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    Strategic human resource manage-ment (SHRM) is defined as the pat-tern of planned human resource de-ployments and activities intended toenable an organization to achieve its

    goals (Wright & McMahan, 1992, p. 298). Ithas been argued that when a firms humanresource practices are consistent with eachother (i.e., internal fit), and with the firmsstrategic goals (i.e., external fit), organiza-

    tional efficiency and performance will beenhanced (Huselid, 1995; Wright & McMa-han, 1992). While SHRM is related to HRsalignment with the firms strategy, HR prac-

    tices are the exact mechanisms aimed at theacquisition, development, and motivationof human capital. In other words, SHRM fo-cuses on what a firm does with human re-sources, and HR practices refer to howthese resources are managed.

    In the West, the conceptual and empir-ical link between SHRM and firm perform-ance has been well established in the liter-ature (Huselid, Jackson, & Schuler, 1997;

    Wright & Gardner, 2003). Researchers haveshown that the use of strategic HR prac-tices is positively related to both financialand operational performance (Delaney &

    STRATEGIC HUMAN RESOURCE

    MANAGEMENT, FIRM

    PERFORMANCE, AND EMPLOYEE

    RELATIONS CLIMATE IN CHINA

    H A N G - Y U E N G O , C H U N G - M I N G L A U ,A N D S H A R O N F O L E Y

    We examined strategic human resource management (SHRM) and human

    resource practices in the Peoples Republic of China to assess the impact ofthese practices on firm performance and the employee relations climate. We

    also tested whether firm ownership moderates the above relationships. Em-

    pirical results from a sample of Chinese firms from various industries and re-

    gions showed that the levels of adoption of SHRM and HR practices were

    lower in state-owned enterprises (SOEs) than in foreign-invested enterprises

    (FIEs) and privately owned enterprises (POEs). Both SHRM and HR practices

    were found to have direct and positive effects on financial performance, op-

    erational performance, and the employee relations climate. However, the

    moderating effect of ownership type was significant for financial perform-

    ance only. 2008 Wiley Periodicals, Inc.

    Correspondence to: Hang-Yue Ngo, Department of Management, Chinese University of Hong Kong, Shatin, NT,Hong Kong, Phone: (852) 2609-7797, E-mail: [email protected].

    Human R sourc Manag m nt, Spring 2008, Vol. 47, No. 1, Pp. 7390 2008 Wiley Periodicals, Inc.

    Published online in Wiley InterScience (www.interscience.wiley.com).

    DOI: 10.1002/hrm.20198

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    74 HUMANRESOURCEMANAGEMENT, Spring 2008

    Huselid, 1996). Evidence also has been pro-vided of the synergistic effect of bundles ofHR practices on firm outcomes (Huselid,1995; MacDuffie, 1995).

    Although the applicability of SHRM andhigh-performance HR practices in Asia andhow they diverge or converge from the Westhave been examined, no conclusive resultshave been reached (Bae, Chen, Wan, Lawler,& Walumbwa, 2003; Von Glinow, Drost, &Teagarden, 2002). Recently, several studiesconducted in China have found a positive re-lationship between SHRM and firm perform-

    ance (Bjorkman & Fan, 2002;Law, Tse, & Zhou, 2003).

    The present study attempts toextend the above line of researchby developing and testing a con-

    ceptual model of the HRperform-ance relationship in the contextof the Peoples Republic of China.It differs from previous researchwork in the following ways. Firstof all, we investigate whetherSHRM and HR practices are re-lated to different firm outcomes,including financial performance,operational performance, and em-ployee relations climate. Em-ployee relations climate is viewed

    as an important aspect of organi-zational effectiveness (Schuster,1982, 1998) that has been under-researched.

    Second, we test the moderat-ing effects of firm ownership on

    the relationships between SHRM and HRpractices with firm outcomes. Firms of differ-ent ownership types, including state-ownedenterprises (SOEs), foreign-invested enter-prises (FIEs), and privately owned enterprises(POEs) face different institutional constraints

    (Ahlstrom & Bruton, 2001; Ding, Akhtar, &Ge, 2006) and they search for different HRmodels in order to operate effectively in theChinese transitional economy. Hence, theimpact of SHRM and HR practices on per-formance is likely to vary among these firms.

    Third, we surveyed both the CEO andone other top manager for their evaluationsof the effectiveness of the HR function in

    their firm. In the existing literature, single-respondent measures of HR practices andfirm performance are often used eventhough these measures may contain signifi-cant amounts of measurement error (Ger-hart, Wright, McMahan, & Snell, 2000). Inthis study, we collected information frommultiple respondents and thus avoided theissue of common method bias.

    Literature Review

    SHRM and HR Practices

    According to the resource-based view (RBV),internal firm resources that are rare, valu-able, inimitable, and nonsubstitutable canprovide sources of sustainable competitive

    advantages (Barney, 1991). Human resourcepractices that meet these criteria are such asource (Wright & McMahan, 1992) and thusenhance organizational performance. TheRBV has been instrumental in developingthe notion of SHRM, or the exploration ofHRs role in supporting business strategy(Wright, Dunford, & Snell, 2001).

    Devanna, Fombrum, Tichy, and Warren(1982) highlighted SHRM as a key process instrategy implementation. Specifically, severaltypes of HR activities, such as performance ap-

    praisal, compensation, and development pro-grams, were considered as critical for strategyimplementation if they could elicit desiredemployee behaviors and enable managers toachieve long-term strategic goals (Schuler &Jackson, 1999). Huselid (1995) conceptualizedSHRM as the emphasis each firm places onaligning its HR functions and competitivestrategy. Arguably, such an alignment (or ex-ternal fit) is conducive to firm performance(Bae & Lawler, 2000; Becker & Huselid, 1998).

    As suggested by Lado and Wilson (1994),

    a firms HR practices also are a source of com-petitive advantage. HR practices generallyrefers to a set of internally consistent practicesadopted by firms to enhance the knowledge,skills, ability, and motivation of employees.As these practices support and develop thehuman resources and competencies, they addvalue to the firm (Wright, Smart, & McMa-han, 1995). These practices, widely adopted

    While SHRM is

    related to HRs

    alignment with the

    firms strategy, HR

    practices are the

    exact mechanisms

    aimed at the

    acquisition,

    development, and

    motivation of human

    capital.

    Human Resource ManagementDOI: 10.1002/hrm

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    Strategic Human Resource Management, Firm Performance, and Employee Relations 75

    and utilized by large firms in Western coun-tries, are known as the mainstream (Lepak,Bartol, & Erhardt, 2005) or best HR practices(Wright & Gardner, 2003) in the literature.These practices often are viewed as bundles,rather than as isolated practices (MacDuffie,1995; Wright & McMahan, 1992). Internalconsistency is needed among themfor ex-ample, extensive training should be comple-mented by compensation, performance ap-praisal, and promotion practices that reducestaff turnover in order to be effective (Baron &Kreps, 1999). Considerable research evidenceexists supporting the relationship between in-ternally consistent HR practices and organiza-tional effectiveness (Becker & Huselid, 1998;Bowen & Ostroff, 2004; Huselid, 1995).

    HRM in China

    Before the economic reform, state-owned en-terprises had dominated the Chinese econ-omy. The operation and management of theSOEs were strongly influenced by traditionalculture and communist ideology. The Chineseculture has been marked by collectivism andConfucianism, with an emphasis on respectfor hierarchy, in-group harmony, reciprocity,and loyalty (Chen, 1995). These culture val-ues, together with tight bureaucratic control

    from the government, shaped the pre-reformHRM system in the SOEs, which was charac-terized by lifelong job security, seniority-basedpromotion and wage increases, and extensivewelfare programs (Warner, 1996; Yu & Egri,2005). The so-called iron rice bowl employ-ment system that emphasized egalitarianismand workforce stability, however, has beencriticized as incompatible with the new eco-nomic environment.

    Nationwide reforms in HRM have beenlaunched since the 1990s, with the primary

    objective of enhancing efficiency and pro-ductivity in SOEs. Major changes includedthe introduction of fixed-term employmentcontracts and performance-based rewards, ashift in welfare provision responsibility, and anew labor law regulating employment rela-tions (Warner, 1996). Additionally, employ-ment policies and practices have been decen-tralized to the enterprise level, and managers

    in SOEs have been granted greater autonomyin hiring and firing workers (Chow, Fung, &Ngo, 1999). In effect, the iron rice bowlemployment system has been abolished. De-spite these changes, HR decisionsin many SOEs still are affected bysocial and political considera-tions, particularly the pace of so-cial security reform and the possi-bility of massive unemployment(Wong, Wong, Ngo, & Lui, 2005;Zhu, 2005). Government interfer-ence in enterprise managementstill persists in SOEs, and organi-zational inertia has served as a de-terrent to the change in HR sys-tems (Ding & Akhtar, 2001). Asnoted by Goodall and Warner

    (1999), some traditional practices(e.g., provision of social welfareand personnel administration) co-exist with market-oriented prac-tices (e.g., employment contractsand performance-related rewards)in these enterprises.

    As a consequence of theopen-door policy, the number offoreign-invested enterprises hasincreased substantially in Chinaover the past two decades. West-

    ern mainstream practices inHRM such as formal perform-ance appraisal, performance-based compensation, and exten-sive training have been widelyadopted in these firms (Ding etal., 2006; Warner, 1997). Subjectto less administrative interfer-ence from the central and localgovernments, these firms havemore discretion in designingtheir own HR systems (Chow et

    al., 1999).The number of privately

    owned enterprises has also experi-enced rapid growth. One charac-teristic of these firms is their ability to re-spond quickly to environmental changes. Aspointed out by Warner (1996), POEs havegreater leeway in their employment practicesthan SOEs, and they can hire and fire workers

    Nationwide reforms

    in HRM have been

    launched since the

    1990s, with the

    primary objective of

    enhancing

    efficiency and

    productivity in SOEs.

    Major changes

    included the

    introduction of

    fixed-term

    employment

    contracts and

    performance-based

    rewards, a shift in

    welfare provision

    responsibility, and a

    new labor law

    regulating

    employment

    relations.

    Human Resource ManagementDOI: 10.1002/hrm

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    76 HUMANRESOURCEMANAGEMENT, Spring 2008

    in a relatively unconstrained way. Because oftheir short history, their HR practices tend tobe informal and nonsystematic as comparedwith other firms (Zhu, 2005). However, to im-prove their market competitiveness and to at-tract and retain talent, these firms havestarted to invest more in HR and to developtheir HR systems (Zhu, 2005).

    HRM and Firm Performance in China

    Using a large-scale survey of HR managersacross China, Law et al. (2003) found that thestrategic role of HR is important to firm per-

    formance in joint ventures (JVs).Bjorkman and Fan (2002) focusedon JVs and wholly owned foreignsubsidiaries in China and found

    support for the positive impact ofhigh-performance HR practicesand the extent of HRM-strategy in-tegration on firm performance.They further noted that HRM-strategy integration was a strongerpredictor of performance than HRpractices. Nevertheless, Mit-suhashi, Park, Wright, and Chua(2000) reported the poor perform-ance of HR departments of multi-national corporations (MNCs).

    The HR managers in these firmsattributed the unsatisfactory per-formance to the inability of HR de-partments to act strategically. Zhu,Cooper, De Cieri, and Dowling(2005) also noted that HR man-agers across all ownership typesare beginning to participate instrategic decision making, buthow far they can strategically inte-grate the HR function remains tobe seen.

    Regarding the effects of HR practices onorganizational outcomes, Deng, Menguc, andBenson (2003) reported that in their sample ofSOEs, a bundle of HR practices had a substan-tial impact on export performance. Yu andEgri (2005) found that several HR practiceswere related to job satisfaction and affectiveorganizational commitment of employeesworking in a JV and an SOE. Bjorkman and

    Fan (2002) reported that HR practices thatfocus on individual performance and employ-ment motivation were strong predictors offirm performance in FIEs. Takeuchi, Wak-abayashi, and Chen (2003) also found supportfor the positive relationship between a firmsHR practices and financial performance in asample of Japanese subsidiaries.

    Furthermore, Wang, Tsui, Zhang, and Ma(2003) argued that organization-specific em-ployment relationships with different levels ofinducements and expected contributions arecritical for firm performance. Among POEs,firm performance is highest when utilizing theunderinvestment approach (i.e., low induce-ments and high expected contributions),whereas among SOEs, firm performance ishighest when they use the organization-fo-

    cused approach (i.e., high inducements andhigh expected contributions). Tsui and Wu(2005) further suggested that certain HR prac-tices such as training and development lead toan employment relationship that contributesto firm performance.

    In summary, theoretical and empiricalevidence supports that both SHRM and HRpractices have positive effects on firm out-comes. However, the utilization of SHRMand HR practices seems to vary among dif-ferent types of firm ownership in China. As

    illustrated in our conceptual model in Figure1, we expect direct effects of SHRM and HRpractices on financial and operational per-formance and on the employee relations cli-mate, and a moderating effect of ownershiptype on these relationships.

    Hypotheses

    Differences in SHRM and HRPractices Across Ownership

    According to Law et al. (2003), ownershiptypes not only encompass the influences ofvariables external and internal to the firm,but they also represent interacting systemsof factors that are relevant to the way man-agement practices operate. Previous studieshave demonstrated the salient role of firmownership on the adoption of HR practicesin the Chinese context (Braun & Warner,

    Theoretical and

    empirical evidence

    supports that both

    SHRM and HR

    practices have

    positive effects on

    firm outcomes.

    However, the

    utilization of SHRM

    and HR practices

    seems to vary

    among different

    types of firm

    ownership in China.

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    Strategic Human Resource Management, Firm Performance, and Employee Relations 77

    2002; Ding & Akhtar, 2001). For example,multinational firms tend to transfer theirmanagement system from their homecountry to the local subsidiaries (Lau &Ngo, 2001).

    As FIEs face fewer institutional constraints,they enjoy greater autonomy and flexibility inemployment (Chow et al., 1999), and henceadopt a more market-oriented approach inmanaging human resources than local firms

    (Warner, Goodall, & Ding, 1999). In thesefirms, HRM is considered to be strategicallyimportant and Western-based high-perform-ance HR practices often are introduced (Braun& Warner, 2002). Their expatriate managersalso are inclined to implement SHRM, giventhat SHRM is a concept developed within aWestern context. Ding and Akhtar (2001)found that JVs place greater emphasis onstrategic business planning and HR practicesaimed at developing human capital. Cooke(2004) noted that FIEs tend to develop sophis-

    ticated HR systems, many elements of whichare Western practices transferred and adaptedto suit the Chinese environment.

    In the past, under the iron rice bowlemployment system, the workforce was notused as a strategic tool to achieve a compet-itive advantage in SOEs (Benson & Zhu,1999). Owing to economic reform, SOEstook on more marketized HRM functions

    such as recruitment, training, and perform-ance evaluation (Ding & Akhtar, 2001; Zhu& Warner, 2004). However, these firms haveto overcome many institutional constraints,especially those from the government andtrade unions, before they can successfullyintroduce new HR practices or change theirHR systems. Owing to their limited expo-sure, personnel directors in SOEs are muchless market-oriented, and they implement

    fewer mainstream HR practices than person-nel directors in FIEs (Warner et al., 1999).Similarly, the entrepreneurs and CEOs inPOEs have a limited sense of the strategicimportance of HRM to organizational com-petitiveness (Cooke, 2004). Being free fromsocial and political obligations, POEs havesome autonomy to adopt marketized HRpractices resembling those of FIEs (Ding, Ge,& Warner, 2001). As pointed out by Zhu(2005), the HR practices in these firms tendto be informal and nonsystematic. POEs also

    lack a comprehensive HR strategy and awell-structured HR system (Cooke, 2004). Inview of the above, we put forward the fol-lowing hypothesis:

    H1: Ownership types influence the adoption ofSHRM and HR practices of firms. Specifically,FIEs employ more SHRM and HR practicesthan SOEs and POEs.

    Human Resource ManagementDOI: 10.1002/hrm

    FIGURE 1. Conceptual Model

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    78 HUMANRESOURCEMANAGEMENT, Spring 2008

    Main Effects of SHRM andHR Practices

    The positive relationships between SHRMand HR practices with firm performance havebeen demonstrated in the West, and more re-cently in China. These relationships are not

    only found in FIEs and JVs, butalso in SOEs (Bjorkman & Fan,2002; Law et al., 2003). Both localand foreign firms are aware thatthe proper utilization of humanresources can improve organiza-tional effectiveness (Zhu et al.,2005). Firms that are able to at-tract, recruit, and retain talent viaHRM gain a competitive edge inthe dynamic market. When theHR practices are internally consis-

    tent and well integrated with busi-ness strategy, they help to developa human resources pool that addsvalue to the firm, and in turn en-hances firm performance (Bae &Lawler, 2000; Wright et al., 1995).We thus hypothesize that firmsusing more SHRM and HR prac-tices achieve higher financial andoperational performance.

    H2a: SHRM and HR practices arepositively related to firm per-formance.

    Apart from financial and op-erational performance, a goodemployee relations climate is an-other important outcome that de-serves close scrutiny. SHRM andHR practices, when properly im-plemented, should create a social

    atmosphere in which employees have a good

    feeling about the organization (Bowen & Os-troff, 2004). For example, effective manage-ment of human resources should result inthe presence of a feeling of participation,open communication, sharing information,and trusting relationships in the organiza-tion (Collins & Smith, 2006). This kind ofshared perception and feeling among organi-zational members often is referred to as the

    organizations climate (Riordan, Vanden-berg, & Richardson, 2005).

    The employee relations climate, therefore,reflects a high involvement, employee-cen-tered culture that creates the conditions foremployees to make a value-added contribu-tion to improving organizational perform-ance (Riordan et al., 2005; Schuster, 1998).This kind of climate can be used as a proxy toevaluate how strategically and effectively anorganization manages its human resources.The relationship between HR practices andemployee relations climate has been demon-strated in previous studies (Collins & Smith,2006; Schuster, 1998). Accordingly, we de-velop the following hypothesis:

    H2b: SHRM and HR practices are positively re-

    lated to the employee relations climate.

    Interaction Effects of Ownershipwith SHRM and HR practices

    There is substantial variation in the wayhuman resources are managed among differ-ent ownership types, industries, and regionsin China (Ding et al., 2006; Zhu & Warner,2004). The impact of HRM also is likely todiffer among firms. Law et al. (2003) foundthat ownership types moderated the HRper-

    formance relationship in that the relation-ship was positive and significant for JVs, butnot for SOEs. It is plausible that some typesof firms may use their HR practices more ef-fectively than others, given their internaland external contingencies. For example, thepolitical interference and bureaucratic struc-ture in SOEs imply that they have a low levelof flexibility in managing people. The insti-tutional constraints posed on these firms arelikely to reduce the positive effects of somebest management practices.

    Furthermore, HR managers in SOEs haveless active and strategic roles than those inFIEs (Ding & Akhtar, 2001; Zhu & Warner,2004); thus, implementing HR policies andpractices may have less of an effect on per-formance in these firms. Law et al. (2003)concluded from their research that for SOEs,the more powerful the HR departments (andthus the more political the organization), the

    Firms that are able

    to attract, recruit,

    and retain talent via

    HRM gain a

    competitive edge in

    the dynamic market.

    When the HR

    practices are

    internally consistent

    and well integrated

    with business

    strategy, they help

    to develop a human

    resources pool that

    adds value to the

    firm, and in turn

    enhances firm

    performance.

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    Strategic Human Resource Management, Firm Performance, and Employee Relations 79

    lower the firm performance, unless increasedHR power was accompanied by a change inownership. In contrast, expatriate managersin FIEs are able to think strategically aboutHRM (China Staff, 2005) and have full au-tonomy to design an HR system for theirfirms that suits the internal and external en-vironment. It follows that FIEs may bettercapitalize on SHRM and Western-developedHR practices than local Chinese firms.

    Equally plausible might be the argumentthat compared to FIEs, managers in SOEs andPOEs will see greater improvements in orga-nizational performance because they have alarger performance gap to fill. In particular,SOEs still lag behind FIEs in both manage-ment processes and firm performance (Chen& Lau, 2000). Since human resources were

    not properly managed in many SOEs prior toenterprise reform, performance couldchange drastically once SHRM and main-stream HR practices are employed. Thus,SOEs and POEs may reap more benefits fromadopting SHRM and HR practices than FIEs.We propose a general hypothesis regardingthe moderating role of ownership types.

    H3: Ownership types moderate the relationshipsof SHRM and HR practices with firm per-formance and employee relations climate.

    Research Methods

    Data Collection

    The data for this study were collected througha survey of 600 Chinese enterprises. Thesefirms were located in four different regions inChina (i.e., Beijing, Shanghai, Guangdong,and Sichuan) and represented various indus-tries and ownership types. The survey waspart of a larger study conducted in collabora-

    tion with the National Bureau of Statistics ofChina (NBS) in 2003. The firms in the samplewere randomly selected from those registeredwith the local government.

    Two informants from each firm were in-vited to participate in the survey through face-to-face interviews. The first respondent, theCEO, provided strategy-related informationabout the firm. The second respondent, either

    the HR director or financial director, providedinformation about HR practices and objectivefirm-level data. Since the study was adminis-tered by the NBS, these respondents were verycooperative in providing information. Wecross-validated the information provided bythe two respondents and found high consis-tency and reliability of our data.

    Of the sample, 150 (25%) are from each ofthe four regions. Regarding ownership types,161 (26.8%) are SOEs, 120 (20%) are FIEs, 228(38%) are POEs, and the remaining 91 (15.2%)belong to other types of ownership. The ma-jority of these enterprises (80%) arein the manufacturing sector.

    Measures

    Dependent Variables

    This study has three outcome vari-ables. First, financial performancewas measured by asking the CEOsand the HR/Finance directors toevaluate the firms performancecompared to the following indus-try averages over the past year:sales growth, market share, netprofit, return on investment (ROI),profit from sales, capital liquidity,

    and return on assets (ROA). Simi-larly, operational performance was measuredby asking the two informants to evaluate thefirms performance as compared with the in-dustry average in productivity, production ef-ficiency, new product development, researchand development expenses, and marketingexpenses. Each of the respondents was askedto assess whether their performance in respec-tive areas was much lower than the industryaverage (1) or much higher than the industryaverage (5) on a five-point Likert scale.

    Since the correlations of ratings providedby the CEO and the HR/Finance director ofeach firm were very high, the average of theseratings was calculated to capture the financialand operational performance of the firm. Thelast variable was employee relations climate,which was measured by a six-item scale se-lected from the Human Resources Index de-veloped by Schuster (1982). The items pertain

    Ownership types

    moderate the

    relationships of

    SHRM and HR

    practices with firm

    performance and

    employee relations

    climate.

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    80 HUMANRESOURCEMANAGEMENT, Spring 2008

    to work atmosphere and human relations(please refer to Appendix A for the items).They encompass several aspects of an organi-zations climate: interpersonal relationships,worker participation, communication, andtask performance. The CEOs were asked toevaluate whether these items accurately de-

    scribe the situation in their organi-zations on a five-point Likert scale.In this study, the alpha coefficientof this scale was 0.88.

    Independent Variables

    SHRM was measured by a seven-item scale modified from theStrategic Human Resource Man-agement Index. This scale was

    originally developed by Devannaet al. (1982) and has been used byHuselid (1995) and in HRM re-search conducted in China (Zhao,2001). The CEOs were asked todescribe the extent to which theirfirms have aligned the firmsHRM policies with the firmsstrategy on a five-point Likertscale (the items are shown in Ap-pendix A). This scale had analpha coefficient of 0.91.

    HR practices were measured bya 15-item instrument adopted fromNgo, Turban, Lau, and Lui (1998).The HR/Finance directors wereasked to describe the extent towhich these practices were used intheir organizations on a five-pointLikert scale. The list of items con-

    tains various aspects of HRM such as selection,recruitment, training, performance appraisal,and compensation (see Appendix A for theitems). A principal component factor analysis

    with varimax rotation was conducted on theseitems, and only a single factor was identified.Thus, all items were employed to form the scalewith an alpha coefficient of 0.91.

    Ownership types were measured by threedummy variablesstate-owned enterprises,foreign-invested enterprises, and privatelyowned enterpriseswith all other types offirms as the reference group.

    Human Resource ManagementDOI: 10.1002/hrm

    Control Variables

    We included several control variables that po-tentially could affect firm performance in theChinese context. First, industry was measuredby two dummy variables: heavy manufactur-ing and light manufacturing. Firms in otherindustries such as services were treated as thereference group. Second, three dummy vari-ables were created to capture the effect of geo-graphic locationnamely, Beijing, Shanghai,and Guangdong. Firms located in Sichuanwere considered the reference group. Finally,firm size was measured by the natural loga-rithm of total current assets of the firm.

    Analysis

    To show the differences in SHRM and HRpractices among firms of various ownershiptypes, ANOVA was employed. A multiplecomparison post hoc test with least signifi-cant difference (LSD) was used to determinewhich ownership types were significantly dif-ferent from the others. To evaluate the effectsof various independent variables on the out-comes, hierarchical regression analysis wasthen conducted. We first entered the controlvariables, followed by the ownership types,SHRM, and HR practices to test for their main

    effects. Finally, the interaction terms of SHRMand HR practices with ownership types wereentered to test for the moderating hypothesis.

    Results

    Table I displays the means, standard devia-tions, and correlations of the study variables.It is worth noting that SOEs had a significantand negative correlation with SHRM, HRpractices, and financial and operational per-formance, while FIEs had a significant and

    positive correlation with all these variables.POEs had a significant positive correlationwith HR practices and operational perform-ance only. As expected, SHRM and HR prac-tices were positively correlated with eachother, and both had a positive and significantcorrelation with the three outcome variables.

    Table II gives the results of the analysis ofvariance (ANOVA). As predicted, significant

    Significant

    differences in SHRM

    and HR practices

    were found among

    various types of

    ownership. In

    particular, both

    SHRM and HR

    practices were used

    the least in SOEs. As

    compared to other

    ownership types,

    FIEs adopted more

    SHRM, and both FIEs

    and POEs adopted

    more HR practices.

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    Strategic Human Resource Management, Firm Performance, and Employee Relations 81

    Human Resource ManagementDOI: 10.1002/hrm

    Variables

    M

    SD

    1

    2

    3

    4

    5

    6

    7

    8

    9

    10

    1

    1

    12

    13

    1.

    HeavyManufacturing

    0.3

    7

    0.4

    8

    2.

    LightManufacturing

    0.4

    3

    0.5

    0

    0.6

    6**

    3.

    Beijing

    0.2

    5

    0.4

    3

    0.0

    9*

    0.0

    8*

    4.

    Shanghai

    0.2

    5

    0.4

    3

    0.1

    5**

    0.1

    5**

    0.

    33**

    5.

    Guangdong

    0.2

    5

    0.4

    3

    0.0

    1

    0.0

    2

    0.

    33**

    0.3

    3**

    6.

    FirmS

    ize

    9.1

    5

    1.6

    6

    0.0

    7

    0.0

    3

    0.

    09*

    0.0

    2

    0.0

    7

    7.State-owned(SOE)

    0.2

    7

    0.4

    4

    0.0

    1

    0.1

    0*

    0.

    16**

    0.0

    5

    0.0

    1

    0.0

    2

    8.

    Foreign-invested(FIE)

    0.2

    0

    0.4

    0

    0.0

    4

    0.0

    2

    0.

    00

    0.0

    0

    0.0

    0

    0.1

    2**

    0

    .30**

    9.

    PrivatelyOwned(POE)

    0.2

    0

    0.4

    0

    0.0

    1

    0.0

    6

    0.

    00

    0.0

    0

    0.0

    0

    0.3

    4**

    0

    .30**

    0.2

    5**

    10.

    SHRM

    3.2

    6

    0.7

    8

    0.0

    5

    0.0

    1

    0.

    04

    0.1

    1**

    0.0

    8*

    0.2

    0**

    0

    .14**

    0.1

    0*

    0.0

    3

    11.

    HRPractices

    3.2

    2

    0.6

    4

    0.0

    3

    0.0

    1

    0.

    09*

    0.0

    1

    0.0

    6

    0.1

    8**

    0

    .21**

    0.1

    1**

    0.1

    1**

    0.4

    8**

    12.

    FinancialPerformance

    2.9

    8

    0.7

    6

    0.0

    5

    0.0

    3

    0.

    15**

    0.0

    6

    0.0

    7

    0.2

    3**

    0

    .26**

    0.1

    4**

    0.0

    7

    0.3

    6**

    0.4

    6**

    13.

    Operational

    Performance

    3.0

    1

    0.7

    3

    0.0

    5

    0.1

    1*

    0.

    14**

    0.0

    1

    0.1

    1**

    0.2

    3**

    0

    .24**

    0.1

    1*

    0.0

    8*

    0.4

    2**

    0.4

    6**

    0.7

    1**

    14.

    EmployeeRelations

    Climate

    3.5

    6

    0.7

    0

    0.0

    0

    0.0

    5

    0.

    01

    0.1

    2**

    0.0

    7

    0.1

    0*

    0

    .08

    0.0

    1

    0.0

    7

    0.6

    3**

    0.4

    0**

    0.2

    9**

    0.3

    6**

    *p