Annotated Bibilography

T h e J o u r n a l o f D e v e l o p i n g A r e a s Special Issue on Dubai Conference Held in April 2016

Volume 50 No. 6 2016

THE EFFECT OF HUMAN RESOURCE

MANAGEMENT SYSTEM ON EMPLOYEES’

COMMITMENT: THE MEDIATING ROLE OF

THE AMO MODEL

Zeyad Almutawa

RMIT University, Australia

Nuttawuth Muenjohn

RMIT University, Australia

Jiaying Zhang

RMIT University, Australia

ABSTRACT

Although the field of Human Resource Management has been extensively studied in the

previous decades, still remaining theoretical and methodological questions are yet to be

answered. These questions were found to evolve around how to conceptualize and

operationalize HRM as well as the mechanism through which HRM affects performance.

Consequently, numerous models were proposed to address these questions and among which

the AMO model is considered the one that grasp the attention of many scholars. The current

study, therefore, aims to address these questions by investigating the mediating effect of

employees’ Ability (A), Motivation (M), and Opportunity to participate (O) model on the

relationship between HRM system and employees’ affective commitment. An abstract level of

HRM system was operationalized and hypothesized to have an indirect effect on employees’

affective commitment via the AMO model. A cross-sectional data was gathered through a

questionnaire survey distributed to 800 employees working in the telecommunications sector

in Kuwait. Structural equation modelling (SEM) via AMOS22 was used to build and test the

hypothesized model. The confirmatory factor analysis (CFA) has revealed that the abstract

level HRM system is better conceptualized as having three categories namely, Skill enhancing

HRM practices, Motivation enhancing HRM practices, and Empowerment enhancing HRM

practices. Moreover, the results have indicated that HRM system significantly and positively

affect employees’ ability, motivation, and opportunity to participate. More importantly, the

results have supported that the relationship between HRM system and employees’ affective

commitment is partially mediated by the AMO model. This study has contributed to the field

of Human Resource Management by empirically justifying the critical role that employees’

ability, motivation, and opportunity to participate (AMO) have in increasing employees’

affective commitment. Accordingly, the current study is directing the attention of the

telecommunications companies’ managers toward designing their HRM system in ways that

increase the three dimensions of the AMO model, which inn turn could result in increased

level of commitment.

JEL Classifications: M12, M54

Keywords: HRM system, AMO model, Affective commitment

Corresponding Author’s Email Address: zeyad.almutawa@rmit.edu.au

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INTRODUCTION

According to the resource-based view of competitive advantage (Barney, 1991),

sustained competitive advantage can be achieved only when an organization

possesses valuable, rare, non-imitable, non-substitutable, and non-transferable

resources. Human resource was introduced as one of the most valuable resource that

organizations possess to achieve the desired competitive advantage. That is, the

degree of imitability of tangible assets is much greater than intangible assets

especially human resources (Huselid, 1995). Also, the complexity and the ambiguity

of the causal relationships in the human attitudes and behaviour further increase the

barrier for other organizations to imitate. Consequently, researchers and practitioners

have devoted a great deal of time and efforts to study all the possible means through

which they can get the most benefit from their human resources.

As a result of such astonishing efforts, a realization was established that

HRs need to be managed with deliberate care, and since then, HRM has appeared to

capture the attention of many scholars. Despite the many efforts researchers have

spent on defining HRM, a disagreement among researchers is persisting regarding

what constitute HRM and how HRM is conceptualized and operationalized. Such

arguments have led Guest (1997) to call for a theory refinement regarding how HRM

is linked to performance. As a response to Guest (1997) call, a number of theoretical

models were proposed and among which the AMO (Ability, Motivation, Opportunity

to participate) model has received the greatest attention. AMO model was proposed

to serve as a mediating mechanism through which HRM affect performance. Despite

its popularity, little empirical efforts were found that investigate the mediating effect

of the AMO model in the HRM-performance relationship. Moreover, based on

Kanfer (1992) proposition of proximal versus proximal variables, eemployees’

attitudes are considered one of the important proximal variables in the mediating

stage of the HRM- performance relationship (Deer & Reeves, 1995). Although

employees’ attitude is largely defined in terms of job satisfaction and organizational

commitment, the focus of this study is on affective commitment. Affective

commitment is considered more stable than job satisfaction in closely associated with

employees’ behavior (Bell & Menjuc, 2002). Accordingly, this study aims to

investigate the mediating effect of the AMO model on the relationship between HRM

system and employees’ commitment.

CONCEPTUAL FRAMEWORK AND RESEARCH HYPOTHESES

In a response to Guest (1997) call for a theory refinement regarding HRM-

performance relationship, researchers have developed many models that incorporate

intervening variables. This effort was based on the fact that HRM system does not

affect organizational performance directly, rather, HRM affect performance

indirectly through mediating variables. According to Colvin and Boswell (2007),

HRM practices do not affect organizational performance; instead, it affects how

people do their jobs which in turn affect organizational performance. Hence, the

nature of HRM-performance relationship necessitates the inclusion of some

mediating variables. Kanfer (1992) and Dyer and Reeves (1995) have further

demystified the mediating stage by arguing that the distance between organizational

performance indicators and HRM system is “too large”, and other organizational

interventions may exist. Therefore, as Paauwe (2009; p.153) argued “we are in need

of performance indicators that are far more proximal in terms of what HR practices

19

can actually affect”. Thus, a focus should be directed towards understanding the

effect of HRM practices on the more proximal outcomes (individual outcomes).

According to the literature, the mediating variables that are most frequently studied

and considered as the most proximal to HRM are the AMO factors (Boselie et al.,

2005).

The AMO model is an abbreviation of three employee-related variables

namely ability, motivation, and opportunity to participate. AMO model is built on

individual-level theory of job performance (Campbell et al., 1993) which states that,

employee’s performance is affected by the Knowledge, Skills, and Abilities

possessed by the employee, and whether he/or she is motivated to do the job

effectively. Skilled and motivated employees, however, need a space where they can

apply their KSAs. Therefore, the opportunity to participate was proposed to act as the

third dimension of the individual-level theory of job performance (Lepak et al.,

2006). Thus, the AMO model suggests that organizational performance is affected by

changes in employees’ ability, motivation, and opportunity to participate.

Although the majority of research conducted after 2000 has used the AMO model

(Boselie et al., 2005), most empirical research has focused on only one factor of the

AMO model (Jiang et al., 2013). According to the classic work of performance

theories (Blumberg & Pringle, 1982), all AMO factors must exists in order for the

task to be accomplished; otherwise, a drop in performance is expected whenever one

of the three factors drops. Accordingly, it is highly important to study all the factors

of the AMO model simultaneously.

The logic of HRM-AMO linkage is that, high-qualified HRs are considered

a source of competitive advantage, and HRM is a mean to achieve it (Barney &

Wright, 1997). Competitive advantage to be truly sustainable it needs to be based on

competent and qualified employees who are equipped with the necessary skills and

abilities (Ferguson & Reio, 2009). The effectiveness of qualified and skilled

employees will be worthless, however, if they are not motivated and not given the

opportunity to participate (Delaney & Huselid, 1996). From this view, the AMO

model introduces itself as a critical mediator in the HRM-performance relationship.

According to the resource-based view (Barney, 1991) HRM practices may have an

impact on employee attributes such as skills, abilities, motivation, which

subsequently lead to improved organizational performance. Thus, it could be

hypothesized that:

[Hypothesis 1]: There is a significant positive effect of HRM system on

HRM outcomes represented by the AMO model.

The current study was conducted in the telecommunications sector in Kuwait.

According to the literature, service organizations usually exist in an environment

characterized by randomness due to the unpredictable behaviors required to satisfy

customers (Aryee et al., 2016). Therefore, in service contexts, employees’ behaviors

that are considered important to satisfy customers are usually never mentioned in the

job description. Instead, necessary behaviors are discretionary and not formally

required (Nishii et al., 2008). A review of the literature revealed that among the three

dimensions of organizational commitment, it is affective commitment that positively

affects the desired extra-role behaviour (Meyer & Allen, 1991).

Affective commitment is defined as employees’ “emotional attachment to,

identification with, and involvement in the organization” (Meyer et al., 2002). Highly

affective employees are likely to align their own interests with those of the

organization (Bell & Menjuc, 2002) and hence, high level of citizenship behaviour is

likely to exist. Unlike continuous commitment which is based on economic exchange

relationship, affective commitment is a concept closely related to the social exchange

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relationship which is considered a prerequisite for citizenship behaviour (Organ,

1990). According to the social exchange theory (Blau, 1964), an individual who is

well treated by another person, will feel a sense of obligation to return the favour.

Thus, when employees perceive HRM system as a system that invests in their skills

and abilities, and cares about their well-being, they will reciprocate by showing

positive attitudes and behaviors.

It was argued that HRM practices do not affect performance; instead, it is

employee’s perceptions of HRM practices that affect performance (Nishii & Wright,

2007). Thus, regardless of how effectively HRM is implemented, if employees do not

perceive that the system indeed improve their skills, motivate them appropriately, and

provides them the opportunity to participate, they will show little if any commitment.

Also it was argued that employees’ commitment is not directly linked to HRM

system, rather, it is more likely that employees’ commitment is directly related to the

AMO model. For example, both Gardner et al. (2001) and Ileana Petrescu and

Simmons (2008), indicated that employees who possess a wide range of skills and

abilities, who are motivated, and have the opportunity to participate, are more likely

to be committed to their organization. Thus, HRM system affect employees’ affective

commitment only when employees perceive that HRM system indeed affects their

ability, motivation, and opportunity to participate. Therefore, it could be

hypothesized that:

[Hypothesis 2.a]: There is a significant positive effect of perceived AMO

enhancement on employees’ affective commitment.

[Hypothesis 2.b]: There is a significant positive indirect effect of HRM

system on employees’ affective commitment via the AMO

model.

FIGURE1. THE RESEARCH CONCEPTUAL MODEL

METHODOLOGY

Sample

Telecommunications sector in Kuwait includes three main competitors employing

more than 2330 employees. A questionnaire package outlining the research aim and

significance was given to the HR manager in the three companies. Unfortunately,

only two companies have accepted to participate in this study. 800 paper-based and

online questionnaires were randomly distributed to all employees via the HR

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departments in May 2015. This has resulted in a total of 200 completed

questionnaires with a response rate of 25%.

The data indicates that (69%) of the sample was male, and that (48.5%)

were found in the group age of (25-34). Additionally, the majority had obtained

bachelor degree (59 %). One third of the respondents (35%), have demonstrated an

experience between five to fifteen years, whereas only 5% have experience of 16 to

20 years. Finally, the data has revealed different distribution in terms of the

department of employment. For example, the majority were found employed in the

telecom regulation department (24%) followed by (18.5%) in the HR department and

(11.5%) in marketing and sales department. customer service, internal audit, quality

assurance department were all found around (4%).

Measure

HRM system

HRM system was measured through 23 items intended to measure six different

abstract level HRM practices. The model includes first and second-order factor where

the second-order factor represents a reflective model of HRM system. The first-order

factors represent three main categories namely, Skills enhancing, Motivation

enhancing, and Empowerment enhancing HRM practices. 9 items were used to

measure skills enhancing practices. The items were designed to assess recruitment

and selection (the company provides new staff with formal orientation program; the

company hires only the best people for the vacant position), and training (the

company offers opportunities to learn new things). Motivation enhancing was

measured through 11 items and designed to measure performance appraisal (the

performance review process is standardized and documented). Finally, 3 items was

used to measure empowerment enhancing practices (the job allows me to make my

own decisions about how to schedule my work). All items requires the use of a five-

point Likert scale ranging from (1 = strongly disagree to 5 = strongly agree).

Measurement model validity was assessed through confirmatory factor

analysis (CFA). The proposed model demonstrates high shared variance (AVE =.59),

indicating good convergent validity (Fornell & Larcker, 1981). Moreover, the model

fit was assessed using different combinations of fit indices including normed chi-

square, root mean square error of approximation (RMSEA), comparative fit index

(CFI), standardized root mean square residual (SRMR). Accordingly, the proposed

second-order HRM system fits the data well (χ2 = 171.620, p-value= .234, df. = 159,

χ2/df = 1.079, CFI = 996, RMSEA = .019, SRMR = .06). The first-order factors were

also found to be significantly (p<0.001) related to the second-order HRM system and

the standardized factor loadings ranged from .62 to .87. Thus, the three first-order

factors were considered valid indicators of the second-order HRM system.

One single factor analysis was conducted to assess discriminant validity

(Hair et al., 2010), which results in a poor convergent validity (AVE = .38). This

provides a good indication that the one factor model did not account for the majority

of the variance in the data. Hence, the second-order factor of HRM system was

considered good representative to the data.

AMO Model

Employees’ ability was measured through three items. An example includes (I have

the required skills and abilities to do my job effectively). Employees’ motivation was

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measured through 3 items based on previous literature. An example include (I feel a

sense of personal satisfaction when I do this job well). Opportunity to participate was

largely operationalized based on the work of Blumberg and Pringle (1982). An

example includes (I can use my personal judgments in carrying out my job). A five-

point Likert scale ranging from (1 = strongly disagree to 5 = strongly agree) was

used.

CFA analysis was conducted and indicated that the items of the three factors

have satisfactorily converged to represent their respective factor. This was clearly

indicated by the accepted AVE as presented in Table 1. Analyses of how well the

model fits the data also shows acceptable fit for the three factors AMO model (χ2 =

62.211, p-value= .000, df. = 30, χ2/df = 2.073, CFI = 955, RMSEA = .072, SRMR =

.05). A one-factor model was adopted to ensure discriminant validity. The one factor

model has shown poor model fit (χ2 = 365, p-value= .000, df. = 35, χ2/df = 10.428,

CFI = .532, RMSEA = .212, SRMR = .14). Accordingly, the AMO model with three

factors appears to be the one that fits the data well and hence considered valid.

Affective Commitment

Affective commitment was measured using 5 items adapted from Allen and Meyer

(1990). An example of affective commitment items includes “I would be very happy

to spend the rest of my career with this organization”. The measure employs a five

point Likert scale ranging from (1-strongly disagree to 5- strongly agree). The

measurement model has achieved high convergent validity with an AVE of .66. Also,

the model has shown very good fit to the data (χ2 = 6.071, p-value= .108, df. = 3,

χ2/df = 2.023, CFI = .995, RMSEA = .070, SRMR = .01).

TABLE1. AVERAGE VARIANCE EXTRACTED AND INTERNAL

CONSISTENCY

Variable No. of

items

AVE Cronbach’s alpha α

HRM system 23 .59 .93

Skills enhancing practices 9 .50 .89

Motivation Enhancing practices 11 .50 .91

Empowerment enhancing

practices

3 .67 .83

AMO Model

Ability 3 .54 .73

Motivation 3 .53 .77

Opportunity to participate 4 .54 .80

Affective commitment 5 .66 .91

Since the current study has relied on a self-reported questionnaire

administered at a single point in time, the possibility of a common method bias

becomes high and warrant further investigation. Harman’s single-factor test was used

to investigate any potential influence of common method bias (Podsakoff et al.,

2003). The result of the un-rotated exploratory factor analysis with a principal

component analysis indicates 8 different factors extracted with an eigenvalue greater

than 1. The 8 factors extracted explain about 69% of the variance. Therefore,

common method bias is of a little concern.

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Data Analysis

Before commencing data analysis, a close attention was made regarding the rigor of

the data in terms of missing values, outliers and normality. Missing data was

addressed by adopting expectation-maximization (EM) algorithm (Dempster et al.,

1977). Outliers were determined by comparing the mean against the trimmed mean

(Miller, 1993). Normality was detected through the standardised kurtosis and

skewness, which revealed normal distribution of all the variables under the critical

values of ± 1.96 and ± 2.58. Structural equation modelling SEM through AMOS22

was used to build the measurement model and test the hypotheses. SEM is considered

appropriate for the current study because the research model is perceived as a path

analytic model that includes latent variables which are measured using multiple

items. Finally, Baron and Kenny (1986) mediation method was followed to test the

mediation of the AMO model.

RESULTS

Descriptive statistics

Table 2, presents the descriptive statistics and the inter-correlations of HRM system,

AMO model, and employees’ affective commitment.

TABLE 2. DESCRIPTIVE STATISTICS AND CORRELATIONS

Variable Mean SD 1 2 3 4 5 1 HRM system 3.54 .598 1

2 Ability 4.31 .494 .294** 1

3 Motivation 4.35 .537 .221** .011 1

4 Opportunity to participate 4.00 .624 .354** .174* .339** 1

5 Affective commitment 4.02 .755 .608** .301** .310** .428** 1 Notes: **p<0.01, *p<.05

The results presented in table2, indicates that HRM system significantly correlate

with employees’ ability (r = 0.29), motivation (r = .22), opportunity to participate (r =

.35). This significant correlation supports the linkage between HRM system and each

factor of the AMO model. Moreover, HRM system was found to have strong

correlation with employees’ affective commitment (r = .60). Furthermore, the three

factors of the AMO model have shown significant correlation with employees’

affective commitment, and thus, support the linkage between the AMO model and

affective commitment.

Structural Equation Models and Hypotheses Testing

The current model has achieved mixed results in terms of model fit (χ2/df = 2.126, P

= .000, CFI = .873, RMSEA = .073, SRMR = .076). A close examination was made

of both standardized residual covariance and the modification indices has revealed

that better model fit might be achieved if the error terms between the AMO model

and affective commitment allowed to be covered. Error covariance between the

factors is a common practice especially when the different variables were measured

through the same questionnaire and by using the same response scale (Rogg al.,

2001). The resulted model after allowing for error covariance has achieved

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admissible model fit (χ2/df = 1.197, P = .002, CFI = .981, RMSEA = .03, SRMR =

.05). The standardized factor loadings and parameter estimates of the respecified

model are presented in figure 2.

FIG.2 THE OPERATIONAL MODEL OF THE HRM-AFFECTIVE

COMMITMENT RELATIONSHIP

TABLE 3. HYPOTHESES TESTING AND MEDIATION RESULTS

Model1 Model2 Model3 Model4

Path Std.β Std.β Std.β Indirect

effect. Conclusion

HRM system -> Ability -

> Affective commitment

.37*** .35*** .64*** .12** Partial

mediation

HRM -> Motivation ->

Affective commitment

.21** .45*** .64*** .13** Partial

mediation

HRM -> Opportunity ->

Affective commitment

.49*** .49*** .64*** .29** Partial

mediation

HRM system R2 (∆R2)

F-statistic

.37(.34)

116.02

Ability R2 (∆R2)

F-statistic

.13(.10)

18.67

.12(.09)

19.79

Motivation R2 (∆R2)

F-statistic

.05(.02)

10.15

.20(.17)

21.10

Opportunity R2 (∆R2)

F-statistic

.24(.21)

28.32

.24(.21)

44.49

Notes: ***p<0.001, **p<.01.

25

Mediation and Regression Analysis

Research hypotheses were tested using four models as presented in table 3. The first

model focuses on answering hypothesis 1 by testing the effect of HRM system on the

AMO model. The results indicate that HRM system has moderate effect on

motivation (β = .21), whereas relatively strong effect was found on both employees’

ability (β = .37) and opportunity to participate (β = .49). Thus, hypothesis 1 was

supported. Hypothesis 2a was tested through model2. When controlling for HRM

system, employees’ ability (β = .35), motivation (β = .45), and opportunity to

participate (β = .49) were all found significantly predicting affective commitment.

Hence, hypothesis 2a is supported. Model 3 delineate the relationship between HRM

system and affective commitment. The results indicate that HRM system has a

significant direct effect on affective commitment (β = .64). The final step in assessing

mediation is to estimate the indirect effect of HRM system on affective commitment.

The indirect effect was assessed through a bootstrapped confidence interval with a

500 sample being requested (Bollen & Stine, 1990). The result indicates that the

effect of HRM system on affective commitment, after entering the AMO model, has

dropped significantly. Accordingly, the results suggest that large proportion of the

effect of HRM system on affective commitment is mediated by the AMO model.

Hence, hypothesis 2b is partially supported.

DISCUSSIONS

This study has contributed to the field of HRM by studying the effect of HRM system

on employees’ affective commitment, taking into account the mediating role of the

AMO model. Theoretically, Guest (1997) has argued that in order to better

understand the HRM-performance relationship, a theory about how HRM in linked to

performance must be developed. The current study has focused on one of the most

important mediator in the HRM-performance relationship namely AMO model.

Unlike previous literature, the current study has focused on investigating the three

main factors of the AMO model simultaneously. The results found in this study

indicate that HRM system directly and significantly affects employees’ ability,

motivation, and opportunity to participate. An interesting finding is that Katou and

Budhwar (2010) have studied the effect of resourcing and development –a concept

closely related to skills enhancing HRM practices- on employees’ skills, and found

the effect to be almost similar to what we have reported in this study of (β = .37).

Also, the results of this study are consistent with Peccei and Rosenthal (2001) study,

were HR practices found to have significant and positive effect on employees’ job

autonomy which corresponds to opportunity to participate.

Although motivation was found to be significantly related to the HRM

system, it does not show as strong relation as that found with either ability or

opportunity to participate with HRM system. Such a relatively moderate effect of

HRM system on motivation may be attributed to the fact that employees working in

the telecommunications sector in Kuwait are well educated, highly skilled, and

financially supported from Kuwait government. Thus, both skills and motivation

enhancing HRM system may have little to do with motivating already skilled and

financially supported employees. This was supported by the insignificant correlation

found between employees’ ability and motivation as presented in table 2. The

relatively weak effect of HRM system on motivation was also found to be consistent

with previous literature such as Gould-Williams (2004) which has concluded that two

26

out of ten high commitment HRM practices were found to have significant effect on

employees’ motivation.

Finally, unlike previous literature that focus on the direct effect of HRM on

affective commitment such as (Chang & Chen, 2011; Gilber et al., 2011), the current

study has supported that the relationship between HRM system and affective

commitment is partially mediated by the AMO model. The results are consistent with

the social exchange theory (Blau, 1964). The results indicate that when employees

perceived that the organization is interested in improving their skills and abilities,

cares about their well-being by providing them adequate compensation, and show

faith in them by designing the job in ways that enables them to effectively participate,

they will feel a sense of obligation and return the favour by showing high affective

commitment. Such empirical indirect effect is in line with Mathieu and Zajac (1990)

meta-analysis that employees’ skills and autonomy are among the possible direct

antecedents of employees’ commitment. Also, the findings were found to be

consistent with Meyer and Smith (2000) study of a mediation model in the HRM-

organizational commitment relationship.

LIMITATIONS AND FUTURE IMPLICATIONS

The current study is not free from limitations. First, this study has relied on cross-

sectional data to infer cause-and-effect relationship. Cause and effect relationships

cannot be determined precisely through cross-sectional data. In order to overcome

such limitation, path analysis via SEM was used According to Lieras (2004), path

analysis techniques can help in determining “complex” relationships and specify the

“most significant” cause and effect relationships. Consequently, future research may

take the advantage of considering longitudinal methodologies in order to infer more

accurate cause-and-effect relationships.

Second, the AMO model was investigated as a mediator in the HRM-

affective commitment relationship. The exact mechanism through which employees’

ability, motivation, and opportunity to participate are operationalized is not

investigated in this study. According to the literature, the effect of AMO model is

based on the extent to which the three factors interact or complement each other

(Blumberg & Pringle, 1982). Therefore, more research is needed to explore the

mechanism through which the AMO model can be operationalized so as to achieve

the desired performance.

Generally, it could be said that the study’s contributions to the field of HRM

outweigh its limitations. First, the current study is considered among the first studies

that investigate the three factors AMO model simultaneously in one study. The AMO

model is considered among the most frequently studied model in the HRM-

performance literature. The literature has focused mainly on theorizing the AMO

model at the expense of empirically approving it. Thus, this study provides an

empirical basis for approving the effectiveness of such model as a mediating variable.

27

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