A tale of two strategies : A framework of analysis for human resource management and innovation - An Australian perspective

Innovation, both technological and organisational, has become the top national priority in generating strong industrial development in order to stimulate economic development and strengthen competitiveness. From this perspective, it is crucial to identify how various aspects of business management in practice are responding to the challenge of supporting innovation. One crucial aspect under scrutiny lately has been the role of human resource management (HRM) in effectively building the capacity of organisations to innovate through motivation and learning. Recent research has found a positive relationship among HRM policies, innovation and industrial performance. This important relationship has been often mentioned, but without any clear theoretical framework or empirical evidence to identify the type of HRM strategies that support innovation. The aim of this paper is to examine the Australian situation with regard to HRM strategies and their support (or lack thereof) for innovation during the 2000s boom years prior to the recent ?Great Recession?. This is done by comparing two distinct HRM systems and strategies implemented in Australia. One is centred around deregulation, the other is centred around regulation. A theoretical framework is developed based on the capability of firms to innovate and how it is strictly related to their ability to substitute between labour inputs, within these two strategies. This framework then provides the basis for examining HRM practices and industrial relations systems in order to identify the difference between the learning practices that are common to successful innovation, and the ones that hamper innovation. The focus of the paper is on the input of innovative individuals. For it is individuals who learn within a frame of reference created by their education and by their social and organisational systems of rewards. The paper will show how through HRM strategies, the process of learning can lead to innovation, but it can also hinder innovation. It is crucial that societies invest in practices that foster and maintain the individual?s motivation to innovate and ability to generate new knowledge.