HRM systems and firm performance: The mediation role of strategic orientation

Prior research evidence of a set of internal fit human resource practices supports a positive human resource management (HRM)-performance relationship. Yet we know very little about exactly what drives the HRM-performance (also known as strategic HRM) relationship. In response to the call for suitable theories to explore the "black box" between HRM and firm performance, this study is designed to extend previous work by examining how the relationship between HRM and strategic orientation influences firm performance. Specifically, it examines the relationship between HRM systems, strategic orientation, and performance in a cross-section of 190 firms in Singapore. The research hypotheses were tested using multiple regression and LISREL. As predicted, there was an indirect effect between Inducement and Investment HRM systems and firm performance, such that the relationship was mediated by strategic orientation. In particular, Singaporean firms which implemented product and market differentiation strategies would mediate the HRM systems-performance relationship. Implications for research and managerial practices are provided.