Linking Human Resource Management, Human Capital Development, and Innovation Adoption to Sustainable Firm Performance: Insights from the Ornamental Plant Agribusiness Sector

Abstract

The ornamental plant industry in East Java holds substantial potential but faces challenges such as intense market competition, shifting consumer preferences, and the continuous demand for innovation. This study examines the influence of human resource management (HRM) practices on workforce capability enhancement, innovation uptake, and their implications for organizational outcomes in ornamental plant enterprises in Surabaya and Malang. A quantitative approach was applied using Structural Equation Modeling–Partial Least Squares (SEM-PLS) based on data collected from 150 human resource managers. The results indicate that effective HRM practices significantly strengthen workforce capabilities, which subsequently enhance firms’ capacity to adopt innovation. Innovation uptake plays a critical role in improving organizational outcomes, particularly in productivity, product quality, and long-term business viability. Furthermore, the findings confirm the presence of indirect effects through the mediating roles of workforce capability enhancement and innovation uptake. These results support the integration of the Resource-Based View, Knowledge-Based View, and Dynamic Capabilities perspective in explaining performance improvement mechanisms within ornamental plant agribusinesses. From a broader perspective, strengthening HRM systems, investing in employee competencies, and accelerating innovation uptake contribute not only to firm competitiveness but also to sustainable agribusiness development by supporting resilient agricultural enterprises, improving rural employment quality, and advancing the achievement of SDG 8 and SDG 12.