Employee-Organization Relationship based HRM system and Organizational Ambidexterity: The Mediating Role of Organizational Trust and Human Capital

Abstract

This study clarified two different mechanisms of how HRM systems developed on the basis of Employee-Organization Relationship (EOR) framework (Tsui, Pearce, Porter, & Tripoli, 1997) affect the organizational ambidexterity. After classifying the HRM practices into two dimensions, HRM inducements and investments and HRM expectation-enhancing practices, this study clustered firms into four different groups based on the level of the two HRM dimensions. The study suggests that the firms adopting mutual investment EOR forms, referring to the clustered group with high level of both the HRM dimensions, would improve the explorative and exploitative performance through organizational trust and human capital. Using data from 319 Korean firms, clustered regression was executed to test the hypotheses. The results confirmed that the firms with mutual investment EOR forms have positive relationships with organizational trust and human capital. Furthermore, organizational trust and human capital are positively related to the firm’s explorative and exploitative performance. Overall, organizational trust and human capital mediated the relationship between the mutual investment EOR form and the firm’s explorative and exploitative performance. This study reveals that in addition to psychological path of organizational trust, firms adopting mutual investment EOR forms can enhance the organizational explorative and exploitative performances by attracting and retaining the highly qualified human resources, leading to achieve sustainable competitive advantages.