Managing human resources in dynamic environments to create value: role of HR options

Abstract

HR options as firm investments in human assets in uncertain environments to create the capability to flexibly respond to future contingent events have been recognised as valuable. However, the black box of causal interlinkages between environmental uncertainties, HR options and firm performance is yet to be explored in strategic HRM literature. Based on the data obtained from 108 IT software firms in India, this study empirically explores these linkages using a multi-level causal model. The results suggest that the use of HR options positively mediates the effects of environmental uncertainties on firm performance. The mediating influences of different types of HR options, used by the firms to manage various types of uncertainties affecting their human assets, on the operational and the financial performance of the firms are found to be different. Implications of findings of the study for managing investments in human assets under uncertainty have been discussed.

Keywords:

• environmental dynamism
• firm performance
• HR options
• real options theory
• strategic HRM

Notes

1. Descriptions in this section have close similarity with those in the corresponding portions in Sanyal and Sett (2011) because the two studies were parts of a common larger project.