The Effects of Human Resource Management on Small Firms' Productivity and Employees' Wages.

A. de Grip*, I.J.P. Sieben

*Corresponding author for this work

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This paper analyses whether employees and firms differently benefit from particular human resource (hr) practices. The focus is on small firms that may be badly informed on the impact of hr practices on firm performance. In this study on dutch pharmacies, it is found that firms do not reward employees’ skills according to their contribution to firms’ productivity, as (1) employees are over-rewarded for their sector-specific skills and under-rewarded for the productivity enhancing effect of their computer skills and (2) employees’ work experience positively affects their wages but does not have real productivity effects. Moreover, it is found that training employees in case of vacancy problems seems to be an adequate hr practice, since it increases productivity without affecting the average wage level. The opposite holds for offering higher wages to newly recruited employees. Furthermore, we find that only the employees benefit from performance evaluation interviews, whereas employing many employees by temporary contracts appears to have a negative effect on productivity, without affecting the wage level.
Original languageEnglish
Pages (from-to)1047-1054
Number of pages8
JournalApplied Economics
Issue number9
Publication statusPublished - 1 Jan 2005

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