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Unravelling the HRM–Performance Link: Value‐Creating and Cost‐Increasing Effects of Small Business HRM*
Author(s) -
Sels Luc,
De Winne Sophie,
Maes Johan,
Delmotte Jeroen,
Faems Dries,
Forrier Anneleen
Publication year - 2006
Publication title -
journal of management studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.398
H-Index - 184
eISSN - 1467-6486
pISSN - 0022-2380
DOI - 10.1111/j.1467-6486.2006.00592.x
Subject(s) - profitability index , productivity , business , industrial organization , sample (material) , value (mathematics) , conceptual framework , scale (ratio) , marketing , economics , finance , computer science , economic growth , chemistry , chromatography , machine learning , philosophy , physics , epistemology , quantum mechanics
The majority of empirical studies on the HRM–performance link report a positive story. The costs associated with the productivity rise due to high performance work practices (HPWP) have been largely neglected. The purpose of this study is to develop a conceptual framework that maps both the value‐enhancing and cost‐raising impact of HPWP. In addition, we want to pronounce upon their overall effect on financial performance. To test our model, we rely on a sample of small businesses. Understanding both performance and cost‐related effects of the implementation of HPWP is particularly valuable for small businesses since they often lack financial resources to implement HPWP and benefit less from economies of scale compared to their larger counterparts. Study results indicate that although greater use of HPWP is associated with increased productivity, this effect is offset by increased labour costs. However, we find an overall positive effect of HPWP on firm profitability.