Responsible Human Resource Management and Organizational Innovation Capability

This chapter investigates the linkage between internal stakeholder engagement, organizational innovation capability, and firm value, focusing on employee non-pecuniary rewards. Employee-oriented CSR in the framework of human resource management (HRM) works on improving employee motivation for creativity and commitment to organizational innovation by providing non-pecuniary rewards. These include equal opportunities (EO) and work quality in the workplace, work-life balance (WLB), and employee welfare. The empirical results demonstrate that non-pecuniary rewards alone and combined with monetary rewards enhance value-based innovation, though non-stakeholder perceptions of employee-oriented CSR negatively moderate this relationship. Employees, as social stakeholders, are concerned with their organization's social interaction and reputation. Thus, we also examine the effect of a firm’s environmental initiatives on the employees’ commitment to the organization in increasing social concerns regarding environmental issues. We find that a firm’s environmental-oriented CSR has a positive interactive effect on the relationship between employee-oriented CSR and firm-level innovation. Our findings imply that CSR engagement determines employee attitudes and behaviors directly through CSR-HRM practices and indirectly through organizational social identity. For innovative firms, multi-stakeholder engagement is critical to activate employee motivation to be creative.