When the fit between HR practices backfires: Exploring the interaction effects between rewards for and appraisal of knowledge behaviours on innovation

Abstract

This paper explores the idea that well‐aligned HR practices may produce varied and even negative effects on innovation performance. To do so, we examine the interaction effect between rewards for and appraisal of knowledge behaviours on radical and incremental innovation outcomes. Drawing on the insights from the strategic HRM literature on the internal fit between HR practices, as well as the developments of the knowledge governance approach, we argue that rewards and appraisal applied together produce a setting that is conducive for deepening existing knowledge bases, but hindering for more distant and diverse knowledge search. Empirical test of these hypotheses using the data from 259 Finnish companies lends partial support for this argument. Intensive usage of appraisal of knowledge behaviours reduces the positive impact that rewards for such behaviours have on radical innovation. At the same time, rewards and appraisal do not intensify each other's effect on incremental innovation.