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Examining HR Architecture Snell & Lepak

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Journal of Management 2002 28(4) 517543

Examining the Human Resource Architecture: The Relationships Among Human Capital, Employment, and Human Resource CongurationsDavid P. LepakDepartment of Management and Organization, Robert H. Smith School of Business, University of Maryland, 3341 Van Munching Hall, College Park, MD 20742-1815, USA

Scott A. SnellDepartment of Management and Organization, Smeal College of Business Administration, The Pennsylvania State University, 417 Beam B.A.B., University Park, PA 16802, USA Received 8 May 2000; received in revised form 16 May 2001; accepted 14 August 2001

In this study we examined the characteristics of human capital as well as the human resource (HR) congurations used for employees in four different employment modes (knowledge-based employment, job-based employment, contract work, and alliance/partnership). Results from 148 rms show that the strategic value and uniqueness of human capital differs across these four employment modes. In addition, each employment mode is associated with a particular type of HR conguration (commitment-based, productivity-based, compliance-based, and collaborative). 2002 Elsevier Science Inc. All rights reserved.

Research in strategic human resource management (SHRM) has been central in shifting our attention toward rm-level issues related to managing people. Rather than focusing on individual jobs and the employees that occupy them, SHRM researchers have established a broader perspective that is oriented toward managing the workforce as a whole. And instead of focusing on particular human resource (HR) practices that are used independently or in isolation, SHRM researchers look more broadly at bundles of HR practices that are implemented in combination.

Corresponding author. Tel.: +1-301-405-8144; fax: +1-301-314-8787. E-mail address: [email protected] (D.P. Lepak). 0149-2063/02/$ see front matter 2002 Elsevier Science Inc. All rights reserved. PII: S 0 1 4 9 - 2 0 6 3 ( 0 2 ) 0 0 1 4 2 - 3


D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517543

In order to study strategic HR at an organizational level, however, researchers have tended to aggregateboth conceptually and empiricallyall employees as though they were managed with a single (or at least dominant) HR conguration. Snell and Dean, for example, originally analyzed the HR practices of different employee groups in advanced manufacturing environments, but later combined the data into a single prole (Snell & Dean, 1992, 1994; Youndt, Snell, Dean & Lepak, 1996). Similarly, Huselid (1995) originally collected separate HR data on exempt and non-exempt employees, but combined it using weighted averages in order to portray one prole. While such aggregation aids parsimony, we would argue that doing so masks potentially important aspects of how different employee groups are managed strategically. In one of the earliest papers on strategic HR, Miles and Snow (1984) noted that while certain HR practices might be centralized or standardized for all employees, others might be customized to match the specic requirements of particular employee groups. These differences are no less important; they are, in fact, crucial aspects of a rms strategic approach to HR.Two streams of research are particularly salient here. In the context of internal vs. external employment, Davis-Blake and Uzzi (1993), Matusik and Hill (1998), Mangum, Mayall and Nelson (1985), Osterman (1987), and others have found that rms use different modes of employment for strategic reasons. Similarly, in the context of psychological contracts, Rousseau (1995), Tsui, Pearce and others have shown that rms establish different employment relationships with employeesand modify the scope of HR investmentsdepending on their expected contribution to the rm. Building on this, Lepak and Snell (1999) argued that, . . . it may be inappropriate to simplify the nature of human capital investments and suggest that there exists a single optimal HR architecture for managing all employees (p. 32). As different groups of employees possess skills that vary in importance to a rms competitiveness, the HR practices used to manage them are likely to vary (Jackson, Schuler & Rivero, 1989). Although we know that different employment modes exist, empirical examination of HR systems at this employment group level of analysis remains limited. The purpose of this study is to address these issues by focusing on HR systems used for employees in different employment modes. Following Lepak and Snell (1999), we frame our investigation by distinguishing among four types of employment: knowledge work, job-based employment, contract work, and alliance/partnerships. We then differentiate among these employment modes by examining the strategic value and uniqueness of human capital embodied within each as well as the HR congurations used to manage them.

Theory and Hypotheses We begin our discussion by recognizing that rms rely upon a variety of different modes of employment. Osterman (1987), for example, examined differences among industrial, salaried, craft, and secondary employment subsystems in rms. More recently, researchers such as Matusik and Hill (1998), Rousseau (1995), Tsui et al. (1995) have studied differences in employment relationships that range from long-term relationships with core employees to short-term exchanges with external workers and other forms of contract labor.

D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517543


Related, there is a fair amount of research that focuses on the choice between internalization and externalization of employment. For example, Baron, Davis-Blake and Bielby (1986) found that choices about employment modes are frequently driven by differences in employee skills (e.g., rm-specicity), occupational differentiation, technology, and the like. Others have argued that differences represent, among other things, differences in their human capital (i.e., knowledge, skills, and abilities that have economic value to the rm) (Davis-Blake & Uzzi, 1993; Stewart, 1997). As noted by Mangum, Mayall, and Nelson, Many employers carefully select a core group of employees, invest in them, and take elaborate measures to reduce their turnover and maintain their attachment to the rm. Many of these same employers, however, also maintain a peripheral group of employees from whom they prefer to remain relatively detached, even at the cost of high turnover, and to whom they make few commitments. (1985: 599) In order to integrate this research and link it more broadly to strategy and HR, Lepak and Snell (1999) argued that differences in employment are likely to reect differences in human capital that would then be accompanied by variations in the HR congurations used to manage employees. Lepak and Snell (1999) focused on the strategic value and uniqueness of human capital as principle drivers of employment modes and HR congurations. The strategic value of human capital refers to its potential to improve the efciency and effectiveness of the rm, exploit market opportunities, and/or neutralize potential threats (Barney, 1991; Ulrich & Lake, 1991). Theorists such as Barney (1991) and Quinn (1992) suggest that as the strategic value of human capital increases, so too does the likelihood that rms will employ it internally. The uniqueness of human capital, on the other hand, refers to the degree to which it is rare, specialized and, in the extreme, rm-specic (Barney, 1991; Williamson, 1975). Human capital that is not readily available in the labor market, and is not easily duplicated by other rms, provides a potential source of competitive advantage (Snell, Youndt & Wright, 1996). Transaction-costs theory suggests that rm-specic human capital increases information asymmetry, thereby creating strong economic incentives to employ it internally (cf., Williamson, 1975). Human capital theory (e.g., Becker, 1964) posits that rms are more likely to invest in education, training, and development for skills when they are not transferable. Individuals are expected to make their own investments in generic (transferable) skills, or defray the rms costs through lower wages. Firms are viewed as being more likely to acquire generic human capital externally by paying the market wage for labor (Schultz, 1961; Wallace & Fay, 1988). While this distinction between make and buy is perhaps clearest for internal employment, Matusik and Hill (1998) suggest that rms invest more in developing and improving relationships with external workers in cases where their partnership focuses on creating and transferring private knowledge. Development of unique human capital is often path-dependent (Barney, 1991; Itami, 1987) and may require tacit knowledge that is created in situ (Polyani, 1967; Williamson, 1975). Because of this, it likely needs to be developed and nurtured over time. If we juxtapose the dimensions of strategic value and uniqueness (see Figure 1), we derive a model adapted from Lepak and Snell (1999) of the relationships between human capital characteristics and employment modes.


D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517543

Figure 1. Human capital characteristics and employment modes (adapted from Lepak and Snell (1999)).

Human Capital and Employment Knowledge-based employment. Lepak and Snell (1999) argued that human capital in quadrant 1 is most likely to be viewed as core to the rm. Because of their value, these employees are able to contribute to a rms strategic objectives. When human capital is both valuable and unique, it represents the knowledge base around which rms are most likely to build their strategies (Snow & Snell, 1993; Stewart, 1997). These workers are those most likely to represent a rms knowledge workersthose people who use their heads mo

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