4.5 Conclusion
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In this chapter we have explored the suitability of an economics framework for the
study of HRM, considered the value of selected approaches that go some way
towards integrating the two worlds of economics and HRM, and argued for the
need to incorporate some of the rich empirical and theoretical insights derived
from comparative institutional analysis of employment organization. The starting
position of the mainstream economist is a set of assumptions that derive from
methodological individualism, which do not immediately marry with the concerns
of HRM and its focus on organizations and workforces. However, economists have
a capacity to adapt and develop their methodology to move into fresh areas of
research, and their entry into the world of HRM is no exception. With advances in
ideas about incentive theory, several economists have presented new ideas about
the workings of theWrm, recasting it as ‘an incentive system’, drawing on a fast-
growing literature on principal–agent problems of coordination and game theory
(Alchian and Demsetz 1972 ; Holmstrom 1982 ; Holmstrom and Milgrom 1994 ).
Such ideas form the bedrock of studies in theWeld of personnel economics, but
while they may add a rich analyticalXavor in addressing HRM issues, thisWeld has
developed through a one-sided integration and it is theWeld of HRM proper where
the complex realities of the employment relationship are better recognized.
Various scholars have sought to develop a more integrated approach, but it is the
studies by those starting from a non-mainstream economics background that
appear most convincing. The lesson is that while economics is dominated by a
so-called mainstream approach, it is large enough to be home to an important
minority of economists who are sensitive to the limits of conventional analytical
tools, and it is perhaps within the non-mainstream camp where future integration
of HRM with economists’ analytical techniques ought to begin.
We ended our chapter with a review of the contributions of the comparative
study of employment organization to the understanding of HRM. It is through a
comparative perspective that the importance of institutions becomes clear, not
simply in shaping some fuzzy context to the workings of organizations, but in
generating ‘institutional signals’ (to adapt the economists’ terminology) to which
Wrm strategy gravitates. Moreover, a focus on coordination problems enables these
approaches to consider both the micro and macro consequences of alternative
HRM practices; as we have argued in this chapter, theWeld of HRM has not
adequately incorporated issues of national policy and national goals into an
analysis of the organization. Within theWeld of HRM, an embracing of a com-
parative approach could take these types of analysis further. For example, it might
consider how and under what institutional conditions varieties of HRM practices
are possible. What are the potential disjunctures among national institutions and
84 damian grimshaw and jill rubery