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The purpose of this paper is to investigate the relationship between strategic human resource management (SHRM) and performance in service sectors firms in India. Also, it has tried to explore whether the three main approaches in the area of SHRM – universalistic, contingency and configurational approaches hold true in an Indian setting.

Data were collected from 25 organizations, using two sets of questionnaires. Set 1 comprised measures of business strategy (n=98) and key informant approach was used to collect the data. Set 2 had measures of SHRM which consisted of two sections – human resource management (HRM) system orientation and HRM capabilities and organizational effectiveness (n=750). Performance was measured in terms of organizational effectiveness. Regression analysis was carried out at two levels: industry level and overall level.

Results indicated that there is positive relationship between SHRM and effectiveness, business strategy has an impact on the relationship between SHRM and effectiveness and universalistic theory of SHRM does not work in the Indian service sector.

The results of this study revealed that transport and IT‐enabled industries require more strategic HR capability while finance requires more technical HR capability. The SHRM policies need to be dynamic and contingent on the business strategy to attain maximum impact on effectiveness.

This study contributes to the sparse literature on the role of SHRM in the service sector industry where dependence on human resources is more critical as compared to other sectors.