An empirical study of the internal factors influencing the application of compensation incentives in SMEs

Abstract

Purpose Competitiveness is a multidimensional construct, related to a number of external and internal company factors. This paper aims to provide empirical evidence on the relationship between the application of small- and medium-sized enterprises’ (SMEs) compensation incentives as an index/element of human system development and competitiveness. Design/methodology/approach A unique primary data set drawn from the Global Competitiveness Project on SMEs’ competitiveness was analysed, using cross-sectional data of 784 firms. First, descriptive statistics were used to show the data set peculiarities. Second, a forward logistic regression was applied to show the effects on the application of compensation incentives. A 25.1% of explanatory power was found by targeting the application of compensation systems by 7 firm-level principal factors and 30 control variables. Findings The findings suggest that there is a higher chance of the application of compensation incentives in cases when the employees possess a more substantial tacit knowledge and formal and informal relationship networks. It is also positively impacted by the higher level of intra-company manifestation of knowledge. Research limitations/implications The research was conducted among SMEs from eight countries, based on a unique questionnaire designed for small enterprises. The respective countries are from Europe and Latin America, which serve as a reference category for Hungary. Also, there is a high level of 0 answers for the involved variables. The binary logistic regression methodology is suitable for filtering out some of these; nevertheless, the proportion of uncertain factors remains high as it is indicated by the explanatory power. Originality/value The majority of the literature is dealing with large companies in the topic of competitiveness, whereas in this data set, a deeper analysis was carried out among SMEs from eight countries, comparing their results to the Hungarian ones. The findings can be used as reference points for future studies, and the understanding of the HR cycle within SMEs.

Factors Affecting Employee Retention Among SMES’ Millennial Employees in Klang Valley, Malaysia

“…According to Lazear (2018), when employees' salaries are increased, they are more diligent and concerned about their jobs. Employee benefits like health insurance, vacation pay, and retirement pensions, according to Modau et al (2018); Balogh et al (2020) are major indirect financial rewards. Employer benefits are not only a technique for improving employee performance; but they also aid in attracting applicants to the hiring process.…”

HRM in Entrepreneurial Firms: A Systematic Review and Research Agenda

“…A second category of firm-level antecedents influencing HRM adoption in entrepreneurial firms is the availability and type of firm resources. For example, studies suggest that financial resource limitations not only restrict the adoption of more advanced strategic HRM systems (e.g., high-performance work practices) but also the number of individual HRM practices adopted (e.g., training practices) (Balogh, Sipos, & Rideg, 2020;Bengtsson & Hand, 2013;Kroon, Van De Voorde, & Timmers, 2013;Schenk, 2017;Studdard & Darby, 2008;Yi & Xu, 2019). Similarly, Yoo, Roels, and Corbett (2016) argue that, if the entrepreneur (or TMT) has too much work and too little time, time becomes as valuable as financial resources, and entrepreneurs are more inclined to hire employees, which may in turn result in HRM adoption.…”

“…Studies also point to the influence of the entrepreneurial firm's human resource pool on HRM adoption. In particular, entrepreneurial firms that employ highly skilled employees adopt more formal and advanced HRM practices (e.g., highperformance work practices) to attract, motivate, and retain these employees (Balogh et al, 2020;Wu, Bacon, & Hoque, 2014).…”

“…Entrepreneurial firms are led by one or more entrepreneurs who wear multiple hats and carry out multiple roles (Åstebro & Thompson, 2011;Mathias & Williams, 2018). Consequently, characteristics of the entrepreneur, such as education, social capital, or Bacon & Hoque, 2005;Barrett, 2015;Burhan et al, 2020;Castany, 2010;Doherty & Norton, 2014;Gilman & Edwards, 2008;Khavul et al, 2010;Mankelow, 2008;Peetz et al, 2017;Psychogios et al, 2016;Tsai, 2010 Economic conditions: Balogh et al, 2020, Bengtsson & Hand, 2013Bryant & Allen, 2009;Colombo et al, 2014;Dietz et al, 2006;Heilmann et al, 2020;Jack et al, 2006;Kroon et al, 2013;Schenk, 2017;Studdard & Darby, 2008;Wiesner & Innes, 2010;Wiesner et al, 2007;Wu et al, 2014;Yi & Xu, 2019;Yoo et al, 2016 -Studies on firm performance, measured by: Financial performance: Faems et al, 2006;O'Donohue & Torugsa, 2016;Rodrigues & Raposo, 2011;Saridakis et al, 2017;Voss & Brettel, 2014 Innovation performance: Andries & Czarnitzki, 2014;Castrogiovanni et al, 2011;De Winne & Sels, 2010;Do & Shipton, 2019;…”

“…Firm Antecedents Quantitative Balogh et al (2020) Entrepreneurial firms employing a workforce with a strong network and a tacit skill set are more likely to adopt compensation incentives. Barrett and Mayson (2007) Entrepreneurial firms with a growth mindset are more likely to adopt formal HRM practices.…”