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CEP discussion paper
The Impact of an Innovative Human Resource Function on Firm Performance: the Moderating Role of Financing Strategy
J Dawson, Neal Knight-Turvey, Andrew Neal and M West April 2004
Paper No' CEPDP0630:
Full Paper (pdf)

JEL Classification: M11; M12; J5; J24; J51; J71

Tags: human resource function; manufacturing; firm performance; asset characteristics

The current study examined the impact of the human resource function and financing strategy on the financial performance of 104 UK manufacturing firms. Hypotheses are drawn from a resource-based perspective on human resource management and a financial theory perspective on capital structure. Results show that an innovative HR function is significantly related to economic performance. However, the relationship between an innovative HR function and economic performance was moderated by the firm¿s financing strategy. Firms obtained higher returns from an innovative HR function when pursuing a low leveraging (debt) financing strategy, a finding consistent with modern finance theory notions that firmspecific strategic assets provide greatest value when financed primarily through equity as opposed to debt.