marginal adjustments to staYng levels or labor costs when conditions change—
and ‘long-run agility’ (Dyer and Shafer 1999 ), a much more powerful ability to
learn in an environment that can change radically. At a minimum, organizations
need some degree of short-run responsiveness and this form ofXexibility must now
be considered an employer goal alongside cost eVectiveness. While someWrms
aspire to long-run agility, organizational ecologists such as Carroll and Hannan
( 1995 ), who study patterns ofWrm birth, growth, and decline in industries, observe
that this is very hard to achieve because core features of organizations are hard to
change once laid down in the early stages of establishment and growth. In other
words, there is a strategic tension between stabilizing a cost-eVective work and
employment system and creating the capacity for radical change.
This discussion has outlined employer goals in relation to the viability problem
of theWrm. A key question in the literature concerns the conditions under which
Wrms can, and do, pursue ‘sustained competitive advantage’ through HRM
(e.g. Boxall and Steeneveld 1999 ; Mueller 1996 ; Wright et al. 1994 ; this Handbook,
Chapter 5 ). In thinking about this question, it is helpful to distinguish between
labor cost advantages and labor diVerentiation advantages and to consider the
extent to which either form of advantage can be sustained. There is abundant
evidence thatWrms engaged in basic manufacturing industries such as clothing and
footwear have relocated plants to low-wage countries to take advantage of lower
labor costs (Boxall and Purcell 2003 : 100 – 2 ). This, however, might simply be a
viability strategy, not one that bringssustainedadvantage: theWrms that do itWrst
enjoy some temporary advantages but then these are competed away as others
follow suit. DiVerentiation in labor quality, through better-quality human capital
and smarter organizational processes (Boxall 1996 ), is much more what people
have in mind when they think of sustained human resource advantage. When do
Wrms embrace this goal? Boxall ( 2003 ) reviews existing studies on service sector HR
strategy, including Batt’s ( 2000 ) study of call centers and Hunter’s ( 2000 ) study of
rest homes, and develops a framework and set of propositions which argues that
Wrms rarely adopt this goal when they are locked into the cost-based competition
that occurs in mass services (Table 3. 2 ). In mass services, customers are price
sensitive and will typically take part in self-service if the price is right. However,
the goal of HR advantage is envisaged as a possibility in more diVerentiated service
markets (‘Type 2 ’ and ‘Type 3 ’) where a group of more aZuent customers will pay a
premium for better service. In these conditions, Wrms may pursue a goal of
sustained HR advantage through diVerentiating the quality of what people do.
This does not necessarily mean that they will do so: management may not see the
value or may choose to compete in other ways (Boxall 2003 : 16 – 17 ). As noted above,
Lloyd’s ( 2005 ) study of UKWtness centers demonstrates thatWrms at the high end
of the market may simply seek to compete through better-quality facilities and not
employee skills (the tangibles rather than the intangibles). On the other hand, a
study by Skaggs and Youndt ( 2004 ) on a sample of 234 US serviceWrms provides
the goals of hrm 59