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doi: 10.1111/1748-8583.12137
Strategic human resource management, human

capital and competitive advantage: is the field
going in circles?
John E. Delery and Dorothea Roumpi, Department of Management, Sam M. Walton
College of Business, University of Arkansas
Human Resource Management Journal, Vol 27, no 1, 2017, pages 121
The resource-based view (RBV) of the firm has been consistently used as a backdrop in strategic human
resource management (SHRM) research and has the potential to bridge the micromacro divide. The tension
between the SHRM and the strategic human capital literature, however, signifies that RBV has not reached its
potential. In this paper, we begin with a brief review of the conceptual logic linking human resource
management (HRM) practices and firm outcomes that aim at highlighting the different treatment of RBV in
the SHRM and strategic human capital literatures. We then propose a conceptual model that suggests that
HRM practices are not simple levers that enable firms to create sustainable competitive advantage, as most
of the strategic human capital research postulates. On the contrary, we argue that HRM practices can
contribute to a firms sustainable competitive advantage not only by enhancing employees ability, and offering
motivation and opportunities, but also by shaping supply-side and demand-side mobility constraints.
Contact: John E. Delery, Department of Management, Sam M. Walton College of Business,
University of Arkansas, Fayetteville, AR 72701, USA. Email: jdelery@walton.uark.edu
Keywords: strategic HRM; human resource strategy; human capital theory; organisational
performance; resource-based view
INTRODUCTION
T
he resource-based view (RBV) (Penrose, 1959; Wernerfelt, 1984; Barney, 1991)
arguably constitutes one of the most popular theoretical frameworks in the
management literature. RBV, suggesting that sustainable competitive advantage can
be achieved through valuable, rare, imperfectly imitable and non-substitutable resources
(Barney, 1991), is especially appealing for both human resource management (HRM),
particularly strategic human resource management (SHRM) and strategy scholars. Thus,
RBV has the potential to narrow the micromacro divide (e.g. Wright et al., 2001; Nyberg
and Wright, 2015). The extent to which RBV has managed to bridge this gap is, however,
questionable.
On the one hand, SHRM scholars argue that HRM practices can be a source of sustainable
competitive advantage (e.g. Pfeffer, 1994; Becker and Gerhart, 1996; Boxall, 1996). HRM
practices, when viewed as systems of interrelated and internally consistent practices (MacDuffie,
1995: 198), can be unique, causally ambiguous, synergistic and difficult to imitate (Lado and
Wilson, 1994). In line with these conceptual arguments and despite some substantive
(Kaufman, 2010) and methodological concerns (Cappelli and Neumark, 2001), the SHRM
research has provided compelling evidence for the relationship between HRM practices and
various firm-level outcomes (e.g. Arthur, 1994; Huselid, 1995; MacDuffie, 1995; Delery and
Doty, 1996; Ichniowski et al., 1997; Delery, 1998; Boselie et al., 2001; Combs et al., 2006).
HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 27, NO 1, 2017 1
2017 John Wiley & Sons Ltd

Please cite this article in press as: Delery, J.E. and Roumpi, D. (2017) Strategic human resource management, human capital and competitive advantage:
is the field going in circles?. Human Resource Management Journal 27: 1, 121
SHRM and HC: is the field going in circles?
On the other hand, advocates of the human capital advantage (Boxall, 1998) postulate that
it is virtually impossible for HR practices to be rare, inimitable and non-substitutable (Wright
et al., 1994: 318). Others contend that the evidence for the impact of HRM practice on workforce
behaviours and skills is inadequate. For instance, Wright et al. argue that even though RBV
constitutes an appealing underlying rationale for the SHRM literature, as yet no study has
demonstrated anything close to a full causal model through which HR practices are purported
to impact firm performance (2001: 709). Thus, HRM practices are treated in most of the human
capital literature, at best, as simple levers in the relationship between human capital resources
and sustainable competitive advantage.
With the tension between the SHRM and human capital camps in mind, the purpose of
this paper is twofold. We begin with a brief review of the conceptual logic linking HRM
practices and firm outcomes. The intent is not to present a comprehensive review but rather
to emphasise some of the major perspectives over the past three decades regarding what has
been termed as the HRM practices-firm outcomes black box (Becker and Gerhart, 1996;
Guest, 1997; Wright and Gardner, 2003; Wall and Wood, 2005). The ultimate goal of this
journey through the SHRM conceptual logic is to highlight the debate between SHRM and
strategic human capital research regarding the treatment of RBV. Acknowledging the
strategic human capital literature has made important steps forward in theory development
by explicating the differences between basic concepts (e.g. human capital and human capital
resources) and offering complex models of human capital resources (e.g. Ployhart and
Moliterno, 2011; Brymer et al., 2014; Ployhart et al., 2014), we emphasise that the inability
to test these complex human capital models, the broader measurement issues and the
imperfections of the labour market (e.g. Campbell et al., 2012b) constitute important
drawbacks in this research stream. We further argue that, given the criticality of the
management of human capital resources in creating and capturing value (e.g. Wright et al.,
1994; Sirmon et al., 2007; Wright and McMahan, 2011; Nyberg et al., 2014), the human capital
stream of research brings us back to the importance of HRM practices and systems in
generating and sustaining competitive advantage.
The second objective of this paper is to add to this ongoing debate between SHRM and
human capital scholars by arguing that HRM practices are not simple levers that enable
firms to generate sustainable competitive advantage. Drawing on Campbell et al. (2012b)
framework and the abilitymotivationopportunity (AMO) model (Appelbaum et al., 2000;
Purcell and Hutchinson, 2007), we offer a conceptual model that sheds light on how high-
performance work practices (HPWPs) not only enhance employees knowledge, skills,
abilities and other characteristics (KSAOs), and offer motivation and opportunities to
leverage these resources, but also contribute in shaping the supply-side and demand-side
mobility constraints thought to enable firms to generate competitive advantage through
these resources. Thus, we propose that firms can gain competitive advantage only through
the interplay between human capital resources and HRM practices each shaping and
bringing about the other.
REVIEW OF THE CONCEPTUAL LOGIC
This review of the conceptual logic linking HRM practices and firm outcomes focuses on
identifying the major perspectives, namely, early SHRM, behavioural perspective, AMO and
RBV that have dominated the relevant literature. Even though we discuss these four rationales
as distinct from one another and in a specific order, in reality, the evolution of the SHRM
2 HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 27, NO 1, 2017
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John E. Delery and Dorothea Roumpi
conceptual logic is more complex: their boundaries are not always clear, their development is
more simultaneous rather than sequential and they are complementary rather than conflicting.
Early strategic human resource management

During the late 1970s and early 1980s, the conceptual foundations of SHRM emerged. Dyer
(1984), Fombrun et al. (1984), Kochan et al. (1986) and Walker (1980) were among the pioneering
scholars who linked HRM and business strategy. For instance, Dyer (1984) presented a research
agenda that explicitly acknowledged the role of business strategy and HRM systems in
influencing firm outcomes. This early work triggered seminal empirical studies (e.g. Arthur,
1992, 1994; Huselid, 1995; MacDuffie, 1995; Delery and Doty, 1996) that provided evidence
for the HRMfirm performance relationship. This work, however, led to questions regarding
the underlying logic of this relationship, shifting the attention to the mediating mechanisms
of the HRM-performance black box (Boxall and Purcell, 2008). This black box constitutes
the underlying driving force for the theoretical and empirical research that followed.
Behavioural perspective
One of the first efforts to describe the black box of the HRMperformance relationship was the
behavioural perspective (e.g. Schuler and Jackson, 1987; Jackson et al., 1989). The behavioural
perspective, grounded in contingency theory (Fisher, 1989), suggests employee behaviour as
the mediating mechanism between the HRM practices and performance. HRM practices are
viewed as a firms most direct means of eliciting and sustaining desired employee behaviours,
such as task-related behaviour and organisational citizenship behaviours (Coff and
Kryscynski, 2011).
The work of Schuler and Jackson (1987) pushed research beyond the universalistic approach
which suggests there are best practices that yield superior organisational outcomes across
situations (Delery and Doty, 1996). This research stream (e.g. Lengnick-Hall and Lengnick-Hall,
1988; Gomez-Mejia and Balkin, 1992), on the contrary, adopts a contingency approach (Delery
and Doty, 1996). This approach focuses on external or vertical fit (Baird and Meshoulam,
1988; Wright and McMahan, 1992) highlighting the importance of alignment between HRM
practices and the broader identity and characteristics of the firm, including its strategy (Boxall,
1992). As an attempt to explain how specific HRM activities can elicit strategically desired
employee behaviours, the AMO framework emerged.
Abilitymotivationopportunity model
Extending the behavioural approach and building on expectancy theory (Vroom, 1964; Lawler,
1971), the AMO model (Appelbaum et al., 2000; Purcell and Hutchinson, 2007) evolved as an
effort to better explicate how HRM practices elicit desired outcomes. This model proposes that
the relationship between HRM practices and employee-level and firm-level outcomes is
mediated by the direct effect these practices have on employees abilities, motivation and
opportunities.
An important contribution of the AMO model is that it emphasises the need to look beyond
vertical fit. The systems approach that emerged suggests that it is the appropriate combination
of different HRM practices rather than individual practices that can ensure the enhancement of
all three components of the AMO model and ultimately lead to high employee or workforce
performance. At the core of this rationale lies the concept of internal or horizontal fit (Baird
and Meshoulam, 1988; Wright and McMahan, 1992) highlighting the significance of fit and
interplay among HRM practices (Wright and McMahan, 1992; Delery, 1998; Boxall and Purcell,

2000). This line of research does not necessarily disregard the importance of vertical fit but
usually adopts a configurational approach that emphasises the need for both horizontal and
vertical fit (Delery and Doty, 1996).
Along these lines, MacDuffie (1995) proposed the notion of HRM bundles and
demonstrated empirically that systems of HRM practices can interact in complex ways to lead
to superior performance. Extending this concept, Becker et al. emphasised that firms should
avoid deadly combinations [HRM practices that in isolation lead to beneficial firm outcomes
but when taken as a group are a recipe for disaster (1997: 43)] and aim for powerful
connections (HRM practices with synergies or complementarities). Ichniowski et al. (1997), in
a sample of steel finishing lines, used cluster analysis to group HRM practices and
demonstrated that plants using an innovative HRM system (including practices such as
flexible job assignments and incentive pay) were leading in terms of productivity and product
quality. More recently, Delery and Gupta (2016) conducted a more direct examination of the
systems perspective. The authors, on the basis of theory and comparing the results from
different methodological approaches, found that ability-enhancing, motivation-enhancing
and opportunity-enhancing HRM practices interact in an intricate manner to influence
organisational effectiveness. Thus, there seems to be strong support that AMO helps explain
establishment effectiveness. Given, however, that the ultimate goal of the SHRM literature is
to link HRM practices with firm-level outcomes, SHRM researchers turned to strategy
literature for conceptual rationales that would legitimise the macro-level nature of SHRM.
RBV emerged as a conceptual approach that has the potential to support SHRM in its attempt
to bridge the micromacro divide.
Resource-based view
Resource-based view (Penrose, 1959; Wernerfelt, 1984; Barney, 1991) has been consistently
used, explicitly or implicitly, as a backdrop in SHRM and strategy research. However, RBV is
treated differently by HRM and strategy researchers (e.g. Nyberg and Wright, 2015). Thus,
despite its potential to narrow the gap between the micro and macro research, RBV has
triggered an ongoing debate: Are the HRM practices or the human capital resources, the
resources that have the potential to generate sustainable competitive advantage?
According to the first line of RBV research, HRM activities, when appropriately designed and
implemented, have the potential to generate and maintain competitive advantage (Lado and
Wilson, 1994; Pfeffer, 1994; Becker and Gerhart, 1996). MacDuffie and Kochan (1995), for
instance, found that higher investments in training were associated with higher levels of
productivity. Snell and Dean (1992) showed that firms investing in selective staffing,
performance appraisals for developmental purposes and intensive training are more likely to
successfully implement sophisticated new technological systems. Overall, it can be inferred
from the relevant literature (e.g. Lado and Wilson, 1994; Becker and Gerhart, 1996) that
competitive advantage may emerge when HRM activities focus on developing firm-specific
skills (less transferable than generic skills), the HRM function invests in team building (team
outcomes are less imitable and transferable due to causal ambiguity and social complexity),
and HRM activities are combined in highly integrated and coherent bundles (harder to imitate).
Drawing on Ostermans (1987) differentiation of the workforce rationale, several authors
(e.g. Delery and Shaw, 2001; Becker et al., 2009) argued that firms should treat different groups
of their workforce with different sets of HRM practices. Lepak and Snell (1999) suggested that
jobs can be differentiated on the basis of value and uniqueness and each of the emergent job
families should be treated with the corresponding employment mode. It has also been

suggested that firms should pay particular attention to employees possessing core competencies
or strategic capabilities, which are conceptualised as the resources leveraged to achieve strategic
objectives (Becker and Huselid, 2006), because the better management of the core workforce is
more likely to have the greatest impact on the firms value creation (Delery and Shaw, 2001).
The second RBV-based stream of literature advocates that human capital resources
constitute the main source of sustainable competitive advantage. Based on the argument that
HRM practices can be replicated over time by competitors (Wright et al., 1994; Chadwick and
Dabu, 2009), human capital resources, via their unique combinations (Ployhart et al., 2014),
have the potential to generate sustainable competitive advantage (Nyberg et al., 2014). The
underlying assumption is that firm-specificity constrains the mobility of the valued human
capital (Williamson, 1988; Hatch and Dyer, 2004). Some scholars (Barney and Wright, 1998;
Campbell et al., 2012b), however, have highlighted some concerns regarding this assumption.
In line with these concerns, Campbell et al. (2012b) attempted a more in-depth analysis of the
workings of the labour market and the conditions under which human capital leads to
competitive advantage. On the demand-side, the authors, in arguments consistent with Barney
and Wright (1998), suggest that generic human capital, under specific market conditions, can
also generate competitive advantage. Given that employees usually possess both firm-specific
and general human capital (Lazear, 2009), viewing firm specificity as an effective demand-side
mobility constraint is a myopic approach because competitors might perceive as valuable what
the focal firm considers as generic (Campbell et al., 2012b). In addition, the labour market
information imperfections (Chiang and Chiang, 1990) might lead to undervaluing general or
overvaluing firm-specific human capital. On the supply-side, Campbell et al. (2012b) indicated
two important imperfections. First, mobility costs go above and beyond search, bargaining and
switching costs; idiosyncratic preferences (e.g. geographic preferences and non-pecuniary
rewards) and legal restrictions are also included in the costs employees encounter when
switching employers. Second, employees, due to information asymmetries, are not always able
to appropriately estimate their employability (value in the external labour market).
Another important concern about much of the human capital literature is the implicit
assumption that individual KSAOs are automatically translated into positive firm outcomes
(Barnes et al., 2016). Human capital only has the potential to generate sustainable competitive
advantage it has to be leveraged appropriately to do so (Wright and McMahan, 2011; Nyberg
et al., 2014). HRM practices can create and leverage human capital resources. As Wright et al.
noted, sustained competitive advantage is achieved only by the interaction between the human
capital pool and the HR practices (1994: 320). The human capital approach, consequently, brings
us back to square one the relationship between HRM practices and performance.
Following the calls for a more refined approach to the HRM-firm performance relationship,
in the next section, we explore a model that builds upon the AMO model and the framework of
Campbell et al. (2012b). The objective of this model is not to offer new ideas in exploring the
HRM practicesfirm outcomes relationship, but rather to bridge the SHRM literature and
strategic human capital research by emphasising the criticality of HPWPs not only in
developing KSAOs, motivation and opportunities but also in building supply-side and
demand-side mobility constraints for human capital resources.
HIGH-PERFORMANCE WORK PRACTICES, HUMAN CAPITAL AND SUSTAINABLE

COMPETIVE ADVANTAGE
As the journey through the conceptual logic of SHRM revealed, current research is divided in
two streams: the organisational processes advantage (stemming from superior organisational

processes) and the human capital advantage (stemming from superior human capital
resources) (Boxall, 1998). Compelling arguments and evidence exist for both approaches.
Proponents of the organisational processes advantage have provided evidence that HPWPs
may, when aligned with the overall strategy and targeted towards the core workforce, generate
the KSAOs, motivation and opportunity required for achieving superior firm outcomes (e.g.
Arthur, 1994; Huselid, 1995; MacDuffie, 1995; Delery and Doty, 1996). An important deficit of
this research, however, is the lack of consensus regarding which practices should be considered
as HPWPs (Combs et al., 2006; Kepes and Delery, 2007).
The human capital perspective, resting on the assertion that HPWPs can be replicated by
competitors over time (Wright et al., 1994; Chadwick and Dabu, 2009), suggests that the kernel
of sustainable competitive advantage is the human capital resources. Human capital is not only
considered as the source of sustainable competitive advantage simply because of its
competencies but also because of its capacity to provide solutions to managerial dilemmas,
such as the recruitment of high-quality applicants (Coff and Kryscynski, 2011). In support of
the human capital advantage perspective, the meta-analysis of Crook et al. (2011) indicates that
there is a positive relationship between human capital and firm performance (the human
capital-global firm performance path coefficient was 0.10), which is stronger for firm-specific
human capital.
The weak positive relationship between human capital and firm performance along with the
concerns regarding the effectiveness of the human capital isolating mechanisms (Campbell
et al., 2012b) make it questionable whether the human capital perspective is more informative
in explaining and predicting superior firm performance than the HPWPs perspective. In
addition, some of the arguments that human capital scholars have used seem to be inherently
flawed. For instance, if HPWPs were that easy to imitate and given the accumulating evidence
regarding the relationship between specific HRM practices and firm performance, one would
expect that by now such practices would have been adopted by all firms. However, HRM
practices are likely not as easily imitable as suggested. The complexity and the causal linkages
when looking at HRM practices as a system rather than isolated deployments make it harder
for competitors to successfully replicate them (Becker and Gerhart, 1996; Lado and Wilson,
1994). Moreover, the argument that human capital resources are inimitable and less mobile
can also be questioned. Human capital is not an organisational property (Coff, 1997; Castanias
and Helfat, 2001; Ganco et al., 2015). Employees can leave their employers at any time taking
with them their valued human capital. Even when considering human capital resources as
the outcome of social complexity, they can still be transferred. There are numerous examples
of firms poaching entire teams from their competitors (Bordwin, 1999; Agarwal et al., 2016).
More importantly, the simple possession of high-quality human capital resources would not
necessarily yield superior outcomes. Human capital resources without the HRM practices that
generate the appropriate levels of motivation and opportunities would be unable to lead to the
desired outcomes.
In concert with arguments suggesting that added value rests on the interaction between
individuals and their environment (Felin and Hesterly, 2007), we agree that a firms competitive
advantage is contingent on the combination between HRM practices and human capital
resources. However, even though the complex human capital models that have been proposed
(e.g. Ployhart et al., 2014) offer a compelling story, when giving applicable advice to managers
on how to create competitive advantage, assuming that firm leadership has free will to adopt
different strategic and practices, it comes down to what is under their control: what can firm
leaders do in order to create sustainable competitive advantage? And the answer to this

question may be found in the adoption systems of HRM practices appropriate for their
particular competitive environment: it is the HRM practices that can influence the
characteristics of a firms human capital resources and determine the extent to which these
resources will be effectively combined with other resources and ultimately used to achieve
the strategic goals of the firm. The role of HRM systems, however, does not end there. HRM
systems are also key in turning competitive advantage into sustainable competitive advantage
by influencing the workings of labour markets.
In the remainder of the paper, we briefly summarise the extant research regarding the effect
of one such systems of HRM practices, HPWPs, on human capital characteristics (Figure 1). We
then focus more extensively on the often neglected ability of firms to influence, to some extent,
the supply-side and demand-side mobility constraints for human capital through HRM
practices (Figure 2). We employ Pfeffers (1998) parsimonious list of seven HPWPs
(employment security, selective hiring, self-managed teams or teamworking, high pay
contingent on performance, extensive training, reduction of status differences and information
sharing) for illustrative purposes.
High-performance work practices and human capital characteristics

Despite the lack of consensus regarding the HRM practices that are or should be included
under the umbrella term HPWPs (Boselie et al., 2005; Kepes and Delery, 2007), there is a
common thread across the different proposed sets of practices: they address the aspects of
the AMO model (Kehoe and Wright, 2013). In other words, HRM practices that combine as
HPWPs can be viewed as ability-enhancing or skill-enhancing, motivation-enhancing and
opportunity-enhancing or empowerment-enhancing (Huselid, 1995; Combs et al., 2006;
Subramony, 2009).
First, HPWPs, such as extensive training, compensation, selective hiring and teamwork, can
have an impact on the workforces ability (Subramony, 2009), which is conceptualised as the
employees KSAOs (Delery and Shaw, 2001). By employing extensive and thorough
recruitment and selection processes, firms are able to select highly valued human capital and
through training firm-specific, and generic human capital can be enhanced (Arthur et al.,
2003; Takeuchi et al., 2007; Subramony, 2009). Less obvious but not less important are the effects
of pay and teamwork on the ability of human capital. In terms of pay, a pay-for-skill
compensation system motivates employees to engage in activities that enhance their KSAOs
(Gomez-Mejia and Balkin, 1992; Youndt et al., 1996). Additionally, consistent with the sorting
effect of pay (e.g. Cadsby et al., 2007), job candidates who believe they do not meet the
KSAOs-requirements are likely to self-select out of the process, enhancing the quality of the
applicant pool. Finally, when working in teams, employees develop social connections that
enable the exchange of ideas and perspectives and the correction of errors, which can be
considered as learning processes (Argyris and Schn, 1978; Edmondson, 1999) that enhance
employees ability and the firms knowledge creation capability (Nahapiet and Ghoshal,
1998; Smith et al., 2005).
The second aspect of the AMO model, namely, motivation, reflects the direction of the effort
that the workforce exerts (Subramony, 2009). On the basis of social exchange theory (Blau,
1964), when employees perceive that their contributions are valued, they are more likely to
reciprocate by engaging in valued behaviours. As such, high-compensation contingent on
performance, employment security and the adoption of self-managed teams can be argued to
comprise the motivation-enhancing HPWPs. The obvious link among motivation and pay for
performance is well established by a plethora of conceptual and empirical studies (e.g. Bartol

FIGURE 1 The complex relations between high-performance work practices (HPWPs) and the ability
motivationopportunity framework
FIGURE 2 The complex relations between high-performance work practices (HPWPs) and the supply-side
and demand-side mobility constraints
and Locke, 2000; Stajkovic and Luthans, 2003; Rynes et al., 2005; Peterson and Luthans, 2006).
Employment security, when valued by employees, can also increase employees motivation
(Pfeffer, 1998; Gong and Chang, 2008). Finally, inherent in the nature of self-managed teams
are the concepts of effective peer control and enhanced sense of responsibility (Pfeffer, 1998).

This context of constant peer evaluation and accountability can be argued to enhance
employees motivation.
Opportunity or empowerment, the last aspect of AMO, refers to the extent to which
employees have at their disposal all the necessary resources for completing job-relevant tasks
as well as the discretion to decide how to perform tasks (Delery and Shaw, 2001). Opportunity,
of course, does not stem only from HRM practices. Organisational structures and control
mechanisms also influence opportunity. For the purposes of this paper, we focus only on the
opportunity-enhancing HPWPs, such as sharing of information, reduction of status differences
and self-managed teams. Sharing information with employees and minimising status
differences enhance communication among employees (Pfeffer, 1998), while self-managed
teams offer autonomy to employees in terms of determining how their outcome-related tasks
will be performed (Pfeffer, 1998; Mathieu et al., 2006). Thus, these three HPWPs create an
organisational climate and describe an organisational structure that not only welcomes but
also expects employees involvement and participation in influencing work processes
and decisions, which have been shown to be associated with superior work outcomes
(Subramony, 2009).
As briefly discussed earlier, the relationship between specific HRM practices and
organisational outcomes via the enhancement of ability, motivation and opportunity is well
established, particularly at the individual employee level. What has not been sufficiently
addressed yet is how, within the context of a labour market, firms can retain their valued,
motivated and empowered human capital resources. In the following section, we take this step
by conceptually exploring the potential of HRM practices to shape supply-side and demand-
side mobility constraints.
High-performance work practices and human capital mobility constraints

The HPWPs approach and the human capital perspective, despite their differences, have a very
important deficit in common: they either ignore the workings of the labour market or they rely
on the efficiency of questionable isolating mechanisms (i.e. firm specificity). It is important,
therefore, to acknowledge, as we did previously, that human capital, unlike other resources
cannot be owned (Coff, 1997; Brymer et al., 2014). In order for an employer to utilise the
KSAOs of its workforce, a mutually agreed upon employment relationship is required
(Roth and Sotomayor, 1992). This temporally bounded employment relationship along
with the mobility of employees constitutes important barriers towards creating and sustaining
competitive advantage. Firms, however, are not defenceless against the forces of the labour
market. In order to understand how firms can guard their human capital resources, it is
important to connect and explicitly indicate how HRM practices help firms in shaping
supply-side and demand-side mobility constraints (Campbell et al., 2012b). The question
then becomes: Which HPWPs can increase the retention of the valued human capital by influencing
mobility barriers?
Supply-side mobility constraints As previously discussed, there are two main supply-side
mobility constraints (Campbell et al., 2012b): information asymmetries in the labour market,
which limit employees ability to accurately evaluate their external labour market value, and
mobility costs (i.e. search, bargaining, and switching costs, costs associated with idiosyncratic
preferences and non-pecuniary rewards and legal restrictions). Consequently, firms can retain
their valued human capital through HPWPs that minimise employees willingness to specify
their market value and shape mobility costs in such a way that switching employers will be
cost-ineffective. Before discussing which HPWPs constrain the supply-side employee mobility,

it is important to clarify two basic underlying assumptions. First, our focus is on voluntary
turnover or the quit rate. Second, as Coff and Raffiee (2015) underscored, in terms of the
workings of the labour market, employees perceptions and perceptions the market holds
regarding a firms human capital are more important than reality.
We expect that HPWPs can influence supply-side mobility constraints via two routes:
employer attractiveness and job-embeddedness. Employer attractiveness has been described
as the extent to which individuals perceive a firm as a great place to work (Chapman et al.,
2005), and it is linked with Person-Organisation (P-O) fit perceptions (Uggerslev et al.,
2012), as well as the inducements and investments that the firm offers (Tsui et al., 1997).
Job-embeddedness, conceptualised as a constellation of financial and non-financial
(psychological and social) factors (Mitchell et al., 2001; Holtom et al., 2008), has been argued
to result in lower quit rates (Crossley et al., 2007; Lee et al., 2014). Specifically,
job-embeddedness shapes a web in which the employee can be stuck. This web is shaped
via three mechanisms: links (formal and informal connections with people inside and
outside of the firm), fit (perception regarding the value and demands-needs congruence with
the focal firm) and sacrifice (psychological, social and/or material cost associated with leaving
the firm).
Undoubtedly, there are a number of constructs that we could use to explain the potential
impact of HPWPs on supply-side mobility constraints. For instance, organisational
commitment and job satisfaction are two of the most oft-cited predictors of employee
turnover intentions and actual turnover (Mathieu and Zajac, 1990; Eisenberger et al., 1997;
Meyer and Allen, 1997; Kwon et al., 2010). However, job-embeddedness, unlike
organisational commitment and job satisfaction, encapsulates not only on-the-job but also
off-the-job aspects (Mitchell et al., 2001). In a similar manner, even though employer
attractiveness can be argued to partially overlap with the concept of job-embeddedness, it
adds a unique feature: it reflects an individuals perceptions before he or she enters the
employment relationship.
Firms can influence the likelihood of turnover even before the employment relationship
begins through selective hiring processes. For instance, Huselid (1995) showed a link between
turnover and selective staffing practices (as part of a system of practices). By ensuring a high-
value congruence between the employee and the firm, as well as a fit between the requirements
and the offerings of the firm and the abilities and needs of the employees (Kristof, 1996),
employees are less likely to leave their ideal employer (Kristof-Brown et al., 2005). These
enhanced fit perceptions are also associated with employees perceptions regarding the
complementarities between their own abilities and other firm characteristics (e.g. values,
structures and other resources). Such perceptions further enhance job-embeddedness via the
belief that employees can reach their full potential only within the specific context.
Despite the mixed empirical findings regarding the relationship between training and
voluntary turnover (Gardner et al., 2011), training has the potential of increasing the
supply-side mobility barriers for human capital. As Tharenou et al. (2007) conclude in their
review of the relevant literature, training can reduce voluntary turnover when it is framed
as a positive organisational contribution to employees human capital development (262). Firm
investments in training trigger a series of employees perceptions regarding their employer and
their employability. Training signals to employees that the firm cares about them, values their
contributions and is interested in their development and continued employment (Pfeffer, 1998),
enhancing employees perceptions of employer attractiveness (Tsui et al., 1997). Participation in
employer-sponsored training and developmental activities also enhances employees
perceptions that they are investing time and effort in developing firm-specific human capital.

Employees are expected, therefore, to be more embedded with their current employer and less
willing to search for alternative employment fearing that the time and effort they have invested
in developing firm-specific KSAOs will be in vain and not appreciated by the external labour
market.
High-compensation contingent on performance is another of Pfeffers (1998) proposed
HPWPs that influences perceived employer attractiveness and job-embeddedness. Conceptual
and empirical papers (e.g. Osterman, 1987; Shaw et al., 1998; Conroy et al., 2014) have linked pay
satisfaction and turnover. Pay-for-performance, when appropriately designed and
implemented, rewards high performers who will be more satisfied and less likely to leave
(McEvoy and Cascio, 1987; Nyberg, 2010). In addition, when pay-for-performance is properly
communicated, then the pay dispersion among high-performing and low-performing
employees has a negative relationship with the turnover of high performers (Shaw and Gupta,
2007). Thus, firms offering pay-for-performance will be perceived as attractive by those
employees that firms wish to retain: high performers. The willingness of high performers to
terminate their employment relationship will be further reduced when employees perceive that
their high performance and their subsequent high compensation are embedded in the specific
firm (e.g. complementarities with other firm-specific resources).
Perceived employer attractiveness and job-embeddedness are also expected to be enhanced
by employment security. Job security, according to existing research (e.g. Arnold and Feldman,
1982; Luna-Arocas and Camps, 2007), is negatively related to turnover intentions and actual
turnover via various mediating mechanisms, such as affective commitment. As Shaw et al.
(1998) emphasised, when a firm does not offer job stability, the perceived attachment with
the firm is diminished. Inherent in the concept of job security is also the notion of the
continuance of ones income and employment in the future. Employees who decide to
explore alternative employment opportunities face the risk of losing this sense of stability
(Pfeffer, 1998).
Finally, sharing of information, teamwork (self-managed teams) and reduced status
differences are expected to increase the supply-side mobility constraints via perceptions of
embeddedness. First, sharing of information can be viewed as a signal by employees
regarding the extent to which the firm trusts them (Pfeffer, 1998), and trust, in turn, can
create a link between employees and the firm that enhances perceived job-embeddedness
(Mitchell et al., 2001). Similarly, firms emphasising teamwork and reduced status differences
are likely to create an organisational environment that nurtures the development of
social ties among employees and, ultimately, increase embeddedness perceptions and
decrease voluntary turnover (Gardner et al., 2011). These HPWPs boost the sense of common
fate which further cultivates employees attachment with their coworkers and the firm
(Pfeffer, 1998).
Proposition 1: HPWPs create supply-side mobility constraints through increasing employer

attractiveness and/or job-embeddedness perceptions.
Demand-side mobility constraints Demand-side mobility constraints are arguably less

explored, but no less important than supply-side mobility constraints. On the demand-side,
competitors show their teeth: they engage in tactics, such as aggressive recruitment and
extending unsolicited offers to their rivals employees (Rynes and Barber, 1990; Lee et al.,
2008), in order to deplete their rivals from their valued human capital (Finlay and Coverdill,
2002; Rao and Drazin, 2002). Gardner (2005), for instance, showed that, in a sample of 661
companies in the software industry, 135 attribute the loss of human capital resources to their

competitors purposeful depletion tactics. The need to establish effective demand-side mobility
constraints is further highlighted by the fact that firms have sometimes engaged in illegal anti-
poaching pacts (e.g. the case of Adobe, Apple, Google and Intel). It is highly critical, therefore,
for firms to employ legal strategies not only for ensuring that their human capital stays with
them but also for safeguarding, to the extent that it is feasible, their valued human capital from
being stolen by rival firms. HPWPs have the potential to assist firms in building demand-side
mobility constraints.
As noted in the case of the supply-side mobility barriers, the workings of the demand-side of
the labour market is highly contingent on perceptions (Coff and Raffiee, 2015). Thus, even
though firms have important limitations in directly influencing demand-side mobility
constraints, we argue they can do so by shaping the external markets perceptions regarding
their human capitals firm specificity, as well as the complementarities between their human
capital and other firm-specific resources. Firm specificity signifies that the particular human
capital is not readily deployable in other firms (Coff and Kryscynski, 2011), thus decreasing
the exchange value in the external labour market (Klein et al., 1978). As Campbell et al.
(2012b) emphasised, however, the labour market does not always hold accurate perceptions
about the nature of the human capital. From a demand-side perspective, we are not interested
in the actual firm specificity of the human capital but the perceptions that competitors hold.
Given the importance of complementarities (Teece, 1986; Prahalad and Hamel, 1990; Dess
and Shaw, 2001; Campbell et al., 2012a), we argue that the synergies between human capital
and other firm assets (e.g. organisational culture and structure, and other human capital)
and, in particular, the markets perceptions about these complementarities (Coff and Raffiee,
2015) raise demand-side mobility barriers. We propose three HPWPs that have the potential
to influence the demand-side of the labour market via the markets perceptions of human
capitals firm specificity and complementarities: teamwork, investment in extensive training
and selective hiring.
When human capital is embedded in teams not only the output is more than the sum of the
separable outputs of each cooperating resource but also it is difficult, if not impossible, to
identify the specific source of competitive advantage (Barney and Wright, 1998: 39). Studies
have indicated that when rivals have managed to attract the focal firms star performers, the
latters post-mobility performance declines (Groysberg and Lee, 2009), but this decrease in
performance is less pronounced when whole teams are poached (Groysberg et al., 2008;
Campbell et al., 2014). Poaching entire teams, while not impossible, can be particularly costly.
Thus, firms having a reputation for emphasising teamwork send the signal to the external
labour market that their superior performance is the outcome of complementarities rather than
a few star employees. These firms practices simultaneously decrease their competitors ability
to appropriately value the firm-specific and generic human capital that each employee holds.
As mentioned previously, the information asymmetry that characterises the labour market
(Campbell et al., 2012b) forces competitors to rely on signals to estimate the nature of the human
capital of the focal firm (Coff and Raffiee, 2015). Firms, therefore, by signalling that their
employees possess firm-specific human capital can shape the perceptions their competitors
hold and lessen the likelihood that their employees will be poached. In intensifying
competitors perceptions regarding the firm specificity of the focal firms human capital,
selective hiring and extensive training can be useful. Firms that engage in highly selective
hiring processes can create the reputation that they hire only employees who either have
firm-specific KSAOs or the ability to develop firm specificity. This reputation can be further
enhanced when the firm invests heavily in training. On the basis of the aforementioned
arguments, it is proposed that

Proposition 2: HPWPs create demand-side mobility constraints via the labour markets perceptions
regarding the firm specificity of human capital and the complementarities of the human capital with
other firm assets.
DISCUSSION
The so-called micromacro divide (e.g. Molloy et al., 2011) is illustrated vividly in the RBV
literature. On the one hand, the SHRM perspective argues and provides some evidence that
HPWPs are responsible for generating and leveraging the appropriate human capital resources
that lead to superior organisational outcomes (e.g. Arthur, 1994; Huselid, 1995; MacDuffie,
1995; Delery and Doty, 1996; Ichniowski et al., 1997). Thus, HRM practices and systems can
be considered the source of sustained competitive advantage (Lado and Wilson, 1994; Pfeffer,
1994; Becker and Gerhart, 1996). On the other hand, strategy scholars make compelling
arguments that HRM practices are transferable and imitable and, consequently, cannot
generate sustainable competitive advantage (Wright et al., 1994; Chadwick and Dabu, 2009).
Proponents of this perspective, acknowledging the multilevel nature of human capital within
the firm (e.g. Fulmer and Ployhart, 2014), advocate that human capital and its three isolating
mechanisms, namely, firm specificity, social complexity and causal ambiguity (e.g. Williamson,
1975; Lippman and Rumelt, 1982; Barney, 1991), enable firms to generate and sustain
competitive advantage.
In this paper, we shift the attention away from the Is it the chicken or the egg? question.
We argue that, even though the human capital perspective provides compelling arguments,
there are some inherent flaws in the underlying rationale. For instance, as discussed
previously, empirical evidence and theoretical arguments exist that question the effectiveness
of human capital isolating mechanisms. In addition, models indicating how human capital
resources are built via the combinations and complementarities among individual human
capital (e.g. Ployhart et al., 2014) are very difficult or impossible to empirically test. Finally,
the argument that HRM practices cannot be the source of competitive advantage due to their
imitable nature (e.g. Wright et al., 1994; Chadwick and Dabu, 2009) is rather tenuous
considering the variability in the HRM practices that different firms adopt and implement.
Even though this variability has been attributed by some scholars (e.g. Kaufman, 2012) to
the theoretical and empirical flaws of the SHRM literature that have only an anaemic
convincing power over practitioners, we argue that the aetiologies behind these variations
are different. It is our belief that HRM practices, or at least coherent systems of HRM
practices, meet to some extent the criteria (as summarised by Ployhart, 2012) that contribute
to a resources inimitability: social complexity (their interplay with a firms human capital
generated value), interconnectedness with other resources (the value of an HRM practice is
highly contingent on the other practices, the structure, the human capital, the culture and
other resources of the firm), causal ambiguity (competitors do not necessarily understand
the importance of the specific practices) and path dependency (their development and specific
characteristics have followed a specific trajectory over time within a specific firm). We
contend, therefore, that in bridging these two approaches it may be more practical to focus
on HRM practices and systems and the resources they create. Specifically, we suggest that
HPWPs not only build firm-specific and/or general KSAOs and provide necessary motivation
and opportunity for employees to utilise their human capital but also aid in shaping supply-
side and demand-side labour marker mobility constraints.
Our intent in this paper was to simply highlight and stimulate thinking regarding the issues
that reinforce the divide between SHRM and strategic human capital and to provide a

conceptual model that summarises the importance of HPWPs. In doing so, we made a few
assumptions. For instance, we utilised in our model Pfeffers (1998) list of seven HPWPs, but
there is no consensus in the relevant literature regarding which practices should be considered
as HPWPs (e.g. Becker and Gerhart, 1996; Kepes and Delery, 2007). Optimistically, other
researchers will build on this conceptual model and explore the role of other HRM practices.
Similarly, one could argue there are numerous other constructs, besides employer attractiveness,
job-embeddedness, firm specificity and complementarities that could be considered as the
mediating mechanisms between HPWPs and supply-side and demand-side labour marker
mobility constraints. Finally, multiple arguments can be made in support of or against the
suggested links between specific HPWPs and the mediating constructs. However, the purpose
of our model was not to offer novel or undeniable ideas but rather to demonstrate how the
strategic human capital and SHRM literatures constitute two perspectives that, in tandem, offer
a better understanding of the same phenomenon thereby paving the path for future research.
It is our conviction that the intersection between strategic human capital and SHRM research
offers fertile ground for future conceptual and empirical research. One important question that
calls for research involves the identification of the HRM practices that can actually generate the
mobility constraints necessary for firms to retain their valued human capital resources. As
Barney and Wright (1998) and Campbell et al. (2012b) have argued, regardless of the stance that
we take, human capitals potential to generate sustained competitive advantage is contingent
upon labour market dynamics. Firms, however, are not defenceless against the workings of
the labour market. Firms, as we illustrate in our model, have a palette of HRM practices that
can be used to shape, to some extent, human capital resources and mobility barriers. Which
specific HRM practices are more effective in shaping, each is still an important topic for
research. These research questions become more complicated considering that HRM practices
must play multiple roles: enhance ability, motivation and opportunity while, at the same time,
influence the employees willingness to terminate the employment relationship and the
perceptions that the rivals hold regarding the value of the focal firms human capital. An
additional untapped research question meriting exploration is whether firms are able to deploy
and should deploy differentiated HRM practices for influencing the mobility barriers for
different groups of human capital. Following Lepak and Snells (1999) differentiated workforce
arguments, one could argue that firms should utilise different practices for the different
workforce groups in order to enhance the mobility barriers for the employees that they wish
to retain and relaxing these constraints for those employees who are less important for the
firms success. To date, there has been very little research in this area.
Future research should also explore the relative effectiveness of investing in practices with
the intent of enhancing supply-side and demand-side constraints. As we discuss in our
conceptual model, firms may be less able to influence demand-side mobility constraints. One
of the most commonly used arguments associated with the demand-side labour mobility is that
it is the visibility of high-performers that enhances the likelihood of receiving alternative job
offers (e.g. Allen and Griffeth, 2001). It has been proposed, therefore, that firms can minimise
the visibility of high performers by embedding them in work groups. Today, however, the
use of social networks, such as LinkedIn, where individuals keep their networks informed
regarding their roles and responsibilities within their teams and so on, makes it questionable
whether teams are an effective mechanism for weakening the perceptions that specific
employees drive their performance. Simultaneously, other practices that enhance supply-side
mobility constraints, such as high compensation and promotions, constitute signals of high
performance to the external labour market (e.g. Waldman, 1990) and, essentially, increase the
visibility of high performers. Consequently, it would be particularly interesting from a research

and practice standpoint to explore the impact of different HPWPs on both supply-side and
demand-side mobility constraints.
In this paper, we have argued for more attention to HRM practices, and systems, given they
provide a more practical approach for firms to gain, create and utilise strategic human capital
resources and, ultimately, contribute to a firms competitive advantage. In the end, although, it
is difficult to untangle the many factors that might influence competitive advantage, and we
have to acknowledge the critical role of human capital resources. For instance, one can argue that
a firm may need strategic human capital resources within the firm to provide the knowledge to
adopt HPWPs. In other words, a firm must have human capital management expertise to adopt
appropriate human capital management strategies that will ultimately create strategic human
capital resources elsewhere within the firm. This causal chain, however, is not a prerequisite
for firms to achieve competitive advantage, given that there is at least a small possibility that a
firm might adopt the appropriate HRM practices by accident or luck. However, the endeavour
to provide an answer to the debate of whether it is the HRM practices or the human capital
resources that have the potential of creating sustainable competitive advantage is no different
from the vain and unfruitful attempt to resolve the chicken or egg dilemma.
Finally, it should be clear from our review of the literature that the field is going in circles as it
is evolving. Early SHRM researchers emphasised HRM practices and systems as levers to
achieve firm performance. This early research was followed by attempts to explain the black
box between HRM practices and firm performance. What has emerged is the
acknowledgement that human capital resources are at least partially the mediating link
between HRM practices and firm performance. This, however, is nothing new to SHRM
researchers who voiced this relationship from the very beginning (Barney and Wright, 1998).
The field is now engaged in an exploration of how such human capital resources could lead
to competitive advantage. We argue that this actually brings the field full circle to the basic
quest of specifying the HRM practices and their combinations that are associated with higher
levels of organisational effectiveness. Expectantly, this time, researchers will better explore
the ideas behind HRM systems proposed in the 1990s. For instance, the often used indices of
HRM practices are unlikely to uncover the complexity in HRM systemhuman capital
resources relationships. The idea that more HRM, as Kaufman and Miller (2011) frame it,
leads to better performance is certainly not what SHRM researchers have advocated, even if
it appears to be what they have measured. The idea is that higher firm performance is achieved
by having the appropriate system of HRM practices for the firms particular strategic context.
Along with other scholars (e.g. Chadwick, 2010; Delery and Gupta, 2016), we hope that future
research will explore, on the basis of strong theory, the intricate interactions among practices. It
is this complexity that is important to understand, and something that the SHRM research to
date has not explored well. In conclusion, RBV has the potential to generate truly informative
knowledge that will narrow the micromacro divide. In doing so, however, as Kaufman (2015)
emphasised SHRM scholars need to broaden the paradigms they use by incorporating other
approaches, such as economic theory, in order to overcome some major problematic areas in
the application of RBV in the SHRM literature (e.g. potential employee relations ramifications
resulting from HR practices that aim at capturing human capital rents.
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Strategic human resource management, human

HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 27, NO 1, 2017 1

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REVIEW OF THE CONCEPTUAL LOGIC

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Early strategic human resource management

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HIGH-PERFORMANCE WORK PRACTICES, HUMAN CAPITAL AND SUSTAINABLE

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High-performance work practices and human capital characteristics

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High-performance work practices and human capital mobility constraints

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Proposition 1: HPWPs create supply-side mobility constraints through increasing employer

Demand-side mobility constraints Demand-side mobility constraints are arguably less

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