Interplay of Institutional Ownership and Negative Media Coverage on Firms’ High‐Investment Human Resource Management Systems

ABSTRACT We respond to calls for research on the antecedents of human resource management (HRM) systems by exploring the main effects of institutional ownership and the moderating role of negative media coverage. Drawing upon resource dependence theory, we propose that a firm's dedicated institutional ownership is positively related to its use of high‐investment HRM systems. Conversely, transient institutional ownership is negatively associated with such use. Additionally, we theorize that negative media coverage related to labor and employment issues weakens both the positive relationship of dedicated institutional ownership and the negative relationship of transient institutional ownership with high‐investment HRM systems. Using longitudinal archival data on a sample of US‐listed firms from 2007 to 2017 ( N = 5727 firm‐year observations), we found support for a positive relationship between dedicated institutional ownership and high‐investment HRM systems as well as the role of negative media coverage in weakening the positive relationship of dedicated institutional ownership and the negative relationship of transient institutional ownership with high‐investment HRM systems. Our paper advances research on antecedents of HRM systems by highlighting the roles of external stakeholders in affecting firms’ HRM systems. It also contributes to resource dependence theory by showing how firms manage their dependencies on multiple stakeholders. Our findings provide implications for both practitioners and policymakers.