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Steering towards the High Road: A Study of Human Resource Management in Two Indian Garment Factories


  • Lake, Henrietta

    () (Lake Advisory, London)


What are the performance benefits of investing in human resources in a low-cost labor environment where returns to such investment are widely perceived as negligible? This paper presents a matched pair case study on the performance effect of human resource management systems at two garment factories manufacturing for export in India. They make the same product for the same buyer with the same local pool of labor. One factory views its workforce as a variable cost to be minimized, limits training, prefers strict hierarchy and job definitions. It relies on a range of factors including the offer of overtime and a lack of available alternatives to workers for retention. The other factory, which is located almost next door and pays the same basic wage, focuses on skills development, opportunities for promotion and encouraging employee participation. Employee turnover at the first factory is almost three times greater than that of the second, its absenteeism one third higher, while its product quality is 2.6 times lower and its production efficiency over 28 percent lower. This study demonstrates that even in a low-wage environment, HRM and work organization have a tangible and independent impact on performance.

Suggested Citation

  • Lake, Henrietta, 2007. "Steering towards the High Road: A Study of Human Resource Management in Two Indian Garment Factories," IZA Discussion Papers 3227, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3227

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    References listed on IDEAS

    1. Sandra E. Black & Lisa M. Lynch, 2004. "What's driving the new economy?: the benefits of workplace innovation," Economic Journal, Royal Economic Society, vol. 114(493), pages 97-116, February.
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    4. Barton H. Hamilton & Jack A. Nickerson & Hideo Owan, 2003. "Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 465-497, June.
    5. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-817, August.
    6. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
    7. Min, Wei-Fang & Tsang, Mun Chiu, 1990. "Vocational education and productivity: A case study of the Beijing General Auto Industry Company," Economics of Education Review, Elsevier, vol. 9(4), pages 351-364, December.
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    More about this item


    human resource management; labor productivity; labor standards; India; garments;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J8 - Labor and Demographic Economics - - Labor Standards
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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