Abstract
This study advances research on strategic human resource management by examining the importance of alignment between an organization’s HR system and innovation strategy in achieving superior performance. We argue that alternative innovation strategies require different forms of knowledge behaviors from core knowledge workers to deal with the unique knowledge problems underlying exploration versus exploitation innovation strategies. Further, we argue that companies make distinct choices in terms of their HR strategies for managing core knowledge workers, and these alternative HR systems theoretically produce different employee ability, motivation, and opportunity outcomes which support different knowledge search and combination behaviors. We demonstrate, in a field study of 230 software firms, that alternative HR systems support either an exploration or exploitation strategy, and the alignment or misalignment between a firm’s HR system and strategy results in firm performance gains or penalties, respectively.