Human resource systems and employee performance in Ireland and the Netherlands: A test of the complementarity hypothesis

A central claim of strategic HRM is the notion that the way a firm manages its workforce affects its corporate performance. In particular, 'high performance human resource management', a systematic approach toward HR management consisting of internally consistent HR dimensions that develop the skill and motivation of the workforce, is considered to contribute to the 'bottom-line' of companies. The benefits are attributed generally to 'complementarities' among the constituent dimensions. In the theoretical part of this paper we distinguish between three different processes resulting in such complementarities: reinforcement, flanking and compensation. These different processes are exemplified for five areas of high performance human resource management, incentives systems, training, sharing arrangements, guidance and selective recruitment. In the empirical part of this paper we examine whether the effect at the employee level can be traced to the complementary relationships among the five high performance HR dimensions. The core hypothesis to be tested in this study is that the complementarity effect of the high performance HR management system enhances employee performance over and above the sum of the effects of the five practices. This complementarity hypothesis is tested using a methodology for the test of systems effects suggested by Ichniowski et al. (1997). The data come from a matched establishment survey in two European countries, Ireland and the Netherlands. These datasets comprise data from nearly 400 establishments. Key findings are that the complementarity hypothesis is fully supported by the Irish data but rejected by the Dutch data.