The economics profession’s preference for methodological individualism^3
inhibits its contribution to the understanding of collective actions within institu-
tional or organizational structures. Problems such as principal–agent diVerences,
application of game theory, and modelling decision-making in households may
have been the stuVof recent economic debate and advances, but for those working
within other disciplines that explicitly focus on group dynamics, internal politics
and power relations, and complex motivation theory (rather than simple proWtor
utility maximization models), such developments may appear at best to be well
overdue and at worst to be trivial and partial. Furthermore, the dominant focus of
mainstream economics is on issues of static allocation of resources. As Hahn ( 1991 )
further points out, economic theory has not been able eVectively to incorporate
‘learning’—let alone innovation—into its theoretical frameworks. There is a need
to return to more evolutionary approaches to the theory of theWrm where
diVerences in the management and development of resources, including human
resources, may impact upon the likelihood of being and remaining among the
survivors.
A methodological diVerence between HRM and economics is the use of norma-
tive language, the focus on what should be rather than simply on what is happening
(Kaufman 2004 ). This can be partly explained by the greater interest in the
management literature in how organizations not only become but also remain
competitive. The embedding of knowledge and capacities for innovation in the
workforce provides scope for arguing that HRM policies should be designed not
just to meet current needs but also to ensure future competitive success
(Wright and Snell 1998 ). Purcell argues for the development of a strategic approach
where the overriding motivation in shaping HRM policies is to ensure the
achievement of ‘organisationalXexibility and longevity’ (Purcell 1999 : 8 ). This
requires not only adaptation to, but also management of, the external environment
of theWrm. Mainstream economics is peculiarly unsuited to the development of
what Purcell terms ‘transition management’. Managers need to do more than
respond to current or predicted price incentives: creating a high-performing
environment, characterized by the capacity to incorporate new knowledge, may
be a means of anticipating obsolescence rather then waiting until the market
provides appropriate signals.
These diVerences in HRM methodology allow new questions to be asked outside
of the core of economic analysis. However, the analytical separation from economics
also results in much of the specialist HR literature failing seriously to address issues
of markets and costs (exceptions include Boxall and Purcell 2003 ; Baron and Kreps
1999 ). The strategic HR literature’s focus on labour as an asset obscures its continu-
ing role as a cost. While the rhetoric succeeds in highlighting the positive and
(^3) Methodological individualism wasWrst articulated by Hobbes and asserts that explanations for
social phenomena must be presented wholly in terms of facts about individuals.
70 damian grimshaw and jill rubery