Today, human resources are seen as "the available talents and energies of people who are available to an organization as potential contributors to the creation and realization of the organization's mission, vision, strategy and goals" (Jackson and Schuler, 2000, p. 37).There exist two models that seek to describe what strategy is and how an organization should develop such strategy. The first model known as the Industrial Organization (I/O) model is based on the assumption that firms competing in the same industries are homogenous and emphasizes the external environment as the basis for organizational decision making. The second model, called the Resource Based View contrasts the I/O model by assuming that individual firms are unique and
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While RBV may not have contributed directly to this evolution of SHRM, it did play a major role in its development. The development of SHRM only initiated when HR researchers realized that RBV provided a compelling explanation as to why HR practices led to competitive advantage. RBV highlights the necessity of internal factors and resources as sources of competitive advantage and this conjecture catapulted the great importance of employees (human resource) to the forefront of HR theory. RBV has placed people' on the HR map thereby justifying the concepts laid out by SHRM. This is supported by Barney's (1991) article discussing the basic theoretical model and conditions for sources of sustainable competitive advantage.
SHRM makes managing people top priority and assimilates all HR programs and policies into the company's strategy. RBV demonstrates how valuable resources that are neither perfectly imitable nor substitutable without great effort (Hoopes, 2003, p891; Barney, 1991, p117), can assist the firm in sustaining above average returns. Huselid (1995) argued that HR practices can help create a source of competitive advantage, if they are aligned with the firm's competitive strategy. Wright and colleagues (1994) applied the resource based approach of strategic management to examination of the role of human resources in developing competitive advantage. According to their model,