The links between HRM practices and organizational performance have received considerable research attention as significant contributors to sustained competitive advantage. However, the processes that link HRM practices and organizational performance are not fully understood. This study examines the relationships between skill-enhancing, motivation-enhancing and opportunity-enhancing bundles of practices, innovation and organizational performance, and looks at the mediating effect of innovation over time at the workplace level. The results indicate that the temporal pathway from skill-enhancing practices to innovation to organizational performance is positive and significant even after controlling for reverse causality. Strategic activity is also explored and is found to be a significant moderator. This is an indication of the importance of aligning strategy with HRM practices and innovation to achieve improved organizational performance outcomes.

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This study makes a theoretical contribution by taking a persistent characteristics approach to explore the relationship between human resource management practices and innovation outcomes at the workplace-level. Innovators are categorized by the degree to which they are successful at achieving new product/processes and/or improved product/processes outcomes year over year. The human resource management practices explored include the use of highly qualified personnel, and skill-enhancing, motivation-enhancing, and opportunity-enhancing sub-bundles of practices. Further, work organization practices are also explored including integration and collaboration, introduction of organizational changes, and the use of technology. The findings indicate workplaces that set strategic goals related to innovation, that motivate their employees, that create opportunity for their employees to act, and that make greater use of technology tend to be more persistent innovators. These findings can contribute to the development of government policy, which seeks to improve innovation performance outcomes.

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