Taking peers into account: Adoption and effects of high-investment human resource systems

Strategic human resource management (HRM) research considers HRM systems a potential source of competitive advantage due to their positive effects on performance outcomes. However, previous research has not paid enough attention to how peer companies' use of HRM systems is associated with the adoption and the effects of HRM systems of a focal company. Specifically, drawing upon the institutional theory, we propose that a focal company's adoption of high-investment human resource systems (HIHRS) will be positively related to the level of HIHRS used in its peer companies. We also argue that the extent to which a focal company's HIHRS use is associated with organizational outcomes is contingent on the adoption of HIHRS in peer companies. Using a sample of 912 publicly traded companies in the U.S. stock market from 2002 to 2015, we found a positive relationship between the average HIHRS use of peer companies in the previous year and the change in focal company's HIHRS use. We also found that a focal company's HIHRS use is more likely to enhance financial performance (e.g., sales growth and profit growth) when the adoption of HIHRS is low in peer companies. However, HIHRS use is more positively related to employer certifications received by a focal company when the adoption of HIHRS is high in peer companies. These findings suggest that peer companies play an important role in understanding the adoption and the effects of HIHRS use of a focal company. (PsycInfo Database Record (c) 2021 APA, all rights reserved).