Firms pursuing innovative business strategies

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Firms pursuing innovative business strategies

  1. 1. 1 The Linkage of HRM and Knowledge-related Performance in China’s Technology- intensive Industries Irene Hau-siu Chow Department of Management The Chinese University of Hong Kong Shatin, N. T. Hong Kong Tel: (852) 2609-7798 Fax: (852) 2603-6840 Email: irene@baf.msmail.cuhk.edu.hk
  2. 2. 2 The Linkage of HRM and Knowledge-related Performance in China’s Technology- intensive Industries Abstract This study examines the interaction effect of corporate culture and business strategy to fully understand the role of HR practices in knowledge-related performance. The relationship between the knowledge-driven HR practices, corporate culture and business strategy were tested by using 132 firms in China’s high technology industry in the Pearl River Delta area. The findings support that both capability and incentive systems are significant predictors of knowledge-related performance. Significant interaction effect of HR- culture and HR-business strategy in knowledge-related performance were observed. Innovation had no significant impact on knowledge-related outcomes. The firm’s commitment to quality has been found to be an important determinant of firm performance. Keywords: knowledge-driven HR practices, corporate culture, business strategy, firm performance, China Introduction Knowledge-intensive industry faces a dynamic and fiercely competitive environment. Products in high technology industry are more complex, with shorter life cycle that needs constant innovation in order to meet the changes in market conditions and customer expectations (George, et al. 2001). Technological innovation becomes critical in responding to rapid changes and
  3. 3. 3 innovation depends heavily on acquiring new knowledge in high-technology firms. Therefore organization must fully exploit its resources and capabilities in order to remain competitive. Leveraging intellectual capital as sustainable competitive advantage depends upon a firm’s ability to exploit existing knowledge and to generate new knowledge. Human resource will be crucial in meeting the challenges in the formalization of and access to experience, knowledge and expertise that create new capacities, superior performance, and innovation (Beckman 1999). Human resource practices can support and contribute to the creation, integration and utilization of knowledge. HRM practices and knowledge- related outcomes are associated, but their link still misses some important aspects of the interpretation and empirical support (Minbaeva 2005, p. 126). This paper addresses this void by examining the impact of various HR practices that support knowledge creation and utilization which in turn influence knowledge-related outcomes. The corporate culture and business strategy could be considered as mediating link between HRM practices and knowledge-related outcomes. The relationship between the knowledge-driven HR practices, corporate culture and business strategy were investigated by using 132 firms in China’s technology-intensive industry in the Pearl River Delta area. The results contribute to advance our understanding of the complex relationships between HRM practices and operating efficiency and the potential interaction effects of corporate culture and business strategy. The following section starts with a brief review of the literature on knowledge-oriented HR system, organizational culture and the contingency of business strategy on firm performance.
  4. 4. 4 Based on the literature review, hypotheses regarding the role of HR practices and the interaction effect of corporate culture and business strategy and their impact on firm performance are developed, followed by a description of the empirical test and presentation of results. The paper concludes with the discussion of the implications for managerial practices and direction for future research. LITERATURE REVIEW AND HYPOTHESES Knowledge is a key success factor in high technology industry and through acquisition of new knowledge can improve the firm’s innovative activities. The organizational learning literature views the value of knowledge as a key resource and emphasizes the importance of a firm's ability to assimilate, utilize, and leverage information to derive a competitive advantage (Grant 1996). Such competitive advantage depends more on “people-embodied know-how” (Prehalad, 1983), particularly in the knowledge based industry. Increasingly, competitive advantage is seen to be derived from human as opposed to physical capital. Capability as a source of competitive advantage is derived from the resource-based view (Barney 1991; Wernerfelt, 984). HR capabilities serve as a firm's ability to combine, develop, and exploit its resources to create a competitive advantage. Cabrera and Bonache (1999) presented a theoretical framework for the alignment of organizational culture and business strategy by integrating knowledge from strategic HRM and specific design of HR practices. Creating Knowledge-oriented HR System There is considerable interest in studying the role of knowledge-driven HRM practices that contribute to sustained competitive advantage through developing firm specific competencies
  5. 5. 5 and acquiring organizational knowledge which in turn improves the firm’s ability to innovate (Keegan and Turner 2001). The kinds of HRM practices organizations could employ to enhance knowledge-related outcomes are 1. Acquisition of capabilities, recruiting the right people, having the balanced skill sets, create effective innovation teams 2. Performance management, encouraging risk taking, 3. Reward systems- motivating people to achieve productivity, innovation, and profitability 4. Career management, empowering people, continuous education and development (Minbaeva, 2005). The core HR practices, i.e., staffing, training and development, reward and performance management may facilitate the diffusion of knowledge and innovation. Organizations identify the needed skills and knowledge through staffing process of acquiring, developing and retaining human capital. Training or self-development programs can be an important knowledge acquisition mechanism. When properly organized, training programs are important vehicles for promoting collaboration and knowledge exchange (Lyles and Salk 1996; Lane et al 2001). Comprehensive training to develop unique or firm-specific skills, socialization programs, job enrichment, and cross-functional career paths encourage employees to build knowledge. Skill- based pay systems and developmental performance appraisals may be used to facilitate the development of firm-specific knowledge and competencies (Snell et al. 1999). In addition, HRM practices may influence individual performance by providing incentives that elicit desirable behaviors. Performance-based pay and internal promotion systems provide
  6. 6. 6 incentives to secure commitment from knowledge workers. Employees' willingness to share knowledge with others is crucial in determining the contribution HR practices to managing knowledge (Currie and Kerrin, 2003). The extensive use of training, performance management, performance-based compensation and internal communication contribute to knowledge transfer (Minbaeva, et al., 2003). Thus capability and incentives are regarded as being conducive to knowledge creation and utilization. HR-Performance Link There are a number of theoretical and empirical studies linking HRM to firm performance. The current literature shows that HRM practices, in the form of high performance / high involvement work practices, are associated with positive performance outcomes (Appelbaum et al, 2000; Berg, 1999; Levering & Moskowitz, 1993), and higher financial success (Bae and Lawler, 2000; Huselid, 1995; Lawler et al, 1995). The accumulated research evidence shows that effective human resource management can have substantial impact on firm performance. Laursen and Foss (2003) investigated the link between HR practices and innovation performance. They identified two major categories, that is capability to innovate and internal /external training. Investment in capability to innovate can be developed through interdisciplinary work groups/ quality circles, planned job rotation, delegation responsibility, and performance –related pay. Managing human resources to achieve better knowledge-related outcomes focuses on retaining people, building their expertise through on-going learning process, fostering a supportive culture
  7. 7. 7 for sharing knowledge, establishing mechanisms for distribution of benefits arising from the utilization of this expertise (Collins & Smith, 2006; Kamoche & Muller 1998). Previous studies showed that HRM practices applied as a coherent system had greater effect on organizational outcomes than the sum of the individual effects from each practice separately (Huselid 1995; MacDuffie, 1995). Huselid (1995) and Delaney & Huselid (1996) bundled set of HRM practices into two main categories: employees’ abilities and employees’ motivation. This is consistent with the literature of the role of HRM practices in the organizational absorptive capacity. The ability to assimilate /apply the knowledge and motivation incentives are two key aspects of the firm’s absorptive capability (Cohen & Levinthal, 1990). Innovation depends heavily on knowledge. Performance-based pay provides incentive to acquire and share knowledge. Incentives aim at promoting knowledge acquisition /sharing are increasingly prevalent ingredient in the innovation process. Hensen at al’s (1999) study shows that knowledge use and sharing are embedded in appraisal and reward system. We need to have a system in place that motivate and reward knowledge creation and sharing (Bartol& Srivastava, 2002). Therefore, it is hypothesized that a significant and positive relation exists between HRM and innovation performance. Hypothesis 1: The more extensive use of HRM practices (capability and incentive) is positively associated with knowledge –related outcome Fostering a Culture for Creativity and Innovation
  8. 8. 8 A firm’s future abilities are strongly influenced by its knowledge assets and its collective learning. Organization with highly capable and motivated employees will not be effective in recognize new knowledge, assimilate it and apply it if the unit is not successful in building a supportive learning environment. The personal nature of knowledge increases the need for motivation in sharing and utilizing it (Alvesson, 2000). Culture is the most critical factor that influences knowledge creation, sharing and use (DeLong & Fahey, 2000). Innovation must be supported by organizational culture which encourages participation, questioning conventional wisdom, innovation and risk taking. Thus, organizations should provide continuous learning opportunities to share learning. High-tech companies, differ from manufacturing or service companies, particularly with regard to their people management practices. Their people are engaged in the creation and assimilation of new knowledge. Knowledge workers enjoy a highly informal, egalitarian working environment, in which they are granted significant autonomy, trust and ample resources to facilitate knowledge creation processes. Personal growth and achievement are important to this type of worker. These characteristics pose particular challenges for managing knowledge workers. Furthermore, the sharing of knowledge is critical to facilitate and sustain processes of knowledge creation. Organizational culture that promotes knowledge sharing is featured as informality, richness of communication, and openness to transfer of learning and knowledge absorption (McDermott & O’Dell 2001). Inter-disciplinary teamwork, active self-development programs and a climate for learning are conducive to knowledge exchange and collaboration.
  9. 9. 9 Knowledge-intensive organizations must develop and sustain an organizational culture that supports knowledge creation and innovation (Storey and Quintas, 2001). Vital to this will be creation of a supportive environment that will facilitate trust and sharing, exchange, creativity and innovation activities. Supportive culture for cooperation reduces competition among employees and increases their willingness to share the critical information with each other (Szulansk, 1996). Denison and Mishra (1995) found support for the effects of organizational culture on firm performance. Chan, et al.’s (2004) study also revealed that organizational culture had direct impact on firm performance. Hypothesis 2: Corporate culture, particularly sharing/ learning culture, is associated with knowledge-related outcome The Moderating Effects of Corporate Culture Wallach (1983) identified three types of corporate cultures: bureaucratic, innovative and supportive cultures. Bureaucratic culture is characterized as hierarchical and compartmentalized. There are clear lines of authorities. The work is organized and systematic. Bureaucratic organization is power oriented, regulated, procedural and hierarchical. It is not suitable to attract and retain creative and ambitious people. The explicit rules and regulations are likely to inhibit idea generation and constrain employees in using various sources of knowledge for developing new products and services. Innovative culture is exciting and dynamic. It provides a creative place to work, filled with challenge and risk. Supportive culture is described as trusting, encouraging, relationship-oriented and collaborative. It provides an open, harmonious and warm place to work. People are friendly, and helpful to each other. It is reasonably expected that a
  10. 10. 10 supportive culture provides a vital environment for strengthening the relationship between HR practices and firm performance. A supportive organizational culture is needed for HR practices to result in advantage-creating capabilities. Human Resource capability and organizational culture are likely to reinforce each other and enhance firm performance. Chan et al. (2004) found organizational culture moderated the impact of HR practices on firm performance. Creating a supportive culture together with the appropriate HR system could be utilized to shape the willingness of workers to share their knowledge. Thus, it is logical to posit the interaction effects of HR practice and organizational culture on firm performance. Hypothesis 3: The matching of human resource system and corporate culture will enhance firm performance Hypothesis 3.1 Incentive system matching with supportive corporate culture is positively related with higher level of firm performance The Contingency of Business Strategies The strategic perspective of HRM examines the fit between various HRM practices and the company’s business strategies (Delery 1998). Considerable emphasis has been put on the importance of integrating HR practices and strategy for firm performance (Bird and Beechler 1995; Martell, Gupta, and Carroll 1996). Schuler and Jackson (1987) investigated the relationship between HR and business strategy designated different types of employee behavior and HRM systems that are best suited to innovative and quality enhancing strategies. Innovative strategies focus on offering something new and different. The appropriate HR practices include
  11. 11. 11 selecting highly skills, creative individuals, granting more discretion with minimal control; long- term focus and greater commitment. HR practices for quality enhancing strategy include high levels of participation, feedback and cooperative teamwork. Obviously people management becomes an integral part of corporate strategy in producing high performance. Thus, HR can proactively add strategic value by providing innovative products and services and improving quality. Hypothesis 4: Quality enhancing and innovation strategy are positively associated with knowledge-related outcome. Previous studies found that the organization’s strategy moderated the effect of HR practices on performance (Hitt et al 2001; Huselid 1995). Similarly, Youndt, et al. (1996) found that business strategy and HRM practices interaction was an important factor in organizational effectiveness. HR practices paired up with appropriate business strategies as discussed in the previous section will have a positive effect on firm performance. Therefore, the interaction effect of HR practices and business strategies leading to different levels knowledge-related performance are hypothesized. Hypothesis 5.1: The interaction of quality enhancing strategy with capability and incentive system will enhance operating efficiency. Hypothesis 5.2: The interaction of innovation strategy with capability and incentive system will enhance operating efficiency. METHODOLOGY Sample and Procedures
  12. 12. 12 The sample consisted of 132 firms from electronic and communication facilities, computer and software industries in Guangdong China. The average length of establishment was 9.4 years, ranging from 1 to 35 years in operation. In terms of ownership, 22% were state-owned and collectively-owned, 57.6% were Hong Kong and Taiwan firms in China, the rest (20.5%) were foreign invested and joint-ventures. The average number of employees per firm was 1126 with a range of 50 to 21000. On average, the HR department had 19.7 persons. Turnover rate for employees was 14.24%. The questionnaire (constructed in Chinese) was designed based on a combination of previous research and the variables identified in the literature review. Questionnaires were sent to the person responsible for the company’s HRM by e-mail, and follow-up calls were made. The respondents were middle (67.4%) or top management (18.6%) of the firm and the rest were front line managers. Measures HR practices were measured by 6 items, covering staffing, training and development, performance appraisal, performance- based pay, information sharing and participation. These items were pre-tested with practicing managers to verify the usefulness. Each item was assessed by a 5-anchored Likert scales, with 1 being inappropriate characteristic, 5 being the most appropriate characteristic of HR strategies for managerial and professionals in this organization. The respondents were asked to mark the number that best indicated the degree to which each statement described HRM practices employed by their organization. The impact will be stronger when HRM practices are applied as a system of mutually reinforcing practices. Following the current practice, HRM practices form a set of distinct but interrelated
  13. 13. 13 activities that are directed at attracting, developing and motivating a firm’s human resources. The grouping of HRM practices is identified theoretically and then verified through factor analysis. Results of factor analysis indicated the existence of two groups of HRM practices under capability and incentives regarded as being conducive to knowledge enhancing. The resulting two factors accounted for 59% of the variance explained. Examples of capability include ‘the annual training budget as a percentage of total payrolls,’ and ‘the proportion of vacancies filled by internal sources for key positions.’ An example of incentives includes ‘linking performance outcome to compensation, training opportunity and promotion.’ Corporate culture was measured by 18 items using a 5-point scale ranging from 1 (strongly disagree) to 5 (strongly agree). These items were factor analyzed to form three cultures, bureaucratic, sharing and competitive, accounted for 60.55% of the total variance explained. An example of bureaucratic culture is ‘following explicit rules /regulations, orderly operations procedure.” An example of competitive culture is ‘employees display extremely high level of competitiveness.’ An example of sharing culture is ‘emphasis on learning process, exchange and sharing learning outcomes.’ The alpha coefficients for bureaucratic, sharing and competitive culture were .89, .86, and .89 respectively. Business Strategies included innovation and quality enhancement. The argument for focusing on these two strategies is the HR practices contribute more to technology-intensive firm by pursuing quality and innovation strategies. Following Schuler & Jackson (1987) and Huang (2001), ten items were adopted for the present study. Respondents were asked to rate each item on a 5-point scale ranging from 1 (strongly disagree) to 5 (strongly agree). These items were factor analyzed
  14. 14. 14 using principal factor with varimax rotation method. The factor structure of business strategy accounted for 61.74% of the total variance explained. An example of quality enhancing strategy is ‘the company has very strict quality management procedures.’ An example of innovative strategy is ‘the company is usually the first to introduce new products or services in the market.’ The alpha coefficients for quality and innovation were .87 and .79 respectively. Performance measures. Knowledge related outcomes are measured by productivity, research and development capability, products and services quality, and market shares. R&D activities are often undertaken to add new knowledge to the existing knowledge base of an organization. Maintaining a strong R&D program allows them to attract and keep talented scientists. Past studies have used R&D spending as a measure of a firm's input into innovative activities. The number of products on the market indicates firm success in developing and introducing new products (DeCarolis & Deeds, 1999; Shan et al., 1994; Smith et al., 2005). These items were measured on a 5-point Likert scale ranging from 1 (very low) to 5 (very high). Responses were averaged to yield a composite index reflecting the organization’s operating efficiency. The alpha coefficients were .82. Control variables. Since firms with superior resources will be able to formulate and implement unique and innovative strategies, firm age, firm size and ownership types are controlled for the prediction of organizational performance. Firm age is related to firm survival and mortality rates. Firm size was measured by number of full-time employees. Natural logarithmic transformation was used to normalize the distributions and made it more consistent with existing literature. Ownership structure is another characteristic that can influence HRM and performance function.
  15. 15. 15 State-owned firms tend to be more embedded in institutional constrains and therefore less flexible in adopting innovative HR practices. In terms of ownership structure, Hong Kong and Taiwan firms were used as base for comparison; three dummy variables were created to represent state-owned, collective, and foreign-invested /joint ventures. RESULTS Table 1 presents the descriptive statistics and correlations among the variables. As Table 1 indicates, most of the study's predictions are supported by the significant correlations observed among the variables with many of the correlations being quite large (p<.001). It is observed that significant positive correlation exists among HR practices, corporate culture and business strategy measures and these measures were all significantly correlated with operative efficiency. Years of operation and firm size had no significant correlation with any of the HR practices and business strategy measures. In terms of ownership types, Hong Kong and Taiwan firms showed negative correlation with HR practices, corporate culture and business strategy measures while foreign direct invested and joint venture firms showed positive correlation with these measures. ---------------------------------- Insert Table 1 about here ---------------------------------- To test the hypotheses, hierarchical multiple regression analysis were conducted to examine the relative effects of HR practices, corporate culture, business strategy and their interaction on knowledge- related outcome. Regression results are given in Table 2. First, I entered the control variables, i.e., company age, size (number of employees), and type of ownership. Controls were not statistically significant in the regression equation as indicated in Table 2. Next, I examined the increase in adjusted R2, the unique amount of variance explained by each block of variables.
  16. 16. 16 When the two HR factors were entered, the overall model was statistically significant (F=11.40, p<.001; ∆R2=.32, p<.001). The effect of HR on knowledge-related outcome was positive and highly significant. As hypothesized, H1 was supported. The measures of corporate culture on the whole added significant effect on operation efficiency, particularly the effect of competitive culture. As expected, H2 was confirmed. --------------------------------- Insert Table 2 about here ---------------------------------- In testing the interaction effects, the mean-centered variables were used for the main and interaction terms in the regression analysis, as recommended by Aiken and West (1991). The significant positive interaction effect between incentives and sharing culture was observed. H3.1 was supported. It should be noted that there was no significant interaction effect for incentive * bureaucratic and incentive * competitive. Figure 1 displays the significant interaction terms. Under low incentive level, low sharing culture is more efficient as shown in Figure 1. High sharing culture works better under high incentive system. --------------------------------------- Insert Figure 1 about here ---------------------------------------- The same tests were carried out for business strategies. Regression results for business strategy are given in the last two columns of Table 2. When two business strategy variables were entered in the regression, significant result was observed (∆R2 =.04, p<.05; and F = 9.76, p<.001). Quality enhancement strategy is statistically significant. H4 was confirmed. When the interaction terms were entered, the interaction term between incentives and quality was significant but
  17. 17. 17 negative. The interaction between incentive and innovation was marginally significant (β=.15, p<.1). The significant interaction effect of HR practices and business strategy on performance is shown graphically in Figure 2. Low quality strategy is likely to benefit in operating efficiency, particularly for high incentive level, as indicated in Figure 2. It makes no difference for high quality strategy in achieving operating efficiency under any level of incentives. ------------------------------------- Insert Figure 2 about here -------------------------------------- DISCUSSION AND CONCLUSION The present study assesses the direct link between HR practices and firm performance and tests the interaction effect of organizational culture and HR practices on firm performance; examines the contingent relationship between business strategy and HR by evaluating the moderating effect of business strategy. HR practices had highly significant impact in predicting operating efficiency as indicated by ∆R2 =.32 (p<.001). HR may influence knowledge–related outcomes by shaping the skills and attitudes of individuals. Thus the findings support that both capability and incentive systems are significant predictors of knowledge-related performance, which is consistent with other studies that investment in employees’ ability and motivation contribute to higher knowledge-related performance (Cohen & Levinthal, 1990). Corporate culture also shows direct effect as indicated by the significant ∆R2 and F value. The study further explored the interacting effect of HR and culture to fully understand the role of HR practices in knowledge- related performance. The results show significant interaction effects with sharing culture on
  18. 18. 18 performance. The negative non- significant interaction effect between incentives and bureaucratic was observed. The interaction effect of incentive system and competitive culture became non-significant. Perhaps fierce competition creates barriers for resource and knowledge sharing. Results from the present study showed that the traditional control system, that is, bureaucratic culture, did not significantly benefit firm performance. The results support that sharing culture and reward system promote knowledge-related performance (Hensen at al. 1999). From the practical perspective, results from this study offers significant implications for human resource professionals in designing HR systems. Incentives under appropriate cultural environment provide a strong management tool to reward employees. Manager can better develop reward systems and motivational schemes for their employees. It is desirable that HR systems should base on collaboration to support the development of exchange programs and group-based rewards in knowledge-intensive organizations. The current literature suggests that building a supportive sharing corporate culture, captured as informality, openness, enhance knowledge sharing and absorption. It is important to create a sharing culture that supports HR activities and business strategy to enhance firm performance. Despite the highly significant effect of incentives in enhancing operating efficiency, the present study did not find any support for a combination of human resource capabilities and an appropriate culture or business strategy give firms an advantage in achieving high performance.
  19. 19. 19 In terms of business strategy, innovation had no significant impact on knowledge-related outcomes. Quality enhancement strategy is statistically significant. The firm’s commitment to quality has been found to be an important determinant of firm performance. When the interaction term between quality and incentives entered the regression equation, the β coefficient became significant but negative. Low quality strategy has substantial increase in operating efficiency as incentive level increases, while high quality strategy remains at the same level of efficiency as shown in Figure 2. The results provide some research guided insights to design of HRM systems. It is important to link HR to specific business strategy and creating the appropriate culture that is necessary to execute these business strategies more effectively to gain competitive advantage (Barney, 1986). The implications of HR practices for management of knowledge and innovation is profound. Deployment of HRM practice to increase employee motivation, absorbing capacity has a positive impact on knowledge-related performance. It also highlights the need to align HRM with business strategy of the firm to enhance performance Limitations Despite the fact that our results are encouraging, they should be interpreted with caution because of the study's limitations. The data were assessed using perceptual, self-reported measures. Subjective measure of firm performance was widely used in the literature (Bae & Lawler 2000; Delaney & Huselid 1996; Harael & Tzafrir 1999). In the absence of objective data, self-reported measures constitute an acceptable substitute and are equally reliable. Prior research by Dollinger
  20. 20. 20 and Golden (1992) showed that organizational performance rated by self-reported measures was positively correlated with objective performance indicators. In addition to self-reported perceptual measures of performance outcomes, the potential problem of common method variance cannot be avoided if all variables are collected from the same respondent in the same survey. Following Podsakoff and Organ (2003), I checked for presence of common method bias by conducting Harman’s one factor test in our data. A principal components factor analysis with an unrotated solution shows that no single factor accounted for a majority of the covariance in the variables. Common method variance is unlikely to be a serious problem. Causality is difficulty to establish using cross-sectional data. Future research should collect data from multiple sources to minimize the risk of common method variance. More research should be done using larger samples.
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  25. 25. 25 Table 1 Descriptive Statistics and Correlations Mean S.D. 1 2 3 4 5 6 7 8 9 10 11 1. Operative 3.86 .56 Efficiency 2. Years of 9.41 6.19 .14 operations 3. Size (log) 6.68 1.2 .10 .38*** 4. HKTW .58 .50 -.10 .20* .24** 5. FDIJV .20 .40 .23** -.03 .05 -.59*** 6. Capability 2.80 .86 .45*** .09 .05 -.16+ -.01 7. Incentives 3.44 .69 .55*** .08 -.01 -.18* .14 .37*** 8. Quality 3.83 .77 .48*** .12 .21* -.14 .27** .23** .44*** 9. Innovation 3.54 .810 .40*** .09 .08 -.16+ .20* .42*** .51*** .49*** 10. Bureaucratic 3.68 .69 .45*** -.003 -.02 -.02 .14 .30*** .49*** .65*** .63*** 11. Sharing 3.35 .70 .44*** .11 .04 -.10 .11 .44*** .52*** .49*** .62*** .70*** 12. Competitive 3.28 .66 .53*** .10 .02 -.23** .21* .46*** .48*** .55*** .65*** .68*** .72*** *** significant at p<.001; ***p<0.01; * p<0.05 level
  26. 26. 26 Table 2 Results of Regression Analysis Operating Efficiency Control 1 2 3 4 5 6 Year .16+ .08 .07 .06 .06 .09 Logsize .02 -.004 .08 .08 -.03 -.002 HK&TW -.02 .13 .12 .08 .13 .14 + FDI&JV .15 .21* .17 .12 .16 .17 HR practices HR capability .26** .20** .16+ .26** .23** Incentives .44*** .35*** .33*** .31*** .28** Corporate culture Bureaucratic .10 .04 Sharing -.10 -.06 Competitive .25* .30* Interaction Incentives* Bureaucratic -.18 Incentives* Sharing .22* Incentives* Competitive -.12 Business strategy Quality enhancement .21* .10 Innovation .06 .16+ Interaction Incentives*quality -.27** Incentives* Innovation .15+ R2 .06 .38 .43 .47 .42 .47 2 ∆R .06 .32*** .05* .04* .04* .05* F 1.67 11.40*** 9.2*** 7.99*** 9.76*** 9.54*** The numbers are β coefficients + p<.1, *p<.05. **p<.01, ***p<.001
  27. 27. 27 Figure 1 The interaction between Incentives and Sharing culture Operating Efficienc L sharing H sharing Incentives Figure 2 The interaction between Incentives and Quality Operating Efficienc L quality H quality Incentives

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