Abstract—The empirical studies on High Performance Work Systems (HPWSs) and their impacts on firm performance have remarkably little in the developing countries. This paper reviews literatures on the HPWSs practices in different work settings, Western and Asian countries. A review on the empirical research leads to a conclusion that, country differences influence the Human Resource Management (HRM) practices. It is anticipated that there are similarities and differences in the extent of implementation of HPWSs practices by the Malaysian manufacturing firms due to the organizational contextual factors and, the HPWSs have a significant impact on firms’ better performance amongst MNCs and local firms. Keywords—Firm Performance, High Performance Work Systems (HPWSs), Human Resource Management (HRM), Multinational Corporations (MNCs). I. INTRODUCTION VER the past two decades, a series of empirical works has explored the linkages of High-Performance Work Systems (HPWSs) and their impacts on employee outcomes and firm performance. These high-performance work systems consisting of a range of innovative and interactive human resource management (HRM) practices or bundles of HRM practices designed to improve firm performance [1] are also known as “high-involvement management” (HIM) and “high-commitment management” (HCM) [2], [4]. Researchers have found that there is a positive link between HPWSs and organizational performance [2], [6]-[9] based on improvements in firms’ current and potential employees’ knowledge, skills and abilities (KSAs), motivation and commitment, eventually producing high quality employees [1], [6], [9]. Further, it has been found that, HRM practices, which are consistent with HPWSs, outperform traditional HR systems irrespective of their business strategies [1]-[2], [6], [9]-[12], [14]-[19]. The HPWSs concept emerged particularly in the western countries in systematically addressing the management of production workers [11]. HPWSs are designed to be matched with organizational strategies that concentrate on cost cutting and competitive product pricing [9] and varied by sector and business strategy [2], [6], [9] in different work environment settings [92]. Earlier literatures on HPWSs focused on the technological and market factors influencing HR systems of Japanese manufacturers in 1970s and 1980s, including quality Shaira Ismail is with Universiti Teknologi Mara, Pulau Pinang, Malaysia (phone: +61421995017 or +60173111540; email: sheeraz_tz@yahoo.my or sheeraz@ppinang.uitm.edu.my). circle techniques, just-in-time inventory and delivery, and team-based production [133]-[134]. The Japanese manufacturers believe that, these practices provide a degree of control over employees’ job performance, increasing motivation levels and commitment towards improved production systems for a better quality of outputs. [11] have claimed that, these kinds of changes to HR systems within production systems have led to major changes in steel making and car production in the western manufacturing through the implementation of a comprehensive recruitment and selection methods as well as better training and development activities. The HPWSs practices are able to produce a high work quality and output through employees’ empowerment system in the decision making process. The subsequent improvements in the team and company based performance further increase employees’ commitment [134]. II. HIGH PERFORMANCE WORK SYSTEMS (HPWS) IN THE WESTERN AND ASIAN SETTINGS Nowadays, support for the perceived importance of High- Performance Work Systems (HPWSs) continues to grow [13], [16], [32]. HPWSs contribute significantly to the firm performance [3], [11], [23]-[24], [32]. The implementation of HPWSs has been proven effective in the Western settings and, of course, in Japan, but questions remain about their practicability in different cultural settings in other parts of East and Southeast Asia [3], [24]. At the same time, American firms have invested heavily in this region and expanded their HPWS practices into their Asian business operations. European and Japanese Multinational Corporations (MNCs) had also implemented HPWS practices in the Asian countries where they operate, and they appear to have had a positive influence on the local firms HR system [25]. Some of the empirical studies carried out have demonstrated that the implementation of HPWSs is effective in Asia [3], [26]-[28]. A study conducted in Korea demonstrated that, the adoption of HPWSs in many Korean firms has increased the firm performance [29]. In contrast, [30] survey involving 222 firms in Singapore found modest support for the hypothesis that the bundle of HR practices surveyed had a positive correlation with firm performance. Nevertheless, another study conducted by [31] consisting of 191 firms in the same country has revealed that HPWSs are significantly associated with firm performance. The impact of HPWSs on firm success has an influence on managerial perspectives as well as governments and economic policy Shaira Ismail The Impact of High Performance Work Systems’ on Firm Performance in MNCs and Local Manufacturing Firms in Malaysia O World Academy of Science, Engineering and Technology International Journal of Economics and Management Engineering Vol:6, No:11, 2012 3034 International Scholarly and Scientific Research & Innovation 6(11) 2012 ISNI:0000000091950263 Open Science Index, Economics and Management Engineering Vol:6, No:11, 2012 publications.waset.org/3957/pdf