Human Resources or Information Technology: What is More Important for Companies in the Digital Era?
Abstract Background: Companies can improve their business performance, increase revenues and reduce costs by enhancing their information technology (IT) capability. On the other side, there is an increasing importance of human resource management (HRM) practices related to IT utilization, which are important for the business performance of a company in the rapidly changing knowledge-based economy. Objectives: The objective of this paper is to analyze the relations among IT capability, HRM capability and the firm’s performance outcomes. Methods/Approach: The paper uses survey data and Structural Equation Modeling to analyze the relationships among IT capability, HRM capability and firms’ performance. Results: This paper reveals that IT capability to some extent determines firms’ business performance but it plays more important role in enhancing HRM capability. In addition, HRM capability significantly impacts business performance. Conclusions: The findings indicate that managers should not focus on allocating resources only for IT investments. In order to achieve better business performances, these technologies need to be used to support all business processes including HRM activities.