THE INFLUENCE OF HUMAN RESOURCE MANAGEMENT SYSTEMS ON INNOVATION: EVIDENCE FROM IRISH MANUFACTURING AND SERVICE FIRMS

The ability of firms to maximise their innovative potential is fundamental to economic growth. The successful implementation of human resource management (HRM) practices is important for firm performance, and there is a growing understanding of the benefits to firms when HRM practices are applied together. We investigate if HRM practices are significantly more effective when implemented as ‘bundles’ or ‘systems’ of complementarities than when they are implemented individually in Irish manufacturing and service firms. The National Workplace Survey (2009a), a dataset rich with information on HRM practices at the firm level, is employed. HRM bundles relating to performance management and appraisal, knowledge sharing and involvement and empowerment in decision-making are all positively associated with innovation in manufacturing and service firms, and bundles of flexible employment contracts practices positively influence innovation in service firms. In summary, HRM practices when applied together, rather than in isolation, are important for firm innovation.