Organizational context and human resource management strategy: a structural equation analysis of Hong Kong rms

Int. J. of Human Resource Management 11:2 April 2000 264-277 Organizational context and human resource management strategy: a structural equation analysis of Hong Kong rms Dail Fields, Andrew Chan and Syed Akhtar Abstract Previous studies to explain why companies utilize particular human resource management (HRM) strategies have not adequately addressed the in uence of contextual variables such as size, location, ownership, competitive pressure, technological change, age and growth. In this study, we investigate the extent to which these contextual variables are related to HRM strategy in seventy-six private-sector rms located in Hong Kong. Our analysis uses structural equations to examine the relationships among contextual variables and HRM strategy to develop and retain managers. The results show that contextual variables have both direct and indirect effects on an organization s HRM strategy. The indirect effects occur through the top management involvement of the HR function within an organization. Use of a human capital development HRM strategy reduces organizational uncertainty about having an adequate supply of managers to meet rm objectives. Contrary to our expectation, in Hong Kong rms, greater reliance on internal development and promotion tends to increase uncertainty and greater competition tends to reduce training investment. Both of these unanticipated relationships may re ect the high mobility of managers peculiar to the Hong Kong labour market. Keywords Human resource management strategy; Hong Kong companies; structural equation models; contextual variables; top management; uncertainty. Introduction Studies that have attempted to explain relationships within organizations among business strategy, performance and choice of human resource management (HRM) strategy have had limited success (Becker and Gerhart, 1996; Jackson et al., 1989; Jackson and Schuler, 1995). Some studies of HRM strategy begin with the view that there is a set of best HRM practices that are preferable across all situations (Becker and Gerhart, 1996; Delery and Doty, 1996). The best practices often represent efforts to build human capital within a company in order to establish sources of sustained competitive advantage (Becker and Gerhart, 1996; Komache, 1996; Lado and Wilson, 1 1 1 1 1 1 Dail Fields, Associate Professor, School of Business, Regent University, 1000 Regent University Drive, Virginia Beach, VA 23464 9800, USA (tel: 757 226 4091; fax: 757 226 4369; e-mail: dail e@regent.edu). Andrew Chan, Assistant Professor, Department of Management, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong (tel: 852 2788 7300; fax: 852 2788 7220; e-mail: mgandrew@cityu.edu.hk). Syed Akhtar, Associate Professor, Department of Management, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong (tel: 852 2788 7870; fax: 852 2788 7220; e-mail: mgsyed@cityu.edu.hk) The International Journal of Human Resource Management ISSN 0958-5192 print/issn 1466-4399 online 2000 Taylor & Francis Ltd

Fields et al.: Organizational context and HRM strategy 265 1994; Youndt et al., 1996). Practices aimed at human capital development may include an internal labour market, comprehensive training, developmental use of performance appraisals and equitable reward systems (Snell and Dean, 1992; Delaney and Huselid, 1996). Some studies have found that forward-thinking rms tend to use human development-related HRM strategies and have better outcomes as a result (Snell and Dean, 1992; Delaney and Huselid, 1996; Youndt et al., 1996). Other studies are based on a perspective predicting that rms choose an HRM strategy that ts best with business strategy, other rm policies and procedures, and general approach to business (Becker and Gerhart, 1996; Delery and Doty, 1996; Jackson et al., 1989). The contingency views assume that HRM strategies that run counter to human capital development are also valid (Delery and Doty, 1996; Greer and Ireland, 1992). Studies testing the contingency view across organizations have found some support for this perspective, albeit limited. However, the contingency view is inconsistent with resource-based theories of the rm that predict human resources will be developed to create sustained competitive advantage in the long run (Barney, 1991; Kamoche, 1996). Jackson and Schuler (1995) have suggested that studies of HRM strategy have not adequately included the effects of key variables describing an organization s context. Contextual variables that may affect the choice and impact of HRM strategies include company age and size (Fisher and Shaw, 1990; Jackson and Schuler, 1995); growth rate (Jackson and Schuler, 1995); technology and industry (Snell and Dean, 1992; Zerbe et al., 1998); and national culture, laws, regulations and labour markets (Jackson and Schuler, 1995; Hofstede, 1991; Pfeffer and Cohen, 1984). Ignoring these contextual variables may lead to speci cation errors in models used to predict HRM strategy (Becker and Gerhart, 1996). Studies that examine an organization s typical or average HRM strategy may also contain speci cation errors because not all types of employees may be sources of competitive advantage. Firms may make substantial investments in developing and retaining some staff as sources of competitive advantage, while paying little attention to numerous other employees who perform activities that are more easily duplicated by competitors. In addition, not all human resource departments are equally involved in developing or implementing rm-level strategy for gaining and sustaining competitive advantage (Tsui, 1987). The degree of strategic involvement of the HR department may in uence an organization s choice to build competitive advantage around staff capabilities (Becker and Gerhart, 1996). The centrality of the HR department may also affect the quality and completeness of the information they provide to researchers about HR strategy. This study contributes to the HRM strategy literature in four areas. First, we test Jackson and Schuler s (1995) theoretical predictions about the in uences of contextual variables on HRM strategy. Second, we test the extent to which the involvement of the HR department with top managers of the organization plays a role in the relationship of context with HRM strategy. Third, we examine the direct and indirect relationships of contextual variables with HRM strategy using structural models that include the complete system of context, HRM and outcome variables thereby avoiding analytic weaknesses inherent in examining individual dimensions of HRM strategy in isolation (Becker and Gerhart, 1996; Judd et al., 1995). Fourth, we conduct the structural equation analysis in a sample of private-sector organizations located in Hong Kong, adding to the limited knowledge base about in uences on HRM practices outside the United States.

266 The International Journal of Human Resource Management Theoretical perspective and structural model HRM strategy Organizational theory predicts that rms survive because they obtain resources and apply them in ways that cannot be duplicated by others. A rm s ability to secure and deploy staff may provide human resource-based competitive advantage (Barney, 1991; Lado and Wilson, 1994; Kamoche, 1996; Pfeffer and Salancik, 1978). In particular, rms will place top priority on securing and retaining those resources that are most critical to organizational survival (Pfeffer and Salancik, 1978). Talented managers are a critical human resource, especially in a growing modern economy such as Hong Kong (Chiu and Levin, 1993). HRM strategies that focus on the development of human capital generally include emphasis on securing, nurturing and retaining such employees (Delaney and Huselid, 1996; Kamoche, 1996; Snell and Dean, 1992; Youndt et al., 1996). Thus, we focus here on the extent to which Hong Kong organizations have implemented HRM strategies designed to secure, nurture and retain managers. Contextual variables Among the contextual variables that may in uence an organization s HRM strategy, Jackson and Schuler (1995) identify elements of the business environment such as laws and regulations, national culture, markets and industry characteristics. Three of these external variables may explain HRM strategies of Hong Kong rms. The rst is whether a rm is foreign owned and headquartered. Organizations that operate in Hong Kong, but are foreign owned and headquartered may be more likely to adopt a strategy to secure, nurture and retain managers because they are at a competitive disadvantage in the local labour market. These rms may be seen as outsiders compared to Hong Kong-based rms. The highly collective nature of Hong Kong Chinese society may make it dif cult for such rms to establish reliable referral networks or guanxi needed to attract good managerial talent (Bond and Hwang, 1987). Therefore, once foreign companies operating in Hong Kong nd managers, they may be more likely than local rms to develop and promote them internally, provide training opportunities and retention programmes. A second aspect of external context likely to in uence HRM strategies of Hong Kong companies is the intensity of competition. The more a rm perceives that competition from other companies is a threat to achieving its objectives, the greater the value the rm may place on creating sustained competitive advantage (Kamoche, 1996; Lado and Wilson, 1994). Following this logic, we expect that both service and manufacturing rms in Hong Kong that are experiencing greater uncertainty due to competition from other companies will do more to secure, nurture and retain managers. Third, the competitive position of rms might be undermined by the high costs of being located and doing business in Hong Kong. Since the available domestic market is very small, most Hong Kong companies operate globally. Hong Kong s per capita income level is considerably higher than those of many Asian competitors; Hong Kong real estate is some of the most expensive in the world (World Almanac, 1995, 1996). Consequently, companies affected by these higher costs may seek proactively to secure, nurture and retain managers so they can offer unique values to customers that help justify their higher costs. In addition, many Hong Kong rms have entered into joint ventures in mainland China to gain better access to the China market and the plentiful supply of lower-cost workers (Ding et al., 1997). While this approach reduces the

Fields et al.: Organizational context and HRM strategy 267 likelihood that these rms would develop non-management workers, it is also likely to increase focus on managers because of the need to oversee mainland locations (Chiu and Levin, 1993). Labour market, political, law and regulatory variables vary very little among Hong Kong companies and are thus not included in the model we test in this study. The Hong Kong labour market is bounded by stiff limitations on the importation of labour. Some importation schemes have been adopted for domestic help and construction labourers, but these have not created a readily available pool of managers from outside Hong Kong (Daryanani, 1995). Managers in Hong Kong are frequently subject to written employment contracts and areas not covered by contract are speci ed by a comprehensive employment ordinance that applies to all rms. Although, in 1995, there was considerable political uncertainty in Hong Kong as the hand-over to China approached, the effects of these uncertainties on a company s business prospects after 1997 were equally unknown for all rms operating in Hong Kong. The contextual variables internal to the rm that may affect HRM strategy include technology, organizational structure, size, life-cycle stage and business strategy (Jackson and Schuler, 1995). A critical issue affecting HRM strategies is the extent to which the rm must anticipate rapid technological change (Dean and Sussman, 1989). Since Hong Kong companies compete globally and have relatively high costs, maintaining technological parity or superiority is often a critical success factor. Managers are critical resources for identifying and implementing new technologies and integrating new technology with existing practices. Thus, Hong Kong companies that believe rapid technological change may affect their ability to meet objectives will be more likely to emphasize securing, nurturing and retaining managers. Size may be related to HRM strategy because larger companies in Hong Kong have more complete and sophisticated human resource systems (Shaw et al., 1993). Larger rms have more extensive HRM practices because they have more workers to control, are able to spread the costs over more employees and have to be more image conscious due to their higher visibility (Fisher and Shaw, 1990; Jackson and Schuler, 1995; Shaw et al., 1993). In addition, larger Hong Kong rms may emphasize retention because their managers have speci c knowledge that could be used by smaller rms to imitate larger- rm capabilities and undermine the larger rm s market positions (Redding, 1990). A rm s life-cycle stage may in uence choice of HRM strategy because organizational needs for human resources may change as companies move through start-up, growth and maturation phases (Jackson and Schuler, 1995). The implications of lifecycle stage may be ambiguous. For example, growth and development imply expanding opportunities, while maturity suggests fewer promotional opportunities and perhaps even downsizing. However, growing companies might use an HRM strategy that emphasizes securing and nurturing managers because they need more managers to oversee more employees. Alternatively, since growing companies already have some competitive advantage that is responsible in some part for their growth, they may be less concerned with building sustained competitive advantage in the capabilities of managers. Older companies might not be concerned with nurturing and retaining managers since they have enough in place already. However, older companies that are also growing might be more likely to nurture and retain managers whose organizational knowledge accounts for growth. Thus both growth and age must be examined as contextual explanations for HRM strategy.

268 The International Journal of Human Resource Management Organizational structure may affect HRM strategy because it establishes roles, responsibilities and controls needed to implement business plans (Jackson and Schuler, 1995). Speci cally, the extent to which the human resources function plays a central role in key business decisions may affect the likelihood that a rm uses a human capital development HRM strategy for competitive advantage (Lengnick-Hall and Lengnick- Hall, 1988; Poole and Jenkins, 1996). In essence, the centrality of the HR function in the top management team may determine the extent to which other top managers in a rm see major uncertainties as being solved through the development of competitive advantage in the unique capabilities of managers. In addition, some other contextual variables may affect HRM strategy because the human resource function occupies a central management and policy role. Structural model Figure 1 shows a structural model based on these theoretical perspectives. As this gure shows, contextual variables may have direct and indirect effects on HRM strategy. The indirect effects occur through the centrality of the human resources function within the organization. The variables describing HRM strategy securing, nurturing and retaining managers have direct effects on uncertainties about managers needed to accomplish organizational goals and objectives. The model predicts management s perceptions of the rm s uncertainty in being able to obtain suf cient high-quality managers as an outcome from HRM strategy. Some studies suggest that an HRM strategy may be successful because the rm perceives that it reduces uncertainties about the supply of critical resources needed for the organization s survival (Pfeffer and Salancik, 1978; Pfeffer, 1997). Indeed, some rms continue hiring people in certain key jobs even during economic downturns as a hedge against uncertainties of obtaining these employees during boom times (Greer and Ireland, 1992). Thus, it may be appropriate to judge the outcomes of HRM strategy in terms of uncertainty reduction and long-term survival, rather then immediate pro ts and losses (Delaney and Huselid, 1996; Kamoche, 1996). The structural model recognizes that the causal relationship between uncertainties about managers and HRM strategy may in reality be ambiguous and thus allows for evaluation of reciprocal paths between these variables. Figure 1 Structural model of context variables and HRM strategy

Fields et al.: Organizational context and HRM strategy 269 Data and methods Sample The data for this study were collected from a randomly selected sample of Hong Kong companies in 1995. We initially drew a sample of 100 rms. We used information from the Hong Kong Statistics Department to estimate the percentage of rms within each of ve major industry categories. These were manufacturing, banking/investment/real estate, construction/shipping and import trade/business services and hotel/retail. We then used industrial directories for Hong Kong for random selection of sub-samples proportional to the size of each industry category. We contacted each selected company by telephone. After receiving agreement to participate, we mailed the questionnaires to the highest-ranking human resource manager in the organization. Those companies that refused to participate in the telephone contact were replaced with another randomly selected company from the same industry category. We obtained eighty completed questionnaires. Although we initially screened companies to ensure we had rms with more than ten employees, we received four responses from smaller rms. These were removed from the sample for this study. The smallest company in the sample for this study has seventeen employees. The mean size of the companies in the sample is 435 employees. Measures Uncertainty about managers The extent to which uncertainty about managers makes it dif cult for the company to achieve its goals is measured with a six-item scale (alpha 5.87). The items were all collected in a section of the questionnaire in which respondents were asked to describe the extent to which a number of problems make it dif cult for the company to achieve its goals. Responses range from 1 (not at all accurate) to 4 (very accurate). The items in the scale include ratings of uncertainty in retaining managers, attracting quali ed managers, high turnover, work quality and quantity, and supply of affordable managers. HRM strategy To measure the use of a human capital development HRM strategy, we used three multi-item scales to measure the extent to which the rm uses various practices to secure, nurture and retain managers. Securing managers is measured with a ve-item scale (alpha 5.70). The items include the extent to which there is an emphasis on promotion from within, the extent that promotion is based on additional training, the extent there are clear career paths in the company, and the extent the company emphasizes and invests in training new hires. All items are measured on a scale of 1 (not at all accurate about the organization) to 4 (very accurate about the organization). This measure is focused primarily on the actions after personnel are hired to ensure that capable managers are secured. We did not use selection ratios since selecting a small or large percentage of candidates may measure shortages/surpluses in the labour market or dif culty in reaching consensus within an organization. Nurturing managers is measured with a four-item scale (alpha 5.72). The items include the percentage of managers that received training in the past year, the managers trained annually at company expense, the average hours of training a manager received in the past two years, and the average hours of training that rst-year managers receive.

270 The International Journal of Human Resource Management Retaining managers is measured with a seven-item scale (alpha 5.73). The scale items include the extent that pay levels and increases are based on individual performance, the extent that pay levels and fringe bene ts are better than competing companies, the extent to which an employee s performance is discussed frequently with the employee, and the extent to which employees are rewarded for acquiring more skills. Human resources centrality The top management centrality of the human resources department is measured with a seven-item scale (alpha 5.69). The items include the extent to which the human resources department is consulted by top management, the extent to which HR is considered part of top management, the extent that HR frequently helps managers and supervisors, the extent that HR is consulted by other departments, the extent HR helps top management set pay rates and the extent HR helps other departments evaluate employees. The measure not only captures top management involvement of the HR function, but also the extent to which HR plays a key role across departments. Foreign rm This is measured with a single dichotomous variable based on responses as to where the company s headquarters is located. Company age This is measured with a variable whose value is based on the response to a question how old is this company. Company size This is measured as the number of employees working for the company in Hong Kong. Growth This is measured as the percentage change in number of employees in the past two years. Competition This is measured as the extent to which competition from other companies make it dif cult for the rm to achieve its goals. Responses range from 1 (not at all) to 4 (very much). Costs of operating in Hong Kong This is measured as the perceived extent to which high costs in Hong Kong make it dif cult for a company to achieve its goals. Responses range from 1 (not at all) to 4 (very much). Technological change This is measured as the extent to which rapidly changing technology makes it dif cult for the company to achieve its goals. Results The correlations among the variables and their means and standard deviations are shown in Table 1. There is only one signi cant correlation among the three HRM strategy variables, suggesting these measures describe three relatively independent dimensions of a management resource development HRM strategy. On average the companies in the sample declined in size slightly from 1993 to 1995. This is somewhat surprising since

Fields et al.: Organizational context and HRM strategy 271 Table 1 Correlations and descriptive statistics (N5 76) Variables Mean s.d. 1 2 3 4 5 6 7 8 9 10 11 12 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 1 Uncertainty about managers 2.54.69 2 Securing managers 2.36.53.11 3 Nurturing managers 38.08 35.08.18.21 4 Retaining managers 2.51.52.02.46.06 5 HR centrality 2.96.44.15.49.06.40 6 Foreign rm.27.44.01.21.11.13.03 7 Competition 2.92.79.05.02.37.01.17.05 8 High costs in Hong Kong 2.97.79.07.08.32.19.23.18.29 9 Company age 24.98 24.41.11.01.14.07.05.10.08.04 10 Growth 1.48 31.72.04.08.08.10.27.11.11.13.15 11 Company size 434.61 487.42.19.25.29.01.08.06.13.19.27.08 12 Technological change 2.19 1.00.27.02.06.03.15.12.26.08.01.09.13 Note Correlations larger than.23 are signi cant at p,.05; correlations larger than.28 are signi cant at p,.01.

272 The International Journal of Human Resource Management the Hong Kong GDP grew almost 6 per cent in both 1993 and 1994 (Daryanani, 1995). However, in both years, in ation exceeded nominal growth in GDP and may account in part for the lack of growth of the companies in our sample. To examine alternative forms of the possible reciprocal paths between HRM strategy and uncertainty about managers, we compared the t of eight alternative structural models. The rst allows only a unidirectional path from HRM strategy to uncertainty. Next we examined three models that allowed reciprocal paths from uncertainty to each of the HRM strategy variables individually and three additional models that allowed reciprocal paths to the HRM strategy dimensions in pairs. Finally, we estimated a model that includes reciprocal paths to all three HRM dimensions. We estimated the parameters and t of the alternative model in Figure 1 using LISREL. Since several variables in the model are dichotomous, we used the generalized least squares method for estimation (Joreskog, 1993). The measures of t for these models are shown in Table 2. Of the alternatives examined, model 6 in Table 2 has signi cantly better t to the data than the rest of the other structural models. (Model 8 achieves the same degree of t as model 6, but model 6 does it more parsimoniously and thus is preferred.) The best- t model has a nonsigni cant chi-square (X 2 5 8.22, d.f. 5 9, p 5.51) and a root mean square residual (.018) small enough to indicate a close t (Browne and Cudeck, 1993). Of thirty-six possible paths between context variables and HRM strategy, seventeen are signi cant in the best- t model. Figure 2 shows the statistically signi cant paths for the best- t model. Table 2 Comparative t measures for alternative structural models Alternative Models X 2 df p D X 2 AGFI RMSR 1 No reciprocal paths 22.25 11.02.67.039 2 Path from uncertainty 12.08 10.21 10.17*.80.019 -. securing 3 Path from uncertainty 20.94 10.03 1.29.66.046 -. nurturing 4 Path from uncertainty 20.91 10.03 1.32.66.049 -. retaining 5 Paths from uncertainty 11.69 9.27 10.56.79.018 -. securing and nurturing 6 Paths from uncertainty 8.22 9.51 12.05.85.018 -. securing and retaining (best t model) 7 Paths from uncertainty 20.88 9.02 1.37.62.049 -. nurturing and retaining 8 Paths from uncertainty 8.24 8.43 12.01.82.018 -. securing, nurturing and retaining Notes * p,.05. D X 2 is measured as the difference in t from model 1. AGFI 5 adjusted goodness of t index. RMSR 5 root mean squared residual. The normed t index and comparative t indices are not reported because they did not differ across the alternative models. Model in bold type is best t model.

Fields et al.: Organizational context and HRM strategy 273 Figure 2 Signi cant path coef cients for best- t structural model of HRM strategy (only path coef cients signi cant at p,.05 are shown) (N5 76 organizations) Being a foreign rm and company size both have positive direct effects on two dimensions of HRM strategy. More competition from other companies has positive direct and indirect effects on HRM strategy. As predicted, centrality of the HR function plays an intervening role in the effects of contextual variables on HRM strategy. Indeed, all of the other contextual variables (growth, high costs in Hong Kong and technological change) affect HRM strategy indirectly through centrality of the HR function. The nurturing and retaining dimensions of HRM strategy both reduce uncertainty about managers. Likewise greater uncertainty about managers increases the use of retention strategies. Three paths are opposite in sign from that expected. The securing dimension of HRM strategy increases uncertainty about managers. In addition, uncertainty about managers tends to reduce the use of internal development and promotion for securing managers. The effect of competition on nurturing managers is negative. The only context variable that does not have signi cant direct or indirect effects on HRM strategy is company age. The squared multiple correlations for the best- t model average.56 across the three HRM strategy dimensions. The squared multiple correlation for uncertainty about managers is.15. Discussion Our structural equation analysis of seventy-six rms in Hong Kong supports Jackson and Schuler s (1995) assertion that contextual variables help explain a company s HRM strategy. In our analysis, measures of context explain over one-half the variance in HRM strategy. Some contextual variables such as foreign ownership and company size directly impact dimensions of a human capital development HRM strategy. Foreign-owned and larger companies operating in Hong Kong emphasize securing managers through development and internal promotion and retaining managers through performancerelated compensation and rewards for training and development. Other contextual variables in uence HRM strategy indirectly through the extent to which the HR function is involved in top management decision making. Greater HR involvement with top management decisions may increase the awareness in the top

274 The International Journal of Human Resource Management management team that the company s human capital can be a source of competitive advantage. Higher growth, more competition from other companies, more technological change and environmental disadvantages such as the high costs of operating in Hong Kong are business problems that the HR function can help solve if it is more involved with top managers in the organization. That is, our structural equation analysis suggests that the centrality of the HR function is itself an aspect of internal organizational context and may play a facilitating role in how some contextual conditions are interpreted and handled by organizations. Our structural equation analysis also sheds light on the often suspected, but rarely measured reciprocal relationships between dimensions of HRM strategy and perceptual outcomes such as uncertainty about having the managers needed to achieve rm goals. Incorporating the reciprocal in uences of uncertainties about managers in the use of a resource-based HRM strategy signi cantly improved the t of our structural equation model. The reciprocal paths in the best- t model show that HRM approaches to nurture and retain managers reduce uncertainty about the supply of adequate managers, while greater uncertainty about managers increases the use of retention strategies. There are two surprises in our results. First, the effect of a company s use of an approach for securing managers that focuses on internal development and promotion increases uncertainty about the rm having an adequate supply of managers. Likewise greater uncertainty about managers decreases the use of internal development and promotion to secure managers. Both paths are opposite in sign from our expectations based on the resource-based view of the rm. That is, more emphasis on the internal development and promotion of managers should improve the supply of knowledgeable managers. This internal labour market should thus reduce uncertainty about managers in our model (Pfeffer and Cohen, 1984). Other studies have highlighted rapid turnover among educated workers and managers in Hong Kong as a major human resource problem (Kirkbride and Tang, 1989; Tang et al., 1995). In the Hong Kong environment, it is possible that greater use of an internally focused strategy for securing managers increases uncertainty because experience suggests these managers have limited loyalty. In our sample of Hong Kong companies, efforts to retain managers and efforts to secure them through internal development are positively correlated. Thus, Hong Kong rms view these strategic HRM approaches as working synergistically. However, these rms may also anticipate that internal sources may not yield enough of the management talent needed for achieving their goals. Second, our structural equation analysis shows that Hong Kong rms faced with greater competition are less willing to invest in training new or existing managers. This is opposite from the relationship we anticipated. That is, the resource-based view of the rm suggests that companies will invest in training to develop greater skills to provide competitive advantage and thus training should be positively related to greater perceived competition. This negative relationship may also re ect job hopping by managers in Hong Kong. A good deal of the turnover may involve some companies raiding the managerial talent of their competitors. If the loyalty of managers is suspect, rms may be reluctant to invest in training for managers who may take their skills to the competition. Since the training and retention dimensions of HRM strategy are not correlated, Hong Kong rms may not view these approaches as complementary. Company age does not effect HRM strategy. It is possible that technology changes, instability in the managerial labour market and other uncertainties in rapidly changing global markets may create conditions where Hong Kong rms must change rapidly to survive. These other contextual factors may overwhelm the effects of age alone on HRM strategy.

Concluding remarks First, the data used in this study were collected as part of one questionnaire. Thus, some of the relationships among variables could be in ated by common method variance (Judd et al., 1995). The fact that our measures of context are a mix of factual information (company age, size, growth, headquarters location) as well as perceptions (technological change, competition and effects of high costs in Hong Kong, HR centrality) reduced the chances that method variance is a culprit. Using the procedure suggested by Podsakoff and Organ (1986), we examined this issue empirically by checking to see if a single factor accounts for a large portion of the variance within the entire set of study variables. The factor analysis extracted four factors, the largest of which accounts for only 18 per cent of the variance. While not ruling out common method variance effects, this empirical test suggests they may be limited (Podsakoff and Organ, 1986). This study has some weaknesses that further research might consider and overcome. First, we relied on information reported by a single key informant from each organization. Thus, we cannot speak to the reliability of the responses. The reliability would be improved if data were obtained from multiple high-ranking informants within an organization. Obtaining data from multiple respondents across a sizeable number of companies is fraught with problems and costs. However, future efforts should endeavour to overcome this hurdle. Second, we collected information that seeks to characterize practices and perceptions of organizations at a point in time. Our questionnaire did not delve into how much the organization was changing. Clearly, changes in process could limit the reliability of the information we collected. An improvement in the design of future efforts would be to follow up the questionnaires with interviews that would allow us to capture some of the relevant trends and changes. Such interviews would also help us get more insightful information about some of the causal linkages among contextual, strategy and outcome variables that our structural equation analysis suggest are present. References Fields et al.: Organizational context and HRM strategy 275 Barney, J. (1991) Firm Resources and Sustained Competitive Advantage, Journal of Management, 17: 99 120. Becker, B. and Gerhart, B. (1996) The Impact of Human Resource Management on Organizational Performance: Progress and Prospects, Academy of Management Journal, 39: 779 801. Bond, M.H. (1996) Chinese Values. In Bond, M.H. (ed.) The Handbook of Chinese Psychology. Hong Kong: Oxford University Press. Bond, M.H. and Hwang, K.K. (1987) The Social Psychology of the Chinese People. In Bond, M.H. (ed.) The Psychology of the Chinese People. Hong Kong: Oxford University Press Browne, M. and Cudeck, R. (1993) Alternative Ways of Assessing Model Fit. In Bollen, K. and Long J.S. (eds) Testing Structural Equation Models. Newbury Park: Sage, pp. 136 62. Chiu, S. and Levin, D. (1993) From a Labour-surplus to a Labour-scarce Economy: Challenges to Human Resource Management in Hong Kong, International Journal of Human Resource Management, 4(1): 159 89. Daryanani, R. (1995) Hong Kong 1995. Hong Kong: Government Printing Department. Dean, J. and Sussman, G. (1989) Strategic Responses to Global Competition: Advanced Technology, Organizational Design and Human Resource Practices. In Snow, C. (ed.) Strategy, Organizational Design and Human Resource Management. Greenwich, CT: JAI Press. Delaney, J.T. and Huselid, M.A. (1996) The Impact of Human Resource Management Practices on Perceptions of Organizational Performance, Academy of Management Journal, 39: 949 69.

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