The starting point for most HRM approaches in the 1980 s was the external
environment: models typically had an ‘outside-in’ character (see, for example,
the work of Beer et al. 1984 and Schuler and Jackson 1987 ). These works appeared
to have been heavily inXuenced by industrial relations (IR) perspectives (e.g.
Dunlop 1958 ; Kochan et al. 1984 ) or by ‘strategic contingency’ models
(e.g. Woodward 1965 ; Lawrence and Lorsch 1967 ). A radical change from outside-
in approaches to ‘inside-out’ models was introduced during the late 1980 s and
early 1990 s as a result of the increased popularity of the resource-based view of
theWrm (e.g. Wernerfelt 1984 ; Barney 1991 ). This radical change resulted in less
attention to the organizational context and the external environment, simply
because the implicit assumption was made that the context mattered less than valu-
able, scarce, inimitable, and diYcult-to-substitute internal resources (e.g. unique
human resources) for creating sustained competitive advantage (Paauwe and
Boselie 2003 ).
Moreover, in the 1980 s, the academic disciplines of HRM and industrial relations
were more closely aligned with many academics being active in bothWelds (for
example, authors like Kochan, Katz, Boudreau, Keenoy, Guest, Poole, Sisson, and
Purcell). Nowadays, consideration of context is mainly limited to ‘control vari-
ables’ like age, sector, technology, and rate of unionization.
This chapter aims to restore the balance by oVering a more explicit account of
the importance of societal embeddedness in HRM. As an independent variable,
societal embeddedness can have an important inXuence on the shaping of HR
policies and practices and their subsequent eVect on performance. As Karen Legge
remarks: ‘Just at the time when the key ideas of resource-based value theory
penetrate the thinking (if not necessarily, the practice) of practitioners, I would
predict that the academic debates, while not abandoning the RBV perspective, will
tend to refocusoutwardto explore more fully the institutionalist approaches’
(Legge 2005 : 40 ).
The chapter starts with a short overview of the diVerent institutional settings in
which the shaping of HR policies and practices takes place (section 9. 2 ). We next
take a closer look at theWeld of HRM itself (section 9. 3 ), especially focusing on
strategic contingency approaches in HRM. Do diVerent HRM models take
the importance of the societal context into account? In section 9. 4 , we explain
how researchers in theWeld of IR have much to oVer the contextual analysis of
HRM. This motivates us to use institutional theory (section 9. 5 ) to build
a theoretical base that can encompass context in the study of HRM. Finally,
in section 9. 6 , we pay attention to the need to achieve a balance between
market and institutional pressures if Wrms are to simultaneously pursue
competitive advantage, legitimacy, and long-term viability (Boxall and Purcell
2003 ; Paauwe 2004 ).
hrm and societal embeddedness 167