Human Resource Management Practices And Organizational Innovation: An Empirical Study In Malaysia

Abstract

With rapid globalization, firms particularly those in the manufacturing sector have to continuously innovate for competitive advantage. One way to do so is via effective human resource management practices (thereafter termed as HRM). The purpose of this study is to examine the relationship between human resource management (HRM) practices and organizational innovation. We employed a cross-sectional design with a sample comprised of 674 large manufacturing companies from six states in Malaysia which were identified as having a high percentage of innovating companies (Ministry of Science, Technology and Innovation, Malaysia (MOSTI), 2006). Our independent variables comprised of five HRM practices (performance appraisal, career management, training, reward system, and recruitment). Three types of organizational innovation (product innovation, process innovation, and administrative innovation) served as our dependent variables. Our findings provided partial support for our main hypothesis. Training alone was found to have a positive and significant effect bon the three forms of organizational innovation. In addition, performance appraisal positively and significantly affects administrative innovation. Despite the fact that our research framework was partially supported, our study highlights the profound role played by training in stimulating organizational innovation in the context of the manufacturing industry of Malaysia. Implications of our findings and limitations of the research were discussed.