THE ROLE OF HRM AND ICT COMPLEMENTARITIES IN FIRM INNOVATION: EVIDENCE FROM TRANSITION ECONOMIES

Abstract

Innovation is of critical importance for business productivity and economic growth. Firm characteristics and economic geography have been identified as influential drivers of innovation output. More recently, scholars have investigated the influence of Human Resource Management (HRM) practices and Information and Communication Technologies (ICTs) on firm performance. There is evidence that productivity gains from adapting HRM practices are higher if supported by investments in ICT. Therefore, we hypothesise that ICT-use and HRM practices are complementary inputs with respect to firm innovation. Our data source is the Management, Organisation, and Innovation (MOI) Survey which assesses management practices in manufacturing establishments in transition economies. We find that firms that employ HRM practices are more likely to innovate relative to firms that do not use HRM practices. Our analysis also reveals a complementary relationship between ICT-use and HRM practices which positively influences firm innovation performance.