Human Resource Management in India: Performance and Complementarity

• Author: Satwinder Singh,Geoffrey Wood,Rahul Singh,Tamer K. Darwish
• Published date: 01 June 2020
• DOI: http://doi.org/10.1111/emre.12367
• Date: 01 June 2020

Human Resource Management in India:

Performance and Complementarity

TAMER K. DARWISH,

1

GEOFFREY WOOD,

2,5

SATWINDER SINGH

3

and RAHUL SINGH

4

This is a study ofthe relationship betweenHR practices and organisational performanceof large-scale enterprises

in India. The mainsurvey yielded 252 usable repliesfrom the HR directors.Results show that mutuallysupportive sets

of HR practices do notyield disproportionatelysuperior outcomes than limitedand focused individual practices.This

highlightsthe limitations of strategic HRMin an Indian context.It seems there is little immediatebenefit in developing

sophisticated mutually supporting HR systems if particular firm or regionally relevant interventions yield clear

benefits on theirown right. These resultshighlight the limitations in nationallevel institutions madefor a general lack

of complementarities, and/or that firms do not wantto take the risk of over-relying on a specificinstitutional feature

that may be subject to change. We also find that innovative firms are not in any way more likely to adopt best HR

practices to a greaterdegree than their less innovative counterparts.India’s weak and uneven institutionalcoverage

may open up more opportunities for HR innovation, but the lack of systemic support means that there are fewer

opportunities for the latter to realise its fullest potential.

Keywords: organisational performance; strategic HRM; comparative capitalism; institutions; complementarity;

India

Introduction

This is a study of the relationship between individual and

configurations of HR practices and performance within

emerging markets, looking at the case of India. There is

a considerable body of literature on the relationship

between HRM and organisational performance (OP).

However, as the literature on macro-institutional analysis

alerts us, how well a specific set of practices work is

bound up with national institutional setting (c.f. Peng

and Delios, 2006; Carney et al., 2009). There is only a

limited literature on best practices in India (Björkman

and Budhwar, 2007; Cooke and Saini, 2015),but existing

findings suggestthat the introduction of best HR practices

from abroad yield inferior outcomes to when they are

adapted to suit local realities (Björkman and Budhwar,

2007). Again, while practices may be often poorly

aligned, training and pay are the factors that have the

biggest impact (Singh, 2004; Som, 2008). This study

seeks to add to the existing HRM literature through

providing a more up to date analysis of the relationship

between HR systems and performance, and explores

why HR in so many emerging markets tends to be poorly

integrated.

Although thisis not a comparative study of institutional

effects, we deploy comparative institutional theory to

explore as to why complementary sets of practices might

be hard to sustain within an Indian setting, and, by

extrapolation, other emerging markets. The varieties of

capitalism (VoC) macro-institutionalist literature suggests

that in emerging market settings, where institutional

supports are les s developed and mor e fluid, and

institutional coverage less comprehensive, the kinds of

complementarities encountered in the advanced societies

are less likely to emerge (Hall and Soskice, 2001, 2003).

In practical terms, this means that institutions are less

likely to be conducive to the emergence and sustenance

of sets of higher value added HR practices. When they

are present, they are less likely to yield the superior

outcomes typicallyencountered in the advanced societies.

Key strands of contemporary institutionalist thinking

Correspondence: SatwinderSingh, E-mail ssingh@ud.ac.ae

1

The School of Business, University of Gloucestershire, Gloucester, UK

2

International Business, Essex Business School, University of Essex, Colchester, UK

3

International Business and Strategy, University of Dubai,Business School, Dubai, UAE

4

Birla Institute of Management Technology, Business School, Noida, India

5

DAN Department of Management & Organizational Studies, Western University, Ontario, Canada

European Management Review, Vol. 17, 373–389, (2020)

DOI: 10.1111/emre.12367

©2019 European Academy of Management

highlight the extent to which organisations may

themselves constitute institutions (DiMaggio and Powell,

1983; Oliver, 1991; Smets et al., 2015); this would

suggest that specific firms devise their own solutions,

and these may build on or supplement contextualfeatures.

Workable solutions may diffuse across a national

economy, but the extentto which they do is bound up with

macro-institutional circumstances, and the extent to which

they support or sustain such solutions (Oliver, 1991;

Smets et al., 2015). If they do not, they may engage in

institutional entrepreneurship, pioneering and promoting

change (Smets et al., 2015).

A growing body of literature on HRM on emerging

markets suggests that while HRM does not necessarily

revert to a default ‘bleak house’model, characterised by

low pay, insecure tenure, and poor working conditions,

there are strong pressures towards this, mitigated by

informal networks and conventions (Webster and Wood,

2005). This would suggest that advanced HR

approaches, whether of the strategic hard or softer

cooperative variety, are likely to be less common, and

when they are, to have only limited effect on overall

organisational performance.

Novel features of thisstudy include the explicit linkage

between the relative functionality and integration of HR

systems and setting. As such, it seeks to extend the usage

of the literature on institutional analysis in emerging

markets, through providing more finely grained insights

on contextual specificities, and thus provides the building

blocks for new comparative work between the latter,

giving further insights on complementarity and

compatibility in HR practice. Key findings of the study

centre on the very limited and spatially constrained

incidence of complementary sets or bundles of HR

practice, and the key role of sub-national and sectoral

specific institutional arrangementsin supporting the latter.

Innovations and complementarity

A central concept within the l iterature on comparative

capitalism is that of complementarity; that is specific sets

of institutions and practices yield superior outcomes than

simply the sum of their component parts (Hall and

Soskice, 2001, 2003). In other words, within some

settings, certain practices will work together better than

others. As noted above, in contexts where institutional

supports are less developed or fluid, it has been argued

that particular sets of practice are less likely to dominate,

reflecting less developed complementarities (Hall and

Soskice, 2001; Amable, 2003). This means that while

specific individual HR interventions maywork quite well

in a range of settings, it is unlikely thatone will encounter

dominant bundlesof HR practices across sucheconomies,

and they are unlikely to work any better than the sum of

their component parts. Recent work on institutional

complementarity in emerging markets suggests that it

may afford firms competitive advantages, but, given

higher levels of uncertainty and risk, firms may seek to

wean themselves off over-relying on a specific

combination of rules, strategies and practices (Luiz

et al., 2017).

Alternatively, it has been argued that, within more fluid

or changing settings, there is greater room for innovation

that will challenge and ultimately marginalise traditional

ways of doing business (Dore, 2008). Indeed, it has been

argued that large individual emerging markets may each

represent unique types of capitalism, and, that India and

China in particular, have emerging complementarities

(e.g., Carney and Gedajlovic, 2002; Meyer, 2006; Estrin

and Prevezer, 2011). What characterises the Indian

institutionalsetting? There is a wide bodyof literature that

argues thenature of institutional formationmoulds present

practice (Iyer, 2010; Dirks, 2011). Acemoglu et al.(2012)

argue that a key difference is whether or not colonies had

significant European settlement. In the case of the former,

greater attentionwas accorded to erecting ‘mini-Europes’,

with a greater focus on the rule of the law. In the case of

the latter, institution building centred on facilitating

exploitation and wealth extraction. In the post-colonial

period, this legacy has persisted. India represents a

quintessential example of a major colony where the main

concern of the colonial power was expropriation of

wealth, rather than the promotion of indigenous industry,

and the deepening of private property rights. This made

for a persistently weak rule of the law, great variations in

the quality ofeducational and physical infrastructure. This

coupled with a lack of coherent support for productive

areas of economic activity posed challenges for firms

seeking to raise theirgame and move over to higher value

added production paradigms (Iyer, 2010; Dirks, 2011).

This is somewhat at odds with influential theories of

legal origin, which suggest that common law systems

(such as India) are associated with stronger private

property and weak worker rights, and hence, an optimal

environment for firms free reign to adopt optimal

strategies leading to strong performance and overall

growth (La Porta et al., 1999). However, Koehling

(2002) arguesthat the Indian judiciary is weak,with a long

backlog in cases, and unpredictable court decisions

governing both owner and worker rights. In short, it is

not just the tenetsof the corporate law that matter, but also

the mechanisms as to how it is enforced, and the relative

resources successive leaders have been willing to accord

to this. Estrin and Prevezer (2011) argue that, in some

states of India, weak or ineffective formal institutions

have, in some states, led to the development of

‘substitutive’informal institutions, which provide an

alternative basis for corporate governance and the

regulation of labour (c.f. Banerjee and Lyer, 2005).

374 T.K. Darwish et al.

©2019 European Academy of Management