacity, intellectual capital, strategic human resource

management

432 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2017

Human Resource Management DOI: 10.1002/hrm

The lack of attention to understanding the

link between organizational practices and absorp-

tive capacity is surprising given that Cohen and

Levinthal (1990) were quite explicit in asserting

that organizational mechanisms, such as HR prac-

tices, would be important contributing factors

(Chang, Gong, Way, & Jia, 2013; Jansen, Van Den

Bosch, & Volberda, 2005). The few studies that

have investigated the relationship between spe-

cific HR practices and absorptive capacity have

produced some promising findings. A majority of

the studies have focused on the impact of indi-

vidual HR practices upon knowledge creation,

sharing, and transfer. For example, Jansen etal.

(2005) concluded that job rotation and partici-

pation enhance potential absorptive capacity.

Furthermore, Foss etal. (2009) have noted that dif-

ferent aspects of job design foster different types

of motivation that influence employees’ knowl-

edge-sharing behavior. Others have found that

individual HR practices such as staffing, training,

performance appraisal, compensation, job design,

and the like are instrumental for enhancing knowl-

edge sharing and transfer (Lane & Lubatkin, 1998;

Laursen & Foss, 2003; Minbaeva, 2005; Minbaeva

etal., 2003; Simonin & Özsomer, 2009). The con-

sensus among scholars is that certain HR mecha-

nisms and practices have to be present to trigger

and improve knowledge acquisition, dissemina-

tion, and sharing, and that “… a good deal more

work needs to be done to uncover the underlying

mechanisms by which HR practices influence the

development of knowledge” (Minbaeva, Foss, &

Snell, 2009, p. 478).

However, despite recent SHRM reviews sug-

gesting that “coherent systems of mutually rein-

forcing HR practices are likely to better support

sustainable performance outcomes than are any

individual practices” (Kehoe & Wright, 2013,

p. 368), there appears to be a lack of under-

standing about how common configurations

(patterns, bundles) of HR practices, such as are

often deployed in a strategic manner by orga-

nizations, affect absorptive capacity. An excep-

tion is the recent study by Chang et al. (2013),

which advances our understanding of the role

of specific HR practices in the development of a

firm’s absorptive capacity. The authors investi-

gated how a two-dimensional (coordination and

resource) flexibility-oriented HR system can posi-

tively influence a firm’s absorptive capacity. While

Chang and colleagues’ (2013) study has shed light

on how flexibility-oriented HR practices can fos-

ter the development of firms’ absorptive capacity,

the authors did not directly examine absorptive

capacity as a mediating mechanism linking HR

practices and firm innovation performance. This

leading to a greater understanding of the micro-

foundations of human capital–based competitive

advantages (Coff & Kryscynski, 2011) and of the

role of HR in knowledge management research

(Foss, 2011; Minbaeva, 2008; Minbaeva, Mäkelä,

& Rabbiosi, 2012). Specifically, as asserted by Foss

and Minbaeva (2009, p. 6), “empirical research-

ers do not agree on which HR practices matter,

how they matter, how they should be bundled

to achieve maximum impact on knowledge

performance.”

Absorptive Capacity and SHRM

The ability of an organization to continuously

absorb, disseminate, and utilize new knowledge

is widely regarded as an important determinant

of sustainable competitive advantage. Cohen and

Levinthal (1990, p. 128) coined the term absorp-

tive capacity to denote the “ability of the firm to

recognize the value of new, external information,

assimilate it, and apply it to commercial ends.”

Central to the firm’s ability to realize perfor-

mance improvements from external knowledge

sources are four distinct but complementary

learning capabilities as outlined by Zahra and

George (2002): acquisition (the ability to iden-

tify and acquire critical knowledge), assimilation

(the ability to analyze, process, interpret, and

understand external knowledge), transformation

(the ability to combine new and existing knowl-

edge to gain new insights and perspectives), and

exploitation (the ability to incorporate the newly

acquired and transformed knowledge into the

firm’s operations). Researchers have shown that

the development of absorptive capacity contrib-

utes to innovation (Tsai, 2001), financial perfor-

mance (Kostopoulos, Papalexandris, Papachroni,

& Ioannou, 2011), intraorganizational knowl-

edge transfer (Szulanski, 1996), and interorgani-

zational learning (Lane & Lubatkin, 1998; Lane,

Salk, & Lyles, 2001).

Despite the volume and richness of the lit-

erature on absorptive capacity, surprisingly little

attention has been devoted to understanding

how absorptive capacity is actually created and

developed within organizations (Lane, Koka,

& Pathak, 2006; Minbaeva et al., 2003). Thus,

Volberda, Foss, and Lyles (2010, p. 932) have

argued that “absorptive capacity has an impor-

tant, but hitherto neglected, set of distinctly

organizational antecedents, such as organiza-

tional structure, reward systems, and systems of

HR practices and policies”; and Lewin, Massini,

and Peeters (2011, p. 81) point out that the “spe-

cific organizational routines and processes that

constitute absorptive capacity (AC) capabilities

remain a black box.”