e strategy, it is obvious though that from resource-based approach, unique human resource capabilities - development of a core competence will create competitive advantage for firms, hence could contribute to profits and growth.Chinese state-owned enterprises are operating under the transitional economy, and HR functions in most of the SOE’s have been directed slowly away from the previous mode of planned organism and transformed toward modes more related to a market-oriented system. While most of western enterprises operate under free market system, they tend to be inward-looking, and start their HRM approach from pursuing internal set of ideal practices to improve internal management and achieve fitness for gaining market advantages. Once that is established, strategic human resource management approaches are sought to respond to increasing changing external environment to gain competitiveness. Chinese enterprise may well be an opposite case. It started with the government’s open policy which brought in competition. Firms (particularly state owned enterprises) have been challenged first for profitability, then market competitiveness. If the state could exercise intervention to keep profitability and market competitiveness by price control (i.e. distorted price as mostly reflected as monopolized pricing policies), internal management to solve inefficiency problem would be largely ignored. So enterprise performance is largely affected by external factors such as the nature of market, legislation changes and own industry characteristics. Firms tend to set up business strategies to respond to these changes, and HRM strategy and practice (if necessary) would be set up to match the focused objective of achieving profitability and market advantages. Hence, to examine the relationship of HRM practice and enterprise performance in Chinese enterprises, the concept of “fit as strategic interaction” and “fit as cont...
