Learning,innovation and high performance in knowledge-based firms

2.1 HPWS

Traditional literature on employee management has focused on the analysis of employee management practices and performance from different perspectives. One of the most outstanding approaches is the system approach [6]. Under this viewpoint, the joint consideration of some sets of employee management practices results in superior performance than other alternative perspectives [1]. Because, scholars generally agree that the impact of system or bundle of connected employee management practices on competitive advantage can be greater than the cumulative impact of all of the individual practices comprising the bundle, the past two decades have witnessed a shift from a practice-oriented view to a bundle-oriented perspective in the employee management literature [12]. These sets or configurations of practices have been labelled as HPWS in the specialist literature and are designed to promote employees’ skills and behaviors to achieve organizational strategic goals [2, 13]. Current perspectives on HPWS are closely aligned with research on high involvement work practices (HIWPs) and high performance employee management practices. In fact, researchers frequently note that various naming preferences are often used interchangeably and refer to the same phenomena of interest (i.e., a system of employee management practices rather than isolated practices) [14].

The core business of the HPWS function is to develop the employees in accordance with the business strategy, select and hire people, train and develop the staff, evaluate their performance, reward them and create a culture of learning [15]. Though, HPWS refers to a set of employee management practices that positively affect employee attitudes, motivation, and performance [1]. Grounded in resource-based view of the firm (RBV), HPWS proposes that firms can build competitive advantages by developing unique employees. RBV explains how specific internal resources contribute toward a firm’s achieving sustainable competitive advantage [7].

Although scholars do not agree on a specific set of practices comprising an HPWS configuration, practices can be summarized into five broad categories; (1) selection, (2) training, (3) career development, (4) motivation practices, (5) job security. The goal of each practice is either to select, develop, and retain employees, or to motivate them to produce employee output that enhances competitive advantage [6, 16].

2.2 HPWS and innovation

Innovation implies the adoption of an idea or behavior which is new for the organization [17]. Literature distinguishes different types of innovation. An innovation can be a new product or service, a new production process technology, a new structure or administrative system, or a new plan or program pertaining to organizational members [18]. Since the purpose of this article is to analyze how HPWS and OL influences the whole innovation activity of the firm, the present study adopts a broad concept of innovation that includes the adoption of any new product, process and administrative innovation. Innovation helps the company to deal with the turbulence of external environment and, therefore, is one of the key drivers of long-term success in business, particularly in dynamic markets [19].

The literature highlights employee management as one of the determining factors in the firm’s innovative behavior [20–22]. Innovative organizations support creativity and pioneer productive change through affording individual employees or members of the organization the freedom to work independently in the pursuit of new ideas and autonomous actions [23]. When firms develop new products and improve management processes, they require the motivation and ability of employees to produce creative ideas, develop innovative approaches, and exert new opportunities [19]. Employee management function can influence and modify the attitudes, capacities, and behaviors of employees to achieve organizational goals and it plays a crucial role in nurturing the necessary conditions for catalyzing and channeling individuals towards the development of innovation activities [6].

On the other hand, HPWSs have been found to be positively associated with organizational performance [2, 14]. In explaining the above link, researchers mostly use the Ability-Motivation and Opportunity (AMO) framework. The AMO framework suggests that effective employee management practices can improve employees’ knowledge, skills and abilities (A), motivation (M) and the opportunities (O) to express their talents [1, 22]. Similarly, it can be used to explain the link between HPWS and organizational innovation. HPWS improve employees’ knowledge, skills and abilities to innovate, i.e. by building their expertise and talent [22]. Considering the arguments in the above paragraphs, we put forward the following hypothesis:

H1: HPWS positively affects innovation.

2.3 HPWS and OL

Organizations can be described as continuous learning systems, and OL has been defined as a process of coordinated systems change, with mechanisms built in for individuals and groups to access, build and use organizational memory, structure and culture to develop long-term organizational [19, 25]. OL is also the organizational capability to continuously enhance, the collective capacity to reflect, to learn how to learn, to unlearn old ways of doing things and abandon old habits [26]. Moreover, there is an assumption about OL which propose that the learning process has identifiable stages thou it’s a multidimensional concept. In this regard, it’s broadly accepted that OL is a process consisting four dimensions: knowledge acquisition, knowledge dissemination, shared interpretation and development of organizational memory [19, 28]. Knowledge acquisition refers to acquisition of new knowledge internally and externally, while knowledge distribution refers to transferring or sharing of the acquired knowledge, knowledge interpretation to incorporate significant aspects of knowledge through shared understanding and coordination for effective decision-making and finally organizational memory relates to storing knowledge for future use either in the form of designing organizational system or in the form of rules, procedures, etc. [28].

An organization has many tools to manage the process of learning, but in principle, the learning ability of an organization depends on its ability to accumulate invisible assets [29]. As invisible assets such as knowledge are embodied in people, policies regarding employees are critical to OL [30]. Individuals play a fundamental role in the development of OL [27, 28]. Researchers generally agree that organizations learn only through individuals who learn [6, 26–29]. Adult learning theory tells us that people learn primarily by being encouraged to tackle challenges, experiment, fail and correct failures and reflect on their experiences [31]. Thus, it is suggested that some of the more traditional personnel functions of employee management practitioners may be tailored to encourage a focus on learning and thus to help achieve organizational goals [10]. Employee management systems have accordingly been expanded in some companies to encompass the facilitation of individual, group and OL [10, 27]. Using literature relevant to HPWS and OL, it can be assumed that there are a number of evidences showing HPWSs are particularly relevant to the promotion of learning [6, 28]. Therefore, the following hypothesis is proposed:

H2: HPWS positively affects OL.

2.4 OL and Innovation

Innovation is often characterized as a kind of “capital” for the organization [17] and it requires that individuals acquire existing knowledge and that they share this knowledge within the organization [19]. Recently, one major stream of innovation studies focuses on human aspect that lead to innovation [6, 33]. Based on the RBV, an organization’s innovation performance is rooted in the personnel embedded in it that cannot be replicated and transferred [1]. In other words, an organization with the most advanced technology but one that is lacking talented employees still cannot perform and conduct innovative projects. The concept of OL stresses that organizations are systems that support learning and performance improvement at multiple levels of an organization. Therefore, the term innovation performance is connected with OL practices [19].

In addition, OL is understood as the organization ability to absorb and transform new knowledge and apply it to the development of new products with competitive advantage and high production speed [32]. The foundation of organizational knowledge through which new knowledge is gained from existing knowledge (OL) stimulates organizational innovation [17, 33]. Innovation also needs the transformation and exploitation of existing knowledge [34].

Recently, some empirical studies have started to demonstrate that an OL capability has a positive effect on the organizational innovation performance [6, 32–34]. According to these studies, innovation requires that employees share information and knowledge and it occurs when employees share their knowledge with the organization and when this shared knowledge generates new and common insights. In short, OL allows the development, acquisition, transformation and exploitation of new knowledge that enhances innovation [34]. Thus, the hypothesized relation between OL and innovation is stated as follows:

H3: OL positively affects innovation.

The aforementioned hypotheses can be illustrated with Fig. 1.

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Fig.1

Research model.

3.1 Data collection and sample

This study employs a questionnaire survey method for testing the hypotheses and data were collected from electricity distribution companies of Isfahan province. The participants were executives and employees whose career were related to knowledge repositories of those companies. A total number of 155 employee included in the research and a number of 112 of them were proposed as sample according to Cochran’s sampling techniques. After excluding questionnaires with missing data, 100 usable questionnaires (89 percent) obtained for final analysis. The summary of demographic information is shown in Table 1.

The constructs utilized in the study are measured by a five-point Likert scale. Respondents were asked to indicate their agreement to these statements on five-point Likert scale with anchors ranging from “1 = disagree strongly” to “5 = strongly agree”. All constructs are measured using items based on the literature.

3.3 Data analysis

Data analysis was completed with Smart PLS 3.2 software [35] through a two-stage PLS-SEM technique. At the first stage, the measurement model was examined for construct validity and reliability whereas in the second stage, the structural model and by implication the research hypotheses were tested (Fig. 2). The use of PLS-SEM technique derives mainly from its robustness with small and medium samples and it suitability for making predictions with non-normal data [35]. In addition, it has been noted that the PLS-SEM procedure is the most appropriate for exploratory-confirmatory studies because it is the suitable SEM technique for making predictions [35]. PLS-SEM technique is therefore helpful for building and testing causal theory. Since a sample of medium size was employed for the purpose of conducting exploratory-confirmatory analyses leading to the testing of a causal theory in this paper, the PLS-SEM was considered as the most suitable technique that will guarantee the stability of the model estimation. Additionally, since priority was placed on prediction rather than covariation, PLS-SEM is the most appropriate [35].

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Fig.2

Structural model analysis.

Of particular relevance to this study, PLS-SEM incorporates both formative and reflective constructs as well as Hierarchical Component Models (HCMs). In HCMs a general construct is defined that consists of several sub-dimensions. Thus, while the more general construct becomes part of the structural model, additional information can be found on the sub-dimensions by using a second-order model. By using HCMs, we are able to reduce the number of relations in the structural model, making the PLS path model more parsimonious and easier to grasp [35]. Since all constructs in our structural model were multidimensional, they were operationalized as ‘reflective–formative’ higher-order components. Each dimension was measured by its reflective indicators, while their relations with the constructs were indicated as formative. Finally, in establishing the final HCM measurement model, we followed the ‘repeated indicators approach’ combined with the ‘two-step approach’.