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Boundary conditions of the high investment human resource pp
- 1. Boundary Conditions of the High-Investment Human Resource Systems-Small-Firm Labor Productivity Relationship Chadwick, Way, Kerr, & Thacker (2013)
- 2. How Are Small Firms impacted by HIHRS? Presenter: Samuel E. Dunham
- 3. Literature Review Possible positive influence of HIHRS on small-firm labor productivity Acquiring, training, retaining, and motivating Possible negative influence of HIHRS on small-firm labor productivity Managerial Attention Fit between HIHRS and small firms
- 4. Current Empirical Evidence of HIHRS and Objective Firm-Level Labor Productivity Positive relationships have been reported between systems of HIHRS practices and objective firm-level labor productivity (e.g., Guthrie, 2001) Other studies have reported nonsignificant associations Could because the moderating influence of contextual factors haven't been examined in these studies Accurate, observable small-firm performance is difficult to obtain because these firms tend to not be publicly traded Subjective measures of performance tend to be used in small-firms (some as the only measure and in some studies as an addition to objective measures of performance
- 5. Internal Boundary Conditions Differentiation Strategy Niche strategies are prevalent for small firms More distinctive niches are easier for small firms to defend Differentiation is normally best for small firms Continuous adaptation Requires greater demands of managerial attention Inconsistent with HIHRS H1: Differentiation strategy moderates the relationship between HIHRS and small-firm labor productivity, such that the influence of HIHRS on small-firm labor productivity is negative for small-firms that pursue a differentiation strategy and is nonsignificant for small firms that do not pursue a differentiation strategy.
- 6. Internal Boundary Conditions Firm Capital Intensity Capital equipment imposes greater structure on a firm’s value creation processes Positive correlation between small-firm capital intensity and the appropriateness of mechanical forms of control (like HIHRS) HIHRS makes greater unique demands on managerial attention for small-firms with fewer capital H2: Firm capital intensity moderates the relationship between HIHRS and small-firm labor productivity such that the influence of HIHRS on small-firm labor productivity is negative at low levels of firm capital intensity and is positive at high levels of firm capital intensity.
- 7. External Boundary Conditions Industry Dynamism Dynamic industry – typified by rapid change and high variability in competitive demands Firms who operate in a dynamic industry require flexibility Dynamic industries make greater demands for managerial attention HIHRS place more importance on standardization and reliability than for flexibility H3: Industry dynamism moderates the relationship between HIHRS and small-firm labor productivity, such that the influence of HIHRS on small-firm productivity is negative at high levels of industry dynamism and is positive at low levels of industry dynamism.
- 8. External Boundary Conditions Industry Growth Sustained growth gives small firms a relatively predictable competitive environment Increases the suitability of mechanistic forms of control (like HIHRS) Suitability of HIHRS Greater with less liabilities for small firms operating in high growth industries H4: Industry growth moderates the relationship between HIHRS and small-firm labor productivity, such that the influence of HIHRS on small-firm labor productivity is negative at low levels of industry growth and is positive at high levels of industry growth.
- 9. Variables Independent Variable - Firm-Level HIHRS Additive INDEX Made up of 7 HRM practice variables Extensive recruitment, extensive screening, selection tests, continuous training, promotion-from-within, employee ownership, and performance-based pay (each score was standardized) Dependent Variable - Objective Small-Firm Labor Productivity The ratio of firm sales to employees Alternative Firm-Level HIHRS Use Measure The 7 HRM practice variables were reset to a common scale (0 to 1) and the mean of the variables was taken HIHRS use among small-firms in this study was moderate (M = .44, SD = .14) Statistics were compatible to other studies using larger firms Suggests that small-firms may use HIHRS to a similar extent as larger firms
- 10. Variables Moderator Variables Differentiation Strategy (from senior managers) Firm Capital Intensity (from senior managers) Industry Dynamism (from Statistics Canada) Industry Growth (from Statistics Canada) Control Variables Industry Sector Unionization Firm Size Firm Age Written Strategic Plan HRM Owner/Top Management Responsibility Culture Management Industry Munificence Availability of resources in a firm's competitive environment Industry Capital Intensity
- 11. Method Small firms = firms with fewer than 100 employees Data obtained from 3 sources Dun and Bradstreet Canada Used to create the small-firm labor productivity dependent variable, as well as industry sector, firm size, and firm age control variables Statistics Canada Used to create the industry dynamism and industry growth moderator variables, as well as industry munificence and industry capital intensity control variables Data from 96 senior managers Used to create the independent variable (HIHRS additive index), differentiation strategy moderator variable, and firm capital intensity moderator variable, as well as unionization, written strategic plan, HRM owner/top management responsibility, and culture management control variables 906 for-profit, private sector Canadian small firms from a variety of industries were drawn from a database 496 senior managers were successfully contacted with a 20% response rate 4 small forms were omitted from the initial 100 small firm sample because of missing data
- 12. Method Final Sample - 96 for-profit, private sector Canadian small firms Wholesale trade sector – 14% Services sector – 27% Manufacturing sector – 30% Retail trade sector – 15% Transportation/ utilities sector – 9% Finance/insurance sector – 5% Mean firm size of final sample – 36.9 employees Binary logistic regression comparisons (2) Assessed whether the small firms included in the final sample were an unbiased representation of the for-profit, private sector Canadian small firms from multiple industries included in the database 1st Regression - Sample’s 96 firms were not significantly different from the other firms in the database (n = 810) in terms of size, age, sales, labor productivity, or industry sector 2nd Regression - 100 firms that responded (n = 100) were not significantly different from the nonrespondent firms (n = 396) in terms of size, age, sales, labor productivity, or industry sector
- 13. Results The correlations generally ran in directions consistent with the study’s description of small-firms Ordinary least squares-moderated multiple regression was used to test the hypotheses H1 was supported H2 was partially supported H3 was not supported H4 was partially supported
- 14. Discussion Study’s results suggest that the influence of HIHRS on small-firm labor productivity depends on internal and external boundary conditions The moderators and mediators in strategic HRM are not necessarily incompatible Some mediators are more appropriate in certain contexts than Specifying how contextual factors can affect analytic findings in strategic HRM research is important This study in comparison to Data et al. (2005) Different contexts Data et Al (2005) used publicly traded manufacturing firms with more than 100 employees, had annual sales of at least $50 million and only focused on external boundary factors
- 15. Practical Implications (H1) When firms pursue a differentiation strategy, the model estimates that a 1 SD increase in HIHRS is associated with a decrease of $53,118 in firm sales per employee When firms do not pursue a differentiation strategy, the model estimates that a 1 SD increase is associated with a decrease of $5,635 in firm sales per employee H1: Differentiation strategy moderates the relationship between HIHRS and small-firm labor productivity, such that the influence of HIHRS on small-firm labor productivity is negative for small-firms that pursue a differentiation strategy and is nonsignificant for small firms that do not pursue a differentiation strategy.
- 16. Practical Implications (H2) When small-firm intensity is low, the model estimates that a 1 SD increase in HIHRS is associated with a decrease of $22,869 in firm sales per employee When small-firm intensity is high, the model estimates that a 1 SD increase in HIHRS is associated with a increase of $13,742 in firm sales per employee H2: Firm capital intensity moderates the relationship between HIHRS and small-firm labor productivity such that the influence of HIHRS on small-firm labor productivity is negative at low levels of firm capital intensity and is positive at high levels of firm capital intensity.
- 17. Practical Implications (H3) When industry dynamism is high, the model estimates that a 1 SD increase in HIHRS is associated with an increase of $16,581 in firm sales per employee When industry dynamism is low, the model estimates that a 1 SD increase in HIHRS is associated with a decrease of $17,727 in firm sales per employee H3: Industry dynamism moderates the relationship between HIHRS and small- firm labor productivity, such that the influence of HIHRS on small-firm productivity is negative at high levels of industry dynamism and is positive at low levels of industry dynamism.
- 18. Practical Implications (H4) When industry growth is low, the model estimates that a 1 SD increase in HIHRS is associated with a decrease of $38,982 in firm sales per employee When industry growth is high, the model estimates that a 1 SD increase in HIHRS is associated with a increase of $23,067 in firm sales per employee H4: Industry growth moderates the relationship between HIHRS and small-firm labor productivity, such that the influence of HIHRS on small-firm labor productivity is negative at low levels of industry growth and is positive at high levels of industry growth.
- 19. Limitations and Future Research Opportunities Future Research Opportunities Look into the finding that the HIHRS small-firm labor productivity relationship is either not significant or positive for small firms that do not pursue a differentiation strategy, that are capital intensive, that operate in dynamic industries, and operate in high growth industries Look into the relationship between the industry dynamism*HIHRS interaction term and small-firm labor productivity The interaction term may be picking up contextual effects and/or those of industry dynamism itself Limitations Common Method Bias The role of administrative costs could not be directly examined through the study
- 20. Discussion Questions In the study, small-firms were typically characterized as flexible, “laid-back” users of subjective information. Has this generally been true in your own experience? Which of the following do you believe is more important for small-firms to consider (generally) before possibly implementing a HIHRS: internal boundary conditions or external boundary conditions? “It depends” probably holds true, but do these two types of boundary conditions generally hold equal weight for a small-firm considering a HIHRS? The benefits of lower voluntary turnover and higher profitability were not examined in this particular study. Should these exclusions cause us to look at the results cautiously?