Competing through customization: Using human resource management to create strategic capabilities

Given the increasingly diverse customer preferences, customization has become a strategic opportunity for organizations to create value. There is no systematic effort, however, in understanding the implementation of customization as a competitive strategy. Based on theories of resources and capabilities and the multidimensional view of economic rents, we derive three strategies of customization-mass production, mass customization, and total customization-each creating a unique value for customers and incurring different costs. To bridge the gap in the human resources literature in delineating the strategic capabilities as an intermediate outcome of human resources systems, we further draw from organizational psychology perspectives to infer how the strategic capabilities for customization can be created through different human resources management systems.