The contextual approach suggests a significant change in the strategic HRM paradigm different from the previous perspectives. The contextual approaches initiate descriptive and global clarification through a wider approach that are relevant in various circumstance and different locations particularly in all environments and business contexts.
Many scholars, particularly the researchers certified in prices water house project argues that is essentially important to improve the theory of SHRM to present a multifaceted clarification, not only on internal alignment and how it strengthen and improve the attainment of organization aims but also to influence business external context in which the core management decisions are made and assess(Brewster, 1999). In that way, the major benefits of the contextual perspectives lies in the re-examination of the connectivity between the SHRM approach and its context. According to Brewster and Bournois, (1991) the others approaches are done quite well, but the contextual perspectives is considered as emerging variable that offer clarification that exceeds organizational level and incorporates the macro-social framework function which interacts with both internal and external variables. The benefits of contextual model are not just presented in organization outcome alone but also through their effects on others organizations internal variables as well as external environments. The transformation in paradigm of the contextual approach proposed that the approach have developed to become a visible ground for reviewing the three aspects of SHRM, namely: (1) the HRM nature, (2) the analysis level and (3) the major organizational players (Brewster, 1999). The core idea of this model is how its influence other internal variable within the organization, such as HRM functions, and the external environment. The main objectives of contextual scholars are to present the model that are relevant and accepted globally, regardless of the different in business and environmental contexts (Brewster, 1999). The expansion of the contextual approach offer proposition to re-evaluate the significance of environmental aspect by including others traditional variables that was excluded by the previous approaches, such as the effects of trade unionism, civic administrations and occurrence of societal and organizational situations (Bournois, 1991; Brewster and Bournois, 1991).The reassessment of the nature of HRM practices has a significant impacts within organizations. According to Brewster and Hoogerdoom (1992), and Brewster and Soderstrom (1994) explain that HRM practices is no longer the primary responsibility of personnel administrators, but is now comprehensive tasks for the rest of organizations managers, particularly the line managers. Concerning the level of investigation, contradictory to the firm, and occasionally practices or non-practices in the previous models, the contextual models suggests a much wider range; incorporating HRM practices into the environment in which its operate. As result of that, most of the contextual research is been center around developed countries, especially European where most comparative research about the impacts of various environments for HRM is been practices (Brewster, 1999). Even though the three previous models contribute in a broad sense, but the contextual approach has different initiatives, Its re-examination the structure of SHRM and quest many of hypothesis of the previous model and the rationale behind these models (Sparrow and Hiltrop, 1994).Under this new contextual concept, it is also essential important to re-evaluate the scope of stakeholders that are involves in the decision process. In contextual approach there is wide range internal and external stakeholders involved in the creation and implementation HRM strategies, the level at which each of these stakeholders influences HRM strategies must be assess (Tyson, 1997).The contextual approach foundation is based on the postulation that the model can contribute to various set of HRM practices in Europe in compare to others countries in the world especially countries within Europe union. They further differentiate the HRM system in north Europe and HRM approach in the south Europe which Bulgaria, Greece, Italy and Turkey (Apospori et al., 2008). The contextual perspective has adopted a simple statistical approach like means and standard derivations in analysis procedures (Brewster and Bournois, 1991). However, the use of more compound quantitative and qualitative method could permit more elaborate examination of the organizations, cultural, and environmental factors and how they interacts and their overall effects on HRM decision process (Gratton et al., 1999). The organizations HRM decision process deeply relies on both the internal and environmental factors. HRM practices that integrate and adopt factors hence organizations success
2.7 Resource Based View
Though many theories have been used to examine the relationship between HRM and sustainable competitive advantage, the most popular and universally accepted among strategic HRM scholars is the resources based view. The resource based view advocate that competitive advantage comes from the firm’s internal human resources (Wernerfelt, 1984; Barney, 1991). Though the strategic HRM discipline does not originate from the resource-based view (RBV) directly, but it has been actively influential to its growth to a large extent. This is as a result of the facts that RBV have changes the faces of strategy literature from external environment (such as industry position) toward internal resources of organizations as sources of competitive advantage (Hoskisson, Hitt, Wan , 1999). The global acceptance of internal resources as mean of improving organizations outcomes and sources of sustainable competitive advantage bring authenticity to HR’s declaration that firm’s human resources are strategically significant to firm outcomes. The initiative that organization internal resources can create sustainable competitive advantage was a remarkable exists from earlier view of strategy management scholars which concentrates on organizations external environment like consumers, competitors and industry positions (Miles and Snow 1984). Therefore, given both the need to theoretically rational behind the value of HR and the tendency for the SHRM field to borrow ideas and assumption from the wide strategy management and incorporate the RBV of the firm into the SHRM literature. Moreover, two propositions that are not easily forecasted have surface over the past 10 years. The RBV have attracted a lot of interest among SHRM scholars as background for both academic and experimental test than everyone predicted (McMahan, Virick and Wright, 1999). Secondly, the relevance and proposition of the RBV within the strategy management literature have led to the integration of strategic management and SHRM field (Snell, Shadur and Wright, 2001).
According to Jay Barney article published in 1991, the probability that competitive advantage highly depends on firms unique approach of doing things, rather than comparing to some of general approach, has given rise to a considerable body of studies in human resources discipline, known as ‘resource based view’ (RBV) (Priem and Butler, 2001a) . The Resources Based View provided a theoretical background of how organizations human resources can create a competitive advantage as well as enhance firm’s outcomes. According to Allen and Wright, (2006), the RBV present a genuine background upon which strategic HRM scholars can argue that organizations internal human resources can enhance organizations outcomes as well as have a positive impact on firm’s strategy formulation. The foundation of the Resource Based View is the proposal that if an organization possess resource that is valuable and rare, it will have a competitive advantage over other organizations; and that if that resource is difficult for competitors to copy or find alternate for, then the competitive advantage is probable going to be sustained for some substantial period of time (Dierickx and Cool, 1989). The structure of the resource-based view of sustaining competitive advantage proposes that firms attain sustainable competitive advantages by applying strategies that use their internal strengths, through respond to environmental opportunities, while neutralizing external threats and avoiding internal weakness.” For competitive advantage to be gained, resources available to competing firms must be variable among competitors, and these resources are not easily obtainable. The heterogeneity of units as far as human resources are concerned contributes to competitive advantage (Barney, 1991).
Resources Based View provides the basis on how organizations human resources could be possible be a source of sustainable competitive advantage. According to Cappelli and Singh (1992), HRM literature, present background for assessing the allegation of the RBV on strategic HRM and this HRM practices which is built on the foundation that (1) organizations strategy require distinctive set of behaviors and attitudes from employees and (2) Some business human resource practices create some set of distinctive value from their employees. They added that within this HRM strategy there are many perfect HRM models that are easier reshuffled by matching the resources that are available with the choice of strategy, although experiential research appears to involve in the opposite direction. Hence, they anticipated that the resource-based view might offer academic justification for the reasons why HR could have proposition on strategy formulation and execution.
Wright et al. (1994), differentiate between the organizations human resources (which is the bundle of HRM) and HRM practices (i.e HRM instrument used to manage employees). In the application of this notion of value, substitutability, inimitability and rareness, they further argued the organizations HRM approach cannot be a sources of competitive advantage because a competing firms or organizations could easily duplicate or copy. Relatively, they suggest that well trained, motivated and skilled employee have a higher possibility to create sustainable competitive advantage. Lado and Wilson (1994) added that organizations HRM practices could constitute a source of sustainable competitive advantage by investigating the responsibility of HRM in manipulating the capability of the firm, they recommended that bundle of HRM practices can be distinctive and discussable on how they improve organizations core values, and thus could be unique. They also indicated that the structure of HR practices, with all the interdependencies and supportive role will not be easily copy.
Boxall (1996) upgrade on the previous work on RBV and strategic HRM Patterns, he propose that the competitive advantage one firm have over other firms are employees advantage which he refer as the ability to hire and retain collections of outstanding, and talented employees with creative abilities. Secondly, HRM advantages are function of causally ambiguous, and collectively complex, which gradually develop from training, learning, cooperation and innovation.
In recent times, Lepak and Snell (1999) provide more structural models to strategic HRM foundation that partner with RBV. The authors suggest that within the firms, sizeable difference exists with view to both the distinctiveness and core value of employee’s skills. These employees are group side by side which relating to the variation arrangement which complementary employment relationship and the organizations HRM practices. The main impact of this approach is that some employee groups are more useful to build a sustainable competitive advantage than other employees.
In another development, Boxall (1998) build on his previous work and develop more inclusive approach of HRM strategy. He then expanded upon this basic model presenting a more comprehensive model of strategic HRM. He maintained that the main responsibility of firms is the ability to position employees to be creative and dedicated, the unique behaviors and attitude can be sources of competitive advantage for the organizations. Secondly, it is the responsibility of organizations to develop employees with terms spirit among themselves that can motivate them to learn within and outside the organizations. These terms spirit can be sources of competitive advantages for the firm.
Teece et al. (1990), added that it is not the system of HRM approach that are important but the means through which the organization train and accrue new talent and competent, and the pressure that reduces the pace and trend of the system. They define dynamic capabilities as “the organization’s capacity to incorporate, develop, and reshuffle internal and external skill to deal with the rapidly changing environments”. To sustainable competitive advantage, firms need to renew their stock of valuable resources as their external environment changes. Active capacity will enable organizations to impacts those continuing changes and their core value is to uphold or improve the organizations’ sustainable competitive advantage.
The terms of the RBV have become popular and useful since early 1990s, but the theory has attracted high numbers of criticism in recent times. RVB was criticize on the ground that its lucks theoretical essence based on the assumption that organizations with resources that can enhances their outcomes will perform better than the firms that does not possess such resources. They further have review that RBV lacks active directions, that the environmental transformation over the years will certainly adjust resource value (Priem and Butler, 2001a).
According to Barney (2001a) reacted to the criticism misunderstanding the scope of the RBV, which he called opinion and not a hypothesis. As such, it may serve not as a hypothesis itself, but as a descriptive approach that will be a basis for formulating new hypothesis allows a number of new theories to be formulated.