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Linking HRM and Small Business Performance: An Examination of the Impact of HRM Intensity on the Productivity and Financial Performance of Small Businesses


Author Info

  • Luc Sels


  • Sophie Winne
  • Jeroen Delmotte
  • Johan Maes
  • Dries Faems
  • Anneleen Forrier


Attempts to explore empirically the link between HRM and firm performance are numerous. Yet, research on this link remains restricted to large companies. Little is known about the extent to which the existing results extend to small businesses. The purpose of the present study is to develop and test a conceptual framework linking HRM to financial performance that fits small businesses. The central question is whether the development of an intensive HRM is profitable for smaller organizations. For the development and optimization of the conceptual framework, we rely on human capital theory and bankruptcy prediction models. Using structural equation modeling, we study the mediating effect of voluntary turnover and productivity on the relationship between HRM intensity and one year lagged financial performance. The results show both productivity and profitability enhancing effects as well as a cost increasing impact of HRM intensity. Copyright Springer 2006

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Bibliographic Info

Article provided by Springer in its journal Small Business Economics.

Volume (Year): 26 (2006)
Issue (Month): 1 (02)
Pages: 83-101

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Handle: RePEc:kap:sbusec:v:26:y:2006:i:1:p:83-101

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Related research

Keywords: financial performance; HRM; productivity; small business management; voluntary turnover; C39; M50; M51; M52; M53;

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Cited by:
  1. Fabling, Richard, 2007. "Just How Innovative are New Zealand Firms? Quantifying & Relating Organisational and Marketing Innovation to Traditional Science & Technology Indicators," Occasional Papers 07/4, Ministry of Economic Development, New Zealand.
  2. Kidwell, Roland E. & Hoy, Frank & Ibarreche, Santiago, 2012. "“Ethnic” family business or just family business? Human resource practices in the ethnic family firm," Journal of Family Business Strategy, Elsevier, vol. 3(1), pages 12-17.
  3. Zélia Serrasqueiro & Paulo Maçãs Nunes, 2008. "Performance and size: empirical evidence from Portuguese SMEs," Small Business Economics, Springer, vol. 31(2), pages 195-217, August.
  4. VAN DEN BERG, Annette & VAN WITTELOOSTUIJN, Arjen & BOONE, Christophe & VAN DER BREMPT, Olivier, 2011. "The impact of representative employee participation on organisational performance," ACED Working Papers 2011013, University of Antwerp, Faculty of Applied Economics.
  5. VAN DEN BERG, Annette & VAN WITTELOOSTUIJN, Arjen & BOONE, Christophe & VAN DER BREMPT, Olivier, 2011. "The impact of representative employee participation on organisational performance," Working Papers 2011019, University of Antwerp, Faculty of Applied Economics.


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