Reflecting on the last decade of research in the area of HRM, the main emphasis has been on the relationship between HRM and Performance. Thanks to empirical research –carried out on both sides of the Atlantic- our understanding has improved. Performance has been measured both at individual level, team level and firm level. Theoretical and methodological issues have been debated and researchers could benefit from it in order to develop more advanced approaches. The abundant attention for the whole issue of how HRM-policies and –practices can have an effect on performance has also certain drawbacks. One of them is the neglecting of factors, which seem to be determinative in the shaping of HRM policies and –practices, irrespective whether they have an impact on performance or not. After all, HRM is more than only contributing to performance in whatever meaning. A number of practices and policies are simply implemented due to legislation, CBA’s, fashion, imitation out of uncertainty and/or the wish to contribute to feelings and expectations of fairness/equity etc.
Based on recent developments in two streams of theoretical thinking, i.e new institutionalism and strategic management (especially co-evolution and absorptive capacity), we contrast economic rationality with normative rationality. Economic rationality can be used (for example from a RBV perspective) to account for the relationship between HRM and Performance, whereas normative rationality can account for the shaping of HRM practices irrespective of a possible effect on performance. In our paper the focus is on how organisations select and adapt best practices. We develop a hypothetical framework, which accounts for the selection and adoption of best practices among companies using insights from new institutionalism (especially isomorphism), co-evolution and absorptive capacity. In this way we are able to construct the life cycle of an HRM best practice and the way in which companies differ in their speed of selection and adoption of best practices and the consequences this has for whether or not being able to achieve a competitive advantage. Following our theoretical argument we present some illustrative examples and a set of hypotheses to be tested for in follow-up research.