This thesis proposes that a new construct labeled HRM legitimacy, shared organizational climate, and employee discretionary behaviors are important intermediate variables in the relationship between high-performance work practices and firm performance. Using theory from strategic human resource management, psychology, and communications, human resource management systems are reconceptualized as signals from management to employees. It is then argued that shared organizational climate and employee discretionary behavior mediate the HR practices- firm performance relationship, and that HR legitimacy moderates the relationship between HR practices and organization climate, which affects performance through employee discretionary behavior. Results largely support the mediating roles of climate and discretionary behavior, but show no support for the proposed moderators.