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HR Practices and Firm Performance: What Matters and Who Does It?

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Author Info

  • Fabling, Richard

    (Ministry of Economic Development, New Zealand)

  • Grimes, Arthur

    ()
    (Motu Economic & Public Policy Research and University of Waikato)

Abstract

We examine the impact of human resource practices on firm performance. The analysis uses data from an economy-wide survey to determine whether firms that adopt certain individual HR practices, or that adopt a suite of practices, perform better than their rivals. We find that adoption of a suite of high performance practices (and adoption of specific practices pertaining to staff training and performance pay) impacts positively on firm outcomes. The strength of the relationships differ by firm size and age, having their strongest impact on small and large firms; curiously they do not appear relevant for mid-sized firms. The nature of firms that adopt high performance practices varies strongly according to size, age and sector.

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Bibliographic Info

Paper provided by Ministry of Economic Development, New Zealand in its series Occasional Papers with number 07/2.

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Length: 32 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:ris:nzmedo:2007_002

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Keywords: HR practices; performance pay;

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References

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  1. Fabling, Richard & Grimes , Arthur, 2006. "Practice Makes Profit: Business Practices and Firm Success," Occasional Papers, Ministry of Economic Development, New Zealand 06/1, Ministry of Economic Development, New Zealand.
  2. Addison, John T. & Belfield, Clive R., 2004. "Unions, Training, and Firm Performance: Evidence from the British Workplace Employee Relations Survey," IZA Discussion Papers 1264, Institute for the Study of Labor (IZA).
  3. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 19(2-3), pages 179-208, April.
  4. Joseph Blasi & Robert Buchele & Richard Freeman & Douglas Kruse & Chris Mackin & Loren Rodgers & Adria Scharf, 2004. "Motivating Employee Owners in ESOP Firms: Human Resource Policies and Company Performance," CEP Discussion Papers, Centre for Economic Performance, LSE dp0658, Centre for Economic Performance, LSE.
  5. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, American Economic Association, vol. 84(4), pages 972-91, September.
  6. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 70, pages 9.
  7. Sandra E Black & Lisa M Lynch, 2002. "What's Driving the New Economy? The Benefits of Workplace Innovation," Working Papers, Center for Economic Studies, U.S. Census Bureau 02-03, Center for Economic Studies, U.S. Census Bureau.
  8. Black, Sandra E & Lynch, Lisa M, 1996. "Human-Capital Investments and Productivity," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 263-67, May.
  9. Lalith Munasinghe & Brendan O'Flaherty, 2005. "Specific Training Sometimes Cuts Wages and Always Cuts Turnover," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 23(2), pages 213-234, April.
  10. Joshua D. Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 15(4), pages 69-85, Fall.
  11. Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 040, Institute for Empirical Research in Economics - University of Zurich.
  12. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(4), pages 801-17, August.
  13. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, American Economic Association, vol. 90(5), pages 1346-1361, December.
  14. Julia I. Lane & John C. Haltiwanger & James Spletzer, 1999. "Productivity Differences across Employers: The Roles of Employer Size, Age, and Human Capital," American Economic Review, American Economic Association, American Economic Association, vol. 89(2), pages 94-98, May.
  15. Haltiwanger, John C. & Lane, Julia I. & Spletzer, James R., 2007. "Wages, productivity, and the dynamic interaction of businesses and workers," Labour Economics, Elsevier, Elsevier, vol. 14(3), pages 575-602, June.
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Cited by:
  1. Richard Fabling & Arthur Grimes, 2009. "The "suite" smell of success: complementary personnel practices and firm performance," Reserve Bank of New Zealand Discussion Paper Series DP2009/13, Reserve Bank of New Zealand.
  2. Mok, Penny & Mason, Geoff & Stevens, Philip & Timmins, Jason, 2012. "A Good Worker is Hard to Find: Skills Shortages in New Zealand Firms," Occasional Papers, Ministry of Economic Development, New Zealand 12/5, Ministry of Economic Development, New Zealand.

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