Innovation is one of the vital processes through which organizations achieve competitive advantage in the dynamic knowledge-driven economy. Effective management of human capital is a key component for organization-wide innovation. This article focuses on the essential human resource policies and practices through which organizations can create and preserve a culture which fosters innovation.

Innovation is the specific instrument of entrepreneurship... the act that endows resources with a new capacity to create wealth.

LG Electronics, one of the major global companies in consumer durables sector, has established itself as a leader in different product - segments like Color TVs and refrigerators within a decade of its entry into India. Net content with Rs. 7,500 cr turnover in 2005, the company is focused on doubling its sales volume and profit by 2010. In sync with its global strategy, LG plans to achieve its target through innovation in its products. The company proclaims that "fast innovation" will be one of the crucial strategies aimed to achieve growth.

Obviously, innovation as a strategy for achieving sustainable growth and competitive advantage is not being followed by LG alone. In a global market fraught with competition, innovation as an organizational strategy has been successfully executed by major companies like 3M, Hewlett & Packard, Johnson & Johnson, Whirlpool, Microsoft and the likes for years. Today, the importance of innovation is even more in an economy which is driven by knowledge as knowledge leads to innovation. The reservoirs of knowledge are human resources in any organization. This is why the Human Resource Management (HRM) function can play a pivotal role in fostering innovation within the organization and creating a culture of innovation.

HRM Review Magazine, Innovating Organization, Strategic Human Resource Management, Human Resource Policies, Knowledge-driven Economy, LG Electronics, Global Companies, Global Strategy, Global Markets, Hewlett & Packard, Products and Services, Organizational Structure, Innovative Organizations, Career Development, Decision-Making Process, Domestic Economy.