This document summarizes a study that analyzed a survey of human resource practices from 83 chain stores in China. It differentiated between managerial staff and operating employees, and identified clusters of stores with high and low adoption of bundled HR practices. The impact of aligning HR practices on firm performance was evaluated using the high adoption cluster. The findings provide insights for executives on effective HRM strategies in China and advance the literature on high performance work systems.

1. In Search of the Best Human Resource Practices in China’s Chain Stores
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
&
S.S. Liu
Department of Business Management
School of Management
South China University of Technology
Tel/Fax (020) 87113235
Email: ssliu@scit.edu.cn

2. 1
In Search of the Best Human Resource Practices in China’s Chain Stores
Abstract
This paper analysed a recent survey of human resource practices from 83 chain stores in China.
It differentiated managerial staff (core) and operating employees according to different types of
human resource configurations. It also identified high and low adoption based on bundling of HR
practices using cluster analysis. The impact of HR practices alignment on enhancing firm
performance was evaluated using high adoption cluster. The findings advance our knowledge in
the HPWS literature and offer important insights for executives in formulating effective HRM
strategies.
Keywords: High performance work systems, human resource practices, chain stores, China
The effective utilization of human capital will be the ultimate determinant of
organisational performance (Adler, 1988). Managing people is a central challenge in every
organisation. A firm’s intangible assets, such as the way it manages its employees, are more
likely to gain competitive advantage than its tangible assets (Jackson & Schuler, 1995; Barney,
1995). From the resource-based theory, the complexities of human resource value creation
process can be treated as a source of sustained competitive advantage because the types of
activities performed add value to the firm, such as more effective response to market demands
(Wright, McMahan, and McWillians, 1994). A pool of skills and experience of workforce is
unique, rare and not easily imitated or substitutable (Barney, 1991). In order to sustain the

3. 2
competitive advantage through people, organizations need to manage their employees with a set
of complementary HR practices in the form of high performance systems that will enable them to
achieve simultaneously more flexibility, greater efficiency and the ability to gain maximum
economic results. Thus more innovative practices and high performance systems are adopted to
foster high performance.
A literature search shows an extensive study of high performance work systems (HPWS)
in the last two decades (Becker and Huselid, 1998). The importance of HR alignment as a basis
of competitive advantage is repeatedly iterated. Empirical studies revealed a strong and direct
relationship between the quality of HR practices and return on shareholder investment (Delery &
Doty, 1996). HRM practices, in the form of high performance work systems, are associated with
positive performance outcomes (Appelbaum et al, 2000; Kravetz, 1988; Levering & Moskowitz,
1993; Huselid, 1995; Berg,1999), and higher financial success (Huselid, 1995; Lawler et al, 1995;
Varma et al, 1999). The HRM system has a direct impact on employee skills, motivation and job
design/work structure. These attributes elicit greater productivity, creativity, performance and
ultimately to profits, growth, and market value (Neal & Tromley, 1995).
High performance work systems have been shown to contribute to firm performance in
U.S. and other countries. Majority of previous studies were based in the Western context. Very
few studies have been conducted on HR alignment in China. The present study focuses on
alignment of HR practices in chain stores in southern China. Different institutional mechanisms
may shape HR policies and strategies (Paauwe & Boselie 2003). Given the different institutional
environment and the high growth of the service sector in China’s economy, it would be
interesting to find out how effective management of HR might contribute to positive
organisational performance in the world’s largest emerging economy. The service sector has

4. 3
become the major growth industry in China. The huge consumer base offers a lot of potential for
multinational firms to enter the China market. The purpose of this study is to identify a number
of key coherent HRM dimensions of staffing, training, performance appraisal, reward, work
structure and job security and their impact on firm performance. The proposed relationship will
be empirically tested by surveying a sample of 83 chain stores in Guangzhou to find out whether
HPWS could be successfully transferred to the Chinese context. Results from the present study
will draw meaningful and practical implications. It provides valuable information to both HR
academics and practitioners by illustrating how effective human resource management can add
value to organisations.
REVIEW OF THE RELEVANT STUDIES
Two major themes emerge in the HR research. First, the current studies tend to adopt a
systems approach. The focus is moved away from separate HRM practices and employee
performance to a more macro focus on the overall complementary set of HRM practices and firm
performance. HR is moving away from its traditional micro-focused role and is moving towards
a macro strategic paradigm, linking HR and business strategy. The strategic perspective HRM
examines the “fit” between various HRM practices and the company’s business strategies
(Delery 1998). Organisations are simultaneously seeking external fit between the HR function
and organisation strategy, at the same time achieving an internal fit among individual HR
practices.
The second theme is HRM control systems (Snell 1992). Organisations are increasingly
transition from controlling employees to eliciting commitment from employees (Pil and
MacDuffie 1996). Under the control-based culture, HR is focused on administrative aspects and

5. 4
union issues. Training is viewed as expenses to be minimized, not as investments;
communication was mostly top-down; rewards were based on fixed guidelines; and there was
little employee involvement. HR practices were standardized and reactive. In contrast, high-
involvement, commitment-based culture utilized cross-functional teams and employee
involvement. Bae and Lawler’s (2000) involvement--enhancing HR incentives include highly
selective staffing, extensive training, empowerment, performance-based pay and broad job
design. Other HR initiatives included information sharing and provision of communication
channels, lifelong learning, extensive benefits, formal dispute resolution procedures, training and
retraining instead of redundancies during the period of economic crisis. Such trend signifies a
shift away from employee control and toward emphasis on employee commitment.
The last two decades have witnessed considerable experimentation and research on
innovative work practices, such as high-involvement workplace, cross-training and flexible job
assignments, and self-directed work teams (Gerard & Varma, 1998). Existing literature has
demonstrated that the presence or absence of high performance work systems (HPWS) and other
types of high investment HRM systems can have a significant effect on employee attitudes,
behavior, and firm performance (Guthrie, 2001; Huselid, 1995). The underlying premise of
HPWS is to create an environment that fosters commitment toward the long-term well-being and
development of the organisation’s employees.
Huselid, Jackson and Schuler (1997) defined high performance work systems as "an
internally consistent set of policies and practices that ensure that a firm's human capital
contributes to the achievement of business objectives" (p.171). The underlying principles that
support high-performance work systems are: employees shared timely and accurate information
about business performance, plans and strategies in a rapidly changing environment. The nature

6. 5
of competition continues to change, employees' knowledge and skills must also change. They
need to learn continuously to support the organisation's needs. Performance-reward linkage
aligns employees intention and behaviors with the needs of the firm helps them engage in
activities that are mutually benefits to themselves and the organisation. Employees will become
more involved in their work, organisational performance is improved while the quality of work
life is simultaneously increased. The guiding principle of these studies is creating a working
environment that supports internal and external alignment leading to higher firm performance.
There is increasing evidence that HRM practices, in the form of HPWS, are associated with
positive performance outcomes, and higher financial success (Appelbaum et al, 2000; Kravetz,
1988; MacMiffie 1995). Ichniowski et al, (1997) and Berg (1999) studied high performance
work systems in the steel industry and found the presence of more innovative systems was
associated with significantly higher productivity. In manufacturing firms, Appelbaum, et al,
(2000) found the use of HPWS was associated with substantially higher stock market value and
labour productivity. Similar results were found in assessing the effectiveness of HPWS initiative
in the service sector (Varma et al, 1999). Huselid (1995) found that HPWS resulted in decreased
turnover rate, increasing productivity and improved corporate financial performance using
publicly held organizations from various industries. Levering & Moskowitz (1993) surveyed 100
best companies to work for in America and Lawler et al (1995) surveyed Fortune 1000
companies found making use of employee involvement and TQM practices reported significantly
higher financial success. These effects are most pronounced when such work practices are
implemented together as a system. It pays off to combine the appropriate HRM policies and
practices into an internally coherent system that is directly aligned with business initiative to
create value.

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Despite the growing evidence that HR practices affect firm performance, the existing
literature is far from being conclusive about what explains the existence of high performance
work systems. Cappelli and Neumark (2001) found statistically weak evidence that these
practices enhance productivity. The adoption of HPWS had little effect on overall labour
efficiency (output per dollar spent on labour). The discrepancy may lie in what constitute the best
HR practices in HPWS.
After an extensive review of existing literature in this area, notable differences exist
across studies on what constitutes “best” practices because the studies used different measures.
Not only did the different empirical studies use different measures of best practices, but they also
showed inconsistent effects from individual practices included in the set. Even though there is
no universal agreement about which practices or combination of relevant practices constitute a
high performance workplace, some common principles were mentioned in many of the studies.
The typical features of HPWS include selective staffing procedures, extensive training to
enhance workforce skills, generous pay and benefits to attract better qualified workers, together
with greater use of employee participation.
HR Practices Alignment and Organizational Performance
Organisations can adopt various HRM practices to enhance productivity. Currently there
is a growing acceptance of the idea that a bundle of appropriate HRM practices is needed to
realize the synergistic effects--that HR practices need to be applied as a set of complementary
practices aligned with the firm's goals and strategies before they are effective. This systems
perspective is based on the notion that HR practices often complement each other, so that the
adoption of a particular practice is only effective when it is adopted in combination with other

8. 7
supporting practices. Bundles of interrelated and internally consistent HR practices, rather than
individual practices, create a synergistic package, mutually reinforcing conditions that support
employee motivation and skill acquisition. Based on existing literature, the effects of different
HR practices are additive. The strengths and weaknesses of using an additive approach when
creating a HPWS unitary index see Becker and Huselid (1998) and Delery (1998).
A systems perspective supports coherent and integrated ‘bundles’ of HRM leads to
increased organisational performance (MacDuffie, 1995; Ichniowski et al, 1997).. Selective
recruitment and staffing procedures together with rigorous training enhance workforce skills,
while higher base pay and benefits attract better-qualified workers. Performance-based pay, job
security, and information sharing are expected to enhance employee motivation. Recognizing
the contribution that employees make, as well as soliciting employee input and encouraging
employees to participate in decision, are expected to enhance employee involvement. Specific
practices such as training, performance-based pay systems, and employee involvement are
correlated with higher productivity (Youndt, et al., 1996). Individual HRM practices will not
yield their full benefits unless they are combined together with the appropriate complementary
practices, in coherent packages. It is necessary to bundle together the appropriate combinations
of HRM practices to realize the synergistic effects. It follows that HPWS framework promotes
vertical (external fit with business strategy and attainment of organisational goals) and horizontal
(internal fit of HR practices) linkage (alignment). Thus, the internal HR practices alignment is
proposed to enhance organisational performance.
DATA AND METHOD
Research setting

9. 8
China was chosen as an appropriate research setting for its high growth rate in the retail sector.
China has experienced a rapid economic growth. During the last two decades, its GNP increased
more than six-fold. Even facing with the Asian financial crisis, it was able to sustain an
impressive growth rate of over 7%. Service sector accounted for 32.9% of GDP in 1999 in China,
arising from merely 21.4% a decade ago. Guangzhou has a population of 6.7 million, having the
highest income consumers in China. Consumption expenditure in urban cities increased 4 times
from 1992 to 2000. Shopping habits of the Chinese consumers are changing. They prefer to
shop in chain stores, supermarkets and convenience stores. There were 50 chains (37 in retailing
and 13 in catering) and 1134 outlets employing 39068 persons and total sale revenues of 10931
million yuan in 2002. A total of 133 supermarket outlets and 522 specialty stores were operating
in Guangdong by the end of 2002. Number of outlets per 10,000 persons was 225 (Guangzhou
Statistical Year book 2003, p.546). Chain stores are gaining popular for the purpose of achieving
the advantage of economy of scales in terms of distribution, warehousing, training and
management. The present study examines the human resource practices in this fast growing
sector in southern China.
This research employs a triangulation method of inquiry. In-depth face-to-face interviews
provide richer and deeper insights, and fuller contextual information. These interviews offer a
better understanding of the HR issues arising in their daily operations. Data were gathered from
multiple sources of informants-- different level of employees, CEOs, line managers and HR
managers using both interviews and survey, as well as secondary sources such as internal
documents and newspaper reports. For qualitative method, senior management teams from 28
chain stores were interviewed. These chain stores included supermarkets, shopping malls,
department stores and drug stores. A team of three interviewers asked probing questions on HR

10. 9
practices, and cross-checked views from different sources to ensure accuracy of the obtained
information.
Based on the interviews and extensive review of the secondary sources on chain stores in
China, a survey questionnaire was constructed. Questionnaires were sent by the Association of
Chain Stores in Guangdong. The survey respondents were drawn from personnel, finance and
general managers. One hundred forty three questionnaires were distributed, 96 were returned.
Excluding the incomplete, 83 questionnaires were usable. The overall effective response rate was
58%. The present study focuses on an industry specific context (chain store) to restrain
variations contributed by a single industry. The advantage of an industry –based study as oppose
to large-scale inter-industry cross-sectional data is to control for the influence of context and
environment differences across industries.
Measures
Based on the literature pertinent to HR best practices, a survey instrument was constructed
to examine the relative importance of a broad range of HR practices. The respondents were asked
to rate the extent to which HR practices were used in their firms, using a six-point scale of 1 (not
at all) to 6 (very extensively). These HR practices included in the present study can be classified
into six areas: (1) staffing, (2) training and development, (3) performance appraisal. (4) reward
and compensation, (5) work information sharing and participation in decision-making, and (6)
job security. Each of these areas was measured by 3 to 5 HR practices.
Individual HR practices were combined into an overall HR index reflecting the extent to
which the surveyed organisations have adopted the HRM practices. HPWS index was
operationalised as the summation of the standardized scores of the equally weighted HRM

11. 10
practices (selection, formal training, performance appraisal, reward systems, work structure and
job security). The use of an index reflects the HR system is consistent with both the emphasis on
"bundles"and "systems" that is emerging in the literature (Youndt et al., 1996, MacDuffie 1995).
We operationalised two sets of HR practices as additive indices, one for managerial staff (core)
and another for operating employees.
Firm performance is commonly measured by employee turnover, financial profit, and
market share. Because not all surveyed organizations are public listed companies, objective
financial data are sensitive and not available. The dependent variables in the present study
include three subjective performance indicators. Respondents were asked to indicate their firm’s
performance over the last two years as compared to their industry’s average in terms of
profitability, market share and growth in sales. A five-point scale of 1 (very poor) to 5 (very
good) was used.
We control for firm size and ownership types of the organisations surveyed. Firms with
superior resources will be able to formulate and implement unique strategies. Therefore, large
firms have more resources advantages. Firm size was measured by number of full-time
employees. We take natural logarithmic transformation to normalize the distributions and make
the measure more consistent with existing literature. As for types of ownership, state-owned
firms tend to be more embedded in institutional constrains and therefore less flexible in adopting
innovative HR practices. Ownership types was coded 1 for state-owned and collectives, 0 for
others.
FINDINGS
The result is based on the data from 83 questionnaires from China’s chain stores in our survey
and 28 interviews with top management. Among the 83 surveyed chain stores, 8.4% were state-

12. 11
owned and 62.7% were collectives. The average number of employees was 1495 with a range of
110 to 10000. The ratio of managerial to operating staff was 38.8%. On average, the HR
department had 10 persons. Turnover rates in the last two years for managerial staff and workers
were 10.75% and 20.21% respectively.
The HR practices apply to managerial and operating staff may be quite different (Fey, et
al., 2000). The means of the HRM dimensions for managerial and operating employees are
reported in Table 1. An overall index of high performance work practices was computed by
totaling six dimensions of HR practices in an organisation. Staffing and performance appraisal
had higher mean scores for both managers and operating employees. Managers scored
significantly higher than operating employees in staffing, performance evaluation and
information sharing but significantly lower in training and turnover rate as indicated by t-tests.
The results show no significant differences in pay and job security for the two groups. Results
from the present study confirm low wage differential reported in previous study by Goodall and
Warner (1997). Moving from predominantly egalitarian wage payment system to one that is
more individualized performance-related payseems to be the trend in HPWS, at least not in the
present study of chain stores.
Cluster analysis allows us to focus on the pattern whether there is any systematic
differences in the ways firms design their HR strategies. The purpose is to identify high and low
performing firms. Using K-mean cluster analysis, two clusters of firm with remarkably different
HR strategies were identified, resulting in 60 high adopters and 23 low adopters based on the
overall HR index (summation of the six dimensions scores). Once cluster solution has been
found, we examine the difference in level of human resource management between the clusters.
The comparison of high and low HR practices firms is given in Table 2. There were significant

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differences between these two groups of firms in most of the HR dimensions except job security.
There was considerable variation in their use of these HR practices. Firms with HPWS adopt HR
management practices very different from those adopted by firms with low performance work
systems. HPWS firms devoted considerably more resources to recruitment and selection, train
with greater vigor, do a lot more performance management and tie compensation to performance.
The differences in HR activities reflect the level of investment in human capital. There was no
significant difference in job security between the two clusters. Legal regulation imposes
obligations on enterprises in their treatment of surplus workers. Massive layoff of surplus
workers is still difficult. Workers enjoy high degree of job security. The outcome measures
associated with the two clusters showed no substantial difference.
When these 6 dimensions were factor analyzed, they all merged into two factors,
accounting for 42.91% and 18.36% of the variance respectively. The first factor is competence
enhancing HR practices consisting of training, performance appraisal, pay and sharing
information. These are primary HR practices firms use to elicit and reinforce desired behaviors.
The second factor is employment (staffing and job security). To a certain extent, the results
showed a coherent HR strategy.
Correlations between HR practices with outcome measures are given in Table 3. The three
outcome measures were highly correlated. Firm size as measured by number of employees (log)
and ownership types are significantly correlated with market share. Larger firms and state-owned
enterprises occupied higher market share. None of the HR practices were significantly correlated
with market share. Growth in sales was correlated with performance appraisal only but not with
other HR practices. Performance appraisal was significantly correlated with profit and sales.
Turnover rate had no significant correlation with any variables in the study. Job security, pay,

14. 13
training, staffing and HR index were not correlated with any of the performance indicators. This
contradicts previous study that human capital enhancing strategies, such as competitive pay,
intensive training and rigorous selection will lead to high performance (Delaney & Huselid,
1996).
Effects of HPWS on Organisational Performance
Hierarchical regression was used to investigate the effects of HR practices on
performance measures. To determine which factors may account for the observed differences in
the three performance measures, separate hierarchical regression analyses were conducted on
each of the dependent outcome variables. Results are presented in Table 4. Size measured in
employee number (log) and types of ownership were first entered as control variables. Size and
ownership had significant effect on market share. Because larger organisations have more
resources, they can afford to implement more high quality practices to capture a large market
share. Both size and ownership types had no effect on profitability and sales growth.
When the HR practices were entered as predictors, there was a significant effect on
profitability. Adding all the HR practices increased the explained variance significantly by 25%.
For individual HR practices, information sharing and involvement showed a significant but
negative effect on profitability as indicated by the standardized Beta coefficient. It should be
noted that there was no significant effect of the HR practices on growth in market share and sales.
None of the proposal relationships holds for Low HR index group. Low HR level firms are not
willing to invest in their human capital. The result was further reiterated by cluster analysis of
two clusters of firm with remarkably different HR strategies.

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DISCUSSION AND CONCLUSION
The purpose of this paper is to extend the emerging empirical studies on firm level impact of HR
practices on performance measures in the Chinese context. While the literature on HPWS from
the Western countries presents an overwhelmingly positive result, results from the present study
on chain stores in China are positive but not as strong or clear. The findings add to the growing
empirical evidence in the Asian context. Consistent with previous studies, the results partially
support for a positive relationship between the presence of HPWS and firm performance
(subjective measures of profitability).
The present study supports that internally coherent HR practices are positively related to
the perceptual measures of organisation performance. Empirical evidence demonstrated
statistically significant relationship between measure of HR practices and firm profitability. An
important message is building profit by putting people first. To a certain extent, there is strong
coherent among the different HR practices, but alignment with the firm's business initiative is
low. This explains why there is no significant impact on some of the performance measures
(market share and sales growth). Another explanation may be due to the industry specific nature
of the retail chain stores. The high growth in the industry creates shortage of well-trained skilled
workers. The high turnover and low-skill labour is a critical issue in the study of high
performance work systems. Turnover rates for managerial staff and operating employees were
10% and 20% respectively as reported by the respondents in the survey. High turnover is a
problem in the retail industry. Difficulty in attracting and retaining high caliber is mentioned
frequently in the interviews. With high turnover rate, the much needed job specific tacit
knowledge is difficult to accumulate. Organisations need to pay more attention to attract and

16. 15
retain employees simply because employee loyalty (low turnover) drives productivity/
performance (Batt 2002).
The present study finds weak evidence that HR practices enhance performance. One
possible explanation is the current status of HR management in China’s chain stores remains in
the early stage of the diffusion process. HR is stuck in administrative role of doing low-value
added activities like keeping payroll records, administrating benefits. Most retail chains pursue a
low cost strategy, employing mainly low skilled, poorly educated, and inadequately trained
workers. HR function was playing a traditional “personnel’ role rather than being a strategic
partner. They are slow in adopting high performance work practices. Heavy investment in human
resource development and uncertainty regarding the related costs and benefits are substantial
obstacles to be overcome. Risk involved in implementing these practices is high. Companies are
reluctant to adopt very innovative HR practices. Some of these companies are particularly keen
to search for guidance, emulating successful firms as their model.
In the western literature, employee involvement plays an important role in the success of
the HPWS initiatives. Quality and productivity payoff based on more participatory work
organisation. More participatory work organisation is accompanied by a complementary set of
HRM practices that enhance skills and provides incentives for discretionary effort. This may not
be the case in high power distance and authoritative corporate culture in the Chinese context.
High power distance societies place less value on subordinate input and participation. The
participative/involvement practice is incongruence with some cultural barriers that need to be
considered for effective implementation of HPWS in Chinese society, including hierarchical
power distance, reluctant to share power with subordinates, unwilling to delegate power during
decision-making processes, and unwilling to confront others in the workplace due to a desire for

17. 16
harmonious work relationships. In addition, high performance work practices require more
autonomy, greater task variety, or more effective use of knowledge and skill, by increasing
employees’ motivation, and enhancing retention of quality employees (Jones & Wright, 1992).
This may not hold in case of present status of chain store in China. The main concern is control-
based HR system to achieve cost effectiveness instead of enabling mechanism or commitment
system. Commitment based-HR practices were not used extensively. One may challenge the
adoption of HPWS because these systems may not fit the Chinese culture and institutional
arrangements. This casts some doubt on the viability and effectiveness of HPWS in certain
Asian contexts, at least not at the current stage of the diffusion process. Further research in this
area is needed.
Now China has joined the WTO, together with the multinational giant Wal-Mart entering
the China market, the competitive landscape in the retailing industry is experiencing
revolutionary change. Changes in the increasingly competitive environment have placed new
demands on human resource practices. Recruiting better trained with a sufficient numbers and
retaining them in organization become increasingly important. Local firms are adaptive and
quick to copy HR activities from successful companies.
The contribution of HRM to firm performance is to facilitate organisational alignment
such as responding to changes in strategy and the external environment. It is important that these
practices are internally coherent and consistent with firm strategies; the individual HR practices
per se are not so important because their effectiveness strongly depends upon the organisational
context. An organisation’s employees constitute a potential source of sustained competitive
advantage, and it is through HR practices that organisations are able to leverage the value of
people in ways that result in positive performance outcomes. Furthermore, high performing firms

18. 17
excel in many areas other than HR, and these areas must be accounted for by the HR-
performance relationship.
Limitations and Direction for Future Research
Implications of our findings should be interpreted with care as the respondents are
drawing from China’s chain stores only. Common method variance is a potential problem
whenever data are collected from a single source. It relies on perceptual measures of organisation
outcomes. Even though subjective measures are regularly used in research (Babin and Boles,
1998), objective measures of firm performance are more desirable. Future research should
consider using both objective and subjective measures of firm performance. The measure of
HRM practices is by no means complete. Firms adopt different form and structure of
compensation systems and different types of HR practices. The configuration of elements
constituting a HPWS is not clearly defined or researched. A contingency approach suggests that
there are different configurations of HRM, organisation, and strategic orientation. This is an
important area for future study.
Because of the above limitations and exploratory nature of the study, generalization
should be interpreted cautiously. Future studies should be extended to other part of China or
Asian countries for comparison. The current study is cross-sectional in nature, results cannot be
conclusive as to rule out direction of causality. Future research should look at the direction of
causality. Longitudinal study tracking the changes and development of progressive and
innovative HR management practices and their effects on economic measures of organisation
success is highly desirable.

19. 18
To conclude, the results partially support previous studies that alignment of HR systems
enhances organisational performance. Results from the present study add to the understanding of
a much-debated topic in the field, particularly in the under-researched Chinese context. It
contributes to the HRM literature by focusing on high performance work practices in China’s
chain stores. The finding provides an important reference and new insight for practitioners in
understanding how human resources are managed. Although these results should be treated as
preliminary because of data limitations, this study provides a foundation to study the important
HR strategies and organisational outcomes in a Chinese context. As more multinational firms
entering the China market, results from the present study offer some implications for both
research and practice. As for practical implications, the findings from present study offer
important insights for executives in formulating effective HRM strategies.

20. 19
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23. 22
Figure 1 Theoretical Framework
Ownership
HR Systems
Staffing Firm Performance
Training Profitability
Performance Evaluation Market Share
Compensation Sales Growth
Size
Job Security
Turnover Rate

24. 23
Table 1 The Differences in HR Practices Between Managerial and Supporting Staff
Managers Supporting Employees t-test
Mean Std. Dev. Mean Std. Dev.
Staffing 4.33 .50 4.04 .58 4.21***
Training 3.38 .87 3.7 .78 -3.72***
Performance Appraisal 4.44 .58 4.02 .80 5.17***
Pay 3.86 .84 3.73 1.0 1.51
Information sharing 3.90 .68 3.42 .76 6.05***
Job security 3.92 2.48 3.51 1.10 1.42
Turnover rate .11 .95 .20 .14 -2.8**
Rating scale on the extent HR practices used: 1 (not at all) to 6 (very extensively)
*P<.05; **P<.01; ***p<.001

25. 24
Table 2 The Differences between High and Low HR Practices Adopters
Cluster 1 Cluster 2
High Adopters Low Adopters t-tests
N=60 N=23
Mean Std. Dev. Mean Std. Dev.
HR Index 21.81 1.59 15.79 3.39 11.01***
Staffing 4.37 .44 4.16 .26 2.18*
Training 4.22 .65 2.82 1.03 7.06***
Performance Appraisal 4.48 .55 3.60 .83 5.52***
Pay 4.53 .52 3.6 .55 6.82***
Information sharing 4.21 .49 3.23 1.0 5.24***
Job security 4.12 2.71 3.28 1.07 1.28
Outcome 11.28 1.47 11.76 1.35 -1.21
Outcome is a composite measure of profitability, market share and sales growth.
*P<.05; ***P<.001

26. Table 3 Correlations among Variables
Profit Market Sales employee # Owners Staffing Training Appraisal Pay Inf. Share Job Turnover
Share (log) hip Involve Security Rate
Market .389**
Share
Sales .655*** .478***
Growth
log .117 .318* .159
employee #
Ownership -.149 .226+ -.044 -.053
Staffing -.201 .086 .029 .046 .318*
Training .185 -.001 .139 -.134 -.052 -.293*
Appraisal .271* .040 .253* .079 .005 .050 .092
Pay -.065 -.082 -.037 -.304* -.024 .044 .201 .143
Inf. Share -.22+ -.089 .002 -.195 .095 .138 .328** .207 .211
Involvement
Job Security .000 -.090 -.052 -.267+ .085 -.063 -.061 -.115 .120 .030
Turnover -.058 -.242 -.225 -.028 .163 -.138 .094 -.072 -.239 -.086 .024
HRindex -.008 -.094 .017 -.352* .123 .091 .236+ .146 .483*** .368** .848*** -.067
+
Correlation is significant at the P<.1 level; * P< 0.05; **P<.01; ***P<.001

27. 1
Table 4 Regression Results of HR Activities on Performance Measures
Profitability Market Share Sales Growth
+
Size (log employee#) .111 .056 .33** .26 .159 .123
Ownership types -.115 -.018 .276* .30* .002 -.007
Staffing -.14 -.27 .11
Training .01 .157 .232
Performance appraisal .13 -.23 .235
Pay .22 1.03 -.065
Information sharing, -.469** -1.58 -.12
involvement
∆R2 .027 .249* .177** .069 .025 .101
F .645 2.28* 5.06** 1.96+ .612 .871
Standardised Beta coefficients are reported in the table.
+
P<.1; *P<.05; **P<.01