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Unravelling the HRM-Performance Link: Value-Creating and Cost-Increasing Effects of Small Business HRM

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Author Info

  • Luc Sels
  • Sophie De Winne
  • Johan Maes
  • Jeroen Delmotte
  • Dries Faems
  • Anneleen Forrier

Abstract

The majority of empirical studies on the HRM-performance link report a positive story. The costs associated with the productivity rise due to high performance work practices (HPWP) have been largely neglected. The purpose of this study is to develop a conceptual framework that maps both the value-enhancing and cost-raising impact of HPWP. In addition, we want to pronounce upon their overall effect on financial performance. To test our model, we rely on a sample of small businesses. Understanding both performance and cost-related effects of the implementation of HPWP is particularly valuable for small businesses since they often lack financial resources to implement HPWP and benefit less from economies of scale compared to their larger counterparts. Study results indicate that although greater use of HPWP is associated with increased productivity, this effect is offset by increased labour costs. However, we find an overall positive effect of HPWP on firm profitability. Copyright Blackwell Publishing Ltd 2006.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Management Studies.

Volume (Year): 43 (2006)
Issue (Month): 2 (03)
Pages: 319-342

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Handle: RePEc:bla:jomstd:v:43:y:2006:i:2:p:319-342

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2380

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Cited by:
  1. Czarnitzki, Dirk & Thorwarth, Susanne, 2012. "Productivity effects of basic research in low-tech and high-tech industries," ZEW Discussion Papers 12-027, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Ahmed Imran, Hunjra & Muhammad Irfan, Chani & Sher, Aslam & Muhammad, Azam & Kashif-Ur, Rehman, 2010. "Factors Affecting job satisfaction of employees in Pakistani banking sector," MPRA Paper 32130, University Library of Munich, Germany.
  3. Andries, Petra & Czarnitzki, Dirk, 2012. "Small firm innovation performance and employee involvement," ZEW Discussion Papers 12-013, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Petra Andries & Dirk Czarnitzki, 2014. "Small firm innovation performance and employee involvement," Small Business Economics, Springer, vol. 43(1), pages 21-38, June.
  5. Brigitte Kroon & Karina Voorde & Jules Timmers, 2013. "High performance work practices in small firms: a resource-poverty and strategic decision-making perspective," Small Business Economics, Springer, vol. 41(1), pages 71-91, June.

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