ENHANCING ORGANIZATIONAL PERFORMANCE OF MALAYSIAN SMEs THROUGH HUMAN RESOURCE MANAGEMENT (HRM) PRACTICES AND ORGANIZATIONAL INNOVATIVE CAPABILITY: Proposed Conceptual Framework

From a different point of view, former studies have shown that HRM practices are the crucial antecedents to accelerate innovation activities and performance (Child, 1972; Jimenez-Jimenez & Sanz-Valle, 2005; Kok & Hartog, 2006; Lau & Ngo, 2004; Mavondo et al., 2005; Shipton et al., 2005). They are among the most accepted and widely-used antecedents in previous studies. Apparently, the competitive environment of business needs a firm to be proactive in their HRM practices, and it leads to the emergence of new inventions and ideas (Jimenez-Jimenez & Sanz-Valle, 2008; Shipton et al., 2005). The advantages of managing human resources give opportunities to attract, develop, motivate, and retain the employees to achieve superior performance (Jackson & Schuler, 1995). Consequently, the innovation activities of the organization can be considered as a catalyst to enhance organizational performance (Jimenez-Jimenez & Sanz-Valle, 2008; Vincent et al., 2004), and thus indicate the fact that innovation might be a mechanism that provides organizations a competitive advantage in the marketplace through their unique resources (Barney, 1991), namely, HRM practices. However, there are very few studies that associate innovation with both determinants and outcomes of innovation (Vincent et al., 2004), and to the researcher’s knowledge, a few studies have examined an organizational innovative capability as the main mechanism through which the benefits of HRM practice will enhance organizational performance. Therefore, this study will confirm how the implementation of HRM practices affect the organizational performance, with the organizational innovative capability as the intermediate variable. Accordingly, Kok and Hartog, in their findings proposed to introduce innovativeness as an intermediary in the relationship between HRM practices and performance. Hence, the final proposition is: Electronic Payday Loans Online
P4 Organizational innovative capability will mediate the relationship between HRM practices (training and development, reward system, performance appraisal, staffing and communication and information sharing) and organizational performance of SMEs.
Based on the preceding discussion of the literature, the following is a proposed conceptual framework (see figure 1). The framework indicates that HRM practices and organizational innovative capability are associated with organizational performance as well as a mediator role of organizational innovative capability in the relationship between HRM practices and organizational performance. The relationship is based on the resource-based view that suggests that organizational performance is influenced by its organizational resources and capabilities. Firms are able to achieve better performance through the effective use of their organizational resources and capabilities compared to their competitors. Organizational innovative capability is a strategic capability that can affect the organizational performance.

Figure-1

Figure 1 PROPOSED CONCEPTUAL FRAMEWORK