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Investigating reverse causality between human resource management policies and organizational performance in small firms

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  • Anastasia A. Katou

Abstract

Purpose - The purpose of this paper is to test reverse causality between human resource management (HRM) policies and organizational performance, through the intervening steps of employee attitudes (satisfaction, commitment, motivation) and employee behaviors (absences, turnover, disputes), which are still relatively untested in small firms and in a non‐US/UK context such as Greece. Design/methodology/approach - Structural equation modeling was used to survey data from 197 small Greek private companies (manufacturing, services, trade) to examine causal inferences. Findings - The study finds that HRM policies, being contingent on business strategies (cost, innovation, quality), have a positive effect on organizational performance through employee attitudes and employee behaviors. Furthermore, the study supports the view that although HRM policies do not directly lead to high organizational performance, it is high‐performing firms that can directly afford HRM policies. Research limitations/implications - Although time‐lags are not present in the study in order to test time‐dependent reverse causality, the concept of instant changes is used to empirically demonstrate, through a simultaneous equation system, the causal order of the variables involved in the relationship under consideration. Practical implications - Based on the business strategies of improvement of goods, quality enhancement and improvement of service, rather than on trying to cut costs and prices, the findings have implications for practitioners seeking to design HRM policies that will improve organizational performance. Originality/value - The paper examines reverse causality within a simultaneous equations system expressing the relationship between HRM policies and organizational performance.

Suggested Citation

  • Anastasia A. Katou, 2012. "Investigating reverse causality between human resource management policies and organizational performance in small firms," Management Research Review, Emerald Group Publishing Limited, vol. 35(2), pages 134-156, January.
  • Handle: RePEc:eme:mrrpps:v:35:y:2012:i:2:p:134-156
    DOI: 10.1108/01409171211195161
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    Citations

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    Cited by:

    1. Nura Abubakar Allumi (PhD), 2015. "Performance Management System in Nigerian Higher Educational Institutions: Proffering a Double Mediation Model," Journal of Social Sciences (COES&RJ-JSS), , vol. 4(2), pages 828-840, April.
    2. Sleimi, Mohammad Tahseen & Emeagwali, Okechukwu Lawrence, 2017. "Do employee attitudes mediate the relationship between strategic human resource management practices and organizational effectiveness? A SEM based investigation using SMART-PLS software," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 13(1).
    3. Nura Abubakar Allumi (PhD), 2015. "Performance Management System in Nigerian Higher Educational Institutions: Proffering a Double Mediation Model," Journal of Business & Management (COES&RJ-JBM), , vol. 3(4), pages 477-490, October.
    4. Vu Hoang Nam & Hiep Ngoc Luu, 2022. "How Do Human Resource Management Practices Affect Innovation of Small- and Medium-sized Enterprises in a Transition Economy?," Journal of Interdisciplinary Economics, , vol. 34(2), pages 228-249, July.
    5. Rauch, Andreas & Hatak, Isabella, 2016. "A meta-analysis of different HR-enhancing practices and performance of small and medium sized firms," Journal of Business Venturing, Elsevier, vol. 31(5), pages 485-504.

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