Int. J. of Human Resource Management 13:6 September 2002 853-864
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Human resource management and the performance of Western firms in China

Ingmar Bjorkman and Fan Xiucheng
Abstract The study examines the relationship between human resource management and organizational performance in sixty-two manufacturing Chinese-Western joint ventures and wholly owned subsidiaries located in different parts of the People's
Republic of China. A positive relation was found between firm performance and the extent to which firms used a 'high-performance' HRM system as well as the degree to which they engaged in the integration of HRM and firm strategy.
Keywords Human re.source management; organizational performance; China; multinational corporations.
Explaining variations in performance is one of the most enduring themes in the study of organizations (March and Sutton, 1997). During the 1990s it became increasingiy recognized that a firm's human resources can be a source of competitive advantage
(Barney, 1991; Hitt et al., 2001) and a large number of studies examined the effects of the management of human resources on organizational performance. Some of the initial resuits in this line of research have been viewed as promising (see reviews by Becker and Gerhart, i996; Guest, 1997; Becker and Huselid, i998). However, other reviewers have been considerabiy more critical of the extant work (VVood, 1999; Boxall and
Purcell, 2000; Wright and Gardner, 2000), ieading Ferris et al. to write that 'as we view the pubiished work in this area, we are simultaneously excited and troubied, frustrated yet optimistic, and encouraged but cautious' (1998: 236).
One particuiar critique of research carried out to date is that most studies have been conducted at the corporate ievel of anaiysis on the reiationship between HRM practices and measures of firm (financial) performance or market value of North American companies. Much less research has been conducted on other levels of analysis, such as global or local business units or individuai piants (Rogers and Wright, 1998). Little work has been conducted on whether the proposed effects of HR are universalistic or contingent on the nationai context of the organization. Additionai empiricai work is cieariy needed in settings outside the United States and on the subsidiaries of multinational corporations in different countries so as to investigate the impact of nationai cuiture and institutional settings on the HRM-organizationai performance reiationship. In an effort to address some of the gaps in the research on HRM and organizational performance, the objective of this study was to examine the reiationship between HRM practices and the performance of foreign-investment units in the Peopie's Republic of
China. There is a growing body of academic research on HRM in foreign investment
Ingmar Bjorkman (corresponding author), Swedish School of Economics, Post Box 479,
00101 Helsinki, Finland and INSEAD Euro-Asia Centre (e-mail: ingmar.bjorkman@shh.fi);
Fan Xiucheng, Nankai University, People's Republic of China.
The tnternational Journat of Human Resource Management
ISSN 0958-5192 print/ISSN 1466-4399 online © 2002 Taylor & Francis Lid hllp://www.landf.co.uk/journals DOI: 10.1080/09585190210134246

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The International Journal of Human Resource Management

enterprises in China (e.g. Child, 1994; Goodall and Wamer, 1997, 1998; Lu and
Bjorkman, 1997; Verburg, 1996), and several authors have pointed to the importance of
HRM for successful operations in China (e.g. Lasserre and Ching, 1997; Weldon and
Vanhonacker, 1999; Wong and Law, 1999). Many foreign companies have found that there is a great scarcity of high-performing local management and professional staff in
China (Wong and Law, 1999). Hence, firms that successfully recruit, develop and motivate such employees may have significant competitive advantages. Somewhat surprisingly, to the best of our knowledge, ours was the first