The Forgotten Options: Progress of Real Options Perspective in HRM Research and Agenda for Future Research

Abstract

This chapter discusses how the real options theory can be useful for understanding the adoption of human resources management (HRM) practices. The authors review how the real options theory has provided insights into the processes through which firms manage uncertainties involved in the adoption of HRM practices. The authors offer propositions for future HRM research from the real options perspective. The authors contend that analyzing HRM practice adoptions through the lens of real options theory can enhance our understanding of the mechanisms through which firms choose which HRM practices to adopt and how they adjust the timing, scale, and methods of investment in these practices. Specifically, the authors suggest that differences in information relevant to valuation of HRM options are the source of distinct choices of HRM options across firms. Finally, the authors propose advancing knowledge on HRM practice adoptions by using a portfolio of options approach, as well as considering factors like competitors, path dependence, and switching options.

Citation

Han, S.H., Jiang, K. and Anand, J. (2024), "The Forgotten Options: Progress of Real Options Perspective in HRM Research and Agenda for Future Research", Buckley, M.R., Wheeler, A.R., Baur, J.E. and Halbesleben, J.R.B. (Ed.) Research in Personnel and Human Resources Management (Research in Personnel and Human Resources Management, Vol. 42), Emerald Publishing Limited, Leeds, pp. 75-114. https://doi.org/10.1108/S0742-730120240000042003