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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

Listed:
  • Luc Sels

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

Abstract

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

Suggested Citation

  • Luc Sels & Sophie Winne & Jeroen Delmotte & Johan Maes & Dries Faems & Anneleen Forrier, 2006. "Linking HRM and Small Business Performance: An Examination of the Impact of HRM Intensity on the Productivity and Financial Performance of Small Businesses," Small Business Economics, Springer, vol. 26(1), pages 83-101, February.
    • Handle: RePEc:kap:sbusec:v:26:y:2006:i:1:p:83-101
    DOI: 10.1007/s11187-004-6488-6
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    JEL classification:

    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training

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