The Impact High Performance Work Systems, Implementation Effectiveness, and Alignment With Strategy on Shareholder Wealth.

We estimate the impact of the presence of a High Performance Work System and its effectiveness and alignment with firm competitive strategy on shareholder wealth in 702 firms. We find that a one standard deviation increase in these factors is associated with a $42,000 per employee increase in market value. The nature and pace of recent changes in the economic environment have motivated both managers and scholars to look for new sources of competitive advantage and profitability. As many of the traditional sources of competitive advantage (technology, economies of scale, patents, etc.) have diminished in value, the role of a skilled, motivated and flexible workforce has become more prominent (Pfeffer, 1994). Within that context a broadly defined High Performance Work System (HPWS) can be viewed as a key strategic lever, both as a means to develop and sustain core competencies and as a necessary condition for strategy implementation. This study focuses on a recurring theme in this literature; namely, to what extent is the HRM-firm performance relationship contingent upon the degree to which such systems have been implemented effectively, the