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The Diversity of Personnel Practices and Firm Performance


  • Pedro S. Martins


Personnel economics tends be based on single-firm case studies. Here we examine the personnel practices of nearly 5,000 firms, over a period of 20 years, using detailed matched employer-employee panel data from Portugal. In the spirit of Baker et al (1994a, b), we consider different dimensions of personnel management within each firm: worker turnover, the role of job levels and human capital as wage determinants, the dispersion of wages within job levels, the importance of tenure in terms of promotions and exits, and the scope for careers. We find a large degree of diversity in most of these practices across firms. Moreover, some personnel practices are shown to be robust predictors of higher levels of firm performance, even after controlling for time-invariant firm heterogeneity and other variables: low wage dispersion at low and intermediate job levels and a tight relationship between human capital variables and wages.

Suggested Citation

  • Pedro S. Martins, 2015. "The Diversity of Personnel Practices and Firm Performance," Working Papers 62, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
  • Handle: RePEc:cgs:wpaper:62

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    References listed on IDEAS

    1. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    2. Hibbs, Douglas A, Jr & Locking, Hakan, 2000. "Wage Dispersion and Productive Efficiency: Evidence for Sweden," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 755-782, October.
    3. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-880, June.
    4. Pedro S. Martins, 2011. "Paying More To Hire The Best? Foreign Firms, Wages, And Worker Mobility," Economic Inquiry, Western Economic Association International, vol. 49(2), pages 349-363, April.
    5. Ariga, Kenn & Ohkusa, Yasushi & Brunello, Giorgio, 1999. "Fast track: is it in the genes? The promotion policy of a large Japanese firm," Journal of Economic Behavior & Organization, Elsevier, vol. 38(4), pages 385-402, April.
    6. Martins, Pedro S., 2008. "Dispersion in wage premiums and firm performance," Economics Letters, Elsevier, vol. 101(1), pages 63-65, October.
    7. Pedro S. Martins, 2009. "Dismissals for Cause: The Difference That Just Eight Paragraphs Can Make," Journal of Labor Economics, University of Chicago Press, vol. 27(2), pages 257-279, April.
    8. Martins, Pedro S., 2014. "30,000 Minimum Wages: The Economic Effects of Collective Bargaining Extensions," IZA Discussion Papers 8540, Institute for the Study of Labor (IZA).
    9. Treble, John & van Gameren, Edwin & Bridges, Sarah & Barmby, Tim, 2001. "The internal economics of the firm: further evidence from personnel data," Labour Economics, Elsevier, vol. 8(5), pages 531-552, December.
    10. Pedro S. Martins & Gary Solon & Jonathan P. Thomas, 2012. "Measuring What Employers Do about Entry Wages over the Business Cycle: A New Approach," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(4), pages 36-55, October.
    11. George Baker & Michael Gibbs & Bengt Holmstrom, 1994. "The Internal Economics of the Firm: Evidence from Personnel Data," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 881-919.
    12. Lima, Francisco & Pereira, Pedro T., 2001. "Careers and Wage Growth within Large Firms," IZA Discussion Papers 336, Institute for the Study of Labor (IZA).
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    More about this item


    Personnel Economics; Job Levels; Wages; Big Data;

    JEL classification:

    • 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
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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