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knowledge. Other HRM practices may similarly be hypothesized to have a differential impact on
innovation performance.
A further way of advancing research is to dehomogenize the basic process and product
innovation categories. Thus, the process innovation category includes not only innovations in the
basic production process itself, but also innovations in the administrative structure of the firm
(Birkinshaw et al., 2008)—including innovations in HRM. While management innovations may
mainly be introduced by the higher echelons of the firm, there are HRM practices, notably reward
systems, that may positively influence such innovation. Thus, because management innovations are
likely to be implemented across the board in the various departments of a firm, and thus affect the
financial performance of the entire company, upper echelons are arguably incentivized to
implement such innovations by reward instruments that link pay to overall company performance.
In turn, product innovation may be decomposed into innovations of physical products and
innovations of services. Service innovation raises distinct HRM challenges. Thus, while the
increasing emphasis on user innovation has pointed to the importance of users and customers in the
innovation process in general, the importance of heavy customer and user involvement may be
particularly important for service innovations, and it may therefore be particularly to empower
employees to cooperate with customers and users in the case of these innovations.
CONCLUSIONS
The literature on the links between HRM and innovation that we have surveyed in this chapter has
expanded considerably over the last one and a half decades. This may partly reflect that both HRM
and innovation have been expanding fields in this period. It arguably also reflects trends in the
business world that prompt the emerging integration of HRM and innovation research. As firms
increasingly adopt open innovation models and engage with external knowledge sources (see
chapter by Dahlander and Alexi), they find that they need to bring new groups of employees into