Frontiers in Business, Economics and Management ISSN: 2766-824X | Vol. 7, No. 3, 2023 144 Human Resource Management (HRM) Practices and Sustainable Organisational Innovation: A Literature Review Beifan Zhang Management and Marketing School of Durham University, Durham, DH1 3LE, UK Abstract: This paper will critically review and summarise existing research and theories on HRM and organisational innovation. First, the meaning and development process of HRM will be described. In addition, the impact of the macro environment on HRM will also be presented, including technological developments and force majeure. Following the external forces, the dissertation will then illustrate the different stages of organisational innovation activities and changes. Next, this part will analyse the relationship between human resource management and organisational innovation, as well as the operational processes of both. Keywords: HRM practices, Organisational innovation, Integration model. 1. Human Resource Management 1.1. Theoretical Developments in the HRM As defined by Beer and other scholars in 1984, Human Resource Management is the set of management-related decisions and activities that can ultimately shape the nature of the link between the workforce and the organisation (Beer et al., 1984). Boxall, Purcell and Wright (2007) also defined HRM as the fundamental way of any organisation (the organisation which has employed people) to manage work and personnel to fulfil the stated objectives. Therefore, for organisational innovation, the dissertation considers HRM as a tool for decision-makers to achieve strategic goals and always be applied to tasks in all departments. Existing studies have begun to focus on moving HRM into a central position (D’Angelo et al., 2022; Björkman and Søderberg, 2006; Barney and Wright, 1998; Barney and Wright, 1998; Zheng and Yang, 2019) and strategic position in the organisation (Svoboda and Schröder, 2001; Valentine et al., 2019; Lawler and Mohrman, 2003; Lawler and Boudreau, 2009). In order to study deeply, scholars often divide the broad field of human resource management into specific practices and policies (De Leede and Looise, 2005; Gigauri, 2020). In the twentieth century, HRM was known as the personnel department and was responsible for the legal processes related to workers and was primarily concerned with the strategic impact on individuals and collectives of, for example, costs and planning(Valentine et al., 2019). However, as the macro environment has changed, the functions of human resource management have shifted significantly. The core concepts of modern HRM theory have become synergy, fit and integration, focusing on the internal fit of HR practices, the organisational fit and the strategic fit that exists between business or competitive strategies (Wood, 1999). At the same time, people are beginning to attach more attention to talent management based on a global competitiveness orientation (Cascio and Boudreau, 2016). As a result, the ever-changing macro environment has gradually expanded its impact on HRM. However, a growing body of research shows that environmental factors have a multifaceted impact on HRM. Since the global business environment has been affected by macro factors, managers have had to change policies frequently in order to adapt background (Jackson et al., 2011, cited in Bakanauskienė and Brasaitė, 2015) and the jobs of internal stakeholders (including senior managers and junior workers) are at risk of being convulsed. For instance, Figure 1 illustrates the long-established Map of the HRM Territory (Beer et al., 1984), also known as the ‘Harvard ’ model of HRM (Bondarouk and Brewster, 2016; Agyepong, Fugar, and Tuuli, 2010), which flagged the different changes brought about by the use of different HRM practices (Brunetto, Farr-Wharton and Shacklock, 2011). The model of Beer et al. (1984) also demonstrates the steps involved in the involvement of HR practices in organisational strategy, from the analysis of external influences and strategic choices to short-term results and long-term outcomes, which will also be applied to the analysis of HRM and organisational innovation processes in this study. Meanwhile, according to the Leader- Member Exchange Theory (LMX) of Graeri and colleagues (Graen, 1976, cited in Khan, Sang and Iqbal, 2015), differences in the way managers treat followers are directly detrimental to the cohesion within the organisation, such as levels of trust, support and respect (Brunetto, Farr-Wharton and Shacklock, 2011). Therefore, these views mean that studying the impact of the environment on HRM is valuable (Bakanauskienė and Brasaitė, 2015). 145 Figure 1. Map of the HRM Territory 1.2. Changes toward HRM trends in the new era 1.2.1. Technological and networking development The impact of the idiosyncratic and changing nature of the workplace on HR work has begun to be noted (Valentine et al., 2019; Lawler and Mohrman, 2003). One example is the use of various technology (Valentine et al., 2019; Millar, Chen and Waller, 2017). HR practices contribute to society and the economy through the ever-advancing web technologies (Zheng and Yang, 2019). First, the use of virtual teams is becoming commonplace (Gilson et al., 2015), and there has been a trend for the workforce to gravitate towards a digital workplace, which facilitates better employee engagement (Connelly et al., 2021), talent stability (Zheng and Yang, 2019) and interaction (Valentine et al., 2019). Second, Numerical Flexibility as helped also develop talent acquisition tasks such as e-recruitment and interviewing (Huseynov, 2020). However, Andres (2012, cited in Gilson et al., 2015) suggested that technology incorporated into organisational collaboration is negatively impacting work due to misunderstandings being created, negative information seeking, and unsynchronised and incoherent information. Many concurrent pieces of research supported this view by showing that technology simultaneously challenges HRM (Lawler and Mohrman, 2003; Valentine et al., 2019). In addition, the growth of the network economy has also raised the bar for HR practitioners in terms of alliances, mergers and acquisitions (Svoboda and Schröder, 2001). The evidence thus confirms that technological developments have influenced human resource management to a large extent. 1.2.2. Force Majeure The increasing force majeure forces that happened currently are also another element that affects the effectiveness of HRM practices. For example, the COVID‐19 pandemic continues to challenge human resource practices in companies (Butterick and Charlwood, 2021; Gartner, 2020; Huseynov, 2020). The impact of the epidemic covers different types of jobs and groups of workers (Butterick and Charlwood, 2021), especially for people on low incomes, younger groups (Adams-Prassl et al., 2020), and ethnic minorities and women (Topping, 2020). For instance, more than half of workers in the UK were paid lower wages in March 2020, and the trend continues to decrease; the 2019 coronavirus is expected to cause around 33% of unemployment and may also cause health problems for workers (Adams-Prassl et al., 2020). In addition, during the COVID-19 pandemic, 'stay-at-home' became the new order of the day in many countries; however, this new policy has led to a number of adverse effects (Butterick and Charlwood, 2021; Caligiuri et al., 2020; Ererdi et al., 2020), including unemployment, commoditisation of labour, household workloads, inequality in the workplace (Butterick and Charlwood, 2021) and stress from remote management (Caligiuri et al., 2020). Huseynov (2020) found that continuing to work under stress was problematic, and he also referred to the impact of the pandemic on the process of learning and development as 'pre-storm silence'. The HRM function is, therefore, an advantageous tool to assist the workforce in adapting to the new normalisation phenomenon under the new pneumonia pandemic (Gigauri, 2020). More than that, for all disasters, HRM can contribute to recovery. For example, Ererdi et al. (2020), who mentioned that tsunami survivors endured PTSD (post-traumatic stress disorder), also suggested that the crucial role of HRM in disasters includes providing flexible working arrangements that facilitate addressing employee communication and promotion issues. These practical examples demonstrate that the study of HRM practices will require to be carried out under different objective conditions. Accordingly, HRM has taken an essential place in adapting to environmental changes (Caligiuri et al., 2020) and also faced challenges (Ererdi et al., 2020). In the aftermath of the social unrest caused by the epidemic, scholars are beginning to focus on the business value and leading role of human resources, including employee care (D’Angelo et al., 2022; Gigauri, 2020), talent retention (Stuart et al., 2021) and cost-cutting (Gartner, 2020). The soothing effect of these practices during the pandemic was remarkable. Also, HRM has received more support, as Przytuła, Strzelec and 146 Krysińska-Kościańska (2020) mentioned due to the emergence of the coronavirus brings a high frequency of electronic technology use because many HR practices have developed through technology (application tracking system or e-bots). Nevertheless, as suggested earlier and by Thite (2019, cited in Przytuła, Strzelec and Krysińska-Kościańska, 2020), the impact of technology on HRM has both advantages and disadvantages. Hence, the need for research into HRM is to be based on the impact of different contexts and macro- environments. 2. Organisational Innovation 2.1. Theoretical background for innovation The value of innovation is significant (Fagerberg, 2004; Cooper and Kleinschmidt, 1987; Rowley, Baregheh and Sambrook, 2011; Francis and Bessant, 2005; Rowley, Baregheh and Sambrook, 2011), not just for organisations but even at the national level (Tidd and Bessant, 2013) and social level (Fagerberg, 2004) where its value cannot be ignored. This research will focus on innovation at the business level. Thus, understanding the meaning of innovation is an essential step in the study of innovation, and this essay prefers the definition of innovation by Love and Roper; Love and Roper (2004) defined innovation as a process that shows the relationship between a thriving economy, expanding technological advancement, and commercial activity. Tracing the existing literature to the fact that innovation is not the same as invention (Fagerberg, 2004; White and Bruton, 2010), and it is through the combination of multiple types of knowledge, resources, capabilities and skills that firms are able to transform an invention into innovation (Fagerberg, 2004). The following paragraph will deal with the different innovative behaviour in the business dimensions. To better analyse the myriad of factors that influence innovation, a categorical discussion is a common and viable research approach at the business innovation level. Innovation is usually divided into four dimensions, including product innovation, process innovation, position innovation and paradigm innovation (Tidd and Bessant, 2013; Francis and Bessant, 2005). First of all, product innovation is a new technology combination or single technology that is oriented to market demand (individual and organisational) and where the focus of the product changes over time from performance to variety and eventually to cost and standardisation (Utterback and Abernathy, 1975). In order to achieve the goal of driving product innovation, conveniently access to knowledge is the critical driver of success (Un, Cuervo- Cazurra and Asakawa, 2010). Knowledge sharing in organisations hence entails being a strategic element of organisational innovation. Second, process innovation is similar to product innovation, where process innovation is one of the ways in which organisations capture value through internal and external integration (Ettlie and Reza, 1992). At the same time, process innovation and product innovation can be complementary 'partners'; Fritsch and Meschede (2001) suggested that product innovation requires process innovation and that process innovation can support product innovation. Third, positional innovation refers to innovations related to companies, products and brands that change identity through different signals, including digital media (Francis and Bessant, 2005). This innovation (marketing or commercial) helps to debug and create new business systems (Rowley, Baregheh and Sambrook, 2011). Francis and Bessant (2005) also claimed that positional innovation is not very closely linked to product and function; however, product innovation can directly change the target market. Furthermore, paradigm innovation is a change in power structures and values in the firm, with both inner- (A) and outer- (B) directed paradigms; type A innovation is associated with values and policies, while type B innovation is committed to changing business models through, for example, acquisitions, joint ventures and organisational subsystems (Francis and Bessant, 2005). The current innovation paradigm focuses on specific behaviours and methods, as well as exploring the innovation process through different perspectives (Chen, Yin and Mei, 2018). Overall, paradigmatic innovation is a factor for the other three types of innovation (Francis and Bessant, 2005; Rowley, Baregheh and Sambrook, 2011). Consequently, all four of these different types of innovation constantly influence and push the others. However, in the late 20th century, business managers were still unable to break out of their innovation rut and developing product innovation capabilities became a significant challenge (Cooper and Kleinschmidt, 1987). For an organisation, Tohidi and Jabbari (2012) discovered that the ability of an organisation to innovate supports expansion and maintains competitiveness. The research has shown that sustaining the implementation of a sustainable development strategy amidst changing demands and having the ability to act rapidly in times of crisis can successfully increase organisational flexibility. Consequently, innovative thinking and paradigms focused on system wholeness and balance can meet the needs of countries to improve their living standards (Chen, Yin and Mei, 2018). Moreover, focusing on the business environment, innovation can bring advantages to different industries (Tidd and Bessant, 2013), including banking, catering and retail (Tidd and Bessant, 2013). For example, the strategic advantages that innovation can bring include novelty, speed, price, quality and market share (Tidd and Bessant, 2013). Hence, as Dibrell, Craig and Hansen (2011) demonstrated, firms will be aware of market information in order to respond to the highly dynamic and changing technologies in a competitive environment, thereby allowing innovation, particularly product innovation, to be placed in a vital position. 2.2. The state of organisational innovation With the social change, the factors influencing innovation activities are constantly being updated. When innovation programmes operate, the time (Un, Cuervo‐Cazurra and Asakawa, 2010; Abernathy and Utterback, 1978) and environment are the variables that affect outcomes (Utterback and Abernathy, 1975). For instance, Tidd and Bessant (2013) illustrated that decision-makers place new product innovation and process innovation at the heart of the organisational strategy to respond to the changing organisational environment. Meanwhile, this attitude contributes to different corporate processes as managers actively integrate environmental and social issues into the strategic deployment of their organisations (Dibrell, Craig and Hansen, 2011). Analysing through real-world examples, the 2019 coronavirus disease pandemic changed innovation strategies (Sampat and Shadlen, 2021; Farrugia and Plutowski, 2020). Agrawal et al. (2020) confirmed the high demand for innovation skills and the significance of fostering innovation in a remote working environment with a high degree of autonomy. Moreover, the Coronavirus may serve as a 147 platform for further innovation dedicated to making a global contribution (Farrugia and Plutowski, 2020). Specifically, the drivers of innovation are beginning to change. For instance, the incentive to innovate shifted from traditional patents to the need for procurement signed by the government, in addition to nonpatent barriers to competition turning out to be one of the incentives (Sampat and Shadlen, 2021). These transformations are product and positioning-related innovations. In addition, this upheaval has facilitated the creation of virtual visits and has altered the way teaching is done (Woolliscroft, 2020). This is a process innovation for hospitals and universities. Therefore, the environment (and especially the COVID-19 pandemic) has played an important role in recent years in driving innovation in the company. Moreover, the impact of technology on innovation is clear (Utterback and Abernathy, 1975; Witzeman et al., 2006). White and Bruton (2010) have argued in their work that technology offers support for the generation of creativity involving knowledge, tools and systems. A great example to support the view of White and Bruton is the 'open innovation', which demonstrates a unique way of acquiring technology from outside as a component of innovation (Witzeman et al., 2006). Concurrently, innovation also is one of the key steps in the development of technology (White and Bruton, 2010). For example, the finding of Dubickis and Gaile-Sarkane (2015) suggested that technology transfer and innovation have overlapping components. Technology transfer works to create new knowledge, introduce new technologies and improve original technologies (Hoffman and Girvan, 1990, cited in Wahab, Rose and Osman, 2012). This finding implies that innovation and technology are mutually driving forces. As a result, the macro conditions that drive and hinder innovative behaviour are essential preconditions when conducting research. 3. Integrated Studies for Innovation And HRM Based on existing research findings, this section will address the reasons for integrating HRM and innovation activities in organisational practice, focusing on the roles of HRM in different innovation processes. In addition, specific phases of HRM practice and organisational innovation will be discussed and presented in this section. 3.1. Creating a win-win situation The interplay between HRM and organisational innovation is increasingly valued and gaining attention in research in this field, with many studies confirming that the right HRM leads to a possible win-win relationship between the both. Bundling research on the impact of HRM practices on organisational innovation activities may lead to a win-win organisational strategy. Wood (1999) argued that organisations should view HR practices as part of the HR system and integrate them with organisational strategy to demonstrate the best results. Many researchers supported this argument by studying the integration of HRM into strategic deployment (Zheng and Yang, 2019; Snell and Bohlander, 2013). In particular, as HRM is forced to change itself in order to survive in the environment (KILIÇASLAN and Marşap, 2018), the task centre of HR is also beginning to shift towards innovative factors (Valentine et al., 2019). For example, De Leede and Looise (2005) argued that expertise, leadership and creativity are essential HRM practices in the early stages (signal processing and strategy); in the resourcing section, the roles of recruitment, development and reward practices are highlighted; and finally, reward and development interventions also contribute to the implementation section. This claim was backed by Becker and Matthews (2008), who demonstrated that the flexible, appropriate, and strategic application of HRM might potentially make a positive contribution to the promotion of innovation. Similar to what Shipton et al. (2006) observed, appraisal, induction, training, teamwork and exploratory learning are among the elements that predict creativity. Therefore, academics have typically argued that HRM practices have a favourable impact on organisational innovation (Laursen and Foss, 2003; Jimenez- Jimenez and Sanz-Valle, 2008; Shipton et al., 2006; Lewicka, 2013; de Azevedo, Schlosser and McPhee, 2020; Jiménez‐ Jiménez and Sanz‐Valle, 2005). The hospitality industry (Wikhamn, 2019), the technological innovation of high-tech firms (Wang, 2005), and established firms (de Azevedo, Schlosser and McPhee, 2020), as well as other diverse industries, are just a few of the projects, industries, and businesses that benefit from these favourable effects. Additionally, earlier research has shown that innovation aids in adapting to changing external elements (including the environment, market, and customer demands) and that innovation has a non-negligible impact on internal organisational features (such as management, work satisfaction and performance) (Tohidi and Jabbari, 2012). Human resource management is seen as the precursor of innovation (Jimenez-Jimenez and Sanz-Valle, 2008; Gupta and Singhal, 1993, cited in Jimenez-Jimenez and Sanz-Valle, 2008). These are frequently thought of as HRM-related procedures. Overall, the results support the importance of coupling organisational innovation and HRM in practice. Moreover, the contributions of HRM to innovation have been able to be reflected in actual business activities. For instance, de Azevedo, Schlosser and McPhee (2020) presented the case of HRM aiding innovation and change in that employee voice and cross-departmental collaboration as the basis for innovation shape the appropriate corporate environment. Bakanauskienė and Brasaitė (2015) have supported this view by demonstrating that encouraging employees to innovate actively, including flexible ways of thinking and implementing, is one of the responsibilities and challenges of human resource management. In addition, leaders are involved in the interplay between the two will, as transformational leadership, HRM and innovation can work together to improve performance (Alqatawenah, 2018). As a result, on the one hand, HRM is able to integrate into organisational innovation strategies, and on the other hand, innovation is simultaneously influencing HRM. The digitisation, gig work and platform work as a product of technology-related innovation is closely linked to the development of work platforms within companies, which indirectly affects workforce performance and attitudes (Connelly et al., 2021). Overall, there is a certain amount of research that suggests that there is a correlation between HRM and organisational innovation; however, the reasons for the relationship within it and how to interpret it are not well researched, and more research effort needs to be invested. 3.2. The stages of innovation and HRM This dissertation will combine the innovation stages and employee career cycle, while this method may aid in demonstrating the link between HRM practices and 148 organisational innovation from the start of recruitment and selection. First, the findings of many scholars indicated that the differences in innovation were worthy of breakdown. For instance, Akhmetshin et al. (2018) figured out that the innovation process is staged, starting with the concept and ending with the market, and includes the innovation concept, prototype, industrial design, market product, design and legal documentation. Moreover, Tohidi and Jabbari (2012) also argued nation, idea, create, design and engineering, production, and publication are the stages of the innovation and creative process. However, both classifications are specific to a particular market segment and are not applicable to a wide range of organisational behaviour. Following a review of prior studies, in order to build sustainable innovation activity, this dissertation favours using the model of Tidd and Bessant (Tidd and Bessant, 2020), which shows the process by which a new idea is brought to market (see Figure 2). The highly inclusive and universal nature of the model helps to apply to innovation in all industries and all types of innovation. This model divided the innovation cycle into five stages: idea formulation, concept formulation, product development, test marketing and international marketing (Tidd and Bessant, 2020). Due to the similarity of missions in some of the stages, this study consolidates the five stages into three distinct stages, namely idea and concept formulation, product development, test and international marketing. Second, according to the ‘Harvard ’model of HRM (Figure 1), the policy choices phase is a major part of the integration of HRM practice and organisational innovation; and managers will focus on employees influence, HR flow and reward and work system in this phase (Beer et al., 1984), which will respond to different feedback depending on working practices and the external environment. Similarly, the Integrated Model of De Leede and Looise (2005) showed that the intervention of HRM practices on organisational innovation permeates four components, which are signal processing, strategy, resourcing and implementation. To sum up, this dissertation aims to discuss the effects of different HR policy choices (employees, HRM and organisational systems) in the innovation step (the AIM process) based on these models. Figure 2. Accelerating idea to market – the AIM process 4. Conclusion Although a number of studies integrating the analysis of HRM and innovation have emerged, these studies have limitations, including staging, dynamics and relevance. First, research by researchers and companies on the functional roles of HRM practices in innovation programmes is incomplete. For example, the findings of some studies on HRM illustrate the lack of attention to the impact between HRM and innovation (Jimenez-Jimenez and Sanz-Valle, 2008; De Leede and Looise, 2005), and even the external environment is encouraging businesses to acknowledge the value of HRM. Laursen and Foss (2003) showed that although these challenges are receiving more attention, theory and real-world experience are still unable to support the role of HRM in innovation. More specifically, even though innovation and HRM have been identified as interlinked, employee development, retention and engagement are still not defined as tasks in the company strategy (de Azevedo, Schlosser and McPhee, 2020). In addition, earlier research has concentrated on the various effects of applying human resource management practices on innovation in an integrated way— bundled HRM practices (Seeck and Diehl, 2017; Becker and Matthews, 2008) and in a single method. Scholars discussed that the relationship between HRM and innovation should be studied, that consistent measurement criteria should be 149 adopted, and that greater emphasis should be placed on the different stages of innovation (Seeck and Diehl, 2017), which implies that these results have limitations in detailed stages. Current research on the synergistic interactions between traditional HR practices within organisations and various external work is lacking in clarity (Connelly et al., 2021). Similarly, De Leede and Looise (2005) demonstrated that a focus of current research is on the study of the interaction between innovation and HRM practices and the effects of the interaction at different specific stages. 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