Adopting HRM practices and their effectiveness in small firms facing product‐market competition

Abstract

Abstract Small firms face many challenges in creating a productive workforce given often severe resource constraints and informal organizational structures. This may be particularly problematic in industries with intense product‐market competition. In this study, we focus on the relationship between product‐market competition and labor productivity, particularly as influenced by both adopting human resource management (HRM) practices and having a group culture within the organization. We examine our model using data from 145 UK‐based small‐ and medium‐sized enterprises. Our findings suggest that having a group culture is a key factor in the extent to which HRM practices are adopted, as well as how effective adopting these practices is for increasing labor productivity. © 2010 Wiley Periodicals, Inc.