Do organizations spend wisely on employees

Topics: Human resource management, Learning, Innovation Pages: 20 (10888 words) Published: August 24, 2014
Do organizations spend wisely on employees?
Effects of training and development investments on
learning and innovation in organizations
SUN YOUNG SUNG1 AND JIN NAM CHOI2*
1
2

Summary

School of Business, Nanjing University, Nanjing China
College of Business Administration, Seoul National University, Seoul, Korea

The present study examines the effects of training and development on organizational innovation. We specifically suggest that the training and development investments of an organization affect its innovative performance by promoting various learning practices. We empirically tested our hypothesis by using time-lagged, multi-source data collected from 260 Korean companies that represent diverse industries. Our analysis showed that corporate expenditure for internal training predicts interpersonal and organizational learning practices, which, in turn, increase innovative performance. The data also revealed that the positive relationship between interpersonal and organizational learning practices and innovative performance is stronger within organizations that have stronger innovative climates. By contrast, investment in employee development through financial support for education outside an organization poses a significant negative effect on its innovative performance and no significant effect on learning practices. The present study provides a plausible explanation for a mechanism through which the investment of an organization in employees enhances its innovative performance. Copyright © 2013 The Authors. Journal of Organizational Behavior published by John Wiley & Sons, Ltd.

Keywords: training and development investments; learning practices; innovative climate; innovative performance

Introduction
Increasing endorsements on the strategic value of developing human capital in organizations encouraged scholars to investigate the relationship between training practices and various performance measures (Tharenou, Saks, & Moore, 2007). Empirical studies in this domain focused on the effects of training on productivity (Barrett & O’Connell, 2001), financial performance (Glaveli & Karassavidou, 2011), and employee motivation (Castellanos & Martín, 2011). Unfortunately, the link between training practices and organizational innovative performance has been largely ignored (Nguyen, Truong, & Buyens, 2010). Except for a few recent studies that treat training as a component of effective HR systems (Chen & Huang, 2009; Shipton, West, Dawson, Birdi, & Patterson, 2006), the independent effect of training on organizational innovation has yet to be investigated (Tharenou et al., 2007). This is rather surprising, given the prevailing emphasis of a firm’s innovative capability in achieving competitive advantage and sustainable growth (Kang, Morris, & Snell, 2007; Lau & Ngo, 2004). To address this gap, the present study investigates the effects and underlying mechanisms of the investment in developing human resources on organizational innovation.

Innovation often results from the ability to utilize existing knowledge and information to generate different combinations and reconfigurations (Cantner, Kristin, & Schmidt, 2008). The training and development investments

*Correspondence to: Jin Nam Choi, College of Business Administration, Seoul National University, Shinlim-dong, San 56-1, Gwanak-gu, Seoul, 151-742, Korea. E-mail: jnchoi@snu.ac.kr
This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.

Copyright © 2013 The Authors. Journal of Organizational Behavior published by John Wiley & Sons, Ltd.

Received 08 April 2012
Revised 26 July 2013, Accepted 30 July 2013

Research Article

Journal of Organizational Behavior, J. Organiz. Behav. 35, 393–412 (2014) Published online 9 September 2013 in Wiley Online Library...

References: Ahuja, G. (2000). Collaboration networks, structural holes, and innovation: A longitudinal study. Administrative Science Quarterly,
45, 425–455.
Aiken, L. S., & West, S. G. (1991). Multiple regression: Testing and interpreting interactions. Newbury Park, CA: Sage.
Amabile, T. M. (1996). Creativity in context. Westview: Boulder Co.
Aragón-Sánchez, A., Barba-Aragón, I., & Sanz-Valle, R. (2003). Effects of training on business results. International Journal of
Human Resource Management, 14, 956–980.
Arthur, J. B., & Aiman-Smith, L. (2002). Gain sharing and organizational learning: An analysis of employee suggestions over
time
Bandalos, D. L., & Finney, S. J. (2001). Item parceling issues in structural equation modeling. In G. A. Marcoulides, & R. E.
Barrett, A., & O’Connell, P. J. (2001). Does training generally work? The returns to in-company training. Industrial and Labor
Relations Review, 54, 647–662.
Bassett-Jones, N. (2005). The paradox of diversity management: Creativity and innovation. Creativity and Innovation Management,
14, 169–175.
Bassi, L. J., & McMurrer, D. P. (1998) Training investment can mean financial performance. Training & Development, 52, 40–42.
Benamati, J., & Lederer, A. (2001). Rapid information technology change coping mechanisms and the emerging technologies
group
Benson, G. S., Finegold, D., & Mohrman, S. A. (2004). You paid for the skills, now keep them: Tuition reimbursement and voluntary turnover. Academy of Management Journal, 47, 315–331.
Beugelsdijk, S. (2008). Strategic human resource practices and product innovation. Organization Studies, 29, 821–847.
Birdi, K., Clegg, C., Patterson, M., Robinson, A., Stride, C. B., & Wall, T. (2008). The impact of human resource and operational
management practices on company productivity: A longitudinal study
Birdi, K. S., Patterson, M. G., & Wood, S. J. (2007). Learning to perform? A comparison of learning practices and organizational
performance in profit- and non-profit-making sectors in the UK
Bollinger, A. S., & Smith, R. D. (2001). Managing organizational knowledge as a strategic asset. Journal of Knowledge Management,
5, 8–18.
Bontis, N., Crossan, M., & Hulland, J. (2002). Managing an organizational learning system by aligning stocks and flows. Journal
of Management Studies, 39, 437–469.
Bowen, D. E., & Ostroff, C. (2004). Understanding HRM-firm performance linkages: The role of the strength of the HRM system.
Brown, S. R. (1986). Q technique and method: Principles and procedures. In W. E. Berry, & M. S. Lewis-Beck (Eds.), New tools
for social scientists
Cantner, U., Kristin, J., & Schmidt, T. (2008). The use of knowledge management by innovators: Empirical evidence for Germany.
Castellanos, R. M. M., & Martín, M. Y. S. (2011). Training as a source of competitive advantage: Performance impact and the
role of firm strategy, the Spanish case
Chen, C. J., & Huang, J. W. (2009). Strategic human resource practices and innovation performance: The mediating role of
knowledge management capacity
Chen, G., Mathieu, J. E., & Bliese, P. D. (2004). A framework for conducting multi-level construct validation. In F. J.
Choi, J. N. (2007). Change-oriented organizational citizenship behavior: Effects of work environment characteristics and intervening psychological processes. Journal of Organizational Behavior, 28, 467–484.
Cohen, W. M., Goto, A., Nagta, A., Nelson, R. R., & Walsh, J. P. (2002). R&D spillovers, patents, and the incentives to innovative in Japan and the United States. Research Policy, 31, 1349–1367.
Collins, C. J., & Smith, K. (2006). Knowledge exchange and combination: The role of human resource practices in the performance of high-technology firms. Academy of Management Journal, 49, 544–560.
Crossan, M., Lane, H., & White, R. (1999). An organizational learning framework: From intuition to institution. Academy of
Management Review, 24, 522–537.
Di Milia, L. D., & Birdi, K. (2010). The relationship between multiple levels of learning practices and objective and subjective
organizational financial performance
Du, J., & Choi, J. N. (2010). Pay for performance in emerging markets: Insights from China. Journal of International Business
Studies, 41, 671–689.
Ekström, M., & Sjöstedt-de Luna, S. (2004). Subsampling methods to estimate the variance of sample means based on
nonstationary spatial data with varying expected values
J. Organiz. Behav. 35, 393–412 (2014)
DOI: 10.1002/job
Glaveli, N., & Karassavidou, E. (2011). Exploring a possible route through which training affects organizational performance:
The case of a Greek bank
Gómez, P. J., Lorente, J. J. C., & Cabrera, R. V. (2004). Training practices and organisational learning capability. Journal of
European Industrial Training, 28, 234–256.
González-Romá, V., Fortes-Ferreira, L., & Peiró, J. M. (2009). Team climate, climate strength and team performance: A longitudinal study. Journal of Occupational and Organizational Psychology, 82, 511–536.
Hagedoorn, J., & Cloodt, M. (2003). Measuring innovative performance: Is there an advantage in using multiple indicators?
Research Policy, 32, 1365–1379.
Hancock, G. R., & Nevitt, J. (1999) Bootstrapping and the identification of exogenous latent variables within structural equation
models
Hatch, N. W., & Dyer, J. (2004) Human capital and learning as a source of sustainable competitive advantage. Strategic Management
Journal, 25, 1155–1178.
Hu, L. T., & Bentler P. M. (1999). Cutoff criteria for fit indexes in covariance structure analysis: Conventional criteria versus new
alternatives
Huerta, M. E., Audet, X. L., & Peregort, O. P. (2006). In-company training in Catalonia: Organizational structure, funding,
evaluation and economic impact
Jacobs, R. L., & Washington, C. (2003). Employee development and organizational performance: A review of literature and
directions for future research
Jacobs, R., Skillings, M., & Yu, H. (2000). An evaluation of the workforce development programs jointly sponsored by the state
of Ohio and Ohio civil service employees association
Kang, S. C., Morris, S. S., & Snell, S. A. (2007). Relational archetypes organizational learning, value creation: Extending the
human resource architecture
Katou, A. A. (2009). The impact of human resource development on organisational performance: Test of a causal model. Journal
of Behavioral & Applied Management, 10, 335–356.
Katrichis, J. (1993). The conceptual implications of data centering in interactive regression models. Journal of the Market
Research Society, 35, 183–192.
Langerak, F., Hultink, E., & Robben, H. (2007). The mediating role of new product development in the link between market
orientation and organizational performance
Lau, C. M., & Ngo, H. Y. (2004). The HR system organizational culture and product innovation. International Business Review,
13, 685–703.
Laursen, K., & Foss, N. (2003). New human resource management practices complementarities and the impact on innovation
performance
Laursen, K., & Mahnke, V. (2001). Knowledge strategies, firm types and complementarity in human-resource practices. Journal
of Management and Governance, 5, 1–27.
López, S. P., Peón, J. M. M., & Ordás, C. J. V. (2006). Human resource management as a determining factor in organizational
learning
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Do Young People Spend Their Money Wisely? Essay
  • Essay on How To Spend Money Wisely
  • University Students Do Not Spend Their Free Time Wisely. Essay
  • How important are the employees to the organization? Essay
  • Essay about Do Young People Spend Their Time Wisely?
  • How Do Teenagers Spend Their Days? Essay
  • Essay about Employees
  • The Quality Organization Essay

Become a StudyMode Member

Sign Up - It's Free