The role of HRM practices in firm innovation and product competitiveness: Implications for intra-regional trade

With increasing exposure to product market competition both in export markets and at the domestic level, in part due to deeper trade reforms pursued by East African countries as part of their integration agenda, the firm survival may hinge on innovative products and processes. Motivated by the theoretical and empirical findings that product competitiveness is positively correlated with product and process innovation and the potential facilitative role of human resource management (HRM) practices on innovative behaviour, this chapter provides insights on the link between HRM and firm innovation as a strategic response to foster product competitiveness for three East African countries, Kenya, Uganda and Tanzania. The chapter utilises a detailed firm survey dataset conducted by the World Bank through their enterprise surveys programme during 2013-2014 in the mentioned three East African countries. The preliminary findings from the chapter highlight the facilitative role of HRM practices on firm innovation in products and processes, the role of training in research and development (R&D) and the important role of innovation as a strategic counter to competitive pressure. Finally, enhanced product competitiveness attributed to the firm innovative activities fosters increased intra-regional trade. The facilitative role of HRM reinforces the relative importance of skill development policies that support firms in their innovation path.