The influence of HRM practices on innovative performance – the role of human capital and absorptive capacity

Purpose This paper aims to study the relationship among human resource management (HRM) practices, human capital, absorptive capacity and innovative performance. In addition, this study seeks to unravel the sequential mediating role of human capital and absorptive capacity between HRM and innovative performance. Design/methodology/approach This research collected data from 385 respondents using a Likert scale questionnaire. This research used partial least square structural equation modeling to study the mediating role of human capital and absorptive capacity. Findings This research finds that HRM practices develop human capital that increases the capability of the organization to acquire and create new knowledge, leading to improved innovative performance. Practical implications By thoughtfully considering the roles of human capital and absorptive capacity, organizations can better align HRM practices to improve its innovation potential and performance. The findings of this study also enable HR practitioners to identify areas for intervention, such as improving knowledge assimilation processes and developing staff to acquire and exploit external knowledge. Originality/value This research presents an empirically tested human resource model at the crossroads of HRM, knowledge management and innovation. This model signifies HRM’s role in harnessing innovative performance by using human capital and absorptive capacity. In addition, most of the research is conducted in developed countries, and this study contributes empirically to the existing literature on the socioeconomic context of developing countries.