A meta-analysis of different HR-enhancing practices and performance of small and medium sized firms

Abstract

The role of human capital has received considerable attention in research on small and medium sized firms. However, much uncertainty remains as to how practices that enhance human resources (HR) affect the performance of small and medium sized firms, whether some practices have stronger effects than others, and which contingencies influence these effects. Relying on the framework proposed by Subramony (2009), we propose that small and medium sized firms need to implement HR practices that focus on enhancing skills, motivation, and empowerment. The results of our meta-analysis comprising 56 studies that focused on small and medium sized enterprises (SME) indicated that HR-enhancing practices are correlated with firm performance (r c = .228). Moreover, HR-enhancing practices were more relevant for young firms and SME operating in high-tech industries and in country contexts characterized by rigid labor regulations. We compare the results of this meta-analysis with meta-analyses performed in the large firm context. Overall, our results suggest that HRenhancing practices are important in the SME context in general and, moreover, they specify whether or not these practices have to be adapted to the SME context. Executive summarySmall and medium sized firms typically need a number of skills allowing them to prosper and grow and to survive in a market. One of such skills is managing employees and using HR-enhancing practices that ensure that the human capital of the entire firm contributes to its performance (Huselid et al., 1997). Scientific knowledge about HR-enhancing practices in the SME context is emerging, even though HR management is not a top domain in entrepreneurship research. As a consequence, there is still debate in the domain about (1) whether HR-enhancing practices are useful for SME in terms of firm performance, (2) which HRenhancing practices are particularly related to firm performance, (3) what the contingencies are that affect the relationship between HR-enhancing practices and firm performance, and (4) whether the relationship between HR-enhancing practices and performance differs between SME and large firms.We classify HR-enhancing practices along three dimensions based on the framework proposed by Subramony (2009): HR practices that focus on enhancing skills, motivation, and empowerment. The framework assumes that employees perform better and, thus, contribute to firm performance when they are qualified to do their work, when they are incentivized to work toward the accomplishment of a firm's goals and objectives, and when they are enabled to perform the required behavior.We performed a meta-analysis on 56 independent samples (including 18,521 firms) to examine the relationships between HRenhancing practices and SME performance. Across studies, HR-enhancing practices are positively related with SME performance. The sample size and reliability corrected correlation was r = .228. Moreover, skill-enhancing, motivation-enhancing, and empowerment-enhancing practices correlate with SME performance. In a...

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