The Role of HR Capabilities During External Change in Saudi Arabia

Purpose – State-led initiatives in Saudi Arabia have focused on ‘localisation’, a term, which here is taken to mean a state-led process to increase employment of workers from the local labour market, and displace workers from other countries. In Saudi Arabia, the ‘Nitaqat’ regulations in 2011 required private sector firms to recruit more Saudi nationals, limiting their access to the non-Saudi labour market, and penalising firms that did not comply. To cope with these staffing requirements, firms have been incentivised to upgrade their approaches to HRM. Drawing on the concept of Dynamic Capabilities, this study examines the development and use of human resource capabilities shortly after these regulations were implemented.

Aim – To understand the role of operational and dynamic HR capabilities in organisations’ abilities to manage external change.

Design/methodology/approach – The paper uses a case study design and drew on both primary and secondary data collected in 2013-2014. Data were 17 primary semi structured interviews with key decision makers of three private firms, and secondary government documentation on Nitaqat were analysed by means of a content analysis approach.

Findings – The present research reveals that HRM capabilities do not automatically lead to innovation or successful adaptation to external change, but rather, outcomes depend on how HR strategies interact with, and are shaped by other contextual, environmental factors.

Limitations of the study – The study is limited by its relatively small number of cases, and focus on a single country context.

Practical implications – The results may bring awareness as to the role of socio-cultural context in operational and dynamic HR capabilities and this knowledge can benefit companies that face similar external pressures in the successful development of their capabilities.

Originality/value – The originality of the paper lies in its detailed consideration of how HR capabilities shape, enable and constrain strategic choices during external change. It also points to the vital importance of sociocultural context in understanding how firms navigate change, with the use of HR capabilities being shaped considerably by this context in Saudi Arabia.