MNEs’ Subsidiary HRM Practices and Firm Innovative Performance: A Tacit Knowledge Approach

Abstract

Although there is a general recognition that human resource management (HRM) practices are a key factor in a firm’s innovation performance, from the extant literature we see that empirical investigation does not always offer evidence to support this assertion. This paper proposes that knowledge transfer positively moderates the link between HRM practices and firm innovative performance in foreign multinational enterprises (MNEs) subsidiaries operating in China. Specifically, a tacit knowledge approach affects knowledge transfer in HRM practice as well as firm innovative performance. With hierarchical linear modeling, our results demonstrate that: (1) HRM practices can have a positive effect on firm innovative performance; (2) knowledge transfer can positively moderate the effects of HRM practices and firm innovative performance; and (3) the positive effects of knowledge received on HRM practices and firm innovative performance will be strengthened with a tacit knowledge approach. This paper shows that through the adaptation and application of a tacit knowledge approach, executives can create an atmosphere for interaction between the workforce and senior colleagues, forming an inter-intra network chain to share intangible knowledge that is mostly derived from the culture and experience.