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Journal of Management 2002 28(4) 517–543

Examining the Human Resource Architecture:


The Relationships Among Human Capital,
Employment, and Human
Resource Configurations
David P. Lepak∗
Department of Management and Organization, Robert H. Smith School of Business, University of Maryland,
3341 Van Munching Hall, College Park, MD 20742-1815, USA

Scott A. Snell
Department of Management and Organization, Smeal College of Business Administration, The Pennsylvania
State University, 417 Beam B.A.B., University Park, PA 16802, USA
Received 8 May 2000; received in revised form 16 May 2001; accepted 14 August 2001

In this study we examined the characteristics of human capital as well as the human resource
(HR) configurations used for employees in four different employment modes (knowledge-based
employment, job-based employment, contract work, and alliance/partnership). Results from
148 firms show that the strategic value and uniqueness of human capital differs across these
four employment modes. In addition, each employment mode is associated with a particu-
lar type of HR configuration (commitment-based, productivity-based, compliance-based, and
collaborative).
© 2002 Elsevier Science Inc. All rights reserved.

Research in strategic human resource management (SHRM) has been central in shifting
our attention toward firm-level issues related to managing people. Rather than focusing on
individual jobs and the employees that occupy them, SHRM researchers have established
a broader perspective that is oriented toward managing the workforce as a whole. And
instead of focusing on particular human resource (HR) practices that are used independently
or in isolation, SHRM researchers look more broadly at bundles of HR practices that are
implemented in combination.

∗Corresponding author. Tel.: +1-301-405-8144; fax: +1-301-314-8787.


E-mail address: dlepak@rhsmith.umd.edu (D.P. Lepak).

0149-2063/02/$ – see front matter © 2002 Elsevier Science Inc. All rights reserved.
PII: S 0 1 4 9 - 2 0 6 3 ( 0 2 ) 0 0 1 4 2 - 3
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In order to study strategic HR at an organizational level, however, researchers have


tended to aggregate—both conceptually and empirically—all employees as though they
were managed with a single (or at least dominant) HR configuration. Snell and Dean, for
example, originally analyzed the HR practices of different employee groups in advanced
manufacturing environments, but later combined the data into a single profile (Snell & Dean,
1992, 1994; Youndt, Snell, Dean & Lepak, 1996). Similarly, Huselid (1995) originally
collected separate HR data on exempt and non-exempt employees, but combined it using
weighted averages in order to portray one profile.
While such aggregation aids parsimony, we would argue that doing so masks potentially
important aspects of how different employee groups are managed strategically. In one of the
earliest papers on strategic HR, Miles and Snow (1984) noted that while certain HR practices
might be centralized or standardized for all employees, others might be customized to
match the specific requirements of particular employee groups. These differences are no less
important; they are, in fact, crucial aspects of a firm’s strategic approach to HR.Two streams
of research are particularly salient here. In the context of internal vs. external employment,
Davis-Blake and Uzzi (1993), Matusik and Hill (1998), Mangum, Mayall and Nelson (1985),
Osterman (1987), and others have found that firms use different modes of employment for
strategic reasons. Similarly, in the context of psychological contracts, Rousseau (1995),
Tsui, Pearce and others have shown that firms establish different employment relationships
with employees—and modify the scope of HR investments—depending on their expected
contribution to the firm.
Building on this, Lepak and Snell (1999) argued that, “ . . . it may be inappropriate to
simplify the nature of human capital investments and suggest that there exists a single opti-
mal HR architecture for managing all employees” (p. 32). As different groups of employees
possess skills that vary in importance to a firm’s competitiveness, the HR practices used to
manage them are likely to vary (Jackson, Schuler & Rivero, 1989). Although we know that
different employment modes exist, empirical examination of HR systems at this employ-
ment group level of analysis remains limited. The purpose of this study is to address these
issues by focusing on HR systems used for employees in different employment modes.
Following Lepak and Snell (1999), we frame our investigation by distinguishing among
four types of employment: knowledge work, job-based employment, contract work, and
alliance/partnerships. We then differentiate among these employment modes by examining
the strategic value and uniqueness of human capital embodied within each as well as the
HR configurations used to manage them.

Theory and Hypotheses

We begin our discussion by recognizing that firms rely upon a variety of different
modes of employment. Osterman (1987), for example, examined differences among
industrial, salaried, craft, and secondary employment subsystems in firms. More recently,
researchers such as Matusik and Hill (1998), Rousseau (1995), Tsui et al. (1995) have
studied differences in employment relationships that range from long-term relationships
with core employees to short-term exchanges with external workers and other forms of
contract labor.
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Related, there is a fair amount of research that focuses on the choice between internal-
ization and externalization of employment. For example, Baron, Davis-Blake and Bielby
(1986) found that choices about employment modes are frequently driven by differences
in employee skills (e.g., firm-specificity), occupational differentiation, technology, and
the like. Others have argued that differences represent, among other things, differences
in their human capital (i.e., knowledge, skills, and abilities that have economic value
to the firm) (Davis-Blake & Uzzi, 1993; Stewart, 1997). As noted by Mangum, Mayall,
and Nelson,
Many employers carefully select a core group of employees, invest in them, and take
elaborate measures to reduce their turnover and maintain their attachment to the firm.
Many of these same employers, however, also maintain a peripheral group of employees
from whom they prefer to remain relatively detached, even at the cost of high turnover,
and to whom they make few commitments. (1985: 599)
In order to integrate this research and link it more broadly to strategy and HR,
Lepak and Snell (1999) argued that differences in employment are likely to reflect dif-
ferences in human capital that would then be accompanied by variations in the HR con-
figurations used to manage employees. Lepak and Snell (1999) focused on the strategic
value and uniqueness of human capital as principle drivers of employment modes and HR
configurations. The strategic value of human capital refers to its potential to improve the
efficiency and effectiveness of the firm, exploit market opportunities, and/or neutralize po-
tential threats (Barney, 1991; Ulrich & Lake, 1991). Theorists such as Barney (1991) and
Quinn (1992) suggest that as the strategic value of human capital increases, so too does the
likelihood that firms will employ it internally.
The uniqueness of human capital, on the other hand, refers to the degree to which it is
rare, specialized and, in the extreme, firm-specific (Barney, 1991; Williamson, 1975). Hu-
man capital that is not readily available in the labor market, and is not easily duplicated by
other firms, provides a potential source of competitive advantage (Snell, Youndt & Wright,
1996). Transaction-costs theory suggests that firm-specific human capital increases infor-
mation asymmetry, thereby creating strong economic incentives to employ it internally (cf.,
Williamson, 1975). Human capital theory (e.g., Becker, 1964) posits that firms are more
likely to invest in education, training, and development for skills when they are not trans-
ferable. Individuals are expected to make their own investments in generic (transferable)
skills, or defray the firm’s costs through lower wages. Firms are viewed as being more
likely to acquire generic human capital externally by paying the market wage for labor
(Schultz, 1961; Wallace & Fay, 1988).
While this distinction between “make and buy” is perhaps clearest for internal employ-
ment, Matusik and Hill (1998) suggest that firms invest more in developing and improv-
ing relationships with external workers in cases where their partnership focuses on cre-
ating and transferring private knowledge. Development of unique human capital is often
path-dependent (Barney, 1991; Itami, 1987) and may require tacit knowledge that is created
in situ (Polyani, 1967; Williamson, 1975). Because of this, it likely needs to be developed
and nurtured over time. If we juxtapose the dimensions of strategic value and uniqueness
(see Figure 1), we derive a model adapted from Lepak and Snell (1999) of the relationships
between human capital characteristics and employment modes.
520 D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543

Figure 1. Human capital characteristics and employment modes (adapted from Lepak and Snell (1999)).

Human Capital and Employment

Knowledge-based employment. Lepak and Snell (1999) argued that human capital in
quadrant 1 is most likely to be viewed as core to the firm. Because of their value, these
employees are able to contribute to a firm’s strategic objectives. When human capital is
both valuable and unique, it represents the knowledge base around which firms are most
likely to build their strategies (Snow & Snell, 1993; Stewart, 1997). These workers are
those most likely to represent a firm’s knowledge workers—those “people who use their
heads more than their hands to produce value” (Horibe, 1999, p. xi). In these instances,
firms are likely to rely on a knowledge-based employment mode that focuses on internal
development and long-term employee commitment for their core employees (cf. Lepak
& Snell, 1999; Rousseau, 1995; Tsui et al., 1995). Lepak and Snell (1999) used the term
“internal development” to describe this quadrant. While the term “internal” describes em-
ployment, the term “development” connotes an orientation toward training, education, and
other skill-enhancing activities. To keep employment modes and HR distinct for purposes
of research, we use the term “knowledge-based employment” for this quadrant to reflect
an employment mode that is structured around the skills and competencies of employees
rather than the execution of programmed tasks and job routines.

Job-based employment. Human capital that has strategic value but limited uniqueness
falls within the bottom right quadrant of the HR architecture. As with quadrant 1, the value
of human capital in quadrant 2 provides an incentive to employ these workers internally. At
the same time, these workers’ skills are not particularly unique to the firm and thus, cannot
serve as a differentiating source of competitiveness. In other words, workers within this
quadrant are able to make significant contributions to a firm while possessing skills that are
widely transferable. As with quadrant one, the notion of an acquisition approach suggested
D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543 521

by Lepak and Snell (1999) also confounds employment with HR. The term “acquisition”
implies a focus on staffing (vs. development). We use the term job-based employment to
reflect the fact that employees are hired to perform predetermined tasks.

Contract work. Quadrant 3 contains human capital that is neither of particularly high
strategic value to a firm nor unique. Workers in this category are prime candidates for
outsourcing. In scenarios where “one job-holder is pretty much as good as another” (Stewart,
1997, p. 90) firms would be more likely to seek short-term contractual arrangements for the
performance of tasks with limited scope, purpose, or duration. At the extreme, if value-added
is low and skills are generic, employment decisions may reduce to calculations of costs (cf.
Abraham & Taylor, 1996; Davis-Blake & Uzzi, 1993). In such cases, firms may reduce
their employment costs while increasing their flexibility by contracting for ancillary human
capital (Lepak & Snell, 1999).

Alliances/partnerships. Lepak and Snell (1999) proposed that firms would rely on
alliances/partnerships for human capital that is unique but of insufficient strategic value
to employ internally. In alliances, external workers provide “non-resident knowledge-
intensive services to client firms” (Sharma, 1997, p. 759). Frequently this occurs through
a co-production process in which both parties contribute to some specific outcome (cf.
Parkhe, 1993; Sharma, 1997). For example, research and development labs, legal consul-
tants, accounting and information systems firms, investment bankers, and other external
agencies are often used by firms to provide long-term customized services (Sharma, 1997).
Through partnerships, firms gain human capital without incurring the entire costs of internal
employment while gaining the ability to maintain an ongoing relationship that is necessary
for application of unique and specialized skills.
Viewed in combination, we anticipate that employees will have significantly higher value
in knowledge-based and job-based employment modes than in alliances and contractual
arrangements. Similarly, we expect employees will have significantly higher uniqueness in
alliances and knowledge-based employment modes than in contract work and job-based
employment.

Hypothesis 1: Human capital value will be higher within knowledge-based employment


and job-based employment than within contract work and alliances.

Hypothesis 2: Human capital uniqueness will be higher within alliances and knowledge-
based employment than within contract work and job-based employment.

Employment and HR Configurations

If the characteristics of human capital vary across employment modes, there are likely to
be implications for the characteristics of HR configurations. In part, these differences are
likely to reflect the systems used to obtain, retain, and develop these employees but they are
also likely to reflect the nature of expectations and obligations underlying each employment
mode. Figure 1 presents these differences for an HR architecture.
522 D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543

Knowledge-based employment and HR. If knowledge-based workers possess valuable


and unique skills, firms would logically invest heavily in training and development, par-
ticularly in areas related to firm-specific skills. But the implications for HR extend more
broadly. As the focus is on the development and utilization of proprietary knowledge, man-
agers are likely to structure knowledge work to allow for flexibility, change, and adaptation.
To maximize their contribution, firms are likely to empower these workers, encouraging
participation in decision making and discretion on the job. And to protect their human capital
investments and encourage commitment to the firm’s long-term success, these employees
would likely receive a considerable degree of employment security (Koch & McGrath,
1996).
As the importance of an employee’s ability to learn and develop firm-specific competen-
cies increases, staffing decisions are likely to focus on aptitude rather than achievement. To
further emphasize the importance of learning over time, performance appraisal systems are
likely to focus on development and feedback (Snell & Dean, 1992; Ulrich & Lake, 1991)
and firms may implement knowledge-based pay programs that reward employees for accu-
mulating multiple skills (cf. Delany & Huselid, 1996). To reinforce a long-term orientation
and commitment to these employees firm’s may rely on stock options and other forms of
long-term compensation.

Job-based employment and HR. The human capital of job-based employees can be
important for creating customer value. But because it is more transferable than that of
knowledge-workers, firms are not likely to make the same kind of human capital investments
(Becker, 1964). The idiosyncratic characteristics of job-based workers are likely to be
de-emphasized, and their participation is likely to be limited to the boundaries of their jobs.
In these cases, managers are likely to rely on a productivity-based HR configuration; that
is, hiring employees, paying them a market-based wage, focusing on their job performance,
and preparing for the possibility that they may leave (Becker, 1964; Flamholtz & Lacey,
1981). The distinction between a commitment-based and a productivity-based HR system
represents the “make or buy” decision for human capital.
Rather than developing generic skills, firms are more likely to acquire individuals who al-
ready possess the needed skills (cf. Koch & McGrath, 1996; Snell & Dean, 1992;
Tsui et al., 1995). Given that these individuals may leave, managers are likely to standard-
ized jobs to facilitate more rapid replacement. This does not mean that these employees
are “short-timers.” It simply means that since their human capital is transferable, firms are
likely to establish a shorter time horizon for ensuring their productivity. Rather than focus-
ing on developmental performance appraisals, firms would more likely adopt a short-term
orientation with a results oriented component (Snell, 1992; Snell & Youndt, 1995). Finally,
compensation systems are also likely to be job-based (Mahoney, 1989) balancing market
wages with concerns over internal equity. If incentives are used, they are likely to focus on
near-term productivity targets.

Contractual work and HR. While organizations often seek at least limited continuity
and loyalty from employees in a job-based employment mode, in contractual arrangements
firms may simply focus on the economic aspects of the contract (Rousseau, 1995) and
strive to ensure worker compliance with preset rules, regulations, and/or procedures. To do
D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543 523

so, these economic exchanges would likely “contain explicit definitions for equivalence,
a distinct timetable for the exchange, and terms which are discussible, negotiable, and
enforceable” (Mahoney & Watson, 1993, p. 144). Much like Mahoney and Watson (1993)
authoritarian model, firms would probably limit the discretion of these workers and con-
centrate on enforcing rules and regulations, upholding specific provisions regarding work
protocols, and ensuring conformance to preset standards. Any training and performance
appraisal activities would likely be limited to ensuring compliance with company poli-
cies, systems, procedures, and outcomes (cf. Mahoney, 1989; Rousseau & Parks, 1993).
Given the transactional nature of the exchange and heavy emphasis on conformance, com-
pensation would likely be based on an hourly wage and the accomplishment of specific
tasks.

Alliances/partnerships and HR. HR in this quadrant is non-traditional but instrumental


for integration and collaboration. At a general level, a collaborative HR configuration would
be orientated toward sharing information and developing trust between partners (Ring & Van
de Ven, 1992). Given the need for joint production (a characteristic that distinguishes alliance
partners from contract work), managers would likely recruit/select alliance partners who
can integrate their knowledge and experience into the firm and work in a team environment
(cf. Salas, Dickinson, Converse & Tannenbaum, 1992). Since the exchange of information
and joint outcomes of the collaboration are important, firms would likely invest heavily
in the relationship itself rather than developing the alliance partner’s human capital. To
support this, firms would likely arrange team building initiatives and evaluations would
tend to emphasize developmental issues such as the extent of learning and the evolution
of the relationship (Matusik & Hill, 1998). Finally, firms are likely to establish collective
incentives that encourage both parties to share and transfer information (cf. Davenport &
Prusak, 1998; Quinn, Anderson & Finkelstein, 1996).
Based on these arguments, we anticipate that the HR configuration predicted to be used
for each employment mode will be significantly greater than the other three HR configura-
tions. For example, for knowledge workers, the commitment-based HR configuration will
be significantly greater than the productivity-, compliance-, and collaborative-based HR
configurations.

Hypothesis 3: Within the knowledge-based employment mode the commitment-


based HR configuration will be significantly greater than the other three HR confi-
gurations.

Hypothesis 4: Within the job-based employment mode the productivity-based HR


configuration will be significantly greater than the other three HR configurations.

Hypothesis 5: Within contractual work arrangements the compliance-based HR


configuration will be significantly greater than the other three HR configurations.

Hypothesis 6: Within alliances the collaborative-based HR configuration will be


significantly greater than the other three HR configurations.
524 D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543

Methods

The primary unit of analysis in this study was the employment mode. Our data collection
procedure involved asking participants to answer questions about one specific employment
mode within their firm rather than provide information for all four employment modes. This
procedure was designed to limit potential contrast errors respondents might have committed
if they were asked to describe the HR systems for all four modes (cf. Salancik & Pfeffer,
1978). It also helped us avoid violating the assumption of independence of the responses
(cf. Rosenthal & Rosnow, 1991). As a result of this design, our analytic tests focus on
examining employment mode data from different firms rather than comparing the attributes
of all four employment modes within each firm.
We identified a pool of 2375 firms from the Directory of Corporate Affiliations to represent
a broad sample of organizations. We only selected firms for which public information was
available to enable the collection of archival variables. Holding companies and firms with
less than 200 employees were excluded from the population to eliminate the possibility of
including very small firms that might not have formal HR procedures (Huselid & Becker,
1996).

Senior Executives

The initial step for this study was to contact the senior executive (CEO or President) from
each firm and ask for his or her participation. Each of the 2375 potential respondents in the
population was randomly assigned one of four employment modes and was sent a survey
that included the entire range of HR practices as well as the measures of human capital.
They were instructed to indicate the extent to which their firm utilized each employment
mode, but then were asked to answer the HR and human capital questions only with regard
to the employment mode they were assigned. After 3 weeks, a prompting letter and second
survey was mailed to those who had not yet responded. A total of 84 senior executives
participated in the study.

Senior HR Managers

Each senior executive was asked to identify a senior HR manager (i.e., vice president
of human resources, etc.) within his or her firm. Seventy-four senior HR managers were
identified. Given this limited number, we directly contacted the senior HR manager of each
firm to participate in this study. We sent a questionnaire assessing the characteristics of
human capital and HR practices for a single employment mode (assigned randomly) to
the 1478 firms in the Directory of Corporate Affiliations that had identified a senior HR
manager. After 3 weeks, a prompting letter and second survey was mailed to those who had
not yet responded. A total of 102 senior HR managers participated in this study: 31 identified
by the senior executives and 71 identified through the Directory of Corporate Affiliations.

Line Managers

Each senior executive and senior HR manager was also asked to identify three line
managers familiar with the other three employment modes that they did not emphasize. In
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total, 114 line managers from 53 firms were identified. Each line manager was sent a survey
assessing the human capital and HR practices used within a single employment mode not
assessed by the senior HR manager or senior manager. After 3 weeks a prompting letter and
second survey was mailed to those who had not yet responded. A total of 48 line managers
participated.

Instrumentation and Variables

Employment mode. At the beginning of each questionnaire participants were provided


descriptions of the four employment modes of interest in the study. (1) Knowledge-based
employment—relationships in which firms develop and maintain a long-term commitment
to full-time employees over time (e.g., loan officers in banks, R&D in pharmaceutical
firms, etc.). (2) Job-based employment—relationships in which employees are hired on
a full-time basis to contribute immediately to the firm by performing a specific set of
tasks (e.g., accountants, sales representatives, assembly line workers, etc.). (3) Contract
work—relationships in which external individuals are contracted to perform tasks with
limited scope, purpose, or duration (e.g., outsourced workers, temporary workers, etc.). (4)
Alliance/partnership—relationships in which firms establish ongoing, mutual partnerships
with independent/autonomous to jointly perform some tasks or projects (e.g., consultants,
joint venture partners, key subcontractors, etc.).
After describing the four employment modes, we instructed each participant that their
survey would focus only on one of the four, and we told them which mode this would
be (i.e., knowledge-work, job-based employment, contract work, or alliance). To make
certain that respondents understood and were visualizing a particular subset of jobs, we
asked them to record on their survey which jobs their firm typically employed in the
employment mode their survey emphasized. Table 1 displays a sample of the jobs iden-
tified by respondents. What is interesting is that some jobs are listed in multiple modes.
We believe that this reflects that firms allocate the same jobs in different ways. Some
firms may internalize a subset of jobs while other firms may use external labor for the
same jobs.

Table 1
Sample of jobs identified for each employment mode
Alliances/partnerships: actuarial consulting, Knowledge-based employment: analysts, artists,
architectural services, consultants, executive strategic planning, middle management, design
development trainers, human resource engineers, mechanical engineers, functional
consultants, benefits administration, management managers, exempt engineers, salespersons,
consultants, organizational development, software professional employees, research and
engineers, psychologists development employees, research scientists
Contract work: administrative positions, technical Job-based employment: accountants, administrative
jobs, assemblers, low level clerical, programmers, positions, engineers, salespersons, graphic
consultants, drafting support, janitorial, designers, customer service agents, drivers/delivery
maintenance, general labor, support staff, representatives, account managers, human resource
temporary workers professionals, lawyers, trainers
526 D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543

Human capital characteristics. The strategic value of human capital was measured
with a 12-item index grounded in theoretical work by Porter (1985), Quinn (1992), Snell
et al. (1996), and Ulrich and Lake (1991). As noted above, human capital is valuable to the
extent that it contributes to a firm’s competitive advantage or core competence by improving
efficiency and effectiveness, exploiting opportunities, or neutralizing threats (Barney, 1991;
Porter, 1985). The uniqueness of human capital was assessed with a 10-item index grounded
in theoretical work by Barney (1991), Snell et al. (1996), and Williamson (1975) and was
intended to capture the extent to which a particular form of human capital is idiosyncratic to
a particular firm. These two indices were measured on a 5-point Likert scale (1 = strongly
disagree, 5 = strongly agree) and consist of the mean value for the multiple items comprising
each index. The items are listed in Appendices A and B.

HR configurations. All respondents were asked to assess the degree of reliance on


HR practices related to job design, recruitment and selection, training and development,
performance appraisal, and compensation for the employment mode indicated on their
survey. Following the procedures used by MacDuffie (1995) and Youndt et al. (1996), each
configuration was operationalized as an additive index of HR practices. Operationally, the
HR configurations increase in value by “increasing the number of practices they employ
within the system or by using the practices in an HR system in a more comprehensive
and widespread approach” (Youndt, Snell, Dean & Lepak, p. 849). The HR practices were
combined to form a commitment-based, a productivity-based, a compliance-based, and a
collaborative HR configuration. These indices were calculated based on a 5-point Likert
scale (1 = strongly disagree, 5 = strongly agree). For each case, all four HR indices were
calculated by taking the mean value of the items in each configuration. The specific practices
that comprise each configuration are presented in Table 2.
This approach departs from previous approaches to operationalize HR configurations in
that it allows for the possibility that firm’s might resemble more than one HR configuration in
how they manage a particular employment mode. By testing for differences across employ-
ment modes, our approach is conceptually similar to testing for adherence to an ideal profile
or profile deviation for each HR configuration. The greater the mean on each index, the more
similar it is to the HR configuration. The primary difference is that a score is calculated for
each of the HR configurations for each case rather than forcing cases to resemble only one
such as with a cluster analysis or profile deviation approach. Thus, our approach allows for
variability in the degree to which firms adhere to one or multiple HR configurations.
In addition, our approach allows for equifinality within the HR configurations (Becker
& Huselid, 1998; Delery & Doty, 1996). As noted by Becker and Huselid (1998) “since
the typical index is a summation of individual elements of the HRM system, it implies that
within the broad middle range of the index there are multiple ways to increase its value”
(p. 64). And while we anticipate that an extensive use of the HR practices comprising
each configuration reflects a greater adherence to that particular configuration, we have no
conceptual rationale to expect that any individual HR practice is more or less important
than the others in the configuration.

Potential confounds and control variables. In an effort to enhance the statistical ac-
curacy of our analytic procedures we controlled for organizational, industrial, and labor
D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543 527

Table 2
HR configurations
Commitment Productivity Compliance Collaboration
These employees perform jobs that . . .
. . . allow them to routinely make changes X
in the way they perform their jobs
. . . are designed around their individual X
skills
. . . are extremely simple X
. . . are standardized throughout industry X Reverse
coded
... are well-defined X
... empower them to make decisions X
... have a high degree of job security X
... include a wide variety of tasks X Reverse
coded
. . . involve job rotation X
. . . require them to participate in cross- X
functional teams and networks

The recruitment/selection process for these


employees . . .
. . . assesses their industry knowledge and X
experience
. . . emphasizes promotion from within X
. . . emphasizes their ability to collaborate X
and work in teams
. . . focuses on selecting the best all around X
candidate, regardless of the specific job
. . . focuses on their ability to contribute to X
our strategic objectives
. . . involves screening many job candidates X
. . . is comprehensive (uses interviews, X
tests, etc.)
. . . places priority on their potential to X
learn (e.g., aptitude)
. . . uses many different recruiting sources X
(agencies, universities, etc.)

Our training activities for these employees . . .


. . . are comprehensive X
. . . are continuous X
. . . emphasize improving current job X
performance
. . . emphasize on the job experiences X
. . . focus on compliance with rules, X
regulations, and procedures
. . . focus on team building and X
interpersonal relations
. . . require extensive investments of X
time/money
. . . seek to increase short-term Reverse X
productivity coded
528 D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543

Table 2 (Continued )
Commitment Productivity Compliance Collaboration

. . . strive to develop firm-specific skills/ X


knowledge
Performance appraisals for these employees
. . . are based on input from multiple X
sources (peers, subordinates, etc.)
. . . are based on objective, quantifiable results X
. . . are based on team performance X
. . . assess compliance with preset X
behaviors, procedures, and standards
. . . assess quality of output X
. . . assess quantity of output X
. . . emphasize employee learning X
. . . focus on their ability to work with others X
. . . focus on their contribution to our X
strategic objectives
. . . include developmental feedback X
. . . measure productivity and efficiency X
Compensation/rewards for these employees
. . . are based on hourly pay X
. . . are based on straight salary X
. . . are based on the market wage (going rate) X
. . . are designed to ensure equity with peers X
. . . focus primarily on their short-term Reverse X
performance coded
. . . have a group-based incentive X
component (gainsharing, etc.)
. . . have an individual incentive/bonus X
component
. . . include an extensive benefits package X
. . . include employee stock ownership X
programs (ESOP, etc.)
. . . place a premium on their industry X
experience
. . . provide incentives for new ideas X
. . . value seniority X

market effects during all statistical analyses. Our organizational variables focus on firm
size, unionization, firm performance, and extent of diversification. Firm size was assessed
by the natural logarithmic transformation of the number of full-time employees in the orga-
nization (Kimberly, 1976). Unionization was assessed by a single item (i.e., approximately
what percentage of your firm’s employees are unionized?). Return on investment (ROI) was
collected from the CompuStat database and was included to control for firm performance
and was measured as the average of the four fiscal quarters preceding data collection. Extent
of diversification represents the number of industries (four-digit SIC codes) within which
each firm operates.
D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543 529

The industry in which firms operate may influence how firm’s utilize the four employment
modes. For instance, industries facing growth opportunities may be more likely to outsource
for labor as a short-term solution to deal with increased labor demand. And while our sample
size precludes the possibility of controlling for each specific industry, we draw from Dess
and Beard (1984) and control for industry munificence, dynamism, and complexity. Data for
these industry measures were obtained from Manufacturing USA, Industry U.S. and Trade
Outlook, and Ward’s Business Directory of U.S. Private and Public Companies. Industry
munificence, a measure of the amount of resources available to firms, was measured as
the regression slope coefficient divided by mean sales value when regressing time against
industry sales for the past 5 years (1994–1998). Industry dynamism, a measure of the
amount of change in each industry, was assessed using the same regression model and was
measured as the standard error of the regression slope coefficient divided by the mean sales
value. Industry complexity focuses the degree of market concentration in each industry. This
variable was assessed using the MINL formula (Schmalensee, 1977) of sales concentration
that reflects the relative organizational density within an industry.
Our labor market data were collected from the Bureau of Labor Statistics database for
the 1-year period preceding the data collection for the state in which each firm was located.
Unemployment was measured as the average unemployment rate for the year preceding
data collection. Net change in the unemployment was measured as the difference in the
unemployment rate from 1997–1998. Percent change in unemployment from 1997–1998
was measured to control for the relative magnitude of any changes in unemployment. Un-
employment volatility, a measure of the stability or change in unemployment, was measured
as the standard deviation of the unemployment rate for the 12 months prior to the collection
of the survey data.

Results

Response Statistics

Of the 234 usable returned questionnaires, five indicated their firm does not rely on
the employment mode their questionnaire emphasized (a 1 on a 1–5 scale). These five
respondents were removed from the sample leaving 229 usable surveys. In 23 instances
two individuals from the same firm completed surveys focusing on identical employment
modes. Because the level of analysis for this study rests at the employment mode level,
we aggregated their perceptual responses to the employment level. In total, this sample
consists of 206 cases from 148 firms (6.5%) of which 43 focus on alliances, 48 focus
on knowledge-based employment, 50 focus on contract work, and 65 focus on job-based
employment. These participating firms represent 86 different industries (four-digit SIC) and
average 9836 full-time employees.
Across respondents, the reported mean use for each employment mode was 3.21 for
alliances, 3.56 for knowledge-based employment, 3.02 for contract work, and 4.44 for
job-based employment. Those respondents focusing on the alliance mode reported a mean
of 3.45, those focusing on knowledge-based employment reported a mean of 3.82, those
focusing on contract work a mean of 3.22, and those focusing on job-based employment a
530 D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543

mean of 4.40. Considering that the means tended to be slightly higher for those completing
a survey on a particular employment mode than the average for the entire sample, it is
possible that potential respondents who were not utilizing the employment mode sent to
their firm removed themselves from the sample.
We performed several tests for non-response bias. First, crosstab analysis was used to
assess the possibility of non-response bias for industry differences at the four-digit SIC
code level as well as for the level of diversification. The Pearson chi-square statistic was
not significant at the .05 level for either industry membership or diversification. Using a
one-way analysis of variance (ANOVA), no significant differences were found at the .05
level between responding and non-responding firms in terms of firm size. Similarly, using
a one-way ANOVA, no significant differences were found with regard to ROI, return on
assets, and firm sales between participating firms and a randomly selected sample of 250
non-responding firms.
Following the procedures outlined by Huselid (1995) and Koch and McGrath (1996) we
also formally tested for sample selection bias in a series of regression analyses (for further
discussion of this technique see Berk, 1983 and Heckman, 1979). Specifically, we generated
an inverse Mills ratio that captures the probability of responding to the survey as a function of
three variables—diversification, firm size, and industry membership. Once calculated, this
ratio was included in a regression analysis examining the relationships among human capital
characteristics, employment, and the HR configurations. The results remained consistent
when the Mills ratio is included in the regression equations. Thus, including this correction
for selectivity bias does not change any conclusions that stem from the results of this study.

Descriptive Statistics

Table 1 shows the means, standard deviations, correlations, alphas, as well as interrater
agreements (rwg ), and intraclass correlation coefficients (ICC(1)) for the 23 firms in which
identical surveys were completed. The alphas generally indicate consistency and the in-
terrater agreement (rwg ) statistics met or exceeded .88. The rwg statistics demonstrate that
different raters within the same firm agree in their assessment of the characteristics of hu-
man capital in different employment modes as well as how they are managed. We used the
rwg statistic as a check on the agreement of multiple raters within firms to assess the valid-
ity of aggregating for those cases in which multiple respondents completed from the same
firm completed identical surveys (cf. Kozlowski & Hattrup, 1992). In contrast to assessing
agreement in ratings, ICC(1) present information regarding the reliability of multiple raters.
The ICCs range from −.20 to .46.
The disparity between these two measures has been addressed elsewhere (Gerhart, Wright,
McMahan & Snell, 2000; Huselid & Becker, 2000; Klein & Kozlowski, 2000) and may be
particularly obvious in this sample. In our study, the HR configuration means reflect the
extent to which firms adhere to a particular HR configuration, though the exact pattern of the
individual HR practices used may vary. For the ICC to be meaningful there is an assumption
that differences in ratings between firms for a particular employment mode are meaningful
and greater than the variance among raters within firms for the same employment mode
(cf. Bliese, 1998, Lahey, Downey & Saal, 1983). As noted by Lahey et al. (1983), however,
“ICC values cannot be significant unless the target main-effect is significant (i.e., there
D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543 531

are differences between the targets being rated)” (p. 588). Kozlowski and Hattrup echo
this point, “consistency indexes lack power when variance among judges across targets is
restricted—a situation that occurs when agreement among judges across a set of common
targets is high” (p. 163).
In our study, there is no reason to expect variation across firms in their use of HR practices
within a particular employment mode. In fact, the hypotheses imply that there would be
little variation between firms on the same employment modes. And while this scenario
lends support to the framework being tested (i.e., consistency in assessment of HR for
each employment mode across firms) these exact same numbers offer a misleading validity
assessment. Rather than capturing how much the raters within a firm agree, the ICC statistics
might capture the similarity in the perceptions of the HR practices used across firms for a
particular employment mode.
As an additional check on the validity of the HR configurations, we asked five expert
raters (tenure track professors in HR management) to assess the consistency of each practice
with each of the HR configurations. The raters displayed 100% agreement with the practices
comprising the commitment and collaborative HR configurations, 75% agreement for the
productivity configuration, and 86% agreement for the compliance configuration. The t-tests
for these expert ratings indicated that the mean for the practices included in each HR
configuration were significantly greater than the mean for the practices not included in each
configuration—commitment (t = 9.90, p < .001), productivity (t = 11.21, p < .001),
collaboration (t = 6.90, p < .01), and compliance (t = 11.33, p < .001).

Hypothesis Testing

We first performed multivariate analysis of covariance (MANCOVA) to test for over-


all differences across employment modes for human capital and HR configurations while
controlling for the potential impact of extraneous variables. The results indicate there are
significant differences for human capital (Wilks’s lambda = .54; F = 22.55, p < .001) as
well as the HR configurations (Wilks’s lambda = .35; F = 20.17, p < .001) across the
four employment modes.

Human Capital and Employment

To test Hypotheses 1 and 2 we followed the procedures of Tsui, Pearce, Porter and Tripoli
(1997) and performed ANOVA and analysis of covariance (ANCOVA) to examine the
ordering of the means of human capital value and uniqueness across the four employment
modes. We performed t-tests to compare the level of value and uniqueness between the
specific employment modes. The results of these analyses are presented in Tables 3 and 4.
The ANCOVA results indicate that the means are significantly different for value (F =
42.39, p < .001) and uniqueness (F = 18.77, p < .001). Specifically, across employment
modes human capital value is highest for knowledge-based and job-based employment, next
highest for alliances, and lowest for contract work. The findings indicate that human capital
uniqueness is highest for knowledge-based employment, next highest for alliances and
job-based employment, and lowest for contract work. The uniqueness of knowledge-based
employees is significantly higher than the uniqueness of contract workers and job-based
532 D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543
D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543 533
534 D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543

employees. Similarly, the uniqueness of alliance workers is greater than the uniqueness of
contract workers. Counter to our hypothesis, the uniqueness of alliance workers is less than
knowledge-based employees and is not significantly different from job-based employees.
These results provide support for Hypothesis 1 and mixed support for Hypothesis 2.

Employment and the HR Configurations

To test Hypotheses 3–6 we used ANOVA and ANCOVA. The results of these analyses
indicate that the explanatory effect of employment remained significant for the commitment-
based (F = 66.38, p < .001), productivity-based (F = 22.00, p < .001), compliance-
based (F = 17.98, p < .001), and collaborative-based (F = 12.87, p < .001) HR
configurations after considering the control variables.
Specifically, the results indicate that the commitment-based HR configuration is signifi-
cantly greater for knowledge-based employment than for the other three employment modes.
Similarly, the compliance-based HR configuration is significantly greater for contractual
work than for the other three employment modes. While the productivity-based HR con-
figuration is greatest for the job-based employment mode there is no significant difference
between job-based and knowledge-based employment for this HR configuration. In addi-
tion, although the collaborative HR configuration is significantly greater for alliances than
for contract work, it is not used significantly more than for knowledge-based or job-based
employment.
While these results provide general insights into the pattern of HR configuration use,
the most stringent test of our hypotheses involved a more fine-grained analysis to compare
the four HR configurations within each employment mode sub-sample. To examine these
within employment mode differences in the use of the HR configurations we performed
paired comparisons within each employment mode sub-sample. These results are presented
in Table 5.
Within the knowledge-based employment mode, the commitment-based HR configu-
ration is significantly greater than the compliance-based HR configuration (t = 8.89,

Table 5
Paired comparison of HR configurations within employment modes
Knowledge-based Job-based Contractual work n = 43,
employment employment arrangements t-test
(n = 48), t-test (n = 65), t-test (n = 50), t-test
Commitment vs. productivity .11 −4.97d −9.53d −2.24b
Commitment vs. compliance 8.89d 3.96d −10.44d 1.13a
Commitment vs. collaborative −.25 1.41 −7.72d −7.65d
Productivity vs. compliance 12.93d 9.50d −3.25c 3.14c
Productivity vs. collaborative −.30 4.89d .72 −5.49d
Collaborative vs. compliance 8.63d 2.63c −3.27c 7.02d
a p < .10.
b p < .05.
c p < .01.
d p < .001.
D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543 535

p < .001). However, there is no statistically significant difference between commitment


and the productivity-based (t = .11, n.s.) or collaborative-based (t = −.25, n.s.) configu-
rations. These results provide mixed support for Hypothesis 3, suggesting that firms use all
three of these HR configurations to manage knowledge workers.
Within the job-based employment mode, the results indicate that the productivity-based
HR configuration is significantly greater than the commitment-based (t = −4.97, p <
.001), compliance-based (t = 9.50 p < .001), and collaborative-based (t = 4.89, p <
.001) HR configurations. The results indicate that the compliance HR configuration is
significantly greater than the productivity-based (t = −3.25, p < .01), collaborative-based
(t = −3.27, p < .001), and commitment-based (t = −9.53, p < .001) HR configurations
for contract work. The results indicate that the collaborative HR configuration is significantly
greater than the commitment-based (t = −7.65, p < .001), productivity-based (t = −5.49,
p < .001), and compliance-based (t = 7.02, p < .001) HR configurations for alliance
partners. These results provide support for Hypotheses 4, 5, and 6.

Additional Analysis

Forty-one firms in the sample provide data on multiple employment modes within their
firm. As an additional check we tested whether human capital and the HR configurations
differ across employment modes within these firms. The ANCOVA results indicate that there
are significant differences in the human capital and HR configurations across employment
modes while there are no significant differences when firm (rather than employment mode)
is the differentiating variable. These analyses suggest that, within firms, there are differences
across employment modes with regard to human capital and the HR configurations.

Discussion

In general, this study provides support for the notion that different employment modes
are associated with variations in human capital value and uniqueness. From our study we
can conclude that the strategic value of human capital is reflected in choices about whether
to use internal vs. external employment modes. Consistent with the extant literatures in
strategy and economics, assets that are internalized tend to have a high degree of strategic
value. While this finding is consistent with our hypotheses, what is particularly interesting
is that the reported value of contract workers is significantly less than alliance partners.
Evidently, when deciding whether to utilize short-term contractual arrangements or ongoing
partnerships with external providers, organizations consider the strategic value of the human
capital to be used in these arrangements.
It is evident that the uniqueness of human capital differentiates the likelihood of em-
ploying workers in relational vs. transactional employment modes. The results indicate that
knowledge-based employees tend to have the highest level of uniqueness, alliances and
job-based employees have the next highest, and contract workers have the lowest level of
uniqueness. Interestingly, workers in alliances have a significantly lower level of uniqueness
when compared to knowledge workers while they do not differ significantly from job-based
workers. It may be the case that firms demarcate between core (knowledge-based) and
536 D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543

peripheral (contract) labor and those employee groups that fall in between are allocated
to alliances or job-based employment modes based on their strategic value. Whether in-
tended or emergent, there appears to be a clear pattern in the resource allocations and HR
configurations used for different kinds of workers.
The qualitative responses provided in Table 1 suggest several noteworthy points as well.
First, there is variation regarding the jobs identified for each mode. For example, within the
knowledge-based employment mode the jobs range from engineers to research scientists
and professionals employees. Second, in some cases the same job was listed in different
employment modes. For example, HR professionals were identified as being in job-based,
knowledge-based, and alliances. Taken together, we believe that these differences highlight
an important issue central to an HR architectural perspective—the decisions about employ-
ment are not fixed for a particular job. The issue is which factors lead to this decision.
Though the title of the job may be the same, the role of the individual vis-à-vis the firm’s
competitive position may differ widely from firm to firm. We would encourage additional
research that examines the influence of the job performed relative to the characteristics of
human capital (value and uniqueness) to perform the job in explaining employment choices.
These findings may be encouraging for advocates of the resource-based view of the firm
(e.g., Barney, 1991, Quinn, 1992; Wernerfelt, 1984) who suggest that firms should move
away from relying solely on transactional or financial criteria and consider more strategic
or resource-based factors when making sourcing decisions. Related, these results may also
address the concerns of critics who argue that outsourcing and relying on contract labor
may deplete the core skills that drive organizational success (e.g., Bettis, Bradley & Hamel,
1992). Rather than turning over their entire workforce to contractors, our findings suggest
that firms primarily rely on contract work to meet fairly generic needs or access widely
available skills. At the same time, firms are taking steps to ensure they identify and retain
those workers who are most critical to their competitiveness.
In addition to the characteristics of human capital, the findings suggest a pattern that
pairs HR configurations with employment modes in distinct ways. As hypothesized, the
commitment-based HR configuration is significantly greater for knowledge-based employ-
ees than for workers within the other three employment modes. In addition, the compliance-
based HR configuration is used most extensively for employees in a contract mode. These
findings parallel the work of Arthur (1992) and others who describe two potentially opposing
approaches to HR: one based on commitment, and one based on control/compliance.
The pattern across employment modes for the productivity and collaborative HR config-
urations are more complicated. Though the productivity-based HR configuration is used for
job-based workers, this HR configuration is used for knowledge-workers as well. A similar
pattern exists for the collaborative HR configuration; that is, the collaborative HR config-
uration is used equally for alliance partners and knowledge workers as well as job-based
employees.
Considered in combination with the within employment mode analyses, what is particu-
larly interesting is that much of the variance associated with the HR configurations relates
to the management of knowledge-based employees. While the commitment-based HR con-
figuration tends to be limited to knowledge-workers, within this employment mode, the
results indicate that there is no significant difference regarding the use of the commitment-,
productivity-, and collaborative-based HR configurations. In contrast, within alliances,
D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543 537

contract work, and the job-based employment mode, the hypotheses related to the HR
configurations received support. Evidently, firms vary most in how they manage their
knowledge-based employees.
These results may indicate that some managers do not provide the discretion and latitude
that typically accompanies knowledge work but focus instead on maximizing their produc-
tivity via a productivity-based HR configuration. One explanation may be that managers do
not have the necessary resources to invest in developing knowledge-based employees. In
particularly dynamic environments, firms may not believe they will be able to fully recoup
human capital investments even in their core workers. In these cases, it seems logical that
managers would strive to ensure immediate contribution through a HR configuration that
emphasizes productivity for all valued workers and not just those in a job-based employment
mode.
There may also be inertial pressures that encourage managers to use a productivity
approach (or limit their freedom to adopt a commitment-based approach). As noted by
Snell and Dean (1994), “Theorists have long pointed out that, once in place, administra-
tive systems, such as compensation systems, are notoriously intractable (e.g., Gerhart &
Milkovich, 1990)” (p. 1118). These possibilities are speculative, but might lend support
to those scholars who note the slow diffusion of high-performance work practices across
firms (e.g., Osterman, 1994; Pfeffer, 1994; Pil & McDuffie, 1996). An important avenue
for future research would be to explore the factors that serve as barriers to the adoption of
a commitment-based HR configuration.
In addition to the productivity-based approach, some firms used a collaborative HR con-
figuration for knowledge workers as well as job-based employees. This particular find-
ing might highlight the importance of collaboration and teamwork among individuals
who are valuable to a firm’s core competencies. It also raises the possibility that val-
ued workers are the “other side” of the collaboration necessary for an effective alliance/
partnership.
A more operational explanation may lie in how we measured the collaborative HR con-
figuration. We focused on collaborative activities to reflect the knowledge sharing and
information exchange necessary for alliances articulated by Lepak and Snell (1999). It may
be that firms believe they can garner substantial benefits by implementing a team-based
approach for their internal workers as well as those within alliances, a possibility that
would enhance the relationship between knowledge-based and job-based employment and
the collaborative HR configuration in our analyses. Indeed, during the past decade there
have been a number of academics and practitioners (e.g., Pfeffer, 1994) that have sug-
gested that team-based production and organization may be an appropriate method to in-
crease a firm’s effectiveness. Osterman (1994), for example, found that self-managed teams
were the one aspect of innovative work systems that were the most diffused throughout
industry.
At a broader level, these findings may be particularly informative for the current debate
in the SHRM literature concerning whether adopting a best practice or a contingent ap-
proach to HR is more appropriate (Becker & Gerhart, 1996). On the one hand, these results
offer strong support for a contingent perspective, suggesting that the use of different HR
configurations is associated with the mode of employment for human capital. These results
do not, however, preclude the possibility of best practices existing within firms. As noted
538 D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543

above, the commitment-based perspective described here is similar to the high-involvement


or high-performance work systems proposed by such theorists as Arthur (1992), Huselid
(1995) and Pfeffer (1994) and consists of many of the “best practices” in the current SHRM
literature. Yet, while our findings indicate that the commitment-based HR configuration is
used within firms, the scope of its use is limited to knowledge-based employees.

Future Directions and Limitations

While the results of this study provide insights into the management of different employee
groups, there may be a substantial disconnect between what firms should do and what they
actually do. This points to a limitation of this study; that is, these findings are descriptive
and, as a result, we cannot make any inferences regarding performance implications. While
a greater fit among human capital, employment, and HR would logically be associated
with enhanced performance, research is needed that examines whether the use of a single
HR configuration for all employment modes or the use of distinct HR configurations for
each employment mode results in higher firm performance. Related, we would encourage
research that explores whether the performance of firms that vary from a particular ideal
HR architecture differ systematically from those firms that are more closely aligned with
their ideal architecture (cf. Delery & Doty, 1996).
In addition, while we focused on examining HR subsystems within distinct employment
modes we did not focus on an overarching HR philosophy or logic that may operate at
the firm-level. It may be the case that some firms, regardless of employment mode, tend
to adopt a distinct philosophy regarding how they manage their employees. For instance,
one firm may place great emphasis on developing all of their workers internally while other
firms may tend to adopt a “buy” HR strategy. In short, different firms (even within the
same industry) might have vastly different HR architectures (cf. Becker & Gerhart, 1996).
As our study focuses on differences between employment modes, research that adopts a
firm-level of analysis and examines within firm variation in the use of employment and HR
configurations as well as the influence of a firm-level HR philosophy in how workers in
different employment modes are managed would prove beneficial.
Though the results of this study indicate that there are significant differences across em-
ployment modes for human capital and HR, we do not know how these findings compare to
more traditional categorizations of employees such as exempt vs. non-exempt or managerial
vs. hourly workers (e.g., Jackson et al., 1989). Future research that examines the relative
explanatory power of this perspective compared to more traditional categorizations would
provide an additional test of the usefulness of the framework provided by Lepak and Snell
(1999).
An additional limitation is that this study is cross-sectional and gaining a clearer under-
standing of the relationships among human capital, employment, and HR configurations
will require a longitudinal analysis. Though we examined these relationships in terms of
value and uniqueness determining the choice of employment mode, a choice which in turn
leads to a particular HR configuration, the opposite is possible as well. Indeed, the HR
configurations used to manage employees may influence the relative value and uniqueness
of their human capital. It may also be the case that what is considered valuable and unique
at one point in time may become less valuable and generic at another point in time (Lepak
D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543 539

& Snell, 1999). As a result, the notion of reciprocal causality may be a more accurate de-
piction of the relationships among the architectural components. To untangle these issues,
future research might look at these relationships over time to more completely examine the
temporal and causal relationship among these variables.
There may be some potential concerns with the use of perceptual measures in this study.
Recognizing this, we used multiple respondents for each firm when possible and focused
on top managers that are likely to be informed regarding the characteristics of human
capital as well as the HR practices used to manage employees in different employment
modes. Future research might strive to conduct more intensive examinations within firms
to develop more objective measures of value, uniqueness, employment modes, and the HR
practices used by firms that demonstrate superior levels of agreement and reliability across
raters.
Finally, although our HR configurations are based on the arguments of Lepak and Snell
(1999), these configurations are not mutually exclusive. This was done to reflect the idea that
bundles of different HR practices may be used for different purposes (cf. Becker & Huselid,
1998) or for different groups of employees. One implication of our operationalization is
that it is conceptually possible that more than one configuration could be used for an
employment mode or components of multiple configurations could be used simultaneously.
For example, a firm might use a commitment-based approach independently or in concert
with a collaborative approach for a particular group of employees. We echo the concerns of
Delery (1998), Gerhart et al. (2000), Huselid and Becker (2000) and Wright and Sherman
(1999), and encourage research that further explores the underlying dimensions of HR
configurations.

Conclusion

At the outset of this study, we sought to examine how different HR configurations are used
for different groups of employees. We have demonstrated that different HR configurations
tend to be used to manage workers in different modes of employment. A direct implication
of this study for SHRM researchers is that it may be too simplistic to presume that a single
optimal set of HR practices is ideal, or utilized, in all situations. Rather, it appears that the
most likely form of HR investment varies for different types of human capital. Clearly more
research is needed, but the findings of this study highlight the importance of addressing an
employment level of analysis as a means to understanding how firms strategically manage
different employee groups.

Acknowledgments

This research was supported by grants from the Society for Human Resource Management
(SHRM) Foundation and the Institute for the Study of Organizational Effectiveness (ISOE),
The Pennsylvania State University. The interpretations, conclusions, and recommendations,
however, are those of the author(s), and do not necessarily represent those of the Foundations.
We would like to thank David Day, Karen Jansen, Chuck Snow, Paul Tesluk, and Jim Thomas
for their helpful comments in developing this manuscript.
540 D.P. Lepak, S.A. Snell / Journal of Management 2002 28(4) 517–543

Appendix A. Questionnaire Items for Human Capital Value

Individuals in [insert employment mode] have skills that . . .


... are instrumental for creating innovations.
... create customer value.
... help minimize costs of production, service, or delivery.
... enable our firm to provide exceptional customer service.
... contribute to the development of new market/product/service opportunities.
... develop products/services that are considered the best in our industry.
... directly affect organizational efficiency and productivity.
... enable our firm to respond to new or changing customer demands.
... allow our firm to offer low prices.
... directly affect customer satisfaction.
... are needed to maintain high quality products/services.
... are instrumental for making process improvements.

Appendix B. Questionnaire Items for Human Capital Uniqueness

Individuals in [insert employment mode] have skills that . . .


... are not widely available in the labor market.
... would be very difficult to replace.
... are not available to our competitors.
... are widely considered the best in our industry.
... are developed through on the job experiences.
... are difficult for our competitors to buy away from us.
... are unique to our organization.
... are difficult for our competitors to imitate or duplicate.
... are customized to our particular needs.
... distinguish us from our competition.

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David P. Lepak is Assistant Professor of Human Resource Management at the University


of Maryland at College Park. He received his Ph.D. degree from the Pennsylvania State
University. His research and teaching interests focus on the strategic management of human
capital, managing the contingency workforce for competitive advantage, and virtual HR.

Scott A. Snell is Professor of Human Resource Studies at Cornell University. He received


his MBA and Ph.D. degrees from Michigan State University. His research and teaching
interests focus on developing and deploying a firm’s intellectual capital. He has published
a number of articles in professional journals and is the author of two books.