Improving business processes or human resources? The performance implications and contingencies

Purpose: The purpose of this study is to examine both the separate effects and the interaction effects of business process improvement (BPI) and human resource enhancement (HRE) on operational performance in manufacturing firms and to examine the moderating effect of product life cycle (PLC). Design/methodology/approach: The conceptual model was based on the resource-based view, the dynamic capabilities perspective and contingency theory. Using survey data from 215 manufacturing companies and structural equation modeling, the hypothesized relationships were tested. Findings: The empirical findings suggest that the performance implications of HRE and the interaction of HRE and BPI are contingent on PLC. HRE and its interaction with BPI have stronger effects on operational performance in the maturity stage than in the growth stage. The effect of BPI on operational performance is equally important in both stages of PLC. Practical implications: The results of this empirical study can help to guide manufacturing firms to enhance their performance through improvements in their business processes and human resources at the different life cycle stages of their products. First, firms should upgrade both their processes and people to keep pace with the changing business environment and to sustain their competitive advantage. Second, the performance implications of improving processes and people are contingent on PLC, which suggests that managers should emphasize different things according to their roles. Originality/value: A simultaneous examination of the performance implications of HRE and BPI practices and their contingencies reveals the roles that people and processes play in achieving organizational objectives. The results contribute to our understanding of how firms leverage their resource allocation between processes and people at different stages of PLC to effectively improve their performance.