productive elements of the employment relationship, it deXects attention from the
most interesting aspect of employment—that employers want labor to be ‘both
dependable and disposable’ (Hyman 1987 : 43 ). As a consequence, even the secure and
protected employment for the core labor force is not guaranteed, but is contingent,
inter alia, upon markets and cost conditions inside and outside the organization.
An analogous problem is found in the resource-based theory of theWrm where
the value of theWrm’s resources is treated as independent of the structuring of the
external market, a position challenged by Priem and Butler ( 2001 ), Porter ( 1990 ),
and others on the grounds that changes in markets can both undermine and even
create the value. Barney ( 1991 ) acknowledges the potential for ‘creative destruction’
of value through Schumpeterian-type changes to competitive conditions, but
Boxall and Purcell ( 2003 ) also advise against taking too literally the notion that
the resources which provide the sustained competitive advantage of theWrm must
be inimitable and non-substitutable. Distinctive characteristics may grant an
organization competitive advantage for a while but eventually other organizations
will imitate and catch up, such that the distinctive characteristic becomes an
industry standard—or an enabling rather than a distinctive capability (ibid.: 82 ).
In the next stage, new distinctive characteristics will be developed, endowing either
the same organization or new organizations with competitive advantage. In short,
the focus in HRM on the organization as the unit of analysis is both a strength and
a weakness: it reveals the important issue of path dependency but a more fully
integrated analysis of the interplay between the internal environment and resources
and the external environment in which the organisation operates is still lacking.
The embedding of HRM in the market, political, institutional, and social
environment should provide insights into why HR strategies vary in form and
outcome over time and space. At a minimum, the degree of tightness in the labor
market could shed light on variations in retention and recruitment strategies and
outcomes. But, as Kaufman ( 2004 ) points out, such external ‘economic’ condi-
tions tend to be ignored in the HRM literature. Even less attention is paid to the
institutional environment within which the organization is functioning. The
outcome is a neglect not only of the changing dynamics of the market environ-
ment, but also of the more deeply rooted institutional structures associated with
the varieties of capitalism literature. Theories of best practice management of
work may make little sense if there are systematic variations both in governance
and in the operation of markets to which these practices should and indeed do
adjust.
The chapter is organized in three parts. In theWrst, we consider the development
of personnel economics and argue that there are shortcomings that reXect the one-
sided integration of economics into HRM. The second considers a selection of
studies that provide a more integrated attempt to span the economics and HRM
boundaries. In the third, we turn to the neglect of variations in national institu-
tions and business systems in the analyses of HRM policies within organizations.
economics and hrm 71