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

  • Fabling, Richard

    (Ministry of Economic Development, New Zealand)

  • Grimes, Arthur


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

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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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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  1. 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).
  2. Ernst Fehr & Simon G�chter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
  3. Lalith Munasinghe & Brendan O'Flaherty, 2005. "Specific Training Sometimes Cuts Wages and Always Cuts Turnover," Journal of Labor Economics, University of Chicago Press, vol. 23(2), pages 213-234, April.
  4. 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 F97-F116, 02.
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  6. Joshua Angrist & Alan Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Working Papers 834, Princeton University, Department of Economics, Industrial Relations Section..
  7. 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, vol. 89(2), pages 94-98, May.
  8. John M. Abowd & John Haltiwanger & Julia I. Lane & Kristin Sandusky, 2001. "Within and Between Firm Changes in Human Capital, Technology, and Productivity Preliminary and incomplete," Longitudinal Employer-Household Dynamics Technical Papers 2001-03, Center for Economic Studies, U.S. Census Bureau.
  9. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September.
  10. John Haltiwanger & Julia Lane & James Spletzer, 2000. "Wages, Productivity, and the Dynamic Interaction of Businesses and Workers," NBER Working Papers 7994, National Bureau of Economic Research, Inc.
  11. Douglas Kruse & Joseph Blasi & Robert Buchele & Adria Scharf & Loren Rodgers & Chris Mackin & Richard B. Freeman, 2004. "Motivating employee owners in ESOP firms: human resource policies and company performance," LSE Research Online Documents on Economics 19930, London School of Economics and Political Science, LSE Library.
  12. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
  13. Richard B. Fabling & Arthur Grimes, 2007. "Practice Makes Profit: Business Practices and Firm Success," Small Business Economics, Springer, vol. 29(4), pages 383-399, December.
  14. Kandel, E. & Lazear, E.P., 1990. "Peer Pressure and Partnerships," Papers 90-07, Rochester, Business - Managerial Economics Research Center.
  15. Edward P. Lazear, 1996. "Performance Pay and Productivity," NBER Working Papers 5672, National Bureau of Economic Research, Inc.
  16. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
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