There is growing evidence available to suggest that Human Resource Management (HRM) practice is an important predictor of organizational performance. Drawing upon organizational learning perspectives, we argue that HRM systems also have the potential to promote organizational innovation. We present longitudinal data from thirty-five UK manufacturing organizations to suggest that effective HRM systems – incorporating sophisticated approaches to recruitment and selection, induction, appraisal and training – predict organizational innovation in products and production technology. We further show that organizational innovation is enhanced where there is a supportive learning climate, and inhibited (for innovation in production processes) where there is a link between appraisal and remuneration.