Research Proposal

Human capital, HRM practices and Organizational Performance: A

study on Construction Organizations of Hong Kong with mediating
effect of Knowledge Management and Innovation

For

Doctor of Philosophy (PhD)

By

Huma Sarwar

Qualification: M.S in Project Management

Department of Management Sciences

COMSATS INSTITUTE OF INFORMATION TECHNOLOGY,

Islamabad, Pakistan
 Table of Contents
Abstract .......................................................................................................................................... 2
1. Background ............................................................................................................................ 2
1.1 Research Question(s)............................................................................................................. 3
2. Literature Review .................................................................................................................. 3
2.1 Research Framework ........................................................................................................ 5
3. Methodology and Data Collection ........................................................................................ 6
3.1 Significance and Limitations of the Study ............................................................................ 6
3.2 Conclusion............................................................................................................................. 7
4. References............................................................................................................................... 7

1|Research Proposal
Abstract

The turbulent challenges faced by construction industries in Hong Kong are to enhance their
performance in the successful completion of projects to a level more satisfactory to clients. This
study aims to investigate the relationship of HRM practices, Human capital and organizational
performance with the mediating role of knowledge management and innovation on the successful
completion of projects. The main aim of this study is to analyze the association among Human
capital, HRM practices and organizational performance while taking Knowledge management
and innovation as mediating variables. The survey of this research will be conducted on
managerial level employees who are working in construction organizations of Hong Kong.
Statistical Package for the Social Sciences (SPSS) and AMOS will be used to analyze the data.
Statistical tests like Cronbach’s alpha to check the reliability, correlation, confirmatory factor
analysis (CFA) & regression to prove the hypotheses will apply on data.

KEYWORDS: Human Capital, Organization performance, HRM practices, Knowledge

Management, Innovation, Hong Kong

1. Background

In today’s competitive market, organizations need to invest and support their human capital to
remain and sustain in this competitive advantage. Now days, organizations are facing aggressive
and productive environment. The success of these organizations is heavily depending on their
capacity and ability to adapt their structures able to face the competition and maintain positive
relations with their surroundings. This is especially for the construction organizations where
worker’s cost and productivity are the main elements of gross profit. According to Buller and
McEvoy (2012) human capital has become critical success factor for the development of
organizations and entire business system. HRM is related to the managing organization’s
workers includes training and development, planning, performance measurement career
development, staffing, compensation and benefits, leaving the organizations. So HRM in
construction organizations is a complex and manifold activity that concerns with the application
of ideas. Human resource management (HRM) is critical for progress and productivity.
However, its significance in the construction environment environment is still undefined. On the
one hand, many literatures and studies have identified HRM as a major factor towards
organizational performance (Barczak and Wilemon, 1992; Tampoe and Thurloway, 1993;
Thamhain, 2004a). Becker (1993) found that investment in HRM improves the quality of human
capital that results the high productivity that in turn high profitability. From a practice point of
view, construction organizations are focusing on the importance of HRM if they want to grow
and remain competitive. For this purpose, many organizations are beginning to effectively and
efficiently manage their human capital. The purpose of current study is to explore the role of
HRM in construction organizations in the economy of Hong Kong with the linkage of knowledge
management and innovation. As stated by Becker (1993), to determine the rise and fall of any

2|Research Proposal
economy and income, human capital and HRM are the key elements. The role of human capital
on organizational performance is not clear. So, the main aim of this study is to investigate the
impact of human capital of organizational performance with the mediating effect of innovation
and knowledge management.

1.1 Research Question(s)

1. Is there any relationship between HRM practices and organizational performance?

2. Is there any relationship between Human capital and organizational performance?
3. Does mediating variables KM and innovation affect the relationship among HRM
practices, human capital and organizational performance?
4. Does positive correlation exist between KM, innovation, human capital and HRM
capabilities
5. What is the impact of HRM practices and human capital with innovative ideas on the
construction organizations of Hong Kong?
2. Literature Review

HRM practices and organizational performance:

In the competitive and knowledge based economy, HRM practices is supposed to be the most
important resource. Now days, it has become more crucial for success of any organization
(Schuler, 1990; Moyeen & Huq, 2001; Werther & Davis, 1996). In today’s competitive world
success of the organizations depends on the techniques management are utilizing the capabilities,
competencies and skills of their human resources (Absar & Mahmood, 2011).The impact of
HRM practices on firm level has become important element. Many studies have found a
significant association between HRM and firm performance such as employee turnover
productivity, quality sales, profits, return on investment and market value (Lau and May, 1998;
Harel and Tzafrir, 1999; Youndt et al., 1996; Becker and Huselid, 1998; Welbourne and
Andrews, 1996). Beer et al., (1984) suggested that competence, commitment, congruence and
cost effectiveness as intermediary variables. Becker et al. (1997); Becker and Huselid (1998)
observed that employee motivation, employee skills, job design and structure in which projects
are completed which effect the profits and market value.

Human Capital attributes and organizational performance:

Researchers from different contexts found the significance of human capital for desired
performance and outcomes like development, job creation, innovation, and economic
development (Birch, 1987; Autio, 2005; Kirzner, 1997; Frese, 2000). Human capital attributes –
such as skills of workers, training, trust, knowledge, education and have long been taken as

3|Research Proposal
critical success factors in organizational performance. (e.g., Florin et al., 2003; Pfeffer, 1995).A
particular area for analysis, getting growing attention now a days by many practitioners and
analysts, is the importance of human capital and its impact on organizational performance.
(Moyeen & Huq, 2001; Schuler, 1990).According to Edvinsson and Malone (1997) human
capital is the sum of the employee’s experience, skills and capabilities). Ishikawa and Ryan
(2002) suggested that it is the human capital that can enhance the firm performance. Moreover,
academics and researchers observed that attributes of human capital play larger role in the firm
performance due to the gradually enhancing knowledge-intensive activities in most work
environments (Pennings et al., 1998; Bosma et al., 2004; Sonnentag and Frese, 2002).To date,
the interest in human capital continues, and most authors conclude that human capital is related
to success (e.g., Bosma et al., 2004; Bruederl et al., 1992; Cassar, 2006; Cooper et al., 1994; Van
der Sluis et al., 2005). Storey (1994) presented the positive relationship between human capital
and performance after examining the examined the result of many empirical studies. Schultz
(1993) explains that human capital is very important component of the performance and
productivity. It is observed that if an organization can effectively use its human capital,it will
lead to profitability.

Human capital, innovation and performance:

Today, competitive environment is getting dynamic, stiff and tougher by local and global
competition, limited organizational resources and due to the technological change. So it is
necessary for the organizations to adopt innovative ideas to be in competitive advantage
(Holmqvist, 2004). Previous literatures include a limited number of studies that examine the
relationship between the human capital and performance but not explain the value of innovation
Camisón and Villar-López (2014). Jiménez and Sanz-Valle (2011) observed the positive
correlation between process, product and administrative innovation and organizational
performance. Innovation is considered as a major factor for economic growth in developing
countries (Solow, 1956; Lee & Kang, 2007; Crespi & Zuniga, 2011; Robson, et al., 2009). It
becomes critical to understand role of innovation at the firm level. Many Studies highlighted the
role of human capital among other factors as a driving force for innovation in context of
performance (Dakhli & De Clercq, 2004). In current study, focus was developed on the role of
human capital for innovation at the firm level, because it is helpful for the improvement of new
knowledge (Smith et al., 2005). Hence, human capital when adopting the innovative ideas,
products and processes is now becoming the main factor for organizational performance and
productivity.

Human capital and knowledge management:

According to Grant, 1996; Spender, 1996 knowledge is a precious asset of the firms human
capital with knowledge management enables organizations to intensify capabilities,
competencies and at the end observed and determine innovation opportunities (Grant, 1996;

4|Research Proposal
Wright et al., 2001).Human capital and Human resource management HRM function can
significantly impact and modify the employee’ s practices, attitudes, competencies, capacities to
accomplish firms objectives and goals (Martinsons, 1995; Collins and Clark,2003;) and it is a
major element in supporting the fundamental conditions for organizing workers of the
organizations towards the improvement and progress of innovative activities (Michie and
Sheehan, 1999; Laursen and Foss, 2003; Scarbrough, 2003). Firms that effectively and
efficiently conduct manage and organize knowledge placed in individual personalities will have
the capacity achieve superior competitive advantage (Scarbrough, 2003).

2.1 Research Framework

By taking above discussion and literature in mind the following research framework and
hypotheses are suggested for this research and they are given below.

Hypothesis

H1. Human capital positively relates to the organizational performance.

H2. Positive relationship exists between HRM practices and organizational performance.
H3. Innovation mediates the relationship between human capital and organizational
performance.
H4. KM mediates the relationship between HRM practices and organizational performance.

5|Research Proposal
H5. The association among human capital and organizational performance is mediates by
knowledge management.
H6. The association among HRM Practices and organizational performance mediates by
innovation.
H7. The association among Human capital and innovation mediates by KM.
3. Methodology and Data Collection

This study intends to explore the relationships between HRM practices, human capital,
knowledge management, innovation and organizational performance. Survey questionnaire will
be utilized for this research. Cluster sampling will be used for collecting the sample data. The
primary data for the study will be collected through structured questionnaires. The population of
the present study focuses on construction organizations of Hong Kong. The sample data will be
collected from the top managers working in the organizations of Hong Kong using cluster
sampling technique. Final questionnaire will be pre tested through review before sending to the
managers for content validity. Confirmatory factor analysis (CFA) will be used to check the
discriminant validity. For data gathering, managers will be contacted through emails, letters and
telephonic calls for their helpful participation in the survey. After their encouraging responses,
the questionnaires will be sent to them. To achieve the objectives, the Structural Equation
Modeling (SEM) will be used which is the most fitted and suitable technique. The software
packages like AMOS, SPSS, Microsoft Excel, etc, will be used and finally, results will be
analyzed.

3.1 Significance and Limitations of the Study

This study focuses on construction organizations of Hong Kong, which provides related products
and services for external customers. This study will help firms of Hong Kong and their managers
in understanding the importance of combining organizational HRM practices, Human capital,
knowledge management and their resources before investing in innovative projects to get the
desired outcomes. Due to competition, globalization and technological breakthroughs these
organizations face many difficulties to improve ability to assimilate, and mobilize valuable
knowledge related to the development of new process and product according to market demands.
Finally, this study will give organizations a road map to enhance their flexibility, business
performance and innovation to achieve the competitive advantage. Since HRM practices is
known as the most important factors of construction organization’s success, the main aim of this
work is to explore the role of HRM practices and the significance of human capital in the
construction organizations of Hong Kong, to determine the type of linkage between HRM
practices, human capital, innovation and the success organizations with mediating effect of KM
and innovation. The special task in this research is the exploration of the HRM practices

6|Research Proposal
(Training, staffing, recruitment, compensation, performance appraisal.) that are present in the
construction organizations of Hong Kong.

3.2 Conclusion

HRM practices and Human capital are the key elements of firm performance . Previous
researchers found that HRM and Human Capital have influence on organizational performance.
But previous literatures lack of the combine effect of human capital and HRM practices on
performance with the mediating effect of KM and innovation. This study will be carried out to
find the influence of mediating variables KM and innovation among Human capital, HRM and to
organizational performance. The study will have its practical implications for construction
organizations of Hong Kong. It is hoped that current study will provide a guide and roadmap for
successful interest and investments in HRM practices and human capital with the mediating
effect of KM capabilities and innovation to get the desired outcomes

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10 | R e s e a r c h P r o p o s a l