One of the more fundamental aspects of the ongoing debate about the added value of HRM relates to ‘best practice’ versus ‘best fit’. ‘Best practice’ argues for the universal success of certain HR practices while ‘best fit’ acknowledges the relevance of contextual factors. This article argues that differences in institutional settings affect the nature of HRM. To understand this phenomenon, HRM needs additional theory. This article uses ‘new institutionalism’ and the theoretical notions of organizational justice and organizational legitimacy as a better way to understand the shaping of HR policies and practices in different settings. This article offers an explicit account of the importance of societal embeddedness in HRM. As an independent variable, societal embeddedness can have an important influence on the shaping of HR policies and practices and their subsequent effect on performance. It takes a closer look at the field of HRM itself, especially focusing on strategic contingency approaches in HRM.