The Implications of Knowledge-Based HRM Practices on Open Innovations for SMEs in the Manufacturing Sector

Aim/Purpose: The main aim of this study was to investigate the impact of knowledge-based Human Resources Management (HRM) practices on inbound and outbound open innovation in Jordanian small and medium enterprises (SMEs). Background: SMEs in Jordan lack tangible resources. This insufficiency can be remedied by using knowledge as a resource. According to the Knowledge-Based View (KBV) theory, which posits knowledge as the most valuable resource, SMEs can achieve open innovation by implementing knowledge-based HRM practices that enhance the utilization of knowledge and yield competitiveness. Methodology: This study adopted the quantitative method employing descriptive and exploratory approaches. A total of 500 Jordanian manufacturing SMEs were selected from 2,310 manufacturing SMEs registered lists, according to the Jordan Social Security, by using random sampling. The study’s instrument was a questionnaire that was applied to these SMEs. There were 335 responses that were deemed useful for analysis after filtering out the replies with missing values; this corresponded to a response rate of 67%. The paper utilized structural equation modeling and cross-sectional design to test hypotheses in the proposed research model. Contribution: This study advocates the assumption of the role of KBV in improving innovation practices. This study contributes to the existing strategic HRM research by extending the understanding of knowledge-based HRM practices in the context of SMEs. Thus, this study contributes to the understanding of innovation management by demonstrating the role of knowledge-based HRM practices in boosting inbound and outbound OI practices, thereby enhancing innovation as an essential component of firm competitiveness. Findings: The findings revealed the positive impact of four knowledge-based HRM practices on inbound and outbound open innovation in Jordanian manufacturing SMEs. These practices were knowledge-based recruitment and selection, knowledge-based training and development, knowledge-based compensation and reward, as well as knowledge-based performance assessment. Recommendations for Practitioners: This study is expected to help the stakeholders of SMEs to re-shape the traditional HRM practices into knowledge-based practices which improve managerial skills, innovation practices, and the level of the firm’s competitiveness. Recommendation for Researchers: This study serves as a significant contribution to the research field of innovation practices by building a new association between knowledge-based HRM practices and inbound and outbound open innovation. Impact on Society: The study emphasizes the vital role of knowledge-based HRM practices in enhancing the knowledge and social skills of the human capital in SMEs in Jordan, thus improving the country’s social and economic development. Future Research: Future research could build on this study to include service SMEs. It could also employ a longitudinal study over the long run which would allow for a deeper analysis of the relationships of causality, offering a more comprehensive view of the effect of knowledge-based HRM on open innovation. Furthermore, future research could examine the sample of investigation before and after implementing the knowledge-based HRM practices to provide stronger evidence of their influence on inbound and outbound innovation.