Purpose – State-led initiatives in Saudi Arabia have focused on ‘localisation’, a term, which here istaken to mean a state-led process to increase employment of workers from the local labour market,and displace workers from other countries. In Saudi Arabia, the ‘Nitaqat’ regulations in 2011 requiredprivate sector firms to recruit more Saudi nationals, limiting their access to the non-Saudi labourmarket, and penalising firms that did not comply. To cope with these staffing requirements, firmshave been incentivised to upgrade their approaches to HRM. Drawing on the concept of DynamicCapabilities, this study examines the development and use of human resource capabilities shortly afterthese regulations were implemented.
Aim – To understand the role of operational and dynamic HR capabilities in organisations’ abilitiesto manage external change.Design/methodology/approach – The paper uses a case study design and drew on both primaryand secondary data collected in 2013-2014. Data were 17 primary semi-structured interviews with keydecision makers of three private firms, and secondary government documentation on Nitaqat wereanalysed by means of a content analysis approach.
Findings – The present research reveals that HRM capabilities do not automatically lead to innovationor successful adaptation to external change, but rather, outcomes depend on how HR strategiesinteract with, and are shaped by other contextual, environmental factors.
Limitations of the study – The study is limited by its relatively small number of cases, and focus ona single country context.
Practical implications – The results may bring awareness as to the role of socio-cultural context inoperational and dynamic HR capabilities and this knowledge can benefit companies that face similarexternal pressures in the successful development of their capabilities.
Originality/value – The originality of the paper lies in its detailed consideration of how HRcapabilities shape, enable and constrain strategic choices during external change. It also points to thevital importance of sociocultural context in understanding how firms navigate change, with the useof HR capabilities being shaped considerably by this context