International Handbook of Entrepreneurship and HRM
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International Handbook of Entrepreneurship and HRM

Edited by Rowena Barrett and Susan Mayson

This invaluable reference tool has been designed in response to the growing recognition that too little is known about the intersection between entrepreneurship and human resource management. Paying particular attention to the ‘people’ side of venture emergence and development, it offers unique insights into the role that human resource management (HRM) plays in small and entrepreneurial firms.
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Chapter 7: Human Resource Management and Corporate Performance: Evidence from UK and US Small Firms

Jonathan Michie and Maura Sheehan


7 Human resource management and corporate performance: evidence from UK and US small firms Jonathan Michie and Maura Sheehan Introduction In a special issue of Human Resource Management in small and medium sized enterprises (SMEs) the editor observed that, ‘the science and practice of entrepreneurship has advanced dramatically in recent years’ and that ‘the general business press, too frequently highlights the importance of SMEs for job creation and economic growth’ (Huselid, 2003: p. 297). He went on to ask, ‘How has the field of human resource management made a contribution to the emergent field?’ concluding ‘perhaps surprisingly our contribution has been very limited’, calling for more research and a greater dialogue on HR in SMEs (Huselid, 2003: p. 297). This chapter is a response to that call. It builds upon our previous work on the links between human resource management (HRM) and corporate performance in large UK companies by examining these relationships in small firms (employing between ten and 100 employees) and places the analysis in an international context by comparing results between UK and US small firms in matched industries. The key purpose of this chapter is to examine what contribution HRM practices make to the competitive success of small firms. Competitive success is proxied here by three variables: whether the firm has introduced a product and/or process innovation in the past three years; labour productivity; and financial performance, and so subjective and objective measures of performance are examined. In doing this we take forward the literature examining...

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