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Purpose ‐ Research in strategic human resource management (HRM) has focused mainly on the effects of HRM practices or systems on organizational effectiveness. However, institutional theory argues that besides being financially successful, organizations also need legitimacy to survive. Owing to the tension between competitive and institutional pressures, organizations balance between the degree of conformity and the degree of differentiation from competitors regarding HRM. The purpose of this paper is to address how institutional pressures help shape HRM. Design/methodology/approach ‐ Using the concepts of leeway, human agency and strategic choice, differences in three types of institutional fit are highlighted: innovative, conformist and deviant. A comparative case study approach is used in order to illustrate the framework, using document analysis and 43 interviews in three organizations in The Netherlands. Findings ‐ This paper shows how balancing competitive and institutional pressures in organizations affects HRM. The cases illustrate the proposed theoretical framework, showing leeway, human agency, strategic choice and the nature of institutional fit. The organizations each illustrate a type of institutional fit. Moreover, not the institutional context itself, but the organization's response seems to make a difference for the nature of institutional fit. Originality/value ‐ While previous studies focus on the effects of HRM on organizational effectiveness, this paper examines how the balance between competitive and institutional pressures affects HRM and aims to show that institutional fit can contribute to strategic HRM by providing insight in this more balanced goal setting of organizations.