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The impact of an innovative human resource function on firm performance: the moderating role of financing strategy

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  • Knight-Turvey, Neal
  • Neal, Andrew
  • West, Michael A.
  • Dawson, Jeremy

Abstract

The current study examined the impact of the human resource function and financing strategy on the financial performance of 104 UK manufacturing firms. Hypotheses are drawn from a resource-based perspective on human resource management and a financial theory perspective on capital structure. Results show that an innovative HR function is significantly related to economic performance. However, the relationship between an innovative HR function and economic performance was moderated by the firm¿s financing strategy. Firms obtained higher returns from an innovative HR function when pursuing a low leveraging (debt) financing strategy, a finding consistent with modern finance theory notions that firmspecific strategic assets provide greatest value when financed primarily through equity as opposed to debt.

Suggested Citation

  • Knight-Turvey, Neal & Neal, Andrew & West, Michael A. & Dawson, Jeremy, 2004. "The impact of an innovative human resource function on firm performance: the moderating role of financing strategy," LSE Research Online Documents on Economics 19962, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:19962
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    File URL: http://eprints.lse.ac.uk/19962/
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    References listed on IDEAS

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    3. Mocnik, Dijana, 2001. "Asset specificity and a firm's borrowing ability: an empirical analysis of manufacturing firms," Journal of Economic Behavior & Organization, Elsevier, vol. 45(1), pages 69-81, May.
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    More about this item

    Keywords

    human resource function; manufacturing; firm performance; asset characteristics;
    All these keywords.

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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