High Performance Work Systems and Intermediate Indicators of Firm Performance Within the US Small Business Sector

Abstract

Within this manuscript I present conceptual and empirical evidence that indicates that within the US small business sector high performance work systems (HPWS) are associated with outcomes that are key to the success of small US firms. I also present empirical evidence that indicates that within this sector of the US economy HPWS do not necessarily produce outcomes that exceed the labor costs associated with the use of these systems.

Get full access to this article

View all access options for this article.

References

Ahire, S. L. , & Golhar, D. Y. 1996. Quality management in large vs. small firms. Journal of Small Business Management, 34(2): 1-13.

Appelbaum, E. , Bailey, T. , Berg, P. , & Kalleberg, A. 2000. Manufacturing competitive advantage: The effects of high performance work systems on plant performance and company outcomes. Ithaca, NY: Cornell University Press.

Arthur, J. B. 1994. Effects of human resource systems on manufacturing performance and turnover. Academy of Management Journal, 37(3): 670-687.

Bae, J. , & Lawler, J. J. 2000. Organizational and HRM strategies in Korea: Impact on firm performance in an emerging economy. Academy of Management Journal, 43: 502-518.

Barney, J. B. 2001. Is the resource-based “view” a useful perspective for strategic management research? Yes. Academy of Management Review, 26: 41-56.

Barney, J. B. , & Arikan, A. M. 2001. The resource-based view: Origins and implications. In M. A. Hitt , R. E. Freeman , & J. S. Harrison (Eds.), The Blackwell handbook of strategic management: 124-188. Malden, MA: Blackwell Publishers Inc.

Becker, B. E. , & Gerhart, B. 1996. The impact of human resource management on organizational performance: Progress and prospects. Academy of Management Journal, 39(4): 779-801.

Becker, B. E. , & Huselid, M. A. 1998. High performance work systems and firm performance: A synthesis of research and managerial implications. In G. R. Ferris (Ed.), Research in personnel and human resource management: Vol. 16, 53-101. Stamford, CT: JAI Press.

Blanchard, P. N. , & Thacker, J. W. 1999. Effective training: Systems, strategies, and practices. Upper Saddle River, NJ: Prentice Hall.

10.

Blasi, J. , Kruse, D. , Sesil, J. , Kroumova, M. , & Carberry, E. 2000. Stock options, corporate performance, and organizational change. Oakland, CA: The National Center for Employee Ownership.

11.

Boxall, P. 1998. Achieving competitive advantage through human resource strategy: Towards a theory of industry dynamics. Human Resource Management Review, 8(3): 265-288.

12.

Cappelli, P. , & Neumark, P. , 2001. External job churning and internal job flexibility. Working paper No. 8111, National Bureau of Economic Research.

13.

Chaston, I. 1998. Self-managed teams: Assessing the benefits for small service-sector firms. British Journal of Management, 9(1): 1-12.

14.

Chaston, I. , Badger, B. , & Sadler-Smith, E. 2001. Organizational learning: An empirical assessment of process in small UK manufacturing firms. Journal of Small Business Management, 39(2): 139-151.

15.

Delaney, J. T. , & Huselid, M. A. 1996. The impact of human resource management practices on perceptions of organizational performance. Academy of Management Journal, 39(4): 949-969.

16.

Delery, J. E. 1998. Issues of fit in strategic human resource management: Implications for research. Human Resource Management Review, 8(3): 289-309.

17.

Delery, J. E. , & Shaw, J. D. 2001. The strategic management of people in work organizations: Review, synthesis, and extension. G. R. Ferris (Ed.), Research in personnel and human resource management: Vol. 20, 167-197. Stamford, CT: JAI Press.

18.

Deshpande, S. P. , & Golhar, D. Y. 1994. HRM practices in large and small manufacturing firms: A comparative study. Journal of Small Business Management, 32(2): 49-56.

19.

Dessler, G. , 2000. Human resource management (8th ed.). Upper Saddle: NJ: Prentice Hall.

20.

Dyer, L. , & Reeves, T. 1995. Human resource strategies and firm performance: What do we know and where do we need to go? International Journal of Human Resource Management, 6(3): 656-670.

21.

Elmuti, D. 1996. Sustaining high performance through self-managed teams. Industrial Management, 38(2): 4-9.

22.

Ferris, G. R. , Arthur, M. M. , Berkson, H. M. , Kaplan, D. M. , Harrell-Cook, G. , & Frink, D. D. 1998. Toward a social context theory of the human resource management-organizational effectiveness relationship. Human Resource Management Review, 8(3): 235-264.

23.

Flanagan, D. J. , & Deshpande, S. P. 1996. Top management’s perceptions of changes in HRM practices after union elections in small businesses. Journal of Small Business Management, 34(4): 23-34.

24.

Freeman, R. , & Rogers, J. , 1999. What workers want. Ithaca, NY: Cornell University Press.

25.

Gerhart, B. , Wright, P. M. , McMahan, G. C. , & Snell, S. A. 2000. Measurement error in research on the human resources and firm performance: How much error is there and how does it influence effect size estimates? Personnel Psychology, 53: 803-834.

26.

Golhar, D. Y. , & Deshpande, S. P. 1997. HRM practices of large and small Canadian manufacturing firms. Journal of Small Business Management, 35(3): 23-34.

27.

Greenberg, J. 1990. Organizational justice: Yesterday, today, and tomorrow. Journal of Management, 16(2): 399-432.

28.

Guthrie, J. 2001. High-involvement work practices, turnover, and productivity: Evidence from New Zealand. Academy of Management Journal, 44(1): 180-190.

29.

Holt, D. , 1993. Management principles and practices. Englewood Cliffs, NJ: Prentice Hall.

30.

Hornsby, J. S. , & Kuratko, D. F. 1990. Human resource management in small business: Critical issues for the 1990s. Journal of Small Business Management, 28(3): 9-18.

31.

Huselid, M. A. 1995. The impact of human resource management practices on turnover, productivity, and corporate financial performance. Academy of Management Journal, 38(3): 635-672.

32.

Huselid, M. A. , & Becker, B. E. 1997. The impact of high performance work systems, implementation effectiveness, and alignment with strategy on shareholder wealth. Academy of Management Best Papers Proceedings: 144-148.

33.

Ichniowski, C. , Kochan, T. A. , Levine, D. , Olson, C. , & Strauss, G. 1996. What works at work: Overview and assessment. Industrial Relations, 35(3): 299-333.

34.

Ichniowski, C. , Shaw, K. , & Prennushi, G. 1997. The effects of human resources management practices on productivity: A study of steel finishing lines. American Economic Review, 87(3): 291-313.

35.

Jackson, S. E. , & Schuler, R. S. 1995. Understanding human resource management in the context of organizations and their environments. Annual Review of Psychology, 46: 237-264.

36.

Kirkpatrick, D. L. , 1998. Evaluating training programmes: The four levels. San Francisco, CA: Berrett-Koechler Publishers.

37.

Koch, M. J. , & McGrath, M. C. 1996. Improving labor productivity: Human resource management policies do matter. Strategic Management Journal, 17: 335-354.

38.

Kruse, D. L. 1993. Profit sharing: Does it make a difference? Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.

39.

Kuratko, D. F. , Goodale, J. C. , & Hornsby, J. S. 2001. Quality practices for a competitive advantage in smaller firms. Journal of Small Business Management, 39(4): 293-311.

40.

Lado, A. A. , & & Wilson, M. C. 1994. Human resources systems and sustained competitive advantage: A competency-based perspective. Academy of Management Review, 19: 699-727.

41.

Lind, E. A. , & Tyler, T. 1988. The social psychology of procedural justice. New York: Plenum Press.

42.

MacDuffie, J. P. 1995. Human resource bundles and manufacturing performance: Organizational logic and flexible production systems in the world auto industry. Industrial and Labor Relations Review, 48(2): 197-221.

43.

McEvoy, G. 1984. Small business practices. Journal of Small Business Management, 22(4): 1-8.

44.

Meyer, M. W. , & Gupta, V. 1994. The performance paradox. Research in Organizational Behavior, 16: 309-369.

45.

Miller, E. 1987. A comparison of large and small firm productivity, labor compensation, and investment rates. Review of Business and Economic Research, 23(Fall): 26-37.

46.

Noe, R. , Wilk, S. , Mullen, E. , & Wanek, J. 1997. Employee development: Issues in construct definition and investigation of antecedents. In J. K. Ford (Ed.), Improving training effectiveness in work organizations: 153-189. Mahweh, NJ: Erlbaum.

47.

Olian, J. D. , & Rynes, S. L. 1984. Organizational staffing: Integrating practice with strategy. Industrial Relations, 23: 170-183.

48.

Pfeffer, J. , 1994. Competitive advantage through people. Boston, MA: Harvard Business School Press.

49.

Picot, G. , Baldwin, J. , & Dupuy, R. , 1994. Have small firms created a disproportionate share of new jobs in Canada? A reassessment of the facts. Research Paper Series No. 71, Analytical Studies Branch, Statistics, Canada.

50.

Priem, R. L. , & Butler, J. E. 2001a. Is the resource-based “view” a useful perspective for strategic management research? Academy of Management Review, 26(1): 22-40.

51.

Priem, R. L. , & Butler, J. E. 2001b. Tautology in the resource-based view and the implications of externally determined resource value: Further comments. Academy of Management Review, 26(1): 57-66.

52.

Priem, R. L. , Rasheed, A. M. A. , & Kotulic, A. G. 1995. Rationality in strategic decision processes, environmental dynamism and firm performance. Journal of Management, 21(5): 913-929.

53.

Sapienza, H. J. , Smith, K. G. , & Gannon, M. J. 1988. Using subjective evaluations of organizational performance in small business research. American Journal of Small Business, 12(3): 45-53.

54.

Shapiro, C. , & Stiglitz, J. 1984. Equilibrium unemployment as a worker discipline device. American Economic Review, 74: 433-444.

55.

Shaw, J. D. , Delery, J. E. , Jenkins, G. D., Jr. , & Gupta, N. 1998. An organizational-level analysis of voluntary and involuntary turnover. Academy of Management Journal, 41: 511-525.

56.

Stiglitz, J. E. 1975. Incentives, risk, and information: Notes toward a theory of hierarchy. Bell Journal of Economic and Management Science, 6: 552-579.

57.

Tabachnick, B. G. , & Fidell, L. S. 1996. Using multivariate statistics (3rd ed.). New York: Harper Collins Publishers Inc.

58.

Tyler, T. R. , Rasinski, K. , & Spodick, N. 1985. The influence of voice on satisfaction with leaders: Exploring the meaning of process control. Journal of Personality and Social Psychology, 48: 72-81.

59.

Way, S. A. , & Thacker, J. W. 2001. The successful implementation of strategic human resource management: A Canadian survey. International Journal of Management, 18: 25-32.

60.

Weitzman, M. , & Kruse, D. 1990. Profit sharing and productivity. In A. Blinder (Ed.), Paying for productivity: A look at the evidence: 95-140. Washington, DC: Brookings Institution.

61.

Wright, P. M. , & Boswell, W. R. 2002. Desegregating HRM: A review and synthesis of micro and macro human resource management research. Journal of Management, 28: 247-276.

62.

Wright, P. M. , Dunford, B. B. , & Snell, S. A. 2001. Human resources and the resource-based view of the firm. Journal of Management, 27: 701-721.

63.

Wright, P. M. , & McMahan, C. G. 1992. Theoretical perspectives for strategic human resource management. Journal of Management, 18(2): 295-320.

64.

Wright, P. M. , McMahan, C. G. , & McWilliams, A. 1994. Human resources and sustained competitive advantage: A resource-based view perspective. International Journal of Human Resource Management, 5: 201-326.

65.

Wright, P. M. , & Snell, S. A. 1998. Toward a unifying framework for exploring fit and flexibility in strategic human resource management. Academy of Management Review, 23(4): 756-772.