Impact of Innovation-Oriented Human Resource on Small and Medium Enterprises’ Performance

Abstract

This research paper aims to examine the impact of innovative HRM practices, including employee participation, performance appraisal, reward and compensation, recruitment and selection, and redeployment–retraining on firm performance. For this purpose, four different models are utilized to examine the impact of innovative HRM department practices on the performance of small and medium enterprises (SMEs) in a country. The dependent variable, firm performance, is proxified by different variables such as labor productivity, product innovation, process innovation, and marketing innovation. For empirical analysis, primary data are collected using a questionnaire. Estimation is conducted using ordinary least squares (OLS) and logit regression techniques. The estimated results indicate that most innovative HRM practices have a statistically significant impact on firm performance in terms of labor productivity, product, process, and marketing innovations. These results imply that SMEs in a country may observe the benefits of devoting greater attention to innovative HRM practices to achieve their future growth potential.