70 SITUATING HUMAN RESOURCE MANAGEMENT
other resources: physical, financial, legal, informational and so on (see, e.g.
Grant 1991; Mueller 1996; Penrose 1959).
Identifying what is really valuable and protecting it with barriers to imi-
tation is at the heart of resource-based thinking. In terms of this ques-
tion, it helps to make a distinction between ‘human capital advantage’ and
‘organizational process advantage’ (Boxall 1996, 1998). Since employment
relationships are generally ‘relational’ rather than ‘spot contracts’ (Kay 1993:
278–9), firms have the possibility of generating human capital advan-
tage by recruiting and retaining outstanding people: through ‘capturing’
a stock of exceptional human talent that is latent with powerful forms
of ‘tacit’ knowledge. Organizational process advantage, on the other hand,
may be understood as a function of historically evolved, socially com-
plex, causally ambiguousprocessessuch as team-based learning and cross-
functional cooperation—processes which are very difficult to imitate. This is
often referred to as ‘social capital’ (Nahapiet and Ghoshal 1998) to distinguish
it from human capital while noting the symbiotic relationship between each
of these two forms of capital.
Both human capital and organizational process (or social capital) can gen-
erate exceptional value but are likely to do so much more powerfully when
they reinforce each other (Boxall 1996). Human resource strategy, then, sup-
ported by other sympathetic elements, can enable a firm to build sources of
sustained competitive advantage.
Before developing this line of argument further, we should note that there
is a problem with thinking about resources only at the level of the firm or
even at the level of the industry. Nation states affect the resources available
to firms and the HR strategies they can pursue. Consequently, some firms
and industries have a ‘head start’ in international competition because they
are located in societies which have much better educational and technical
infrastructure than others (Boxall 1995; Porter 1990). American, British, Ger-
man, and French firms, for example, are all assisted by the existence of long-
established traditions of excellence in higher education which enhance the
knowledge-creating capacities of business organizations. German firms tend
to enjoy major advantages in manufacturing arising from superior techni-
cal training systems to those typically found in English-speaking countries
(Steedman and Wagner 1989; Wever 1995). In short, the potential to develop
HR advantage does not lie solely in the hands of managers within firms.
Just as there is competition between firms, there is, in effect, competition
between nations (Porter 1990). Countries with embedded excellence in their
universal education system tend to have higher wage costs, and more institu-
tional rigidity (as seen, e.g. in Europe). This has led to the ‘flight’ of jobs in
manufacturing, and increasingly in the service sector too, to China and other
far eastern countries. This points to a wider paradox in strategy that a firm’s,
or a country’s, competitive strength will often simultaneously be a source of
weakness (in much the same way as heavyweight boxers may be poor at the