Pay and Train to Sustain: A Dynamic Human Capital Resources View of the Relationship Between HRM Practices and Organizational Performance Over Time

The relationship between human resource management (HRM) practices and organizational performance has received con-siderable attention in the literature. Most extant studies, however, have taken a static view, while longitudinal aspects of the HRM-performance link are less studied. We develop an integrative framework drawing on human capital resources theory that enables us to develop hypotheses on whether and how increases in dimensions of HRM practices within organizations over time lead to improvements in organizational performance. We test our hypotheses using a unique large high-frequency panel dataset from the English adult social care sector and fixed effects instrumental variables (FEIV) estimation that allows us to address some biases in prior work. We find that increases in skill-enhancing and motivation-enhancing HRM bundles are significantly associated with increases in performance among organizations with low initial human capital resources stock. Our results sug-gest that the latter relationship is realized partly via a reduction in staff turnover, which, in turn, increases the organization's human capital resources stock. Overall, the article's contribution is to develop and test a dynamic extension of human capital resources theory that considers the processes of human capital resources stock depletion and accumulation over time and the path-dependent relationship between investments in HRM practices and performance.