A hybridism model of differentiated human resource management effectiveness in Chinese context

Human Resource Management Review 22 (2012) 208–219

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A hybridism model of differentiated human resource management effectiveness in Chinese context Yu Zhou a,⁎, Yingying Zhang b, Jun Liu a a Department of Organization & Human Resources, School of Business, Mingshang Building, Room 735, Renmin University of China, Zhongguancun Avenue 59, Haidian District, Beijing 100872, China b Department of Management, CUNEF, Complutense University of Madrid, Madrid, Spain

a r t i c l e

i n f o

Keywords: HRM differentiation Hybridism China Contextualization

a b s t r a c t This paper brings the differentiation perspective of human resource management (HRM) to China's context of economic transition, and constructs a hybridism rationale to explain the distinctive characteristics of Chinese HRM. We respectively discuss the effect mechanisms of commitment-based, control-based, collaboration-based, and contract-based HRM archetypes in China. Then, by comparing the paths of HRM evolution taken by China and the West, we explore the dynamic logics of fit between macroeconomic institutions (economic centralization or laissez-faire) and the organizational tradeoff of hybrid HRM approaches. Ideas for future research and practical implications are discussed. © 2012 Elsevier Inc. All rights reserved.

1. Introduction The globalization of today's business world brings to scholars' attention the problem of reconstructing managerial theories and analyzing their practices, from both global and local perspectives. In specific, researchers are paying close attention to the role of contextualization in management. That is especially true in the context of Chinese management, where management practices are significantly influenced by contextual factors, including human resource management (HRM) (Tsui, 2006). There is a need to integrate Western theories into Chinese contexts in order to achieve theoretical innovation (Whetten, 2009). Among others, scholars such as Tsui (2007) suggests that both “outside in” and “inside out” approaches are necessary in the approach to international research for a better understanding of existing phenomena and for extrapolating better theories in management research. Within this context, we introduce the recently emphasized theoretical perspective of strategic human resource management (SHRM) differentiation and indigenous HRM in China, in order to generate an integrative theoretical model and propositions for further discussion. Some historic and empirical observations indicate that Chinese HRM practices have unique characteristics, which differ from the developmental paths of Western ones (e.g. Child, 1994; Warner, 1995, 2000). Some empirical evidence also demonstrated that the applicability of Western corporate HRM to Chinese local subsidiaries was questionable (e.g. Björkman & Lu, 1999), and the construct of human resource practices (e.g. high commitment work practices) in China was contextually different from those in the Western literature (Xiao & Björkman, 2006). That is, as the evidence stands, the cultural context and background of institutional transformation with Chinese characteristics matter. As pointed out by Warner (2008), during its economic reform China “did not merely replicate foreign models uncritically. Where they have implanted overseas economic management practices since the late 1970s, they did so by incorporating them into [the] Chinese ‘way of doing things’” (p. 771). The so-called “Chinese characteristics” HRM practices cannot be described or explained from either a Western or Eastern framework, but there needs to be a type of hybrid archetype which combines the new and old way of people management,

⁎ Corresponding author. E-mail address: [email protected] (Y. Zhou). 1053-4822/$ – see front matter © 2012 Elsevier Inc. All rights reserved. doi:10.1016/j.hrmr.2012.01.003

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merging the Western with Chinese HRM practices (Warner, 2008; Zhou & Zeng, 2008). Based on this idea, the present paper attempts to provide a differentiation perspective of the SHRM explanation for the coexistence of hybrid HRM systems in China. Specifically, we contribute by pinpointing the particular mechanisms through which diverse HRM configurations comprehensively affect firms' competitive advantages. The paper is structured as follows: First, we present an HRM differentiation perspective to challenge the best practice view of SHRM by tracking the recent arguments for alignments between HRM and strategic capabilities (Becker & Huselid, 2006; Zhou & Hong, 2008). Second, by reviewing empirical and theoretical studies on HRM effectiveness based on the evidence from both the West and China, we propose a hybrid rationale to indicate the distinctive characteristics of Chinese HRM; then we specifically show the mechanisms of four typical HRM archetypes' (commitment-based, control-based, collaboration-based, and contractbased HRM) effects on an organization's divergent outcomes in China. Third, by comparing the different evolutionary paths of HRM practices between the West and China, we explore the contingent logic between macro-level economic institutions and organizational-level HRM alternatives. Lastly, implications are drawn for both theoretical development and practical improvement. 2. A differentiated perspective in strategic HRM The central tenet of SHRM is that people are considered strategic resources that are valuable to firms (Pfeffer, 1998). The determination of best practices for a firm is the equivalent of guessing the contents of a black box. These best practices, then, tend to be adopted by successful firms and are supposed to be effective in all situations (Pfeffer, 1995). Examples of best HRM practices are packaged as work systems such as “high performance” (Combs, Liu, Hall, & Ketchen, 2006; Huselid, 1995), “high commitment” (Arthur, 1994), and “high involvement” (Guthrie, 2001). However, the existence of such best practices is generally questioned. Actually, there is no consistent conceptualization of what constitute best practices across organizations (Becker & Gerhart, 1996). Moreover, the SHRM field is further developed to include the perspective of best fits (Boxall & Purcell, 2000), or the contingency approach (Delery & Doty, 1996) which argues for the fit between HRM practices and both external and internal contexts of firms (Datta, Guthrie, & Wright, 2005; Jackson & Schuler, 1995; Tsui, Pearce, Porter, & Hite, 1995). The contingent logic captures the variance of HRM across organizations with different contexts. Recent endeavors emphasize the variance of HRM systems within organizations. This is recognized as the perspective of HRM differentiation (Becker & Huselid, 2006; Becker, Huselid, & Beatty, 2009; Zhou & Hong, 2008). Earlier, Lepak and Snell (1999, 2002) constructed a rationale of exploiting divergent employment models to target heterogeneous human capital in organizations. Likewise, Becker and Huselid (2006) and Becker et al. (2009) advocate another paradigm that organizations' capabilities determine differentiated HRM practices. Since capability has been considered a series of “specific and identifiable processes” (Eisenhardt & Martin, 2000, p. 1106) constituting resources that create competitive advantage for organizations, there need to create diverse HRM systems that couple with those processes. In turn, the differentiated HRM settings serve as a pivotal bridge to incorporate an integrative alignment among diverse processes and a heterogeneous workforce, constituting a “complex system” (Colbert, 2004) that supports a firm's competitive advantage. Furthermore, following the consistency of organizational strategic processes (Teece, Pisan, & Shuen, 1997), Zhou and Hong (2008) present the notion of complementary similarities among differentiated HRM systems that have been targeting those respective processes. Instead of advocating for one system over another, it emphasizes the coexistence and complementary interaction of multiple HRM systems. In summary, contrary to the simplicity and insufficiency of the best practice view, the differentiation perspective provides broad opportunities to examine intricate HRM structures in organizations. Consequently, there are adequate possibilities of employing this perspective for analyzing the complexity of HRM in China. 3. Hybridism: Effectiveness of differentiated HRM in China 3.1. HRM hybridism under China's economic transition The past two decades have seen significant change in employment relations across the world. Katz and Darbishire (2000) labeled the tendency as “converging divergences.” In other words, as worldwide workplace union power has declined, variation in employment patterns and work practices has dramatically increased. This global trend, in addition to the Chinese rapid economic transformation, provides a particular context for analyzing the effectiveness of human resource practices embedded in hybrid employment systems. This latter aspect in turn offers a broader stage from which to study HRM differentiation issues in the particular context of China. China has transformed from a planned economy to a market economy since its opening in 1978. Translating the effects of economic reform to the organizational level, enterprises of diverse modalities coexist in this country departing from the monopolistic dominance of State Owned Enterprises (SOEs) decades ago. While in the process of rapidly connecting with the international economic system, organizational management in China is facing challenges among diverse practices from different backgrounds. On the one hand, Chinese managerial practices at the firm level have been developed in parallel with international standards, principally with management approaches from America, Japan, and Europe (Warner, 2008). A recent Human Resource Development Report of China (Lin, 2006) collected data from 1883 Chinese enterprises and demonstrated that in general Chinese

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organizations have adopted most HRM practices from the West. Up to 52%, 77%, 72%, 69%, 76%, 55%, 44%, and 55%, respective to the following list, of Chinese enterprise samples have formally applied the HRM practices of job analysis, selective recruitment, performance management, extensive training, rewards management, career development system, employee grievance, and information sharing. On the other hand, the practices from traditional institutions and customary culture still play an important role in the Chinese workplace (Tsui, Schoonhoven, Meyer, Lau, & Milkovich, 2004). The unique gradualism of China's economic reform at the macro level has inevitably maintained a certain kind of institutional inertia. At the same time, the market-rooted competition has dramatically released vitality and energy at the micro level, which has strongly motivated individuals and organizations to make breakthroughs in business. Undergoing the dual forces of top-down inertia and bottom-up vitality, Chinese management, including Chinese HRM, could be characterized by a mix-up of old and new, indigenous and exogenous practices. Earlier observations have indicated that workforce management in Chinese organizations is a mixed configuration between a “purely-three-iron” model (one that characterizes a strongly centralized and stabilized personnel administration) and a “purelyWestern” model (one that presents a free market based employment relationship) within its transformational context (Warner, 1995). Some cases also have demonstrated that Chinese local enterprises are moving to administrative standardization by learning Western managerial practices while somehow maintaining their traditional personnel management ways (Braun & Warner, 2002). Some evidence also suggested multinational corporations in China are increasing their adaptive capabilities by focusing on domestic factors and absorbing localized HRM practices (Child, 2000). Additionally, recent arguments highlighted that China's rapid but not well balanced economic growth incurred variance of human capital investment and heterogeneity of human capitals across workforce groups, which in turn caused differentiated employment treatments in workplaces (Zhao, 2008; Zhu, Warner, & Rowley, 2007). From an organizational “ambidexterity” perspective, Zhou and Zeng (2008) demonstrated that Chinese firms tended to pursue a coexistence of diverse HRM models focusing on different strategic processes for simultaneously attaining both low-cost advantages and innovation capability. All the above arguments support that the so-called “Chinese HRM model” is not a single-dimension construct, but a blending framework embedded with multiple HRM configurations. This hybridism characteristic, as a significant contextual factor, might distort the effectiveness of Western high performance work practices in China. The data from the same above-mentioned survey showed that on average, 62% of Chinese firm samples synthesized a series of universal HRM functions, while less than 10% of firms asserted the effectiveness of those best HRM practices. Some empirical tests of high performance work systems (HPWS) from Western HRM literatures using Chinese data also showed controversial results (see Table 1). For example, some examinations concluded that HPWS were positively related to the performance of Chinese enterprises, while others seldom discovered any significant positive relations. With this contradiction we could conclude that the best HRM practices are not universally agreed upon and accepted in the Chinese context. Thus, it provides a rationale for us to introduce multiple HRM models into contextualized analyses, and to explore their particular mechanisms' effects in Chinese enterprises. Based on the overall theoretical analyses and empirical evidence above, we propose the following. Proposition 1. The impact of Western high performance work practices on Chinese firm performance is inconsistent, while workforce management in Chinese organizations presents characteristics of hybrid combinations of differential HRM archetypes. For some time, scholars have been studying HRM typologies. For instance, Walton (1985) compared control and commitment oriented HRM models. Huselid, Jackson, and Schuler (1997) examined the comparative effectiveness of technical and strategic HRM. Lepak and Snell (1999, 2002) proposed knowledge, collaboration, compliance, and market oriented HRM models based on the uniqueness and values of human capital.

Table 1 The empirical tests on HPWS effectiveness within Chinese firms. Researches in Chinese

Source of HPWS

Firm performance indicators

Effects

Björkman and Fan (2002)

Becker and Huselid (1998)

+

Li (2003) Law, Tse, and Zhou (2003) Jiang & Zhao, 2004 Liu, Zhou, & Zhao, 2005 Xu & Yang, 2005

Census data in service industry of China No explication (strategic HR role) Abstract from prior research No explication Meyer & Smith (2000), Wright, Gardner, & Moynihan (2003), Ding, Fields, & Akhtar (1997) Abstract from prior research Delery and Doty (1996) Ichniowski & Shaw (1999) Delery and Doty (1996)

Perceived performance (overall performance, ranking compared with competitors) ROA ROE, productivity Rank in competition Perceived performance Perceived performance Profit, innovational performance Perceived performance Sales growth Product/service performance, financial performance

+ N/A + Partially +

Financial performance, operational performance

+

ROA, Net profit, Return on sales (Both perceived and objectives)

+

Wang and Zang (2005) Zhang (2006) Cheng & Zhao, 2006 Akhtar, Ding, and Ge (2008) Ngo, Lau, and Foley (2008) Wei and Lau (2008)

Devanna, Fombrum, Tichy, & Warren (1982), Huselid (1995), Ngo, Turban, Lau, & Lui (1998) Huselid (1995)

N/A N/A N/A N/A Weak +

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For further analyzing the effectiveness of differential HRM archetypes in China, we mainly follow the HRM typology from Lepak and Snell's (1999) conceptual work, and adaptively export four constructs of commitment-based, control-based, collaboration-based, and contract-based HRM configurations into Chinese contexts. These four models represent typical organizational person treatments of internalized “make” and “use,” and externalized “alliance” and “purchase” (Lepak & Snell, 2002). Furthermore, in particular forms they existed in the historic practices of Chinese personnel management and have been applied in current Chinese workplaces (Zhou & Zeng, 2008). Each model in the Chinese context exhibits different characteristics, contents, and value contribution mechanisms, which are presented in the following subsections. 4. Commitment-based HRM: A Western fashion with Eastern shadows Commitment-based HRM principally contains characteristics of High Commitment/High Involvement/High Perform Work System (HCWS/HIWS/HPWS). This model was emphasized (e.g. Arthur, 1994; Delery & Doty, 1996; Guthrie, 2001; Lawler, 1992; Walton, 1985) given that the global business environment is becoming increasingly dynamic, where flexibility and innovation are becoming the sources of firms' competitive advantage. This model focuses on investing and developing human resources themselves, and internal deployment to build up organizational commitment and fidelity in the long term. Empowerment and encouraging involvement are the forums to promote and motivate employees' adaptation. In this way, firms could strategically adapt to the changing environment rapidly and flexibly (Lawler, 1992; Pfeffer, 1998). To be more concrete, commitment-based HRM contains practices such as job enrichment, job rotation, strict selection based on value systems and potential, internal promotion based on performance and capabilities, extensive training programs, self-management, formalized information sharing, employee voice and involvement systems, payment based on team performance, appraisal and payment based on capability, leveraged payment levels, and long-term employment security. A high commitment philosophy presented by those HRM practices is beneficial for achieving innovation outcomes, especially focusing on knowledge-based employees (e.g. Lepak & Snell, 1999). Practices such as employment security not only establish employees' psychological commitment to organizations but also help to motivate them to take risks (Jackson, Schuler, & Rivero, 1989). Selective hiring and extensive training for creativity create a talent pool and also convey the value of innovation (Koch & Mcgrath, 1996). Employee involvement, teamwork, and flexible job assignment ensure employees' discretion and opportunities to innovate (Batt, 2002; Ichniowski, Shaw, & Prennushi, 1997). This evidence is in alignment with the results of innovation research demonstrating that an environment in which employees have encouragement, autonomy, and are relatively free of impediments to innovation is a healthy environment for innovation (Amabile, Conti, Coon, Lazenby, & Herron, 1996). Recently, based on large scale, cross industrial organization samples, Zeng and Zhou (2009) reported a positive impact of high commitment HRM systems on Chinese firms' innovation. Even though the commitment-based HRM arguments emerged from Western theory, it is not new for Chinese management. During the period of planned economy, employment was centralized and planned by the Labor Department of the Chinese government as the free labor market was not yet in existence. This fact formed the “internalized” management style at the organizational level. Specifically, the “three-iron” model was one of the typical characteristics for personnel management in China (Warner, 1996). This consists of “iron rice-bowl,” “iron wage,” and “iron chair” respectively. “Iron rice-bowl” refers to the welfare that organizations provided their employees in order to have long-term and stable job security “from cot to tomb” (Ding, Goodall, & Warner, 2000; Fung, 2001). “Iron wage” is the payment policy based on egalitarianism, low extrinsic pay, low salary increase, and emphasis on intrinsic motivation (Tung, 1981). “Iron chair” refers to the tenure position of most operational mangers in organizations and the career development model based on internal promotion. Moreover, other practices such as skillbased pay, extensive training, and the employee proposal policy were typical managerial practices in China (Taylor, 2005; Warner, 1997). These examples demonstrated that personnel management in the period of planned economy carried on the belief in commitment to protect employees' job security and their corresponding rights. That characterized commitment-based HRM style to a large degree, effectively strengthened the position of “big brother” of the collective of workers, and motivated a spiritual dedication to contribute and commit to the organization. Nevertheless, Lin, Zhang, and Fang (2001) also empirically demonstrated that employees in Chinese organizations tended to transform their affective commitment to a long-term personal dependency on their organization, which might decrease an employee's self-challenge and work initiatives. Becker and Huselid (1998) also criticize that some shortcomings of the commitment model will appear and impede an organization from further development when commitment unifies the system at an absolute level. Those are a lack of external motivation, shortage of operational efficiency, popularization of bureaucracy, and a heavy social burden loaded onto production costs. In summary, the commitment-based work system is a new concept for China, as an imported theory from the West, but most of its practices have already been experienced in China. Moreover, Chinese organizations have been undergoing the ambidexterity of high commitment work practices; the bright side is motivating employees' adherence to their organizations and innovation, and the dark side is the rigidity of employee relations and increasing bureaucracy. Combining both sides, we make the following nonlinear proposition. Proposition 2. There will be an inverted-U relationship between the commitment-based HRM model and firm performance. (An appropriate application of the commitment-based HRM model focusing on knowledge intensive works will positively affect innovative outcomes and accentuate firm performance, while an abuse of the commitment-based HRM model, covering all works, will cause high employment costs and attenuate firm performance.)

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5. Control-based HRM: Attaining efficiency and backfire of abuse The control-based model corresponds to the commitment model, and runs based on routine workflow and procedural regulations, in order to achieve work efficiency, administrative compliance, cost constraint, and task performance in the current term (Walton, 1985). This model is often used in routine-line jobs and supporting staff (Lepak & Snell, 1999; 2002), which mainly involves typical practices of standardized work boundary definition, compliance relations based on positions, selection focused on work experience, emphasis on work efficiency in the current term, assessment based on results and quantitative orientation, wages based on positions, professional careers based on position scale, and layoffs of redundant and low-efficiency employees. In the Western literature, control-based HRM is considered an outdated or traditional approach in workforce management (Ichniowski et al., 1997; Pfeffer, 1998). Nonetheless, this model is significantly useful in order to positively build the base of organizational standardization and information system process, especially for those firms who are still building basic managerial systems and workflow processes (Snell, 1992). Since Chinese enterprises became involved in the market economy very recently, only two decades ago, they are still undergoing the processes of market-based employment and administrative professionalization. Therefore, in Chinese organizations, the control-based HRM model still matters for formalizing basic personnel operations, containing employment costs, and maintaining work efficiency (Zhang, 2004; Zhou & Zeng, 2008). However, an extreme application with a simplified model may abuse its functionality, which needs to be avoided, and protected from “over control” and merely maximizing efficiency and minimizing costs. The latter often causes negative effects of labor exploitation, employees' professional tiredness, work–life unbalance, and production of “blood and sweat.” Furthermore, it could provoke serious work burnout and “death by stress” (Shi & Yang, 2001; Zeng, 2006). In turn, it will negatively affect the accumulation and development of human capital in enterprises and weaken firms' sustainable competitive advantages. Hereby, the control-based HRM model also presents ambidexterity, leading to the following: Proposition 3. There will be an inverted-U relationship between the control-based HRM model and firm performance. (An appropriate application of the control-based HRM model focusing on routine works will positively affect cost efficiency and accentuate firm performance, while an abuse of the control-based HRM model will negatively affect human capital sustainability and attenuate firm performance.) 6. Collaboration-based HRM: Social capital as a favorable condition Collaboration HR systems take an outreaching approach and emphasize connections and relationship quality with external stakeholders, partners, intellectual professionals, and contingent talents (Collins & Clark, 2003; Lepak & Snell, 1999). It reflects a broader definition of HRM to include not only the internal workforce, but also the management of external human capital while exploring external knowledge input for innovation (Anand, Glick, & Manz, 2002; Powell, Koput, & Smith-Doerr, 1996). Besides its learning effectiveness, from a social capital standpoint, external alliance is a beneficial approach to building up a firm's social network in business (Brass, 1995; Youndt, Subramaniam, & Snell, 2004), which in turn will positively affect a firm's capability to sympathetically attain business opportunities. The extensive partnership can also be employed as a source for attracting talent from the outside, and as channels for expanding employees' careers from within. Consistent with the description of partnership-based employment relations in Lepak, Takeuchi, and Snell (2003) empirical work, collaboration-based HRM practices principally imply extensive cooperation with external consultants, formal learning mechanisms with business partners such as suppliers and distributors, personnel alliances with academic institutions, the hunt for talent through social networks, extending externalized career opportunities, employing an interdisciplinary team, and sharing rewards. The model of collaboration-based HRM has its conditioned bases in Chinese enterprises. One is benefits from the policies of centralized government, and another is the emphasis on relations in Chinese traditional culture, or Guanxi. Chinese government is used to coordinating different organizations and resources for mega events through political means or public tenders. Recent examples include new and highly innovative programs such as space projects and international events, such as the Olympic Games of 2008. These projects and events present the need to deploy resources across organizations, across countries, and to reorganize social capital. These government-facilitated projects and events also provide opportunities for international cooperation, offering chances for Multinational Corporations (MNCs) to enter the Chinese market. On the other hand, Chinese traditional culture, Confucianism, emphasizes social networking and has positive social effects. Guanxi is not only considered a unique phenomenon of cultural behavior (Chen & Chen, 2004), but also a valuable social capital (Bian, 1997) that is positively related to personal and organizational success. Thus, scholars (e.g. Tsui, 1997) suggest that expatriates of MNCs need to learn techniques of Guanxi to maintain active social collaborative relations with different stakeholders (including governments, suppliers, distributors, and others) in order to improve their performance in China. Proposition 4. The application of collaboration-based HRM will be positively related to external talent deployment to achieve innovation and accentuate firm performance; the utility of social capital or Guanxi has positive effects on the usage of the collaborative HRM model. 7. Contract-based HRM: Balancing employment flexibility and regulation The contract-based HRM model mainly refers to outsourcing contracts to “purchase” the needed human resources from employment agencies in the labor market, in order to fulfill business needs in the short term (Lepak & Snell, 2002). Usually, the modality of

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contract is applied to periodical, routine, and marginal tasks. Contractive HRM mitigates the rigidness of long term labor relations and improves the elasticity of HR employment through economic labor purchase contracts (Abraham & Taylor, 1998). In turn, this configuration helps to develop productivity in the current term and to adapt to cycling changes of the market (Davis-Blake & Uzzi, 1993). The practices involved in contract-based HRM mainly adopt personnel agency formats to obtain a workforce for ancillary jobs, simplify the definition of work boundaries, task-based collective training, monitor dominated appraisal, focus on instant output of work performance, and adjust marketwise wage levels. As Chinese industries are principally labor-intensive, the labor outsourcing approach (or “labor dispatch/placement,” as termed in China) has been becoming a major trend in Chinese enterprises since they could be benefited from employment elasticity and cost reduction. Zeng's (2007) survey showed that there were more than 26,000 labor agencies in the Chinese labor market until 2006, when the accumulated outsourcing workforce reached 25 million in state-owned organizations. An elastic relationship with the outsourcing workforce was not only a substitute for employment immobility in the Chinese workplace, but a convenient way to constrain employment costs (Zhou & Zeng, 2008) resulting from an excess supply of labor force in the Chinese labor market. The wage of those temporary workers on generic jobs just reached, or was even lower than, the average level of market rates. Moreover, the adoption of the labor agency exempted employers from the quasi-fixed labor costs on contingent workers' insurance benefits. Embedding in the contract-based HRM model, the triangular relationship constituted by employers, employment agency, and workers raised the complexity of employment relations, and consequently might increase the risk of infringing upon employees' legal rights (Chang & Li, 2006). On the one hand, as they were entitled to an elastic HR deployment through the contract-based model, employers tended to shorten the term of the labor contract and minimize employment tenure. This inevitably debased workers' employment stability and quality. On the other hand, within the triangular relationships workers are simultaneously exploited by the dual hirers, the firms that they are actually working in, and the agency which provided them the work opportunities. The two contractors often intend to shift off their contract obligations, risking employees' rights (Zeng & Zhou, 2007). In order to rectify those illegitimate practices, the Chinese government enacted a national level new labor law on employment contracts (Labor Contract Law) in January, 2008. There is a chapter which particularly regulates outsourcing labor dispatch, formalizes labor agency qualifications and obligations, employers' obligations, and other related accountabilities. Therefore, Chinese enterprises are facing the challenge of enjoying the cost advantage and employment flexibility, together with applying the stricter legal systems in the workplace to ensure the legitimacy of outsourcing employment contracts. Proposition 5. The application of contract-based HRM will positively affect employment elasticity, reduce employment costs, and accentuate firm performance, while the use of a contract-based model without appropriate regulation may harm employees' rights. As discussed, the four archetypes of the HRM models (commitment, control, collaboration, and contract) have been practiced in diverse Chinese contexts and emerged with their own characteristics and impact mechanisms. Commitment-based and control-based HRM models affect firm performance on an inverted-U curve and they are suitable for targeting innovation and cost constraint, respectively. Both collaboration-based and contract-based HRM models are capable of exploiting external talents and labor force, while they respectively contribute to innovation and cost reduction by accumulating social capital and maintaining employment elasticity. Focusing on heterogeneous works and mediations, those four HRM models are coexisting across and within Chinese organizations, showing an overall characteristic of hybridism in transforming China's workplace. 8. Bridging economic institutions and hybrid HRM 8.1. Comparison of HRM evolutionary paths Economic emergence and transition in China provides an appropriate perspective from which to observe hybrid HRM practices. Nevertheless, the divergence of employment models is not an exclusive feature of China. It is also a universal tendency worldwide. Katz and Darbishire (2000) noted that when the global economy enters into a highly dynamic stage, the normative collectivized approach (such as unionization) in employment relationships is weakened, while individualized treatment is increased, causing a convergent phenomenon of differentiated employment practices. Moreover, in this process of “converging divergence,” the developments of personnel practices in the West and China have experienced different paths under different institutional contexts (see Table 2). In the Western HRM theoretical context, the mechanical transaction-based and efficiency-oriented control model is considered traditional. More arguments have recently been made for commitment, involvement, and the innovative-oriented HRM model (e.g. Arthur, 1994; Ichniowski et al., 1997). It continues moving toward a combination of diverse models (Becker & Huselid, 2006; Tsui, Pearce, Porter, & Tripoli, 1997), and reflects an evolutionary path that follows a “transaction-based HR model under free market competition → internalized high commitment employment under the innovative-orientated economy → hybrid HRM systems in a highly dynamic environment.” In the Chinese context, the planned economic system has broken down and market competition has been becoming more and more intense in the last few decades. Its HRM evolutionary path follows a more complex pattern. First, Chinese enterprises overcame the “three-iron” model in the centralized planned economy. The transformation toward a control and marketwise model improves organizational efficiency, improves employment flexibility, and reduces cost. After the establishment of an efficiencyoriented system, enterprises needed to play a better role with commitment and collaboration models, promoting a jump of

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Table 2 Comparative Chinese and Western HRM evolutional paths. Macro economic institutional context

Highly centralized system (planned economy in China)

Market-based economic system

Ambidexterity of economic regulation and free competition

High commitment and command personnel administration:

High transaction and control workforce management:

High hybridism: Focusing on diverse strategic capabilities and heterogeneous human capitals HR “make”, “use”, “buy” and “ally” models coexisting Taking advantages of each HRM model Complementarities of hybrid models Exploitation of dynamic HRM tradeoffs

Organizational HRM characteristics

Plan-based employment “Three-iron” personnel system Life-long job security High effective commitment with a certain degree of contributive climates Strong personal-organization dependency with high sunk employment cost Bureaucracy with lack of efficiency

Impacts

HRM evolutional paths

Market-based employment or dismissal Efficiency-oriented task management Labor cost optimization High transactional efficiency High employment flexibility High labor mobility High labor-management conflicts Low organizational commitment

Optimize transaction and control −− Import commitment practices − − Hybridism

−−

Western Chinese

A ttenuate commitment — Construct transaction & control procedure

— Reconstruct commitment — Hybridism

competitive advantage from low cost to innovative capability. In other words, it reflects a path of “internalized high commitment employment under planned economy → attenuating excessive commitment → externalized transaction-based employment under market competition → reconstructing internal commitment under an innovation-oriented economy → hybrid HRM systems in a highly dynamic environment.” 8.2. Fits of economic institutions and HRM Following Aoki's (2001) institution-comparative analyses, we tend to construct institutional fit logic to explore the relationship between macroeconomic institutions and organization-level employment approaches. Based on the evolved practices above, we propose a matrix (see Fig. 1) with four quadrants to build a series of fits between economic institutions and organizational HRM. As shown in the quadrant of centralized economy–commitment employment fit (C–C fit), when a high commitment employment system is used in a highly centralized economic institution, rigidity and low efficiency in management could occur. That is because the over-commitment that is embedded in an internalized employment relationship might strengthen people's intrinsic motivation, and their compliance and dependency on the organization, which eventually breeds workplace bureaucracy, impairs

Centralization-Commitment fit: High commitment

High transaction

Organizational HRM approaches

Hybrid HRM

Internalized employment Organized dependence Workplace Bureaucracy Intrinsic incentives

Market-Commitment fit: Investment in commitment Differentiated employment by human capital heterogeneity Compatibility of efficiency & innovation

Hybrid HR by heterogeneity Hybrid HR by status Centralization-transaction fit: Decentralized employment Competition from within Costs constraint Differentiation by status

Market -Transaction fit: Market based employment Mobility by competition Immediate efficiency focus Minimized personnel costs

Macro economic institutions High centralized economy

Tradeoff of economic centralization & laissez-faire

Fig. 1. Matrix of economic institution and organizational HRM fits.

High free economy

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workforce initiative, and inflates organization personnel costs. This scene of C–C fit is typically represented by the “purely-threeiron” employment model in China's plan-based-economy age. The quadrant of market based economy-transaction based employment fit (M–T fit) describes a typical Western scenario in which market force rules in both macro economy and low-level employment. When a highly transactional and control oriented employment system is applied in a completely free market based institution of economy, organizations might tend to strongly rely on external labor markets, and pursue minimizing personnel costs while maximizing immediate work efficiency, but workplace injustice and labor-management conflicts may frequently occur (Dunlop, 1958; Kochan, McKersie, & Capelli, 1984). Since China started to construct a comprehensive market based economy (rather than releasing market force at low level), from 1978, organizations gained autonomy to exploit transaction-based employment through labor market and cost oriented management at workplace, and the scenario of M–T fit was practiced. On the one hand, this helped Chinese enterprises improve productivity and access to low labor costs as one comparative advantage. Data showed that during the past decade, China's average growth rate of annual labor productivity (of manufacturing industry) hit 15%, while the U.S. rate was around 4% (Lu & Liu, 2007). However, until recently, the Chinese manufacturing worker's wage level was only 3% of that in the U.S. (Banister, 2006). On the other hand, it aggravated the inequality of both social status and wealth distribution between workers and employers, which in turn intensified conflicts in employment relationships. According to the data from the statistics bulletins issued by China's Ministry of HR and Social Security, the number of labor dispute cases in China increased by 13.5 times in the past decade. Proposition 6. The application of commitment-based HRM in a higher centralized economy (C–C fit) will lead to greater likelihood of bureaucracy in the workplace and attenuation of organizational efficiency. While, the application of transaction-based HRM in a market economy (M–T fit) will lead to greater likelihood of organizational cost constraint and antagonistic employment relationships. The quadrant of centralized economy–transaction based employment fit (C–T fit) presents a compromising approach of maintaining a highly centralized economic system at the macro level, by deregulation and empowerment in management at the organizational level. However, the rationale of combining high-level centralization and low-level market mechanisms (e.g. Brus & Laski, 1989) was criticized as being constrained by a holistic centralized system. A low-level marketization would be incompetent in releasing efficiency; it would even increase injustice and corruption, as the dominant bureaucratic system might enact rent-setting while the infirm market proprietors might be bound-up in rent-seeking (Kornai, 1990; Murphy, Shleifer, & Vishny, 1992). Earlier, during 1958–1976, China attempted the reform of decentralization and interest concessions to entitle business sectors with partial autonomy on business administration, including workforce employment (Wu, 2003). Then the scenario of C–T fit was undertaken. In addition to employing people loaded by the government's employment plan, business organizations were authorized to hire workers autonomously within a certain scope of headcounts beyond the plan. This partially introduced transactionbased relationships, working competition, and a sense of cost constraint into the workplace. It simultaneously formed a statusbased differentiation in employment. The workers located within the government's plan were “regular employees,” who were endowed with lifelong employment security and related benefits provided by the government. People employed at nonplanned headcounts were “temporary employees,” and had only limited employment benefits at the organizational level. The employees' status, rather than their competency or contributions, determined the differentiated personnel treatments put upon them. This eventually caused injustice and ruined efficiency in workplace. An alternative approach of associating market based infrastructure with organization-level commitment oriented management is indicated as the quadrant of market-commitment fit (M–C fit). In this scenario, the external labor market plays a fundamental function allocating human resources across firms; while within organizations, a high commitment oriented internal labor market is employed, and differentiated HRM treatments are exploited to target heterogeneous human capitals, compatibly cultivating both flexibility and stability, and efficiency and innovation in the workplace. Embedding distinctive commitment into the pervasive market infrastructure inducts hybrid HRM models as alternatives that are available for organizations to use to make dynamic tradeoffs in a rapidly changing business context. This happens especially when a centralized economic regulation and a market dependent laissez-faire practice are ambidextrously exploited. Proposition 7. The tradeoff of economic centralization and laissez-faire practice will lead to greater likelihood of applying hybrid HRM models at the organizational level. (a) The application of transaction-based HRM in a higher centralized economy (C–T fit) will lead to greater likelihood of workplace differentiation by workers' status, and attenuate organizational justice; (b) The application of commitment-based HRM in a market economy (M–C fit) will lead to greater likelihood of workplace differentiation by human capital heterogeneity, and trade off organizational efficiency and innovation. 9. Discussion The perspective of HRM differentiation deepens the insight of diverse HRM models embedded into firms' idiosyncratic human capital and capabilities (Becker & Huselid, 2006; Lepak & Snell, 1999; Tsui et al., 1997; Zhou & Hong, 2008). In this paper, we import the rationale of HRM differentiation into contextually analyzing the effectiveness of hybrid HRM archetypes in China's transitional economy. The arguments we have generated are expected to be submitted to further empirical examination. Likewise they open up new implications for research and practice.

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9.1. Theoretical implications First, we present the distinctive effectiveness mechanisms of 4C (commitment-based, control-based, collaboration-based, and contract-based) HRM archetypes with Chinese characteristics. Based on extensive personnel practices in China's economy transition process, we initially propose inverted-U relationships between the unitary usage of commitment-oriented or controloriented HRM models and firm performance. This basically responds to Becker, Huselid, Pickus, and Spratt (1997) statement of the nonlinearity in HRM–firm performance relationships. Furthermore, contrary to their increment-by-stages model (p. 42), our inverted-U assumptions contain both ascending and descending stages, which prompts research considerations not only regarding the nonlinear effects of HRM, but also the dark sides of the prevalent best HRM practices. Second, our analyses on the specific delivery mechanisms of each HRM archetype invite consideration of mediations between HRM and bottom-line performance. The differentiated HRM systems target various capabilities respectively, and then converge to contribute to final performance, whereby appropriate mediators have become an important direction for analyzing HRM–performance relationships (Becker & Huselid, 2006). For example, the strategic capability of knowledge management (Collins & Smith, 2006), production outcomes (Gibson, Benson, Porath, & Lawler, 2007), and customer service outcomes (Batt, 2000; Liao, Toya, Lepak, & Hong, 2009) all have been considered immediate outcomes of HRM. In this paper, we elaborated the four HRM patterns that affect firm performance though supporting organizational innovation, accumulating social capital, ensuring operational efficiency, and maintaining employment elasticity. We hope researchers will take up these possibilities in future examinations. Third, the rationale of HRM hybridism we argued also offers research opportunities for examining the complementary mechanisms among the diverse HRM archetypes. Extending the “horizontal fit” of single work practices within a unitary HRM system (Delery, 1998), Zhou and Hong (2008) emphasizes the “holistic complementarities” of multiple differentiated HRM systems within organizations for trading off diverse strategic capabilities. Considering our propositions 2 through 4 together, it can be found that commitment-based and collaboration-based HRM models had a mainly convergent target on organizational innovation, while control-based and contract-based HRM models consistently affected cost constraint. As enterprises do not alternatively choose between “innovation” and “cost control” strategies, success often requires that they complementarily support each other (Schreyogg & Kliesch-Eberl, 2007). Thus, it could be expected that possible interactions among those HRM archetypes will be examined. Finally, our efforts to bridge macroeconomic systems and organizational HRM explore a new perspective considering the HRM contingency on dynamic institutional architectures. This in turn expands opportunities of contextualizing employment relation research related to transitional economy. To deepen Katz and Darbishire's (2000) observation of diversifying employment relationships across the world, we compared the different HRM evolvement paths between China and the West, and then constructed four scenarios with which to describe the linkages between economic institutions and organizational tradeoffs of hybrid HRM. We expect empirical work to examine the proposed institutional moderations. Additionally, more comparative analyses on HRM dynamics between Eastern European economies and China are warranted, because in general they have experienced an institutional transition from a centralized economy to a market system, but with substantial differences (Warner, Edwards, Polonsky, Pucko, & Zhu, 2005). This will help to elaborate our understanding of HRM–economic transition alignments. 9.2. Practical implications Our arguments provide several insights regarding appropriate applications of hybrid HRM archetypes in China. Within a limited budget, rational organizational investments in human capital are disproportionate (Huselid, Beatty, & Becker, 2005). This requires that practitioners exploit differentiated HRM packages across various human capitals rather than take an approach of uniformity. We primarily suggest that professionals should understand the unique effect mechanisms and application conditions of each HRM model so as to exploit their advantages and avoid disadvantages contextually. For example, although high commitment work practices have been admired by the superior companies in West (Pfeffer, 1998), in Chinese organizations it may be necessary to shrink the extravagant employment commitment inherited from the past planned economy. Moreover, the economic and social transitions in China increase the managerial complexity of hybrid HRM. With a rapid economic growth, social contradictions including labor–management conflicts have become acute in China. Adoption of HRM hybridism may sensitively cause a potential injustice issue: the differentiated personnel treatments will be challenged by creating disparity and discrimination at the workplace (Zhou & Hong, 2008). Recently, the Chinese government strengthened the legal system to regulate labor relations. Several national-level laws regarding labor contracts, employment promotion, and mediation and arbitration of labor disputes have continuously come into effect in 2008. These provide a series of legitimate bottom lines for ensuring basic equity in divergent employment relations; meanwhile, they require HR professionals to legitimize their accountabilities. Additionally, as Kochan (2007) advocated, beyond building proficiency in diverse HR techniques, HR professionals should actively take responsibility for maintaining legitimacy, justice, and harmony in the workplace so as to promote the effectiveness of HRM on both economic and social outcomes. 10. Conclusion Embedding HRM differentiation theories into China's context of economic transition, this paper constructs a hybridism rationale to explain the distinctive characteristics of Chinese HRM. Respectively, we unearthed the effect mechanisms of commitmentbased, control-based, collaboration-based, and contract-based HRM archetypes in China, disclosing possible non-linear impacts,

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