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Critical Analysis of the Strategic human resource management in India

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string(70) " the opening up of an otherwise closed economy of India \(Som 2008\)\."

Abstract

The last two decades have witnessed many developments in the research and practice of managing human resources. While the debate began with a consideration of the changing role of HRM, more recently there has been increased interest in conceptualizing and testing the links between business strategy and performance. In India, research in the area of HRM gained recognition with the ushering in of the new economic era of liberalisation during the early 1990s.

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The primary objective of this article is to provide a synthesis of the strategic human resource management (SHRM) literature as it relates to India. Specifically, this review will consider the dominant theoretical perspectives adopted by scholars; ways in which HRM and performance are defined and operationalised; the approach taken to research design along with noting the control and contingency variables used. The review also draws out the potential contributions of the existing studies to solving the ‘black box’ problem. Finally, the article also presents the implications for future research on SHRM in India.

Keywords: India, Strategic human resource management, HRM, firm performance

Introduction

Empirical research in the field of SHRM has proliferated significantly since the seminal work of Huselid in 1995. Many recent studies have discussed SHRM in the Asia-Pacific context (Audea, Teo, and Crawford 2005; Bae et al. 2003; Benson and Rowley 2003; Wan, Kok, and Ong 2002). Furthermore, the growth of India as an emerging market prompted institutions such as the World Bank to project the country as the world’s fourth largest economy by 2020 (Budhwar and Varma 2010). This increasing focus on India makes it an interesting setting for this study. The review aims to provide a synthesis of literature in the area of HRM and performance linkages in India. The study reviewed articles between 2003 (first empirical article: Singh 2003) and 2010 in academic journals, focusing on the HRM and performance debate. Specifically, this review will consider the dominant theoretical perspectives adopted by scholars; ways in which HRM and performance are defined and operationalised; the approach taken to research design along with noting the control and contingency variables used. Finally, the review also examines the potential contributions of the reviewed articles to solving the ‘black box’ problem.

This article is organised as follows. The first section reviews the extant literature on SHRM. The next section discusses the need for a review of SHRM in India. The third section outlines the research methodology used in this paper. The final sections discuss the results and present the main conclusions and implications of this study.

SHRM literature: Developments

Lengnick-Hall et al. (2009) identified seven themes across time in the SHRM literature: (1) explaining contingency perspectives and fit, (2) shifting from a focus on managing people to creating strategic contributions, (3) elaborating HR system components and structure, (4) expanding the scope of SHRM, (5) achieving HR implementation and execution, (6) measuring outcomes of SHRM, and (7) evaluating methodological issues. Each of these themes played a significant role in the evolution of the field. Empirical research has suggested a relation between HRM practices (whether as individual practices or as a bundle) and organizational performance (Paauwe 2009).

Wright and Boswell (2002) proposed a typology of HRM research based on two dimensions: level of analysis (individual/ organizational) and number of practices (single/ multiple). Many articles published after Huselid (1995) have not only analysed the effects on performance at an individual practice level like recruitment and selection (e.g. Koch and McGrath 1996), performance related pay (e.g. Dowling and Richardson 1997; Lazear 1996; McNabb and Whitfield 1997), training and development (e.g. Kalleberg and Moody 1994), and internal career possibilities (e.g. Verburg 1998), but also at multiple practice level, that is, bundles or combinations of HR practices (e.g. Arthur 1994; Gould-Williams 2003, 2007; Guest, Conway, Dewe 2004; Subramony 2009).

At the multiple practice level, it is possible to analyse HR practices as a system, which has been referred as a high performance work system (e.g. Huselid 1995) or as a HR practice configuration (e.g. Delery and Doty 1996; Delery 1998). Delery (1998) suggests four types of possible relationships as: a) additive (where each HR practice has its own, unique effect on performance outcomes); b) interactive (the effect of each practice depends on the up-take of other practices within the bundle); c) positively synergistic (some HR practices mutually complement each other); and d) negatively synergistic (an inappropriate combination of HR practices that leads to more negative consequences than the mere absence of the practice).More recently, Subramony (2009) categorized the HRM bundles as a) empowerment- enhancing (those HR practices that boost employee autonomy and responsibility levels); b) motivation-enhancing (bundles that provide employees with adequate levels of direction and inducements); and c) skill-enhancing (bundles that augment the knowledge and skill levels of the workforce). It is now generally accepted that human resource management bundles can favourably affect the performance of business firms. The treatment of HR practices as a bundle is more effective than as an individual practice; when considering its impact on performance (MacDuffie 1995; Ichniowski 1997; Guest 2004).

Though empirical research suggests that there is an association between HRM and performance, there is little understanding of the mechanisms through which HRM practices influence effectiveness (Delery 1998, 289). This largely unexplained facet of the HRM-performance relationship has been labelled the “black box” (Boselie et al. 2005). The discussion on the black box problem was triggered by Guest (1997) when he stated the need for more theory driven research in the area of HRM, performance and the linkages between the two concepts. Legge (2001, 30) reiterated the ‘need to open up the ‘black box’ of the process that links HRM and organizational performance’.

Background: Choice of country

India has been chosen as the research context for the following key reasons. India is one of the BRIC (Brazil, Russia, India and China) countries. Indian economy grew by 7.4 percent over the fiscal year 2009-10 (FICCI 2010). The sustained performance has been guided by robust growth in both service and manufacturing sector. The Indian economy adopted a structural adjustment programme at the beginning of 1991. The structural adjustment programme or liberalization initiated the process of the opening up of an otherwise closed economy of India (Som 2008).

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Thereby, an increasing need to understand HRM practices in India since the 1990s emerged since liberalisation of economic policies took place (Budhwar and Sparrow 1997). The operation of large number of MNCs in India has fuelled the need for the top managers of these organizations to learn about the nature of HR systems appropriate for the Indian context.

HRM in India has rapidly evolved into a specialized function in organisations (Budhwar et al. 2009; Budhwar and Varma 2010), especially in the last two decades. Indian national context is marked by regional, sectoral, socio-cultural, institutional, and economic-political variations. Thus, the nature of the HR function varies from traditional personnel administration to strategic HRM/HRD. Numerous studies have explored the impact of HRM practices on firm performance in western economies like US and UK (e.g. Huselid 1995; Becker and Grehart 1996; Ichniowski 1997; Becker and Huselid 1998; Wood 1999), whereas there is a dearth of empirical research in non-westernised context, specifically India. Given, these factors, we would argue that the contextual focus of this review is justified. This study aims to review the body of literature from a theoretical and methodological perspective.

Formalized personnel functions have been existent in Indian organizations since 1920s in India (Budhwar and Sparrow 1997; Rao 1999; Budhwar 2001). The personnel function then was primarily driven by the concern for labour welfare in factories. The personnel function started expanding beyond the welfare aspect into the three areas- labour welfare, industrial relations, and personnel administration in the 1960s. In the 1970s, the focus of personnel function shifted toward greater organizational ‘efficiency’. By the 1980s, terms such as HRM and HRD gained importance (Rao 1999). The 1990s saw a rapid change in the HRM function due to ushering in of liberalisation (Som 2007, 2008, 2010; Budhwar and Varma, 2010).

Budhwar and Varma (2010) analysed the HRM literature in the Indian context and revealed that research has been pursued on a very broad variety of subjects. These include (1) the evolution of the personnel function in India, (2) the role of unions and industrial relations in the new economic environment, (3) factors determining HRM, (4) HRM and firm performance (e.g. Singh 2003; Chand 2010), (5) HRM in MNCs operating in India (Budhwar and Bhatnagar 2009; Bjorkman and Budhwar 2007), (6) strategic integration and devolvement of HRM (e.g. Budhwar and Sparrow 1997); (7) organizational learning capability (e.g. Bhatnagar 2007), (8) employee relations, (9) turnover issues (e.g., Budhwar et al. 2009; SamGnanakkan 2010; Krishnan and Singh 2010), (10) comparative HR in public and private sector organizations (e.g. Budhwar and Boyne 2004), (11) emerging patterns of HRM in the business outsourcing sector (e.g. Budhwar et al. 2006), (12) the applicability of Western HR models in India, (13) HRD and training, and (14) comparative HR between India and other countries (e.g., Lawler et al. 1995; Budhwar and Khatri 2001; Budhwar and Sparrow 2002; Varma, Pichler, and Srinivas 2005; Woldu, Budhwar, and Parkes 2006).

While there is a significant increase in volume of empirical research in India, there is no previous study that has reviewed SHRM in India. Thus for the purposes of the current study, the review will expand upon one major sub-theme- HRM and firm performance. The next section presents the procedure adopted for this review.

Procedure for review of articles

Research questions

To accomplish the study objectives, the following research questions were posed.

How have HRM practices been operationalised
How has the concept of performance been operationalised
What has been the dominant theoretical perspective that has been adopted
What were the sample characteristics of the research study (e.g. individuals, workplaces, industries or sectors etc.)
Who are the respondents (e.g. Single rater vs multiple raters per unit of analysis or Single vs multiple actors
What data collection methods have been used (e.g. case study, survey, interviews, large scale secondary data etc.)
Does the study deal with how HR practices linkages with performance (Black Box problem)
What are some of the areas future research should focus on

The following sub sections discuss the scope of review and identification of articles.

Scope of the review

There are four important criteria used in selecting articles for review. First, the articles were based on empirical research. Thus, conceptual papers were left out from the review. Second, the articles analysed data from workplaces in India. Third, articles used HRM practices and firm performance as variables. Fourth, articles had to be published in English. Also, the review excludes research published in books, conference proceedings and unpublished dissertations.

Identification of articles

There are 20empirical articles in total which study the impact of HRM practices in India. The literature search was conducted using the following databases- ABI/ Inform, Academic Search Premier, Emerald Fulltext, EBSCO. The search was based on three key descriptors ‘human resource management practices’, ‘firm performance’ and ‘India’. The full text was reviewed in order to eliminate those articles that were not actually related to HRM practices and firm performance.

Empirical studies with specific focus on India and Asia have been presented in special issues of international journals like Journal of World Business (39(4), 2004), Employee Relations (29 (6), 2007), Human Resource Management (47 (1), 2008; 49 (3), 2010). Thus, an exclusive search was conducted in these issues. A total of 20 articles from 14 journals met the selecting criteria. A list of journals contributing these articles is given in Table 1.

– Insert Table 1 here –

Characteristics of the reviewed studies

Table 2 summarises the empirical studies reviewed in the study. Studies in Table 2 differ in sample size and demographic characteristics, industry context, operationalisation of HRM and performance, data collection and analytical method, directions for future research. Each of these aspects is discussed in the subsequent sections. Drawing on an extensive body of SHRM literature, we isolate potential research areas for investigation in India.

– Insert Table 2 here –

Operationalisation of HRM

One of the significant conceptual issues involves understanding how the central construct in this literature, the human resource system, affects firm performance outcomes. Many researchers (Guest 1997, 2001; Boselie et al. 2005, Paauwe 2009) have shared the concern of lack of theory in conceptualisation of HRM, performance and its subsequent link. Hesketh and Fleetwood (2006) contend even if there was sufficient conclusive evidence for statistical association between HRM practices and organizational performance, it is not enough to explain the association.

Another significant issue that has been raised in SHRM literature is the distinction between HR policies and practices (Purcell et al. 2003). The policies refer to the stated firm’s intentions whereas the practices are established on observable, actual activities operationalised in the firm (Wright and Boswell 2002; Wright and Nishii 2004). Paauwe and Boselie (2005) state that the majority of previous studies focus on intended HR practices rather than the ‘actual’ HR practices or the employees’ perception of them. Also, Purcell and Hutchinson (2007) discuss the role of front line managers (FLMs) in ascertaining the level of employee commitment. They argue that the outcome impact on employee attitudes of HRM policies would be more positive if the FLM leadership behaviour is also perceived as positive. Thus, it is argued that research would be more appropriate if it considers multi-actor respondents e.g worker, FLM and employer perceptions.

An important finding is that the reviewed studies have used various measures of HR practices. This is consistent with the empirical literature in the West where there is no definite operationalisation of HRM (Paauwe 2009). Another important finding is some studies, such as Paul and Anantharaman (2003) built an industry-specific instrument to measure HR practices. Ketkar and Sett (2010) have extended Wright and Snell’s conceptualisation of HR flexibility. All other reviewed studies have adopted measures from either existing literature on high involvement HRM (e.g. Bjorkman and Budhwar 2007, SamGnanakkan 2010), innovation, high commitment or progressive HR practices (e.g. Som 2008; Cooke and Saini 2010), bundles of practices (Guchait and Cho 2010), or have used existing practices in organisations surveyed to operationalise HR practices (e.g. Chand and Katou 2007).

Measure(s) of performance

Guest (1999) argues that there is no general theory about performance and its measurement, which can be referred to as the ‘criterion problem’. Dyer and Reeves (1995) suggested that the HR practices work at four levels sequentially- HR (employee), organisational, financial and market. The performance outcomes can be measured as financial, organizational and HR-related outcomes (Boselie et al. 2005). However, as reported by them, the majority of researchers, US commentators in specific, have taken financial outcomes such as profit and productivity.

The empirical studies by Ramsay et al. (2000) and Godard (2001) have strongly criticised the use of financial outcomes alone and led to a renewed attention to a pluralist perspective. Paauwe (2004) builds on this pluralist perspective, stressing HRM’s duality in its focus on added value and economic rationality versus moral values and relational rationality.

Four studies (Singh 2003; Som 2008; Mulla and Premarajan 2008; Ketkar and Sett 2010) have used the financial measures of performance. The majority of studies have used organisational measures of performance (e.g. Chand and Katou 2007; Cooke and Saini 2010; Guchait and Cho 2010). Only two studies (Paul and Anantharaman 2003; Chand 2010) have adopted multiple performance measures – financial and organisational. The remaining studies used HR-related outcomes like organisational commitment (Paul and Anantharaman 2003, 2004; Shahnawaz and Juyal 2006; Maheshwari, Bhat, and Saha 2008; Guchait and Cho 2010; SamGnanakkan 2010), intentions to leave (Guchait and Cho 2010; SamGnanakkan 2010) and employee performance (Ketkar and Sett 2010).

There is limited research on HR-related or proximal outcomes which are treated as intervening variables between HR practices and organisational performance (Kehoe and Wright, forthcoming). This suggests that majority of the research in India is based on unitarist perspective. Another limitation of the reviewed studies is that none have studied the potential impact of HRM practices on negative employee outcomes such as dissatisfaction, stress, burnout and fatigue (Guest 1999; Purcell 1999).

Sample size

The HRM and performance studies present two unique sets of issues owing to sample size. While large sample sizes are difficult to obtain, given the unit or firm level of analysis, the more related challenge is that practically important relationships may be missed because of inadequate statistical power (Gerhart 2007). A commonly used approach to determining the needed sample size for a latent variable model is based on the number of parameters estimated (Williams and O’Boyle Jr. 2008). A study with more parameters suggests a need for a larger sample size. Thus, sample size plays an important role in a research study. It is important to classify studies on the basis of primary levels of analysis (Boselie et al. 2005).

The sample size used in the reviewed studies ranged from a low of 54 employees (Cooke and Saini 2010) to a high of 4,811 employees (Stumph, Doh, and Tymon 2010). The majority of studies reported sample size of over 100. It is suggested that when testing sophisticated models, large number of samples should be used (Hulland, Chow, and Lam 1996; MacCallum, Browne, and Sugawara 1996). The units of analysis were either a single organisation or multiple organisations. The sample in multiple organisation study ranged from 2 (Shahnawaz and Juyal 2006) to 439 organisations (Chand 2010).

Respondents

A methodological issue that continues to be debated concerns who should provide information about HRM (Guest 2011). There has been an ongoing call for using data collected from multiple informants about the presence of practices (Gerhart et al. 2000). Marchington and Zagelmeyer (2005) suggest that most of the high commitment studies have relied on management respondents to estimate the impact of HR practices on performance. It has been suggested that, particularly in the context of large organisations, senior HR managers are not always reliable informants and that it is more sensible to seek information from those experiencing the practices, namely workers. Paauwe (2009) makes a plea for a more contextual approach to HRM. He also suggests that future research should explore HRM- Performance link in light of broader multiple stakeholders like employees, government, trade unions, consumer organizations, etc (Paauwe and Boselie 2005). Also, research should endeavour to adopt a broader view of performance, taking into consideration employee concerns and wellbeing (Guest 2004).

The majority of the reviewed studies have reported data from a single respondent, mainly focusing on senior management (Singh 2003; Agarwala 2003). While acknowledging the possible rater bias, such studies suggest that future studies could use a multi-rater approach, specially collecting data from heads of other functions. Ketkar and Sett (2010) proposed that their choice of single respondent – senior managers from departments other than HR is consistent with the proposition of Batt (2002). Batt (2002) argued that selection of non-HR managers as respondents could improve the reliability of measurements as these managers are expected to be more objective about the HR systems. Only three studies have used multiple respondents. These include Sharma (2008) and Chand (2010), who have drawn samples from employees and customers, and Som (2008) who used samples drawn from senior executives – MD, Director, VP, GM and HR personnel.

Industry context

Datta, Guthrie, and Wright (2005) suggest that industry characteristics may have wide implications for HRM. While there have been an increasing number of studies that discuss the impact of HRM practices on performance, research on the contextual factors that moderate the efficacy of these practices has been largely ignored. The findings of studies conducted in specific industry contexts are not necessarily generalisable to other industries.

Seven studies (Singh 2003; Agarwala 2003; Khandekar and Sharma 2005; Bjorkman and Budhwar 2007; Som 2008; Stumph et al. 2010; Cooke and Saini 2010) draw on samples from multiple industries. Few studies have drawn samples from software industry (Paul and Anantharaman 2003, 2004), hotel industry (Chand and Katou 2007; Chand 2010), banking (Sharma 2008), and the information and communication technology industry (SamGnanakkan 2010).

Theoretical basis

Boselie, Dietz, and Boon (2005) identify three commonly used theories for defining the HRM and performance relationship, namely, contingency theory, resource based view (RBV) and Abilities, Motivation and Opportunities (AMO) framework. Contingency theory argues that HRM responds accurately and effectively to the organisation’s environment and complements other organisational systems (e.g. Arthur 1994; Huselid 1995; MacDuffie 1995; Delaney and Huselid 1996; Delery and Doty 1996; Wright et al. 2001).

RBV advocates that HRM delivers ‘added value’ through the strategic development of the organisation’s rare, inimitable and non-substitutable internal resources, embodied in its staff (e.g. Boxall and Steeneveld 1999; Guthrie 2001; Batt 2002). RBV has become the dominant theoretical paradigm in most recent SHRM literature (Lengnick-Hall et al. 2009). AMO model argues that organisational interests are best served by an HR system that attends to employees’ interests, namely their skill requirements, motivations and the quality of their job (Appelbaum et al. 2000; Bailey, Berg, and Sandy 2001). It is interesting to note that these three approaches represent different traditions in HRM research. Contingency theory is based on organizational institutional theory. RBV can be traced back to concepts in Organizational economics, whereas the AMO framework has its theoretical underpinnings in industrial/ organizational psychology.

Five studies (Bjorkman and Budhwar 2007; Som 2008; Cooke and Saini 2010; Guchait and Cho 2010; Ketkar and Sett 2010) have explicitly specified the theoretical basis for review. Bjorkman and Budhwar (2007) draw on the resource based view (RBV) of strategic human resource management literature. Som (2008) found empirical evidence based on a universalistic or a best practices perspective. Cooke and Saini (2010) integrate three existing theories- RBV, ‘new’ institutional theory and organisational politics perspective. Guchait and Cho (2010) support a configurational or bundles approach to HRM. Ketkar and Sett (2010) extends the existing conceptualisation of HR flexibility used by Wright and Snell (1998). All the other articles reviewed did not contain a clear reference to the conceptual perspective adopted in the study.

Data collection method(s)

Hesketh and Fleetwood (2006) argue that most of the researchers show an empirical association between HRM practices and organizational performance. The authors argue that the existence or non-existence of empirical association does not necessarily imply causal connection between them. Also, Wright et al. (2005) identified that most empirical studies studying HRM and performance are post-predictive in nature. This means HRM practices were measured after the performance period. A more appropriate approach would involve assessing HRM practices at one point of time and assessing performance at some future point of time (Huselid 1995; Youndt et al. 1996; Paauwe 2009). The more recent studies (Guest, Conway, and Sheenan 2003; Wright et al. 2005) control for both past and subsequent performance.

Seventeen studies used the cross-sectional quantitative survey method. Although some studies have suggested use of longitudinal surveys, none of them have applied the method in their own study. The cross-sectional nature of the reviewed studies does not allow for any conclusions regarding causal relationships.

Two studies (Agarwala 2003; Bjorkman and Budhwar 2007) have used a mixed methodology using quantitative survey and interviews. The study by Cooke and Saini (2010) can be classified as a purely qualitative study. Only one study (Mulla and Premarajan 2008) was based on secondary data. The study drew on data from Chairpersons’ speech and directors’ reports of 100 companies listed by the Center for Monitoring Indian Economy (CMIE) database, Prowess. It can be concluded that survey method is the dominant method for researching the HRM and performance literature in India. Although, a social survey offers a great deal of insight into the phenomenon of interest, it is unable to answer some basic questions. For instance, even if a presented theory allows the understanding of reality, the question remains why this reality should be as it is according to this theory (Mingers, 2004; Stavenga, 2006). Thus, future research could focus on adopting a qualitative or a mixed method for collecting data.

Directions for future research

Several suggestions for future research have been made in the reviewed studies. The key issues that have been put forth are the black box problem (Agarwala 2003; Chand and Katou 2007; Bjorkman and Budhwar 2007; Som 2008; SamGnanakkan 2010); the need for longitudinal studies (Singh 2003; Paul and Anantharaman 2004; Som 2008; Chand 2010; Ketkar and Sett 2010); the need to study additional variables (Singh 2003; Paul and Anantharaman 2004; Bjorkman and Budhwar 2007); and the use of multiple respondents (Singh 2003; Cooke and Saini 2010; Ketkar and Sett 2010; SamGnanakkan 2010). Some studies suggest that future studies could be cross-national (Singh 2003; Chand 2010; Cooke and Saini 2010; Guchait and Cho 2010) and could use different industry settings (Paul and Anantharaman 2003; Sharma 2008; Cooke and Saini 2010).

In this article, we will focus on a key issue that emerges from the existing studies- the black box problem. Boselie et al. (2005) has noted that despite the increasing volume of research on HRM and performance, there has been little focus on the ‘how’ aspect of the linkages. Purcell and Hutchinson (2007, 3) note the critical link in the black box problem is ‘how HR practices influence employee attitudes and improve worker performance’. This involves a call for making the research more worker-centric (Guest 2011). The workers’ perceptions and behaviour has become increasingly vital in understanding the relationship between HRM and performance.

A number of studies have discussed how the HR practices influence financial performance (Huselid 1995; Wright and Snell 1998; Ahmad and Schroeder 2003). An increasing number of human resource scholars suggest it is important to explore the ‘black box’ containing the links between HRM practices and distant organizational performance measures such as pro?tability or stock value (Becker and Gerhart 1996; Tremblay et al. 2010; Krishnan and Singh 2011). Researchers argue that HRM practices have only an indirect effect on organisational performance (Appelbaum et al. 2000; Delery and Shaw 2001; Way and Johnson 2005). While there have been many studies that have acknowledged the existence of black box issue, Boselie et al. (2005) found 20 articles that have discussed the issue in detail.

The black box issue has been investigated using two routes. The first route is through quantitative studies that have substantiated the need for identifying the role of intermediate variables in the HRM and performance linkages (Razouk 2011). Becker and Grehart (1996, 793) stated ‘unless and until researchers are able to elaborate models, including key intervening variables- it will be difficult to rule out alternative causal models that explain observed associations between HR systems and firm performance’. Examples of these intermediate variables are employees’ attitudes, behaviours and performance, measured on an organizational level (Sels et al. 2006). Fey et al. (2009) have worked on dataset of 241 firms consisting of subsidiaries of 241 MNEs operating in Russia, USA, and Finland. The findings demonstrate that motivation and ability are important mediating variables in the HRM– Multinational enterprise subsidiary performance relationship. Boon et al. (2011) show that some relationships between perceived HR practices and employee outcomes appear to be indirect, occurring via Person–Organisation and Person–Job ?t. Elorza, Aritzetab, and Ayestaran (2011) conducted multilevel analyses of a sample of 732 employees from 26 Spanish small and medium-sized enterprises (SMEs). The study supported a model in which employees’ commitment mediates between the actual system and unit-level absenteeism, which in turn has an effect on productivity.

The second route used to investigate black box issues rely on in-depth qualitative research. Authors (Truss 2001; Purcell et al. 2003, Purcell and Hutchinson 2007) suggest that qualitative research is more appropriate to explore the black box since there could be an existence of a gap between intentions of HR managers and practice experienced by employees.

In Indian research context, three articles (Agarwala 2003; Paul and Anantharaman 2003; Ketkar and Sett 2010) have discussed the black box problem concerning HRM practices and performance linkages. Agarwala (2003) demonstrates that certain combinations of Innovative Human Resource Practices (IHRPs) lead to specific employee attitudes, such as organizational commitment. The study attempts to provide an explanation for the HR-firm performance link. Paul and Anantharaman (2003) developed a HRM-performance linkage model with four intervening variables- competence, teamwork, organisational commitment and customer orientation between HRM practices and operating performance. The operating performance in turn has an impact on financial performance. Ketkar and Sett (2010) confirm the concept of HR value chain. The study proposes that HR systems have a direct impact on firm-level HR outcomes such as employee performance (also referred to as proximal outcomes). Also, the effects of HR systems on more distal operational and financial outcomes are mediated by HR outcomes.

To summarise, studies have started investigating the black box issue in emerging and developing economies. In India, however, the studies are still scarce. There has been no study which has used the route of qualitative research to explore the black box. Future research should aim to continue ‘the search for holy grail’ by exploring the issue further.

Conclusion

Researchers (e.g., Bowen, Galang, and Pillai 2002; Zhu et al. 2008) highlight that strategic HRM research mainly has been limited to advanced market economies. India’s growing economic importance as an emerging market economy makes it an interesting research context. The growth of SHRM in India thus has wide ranging implications for researchers as well as practitioners.

However, we would like to acknowledge some limitations inherent in the study which should be considered in evaluating its findings. First, the review is specific to a single country, India. Future research could seek to extend the scope to other emerging economies. We also suggest a comparative review of India with other emerging economies or Western economies offers an interesting case. Second, the number of reviewed studies is less which reflects that the field of SHRM in India is still growing. Third, the review has been limited to articles discussing the HRM and performance linkages. Thus, we may have failed to cover articles on other relevant issues in SHRM like role of HR in cross-border mergers and acquisitions (Budhwar et al. 2009), strategic integration and devolvement of HRM (e.g. Budhwar and Sparrow 1997). Although not the focus of this paper, these topics could be of academic interest and exploring them further may have important implications. Despite these limitations, the article provides significant insights in the burgeoning field of SHRM in a promising world economy, India. The study suggests that while there has been an increasing volume of research on SHRM in India, the literature needs to more actively engage in conceptual and methodological debates. The review also highlights the areas of SHRM research that merit future attention in India. Furthermore, the study contributes to the extant literature by reviewing the state of empirical research in India on SHRM.

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