Can HRM alleviate the negative effects of the resource curse on firms? Evidence from Brunei

Abstract

Purpose: The resource curse literature suggests that firms operating in non-oil and gas industries in petrostates face considerable challenges in securing competitiveness and sustaining themselves. Based on a firm level survey within a micro-petrostate, Brunei, this study explores the relationship between specific HR policies and practices and organisational performance, analysing, comparing and contrasting oil and gas with non-oil and gas sectors, and draws out the comparative lessons for understanding the potential and performance consequences of HR interventions in resource centred national economies.Design/methodology/approach: Data for this study was generated from a primary survey administered amongst the HR Directors in companies operating in all sectors in Brunei. A statistically representative sample size of 214 was selected. Findings:We confirmed that firms in the oil and gas sector indeed performed better than other sectors. However, we found that the negative effects associated with operating outside of oil and gas could be mitigated through strategic choices: the strategic involvement of HR directors in the affairs of the company reduced employee turnover and added positively to financial returns across sectors. Practical implications:Developing and enhancing the role of people management is still very much easier than bringing about structural institutional reforms: the study confirms that at least part of the solution to contextual difficulties lies within, and that the firm level consequences of the resource curse can be ameliorated through strategic choice. Originality/value:The nature of the present investigation is one of few studies conducted in South East Asia in general and in the context of Brunei in particular. It also contributes to our understanding whether HR interventions can ameliorate the challenges of operating in a nonresource sector in a resource rich country.

Human resource management in multinational and domestic enterprises: A comparative institutional analysis in Southeast Asia

“…This study was conducted in Brunei Darussalam, a Southeast Asian country bordering the South China Sea and Malaysia. Oil and gas production accounts for the majority of the national income of the country and has dominated the economy since the initial breakthrough in 1963 (Darwish, Mohamed, Wood, Singh, & Fleming, ; Mohamed, Singh, Irani, & Darwish, ). However, economic diversification is one of the principal objectives of Brunei in acknowledgment of the fact that oil and gas are both finite resources and to overcome any negative effects of a possible “resource curse” (Auty, ).…”

Resource Cursed Economies and HR Practices

“…Literature available on the resource curse highlights resource-rich regions as most predominantly characterised by a less stable macroeconomic performance when contrasted alongside those with a lesser abundance of mineral riches (Auty 1993;Alexeev and Conrad 2009;Anderson and Ross 2010;Bhattacharya and Hodler 2010). This may be owing to the inclination of currencies to be over-valued; meaning that there is a lesser degree of competitiveness in other sectors, with investors instead focusing on achieving easy returns from minerals in addition to ensuring profitable contracts from governments offering royalty enrichments (Darwish et al 2017). Subsequently, the latter demonstrate fewer incentives when it comes to motivating the improvements in of institutions and linked policies geared towards achieving more wide-ranging economic development or the encouragement and support of (developmental) initiatives that may be viewed as problematic to support without ongoing financial support, meaning across-sector performance may be inconsistent and unstable (Collier 2010;Ross 2012).…”

“…Secondarily, in the State sector, lucrative protected job opportunities, as well as oil and gas organisations aiming to achieve authorities' goodwill, results in significant degrees of employee turnover, which subsequently induces a drain of talent from other economic areas (Mellahi and Wood 2002;Mellahi 2007). In a comparable vein, when considering that oil and gas donations could potentially increase political stakes (Bhattacharya and Hodler 2010), petro-state governments commonly aim to further develop employment in an effort to encourage stability; subsequently, this could mean that human resources in other economic fields are stripped, which ultimately causes difficulties for employers in the latter to achieve productivity or implement discipline (Darwish et al 2017). Essentially, as opposed to dealing with efforts to improve productivity or work in other areas, staff may then look at opting out and instead direct their attention towards more substantial welfare provisions or, alternatively, more favourable sheltered employment.…”

“…Brunei may be described as a quickly developing micro-petro-state; in much the same way as other regions of a comparable status, Brunei may be recognised by its generally strong presence of foreign multinationals and its significant number of expatriate workers, both in the skilled professionals arena and that of semi-skilled and unskilled (Darwish et al 2017). It is possible that professional expatriates could come to face a number of problems when it comes to adapting to the local environments and its cultures; however, they offer unique capabilities, insights, and skills (Singh et al 2019).…”

“…In the case of Brunei, net migration rate is recognised as 2.4 migrant(s)/1000 in 2015 (CIA 2016). Moreover, an estimated 200,000 people are identified making up the employee base -both unemployed and employed; it was established that, in regard to the labour force participation rate, this was 68%, with an estimated 55,000 employed by the public sector whereas more than 91,000 are employed by the private sector; in consideration to those who are employed, the percentage making up Brunei citizens is 53.7% whereas 46.3% are recognised as temporary residents (Darwish et al 2017). Notably, the government of Brunei has stated that, in consideration to the requirement for greater diversity across the economy, a much larger labour force would be required; nonetheless, it is recognised that migrant workers need to enable diversification plans owing to the fact that the key Bruneian local labour force shows a penchant for roles in the public sector as a result of such work providing both stability and security (Tasie 2009).…”