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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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    Citations

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    Cited by:

    1. Evelien P. M. Croonen & Marko Grünhagen & Melody L. Wollan, 2016. "Best fit, best practice, or stuck in the middle? The impact of unit ownership on unit HR performance in franchise systems," International Entrepreneurship and Management Journal, Springer, vol. 12(3), pages 697-711, September.
    2. Murmann, Martin, 2017. "The productivity effects of worker replacement in young firms," ZEW Discussion Papers 17-010, ZEW - Leibniz Centre for European Economic Research.
    3. Bravo-Ortega, Claudio & Egana-delSol, Pablo & Winkler-Sotomayor, Nicole, 2023. "Does the lack of resources matter in a dual economy: Decoding MSMEs productivity and growth," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 716-739.
    4. VAN DEN BERG, Annette & VAN WITTELOOSTUIJN, Arjen & BOONE, Christophe & VAN DER BREMPT, Olivier, 2011. "The impact of representative employee participation on organisational performance," ACED Working Papers 2011013, University of Antwerp, Faculty of Business and Economics.
    5. Adam Seth Litwin & Phillip H. Phan, 2013. "Quality over Quantity: Reexamining the Link between Entrepreneurship and Job Creation," ILR Review, Cornell University, ILR School, vol. 66(4), pages 833-873, July.
    6. Houldsworth, Elizabeth & Marra, Marianna & Brewster, Chris & Brookes, Michael & Wood, Geoffrey, 2021. "Performance appraisal and MNEs: The impact of different capitalist archetypes," International Business Review, Elsevier, vol. 30(5).
    7. RABIU, Rukayat Oloruntoyin & OLANIPEKUN, Wahid Damilola (PhD) & BAMIDELE, Ayodeji Gbenga (PhD) & AWE, Olasehinde Israel, 2020. "Analysis Of Factors Influencing Adoption Of Human Resource Practices By Small And Medium Scale Enterprises In Nigeria," Management Strategies Journal, Constantin Brancoveanu University, vol. 47(1), pages 42-50.
    8. VAN DEN BERG, Annette & VAN WITTELOOSTUIJN, Arjen & BOONE, Christophe & VAN DER BREMPT, Olivier, 2011. "The impact of representative employee participation on organisational performance," Working Papers 2011019, University of Antwerp, Faculty of Business and Economics.
    9. Darren A. Pawski & Robert J. Powell & Anna Golab, 2022. "Factors affecting the growth of small privately‐owned financial planning businesses," Australian Economic Papers, Wiley Blackwell, vol. 61(4), pages 717-737, December.
    10. Chowdhury, Sanjib & Schulz, Eric & Milner, Morgan & Van De Voort, David, 2014. "Core employee based human capital and revenue productivity in small firms: An empirical investigation," Journal of Business Research, Elsevier, vol. 67(11), pages 2473-2479.
    11. Sundström, Malin & Hjelm-Lidholm, Sara, 2020. "Re-positioning customer loyalty in a fast moving consumer goods market," Australasian marketing journal, Elsevier, vol. 28(1), pages 30-34.
    12. Kidwell, Roland E. & Hoy, Frank & Ibarreche, Santiago, 2012. "“Ethnic” family business or just family business? Human resource practices in the ethnic family firm," Journal of Family Business Strategy, Elsevier, vol. 3(1), pages 12-17.
    13. Jeewhan Yoon & Kevin May & Jae H. Kang & George T. Solomon, 2019. "The impact of emotional self-management on benefit offerings and employment growth: an analysis of the fastest growing businesses in the United States," International Entrepreneurship and Management Journal, Springer, vol. 15(1), pages 175-194, March.
    14. Mª. Eugenia López‐Pérez & Iguácel Melero & F. Javier Sesé, 2017. "Does Specific CSR Training for Managers Impact Shareholder Value? Implications for Education in Sustainable Development," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 24(5), pages 435-448, September.
    15. Zélia Serrasqueiro & Paulo Maçãs Nunes, 2008. "Performance and size: empirical evidence from Portuguese SMEs," Small Business Economics, Springer, vol. 31(2), pages 195-217, August.
    16. Elisabeth Albertini & Fabienne Berger-Remy, 2019. "Intellectual Capital and Financial Performance: A Meta-Analysis and Research Agenda," Post-Print hal-02139763, HAL.
    17. ŠEmsa ÖZAR & Gökhan ÖZERTAN & Zeynep Burcu İRFANOĞLU, 2008. "Micro And Small Enterprise Growth In Turkey: Under The Shadow Of Financial Crisis," The Developing Economies, Institute of Developing Economies, vol. 46(4), pages 331-362, December.
    18. Muhammad Sadiq & Amna Alamgir & Syed Wajahat Ali, 2020. "The Impacts of Total Quality Management, Human Resource Management, and Agility in Business on Firms Financial Performance: Moderating Role of Emerging Business Competition," iRASD Journal of Management, International Research Alliance for Sustainable Development (iRASD), vol. 2(1), pages 09-21, June.
    19. Josée St-Pierre & Théophile Serge Nomo & Kristina Pilaeva, 2010. "The non-financial contribution of venture capitalists to VC-backed SMEs: the case of traditional sectors," Venture Capital, Taylor & Francis Journals, vol. 13(2), pages 103-118, October.
    20. Yoshihiko Kadoya & Mostafa Saidur Rahim Khan & Somtip Watanapongvanich & Punjapol Binnagan, 2020. "Emotional Status and Productivity: Evidence from the Special Economic Zone in Laos," Sustainability, MDPI, vol. 12(4), pages 1-15, February.
    21. Fabling, Richard, 2007. "Just How Innovative are New Zealand Firms? Quantifying & Relating Organisational and Marketing Innovation to Traditional Science & Technology Indicators," Occasional Papers 07/4, Ministry of Economic Development, New Zealand.
    22. Rauch, Andreas & Hatak, Isabella, 2016. "A meta-analysis of different HR-enhancing practices and performance of small and medium sized firms," Journal of Business Venturing, Elsevier, vol. 31(5), pages 485-504.
    23. Gregorio Sánchez-Marín & Gabriel Lozano-Reina & Mané Beglaryan, 2022. "HRM Policies and SMEs Performance: The Moderating Role of CSR Orientation," Central European Business Review, Prague University of Economics and Business, vol. 2022(1), pages 85-110.
    24. Bello, Daniel C. & Radulovich, Lori P. & Javalgi, Rajshekhar (Raj) G. & Scherer, Robert F. & Taylor, Jennifer, 2016. "Performance of professional service firms from emerging markets: Role of innovative services and firm capabilities," Journal of World Business, Elsevier, vol. 51(3), pages 413-424.

    More about this item

    Keywords

    financial performance; HRM; productivity; small business management; voluntary turnover; C39; M50; M51; M52; M53;
    All these keywords.

    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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