The HR system, organizational culture, and product innovation

This paper outlines the critical role of organizational culture in the link between the HR system and development of new products and services. While it has been generally accepted that an innovation-oriented HR system would lead to higher level of innovation, the literature does not lend full support to this link. This paper is to point out the inadequacy of such simplified view. It is suggested that a developmental culture is the missing link in-between HR system and innovation outcomes. An HR system which emphasizes extensive training, performance-based reward, and team development is necessary to create an organizational culture that is conducive to product innovation. The empirical findings from a survey of 332 firms in Hong Kong confirmed that organizational culture acted as a mediator between a firm’s HR system and product innovation. q 2004 Elsevier Ltd. All rights reserved.