Human Resource Management Practices Incorporating Local Wisdom: Evidence from Service Sector MSME's in Manado

Abstract

This study examines how local wisdom–based human resource management (HRM) practices shape the competitiveness of service-sector micro, small, and medium enterprises (MSMEs) in Manado City, Indonesia. Although SHRM and RBV emphasize contextual alignment and strategic resources, how local wisdom is transformed through everyday HRM practices into employee capabilities and competitive value remains underexplored in locally embedded MSMEs. Using a qualitative case study design, this research explores the relationships among local cultural values, HRM practices, employee capabilities, and organizational outcomes. The findings show that kinship, trust, and social cohesion underpin relationship-based recruitment, learning by doing, and participatory leadership. These practices contribute to service competence, loyalty, and work commitment, which support service quality, customer relationships, and perceived competitiveness. Theoretically, the study extends SHRM and RBV by demonstrating that local wisdom can function not merely as contextual influence but as a strategic organizational resource when embedded in HRM routines and translated into difficult-to-imitate capabilities. Practically, the findings support gradual hybridization of culturally embedded and structured HRM practices.