Tác động của quản trị nguồn nhân lực đến hoạt động sản xuất kinh doanh của các doanh nghiệp vừa và nhỏ trên địa bàn tỉnh thái nguyên

khóa luận, luận văn, thạc sĩ, tiến sĩ, cao học, đề tài

Southern Luzon State University Republic of Philippines

IMPACT OF HUMAN RESOURCE MANAGEMENT PRACTICES ON

ORGANIZATIONAL PERFORMANCE IN SMALL AND

MEDIUM ENTERPRISES IN THAI NGUYEN CITY

A Dissertation Presented to The Faculty Graduate School Southern Luzon State University

APPROVAL SHEET

In partial fulfillment of the requirements for the degree Doctor of Business Administration,

this research study entitled “Impact of Human Resource Management Practices on the Organizational Performance of the Small and Medium Enterprises in Thai Nguyen Province” has been prepared and submitted by Le Kim Anh and is hereby recommended for oral examination

Adviser Approved by the Oral Examination Committee, in partial fulfillment of the requirements for the degree Doctor of Business Administration offered by Southern Luzon State University, Republic of the Philippines in collaboration with Thai Nguyen University, Socialist Republic

APOLONIA A ESPINOSA, Ed.D

ACKNOWLEDGMENT

Writing a doctoral dissertation is a gratifying but difficult and sometimes nerve wrecking endeavor that only few engaged in because it requires a lot of sacrifices and hard work from the researcher However, at the end of the task, one experiences a wonderful feeling of joy, happiness, relief and fulfillment

The researcher would like to extend her sincerest gratitude and thanks to the following people who were very instrumental in the fulfillment of this research study

DR CECILIA N GASCON, President of the Southern Luzon State University in the Republic of the Philippines, for her untiring effort and belief that this collaboration is possible thus enabling us to pursue the DBA degree;

DR DANG KIM VUI President of Thai Nguyen University in the Socialist Republic of Vietnam, for his untiring effort and belief that this collaboration is possible thus enabling us

to pursue the DBA degree

DR NGUYEN TUAN ANH, Ph.D., former Director of the International Training Center, Thai Nguyen University of the Socialist Republic of Vietnam, for his enormous pursuit to provide the Vietnamese people an opportunity to grow through education;

DR ALICE T VALERIO her adviser, for the guidance and endless support for the improvement of this study

PROFESSORS ………… , ………., and ………, who composed the Oral Defense Committee, for their suggestions, comments and corrections to improve this study; ITC STAFF, for providing the necessary research materials;

HER FAMILY and FRIENDS, for the love and support in one way or the other;

And TO ALL who have contributed to make this study a success

D E D I C A T I O N

This research is wholeheartedly dedicated with all sincerity and love to my

FAMILY…

To my Mum and Sun who provided me with love and care

To ALL OF THEM…I humbly dedicated my work and success in life

Chapter II Review of Literature and Related Studies 10

Chapter V Summary, Findings, Conclusions and Recommendations 77

LIST OF TABLES

1 Table 4.1.1 Percentage Distribution of Respondents’ Profile in Terms

of Type of Industry and Ownership

2 Table 4.1.2 Percentage Distribution of Respondents’ Profile in Terms

of Business Characteristic

3 Table 4.3.1 The Assessment of Respondents on HRM in Terms of

Recruitment and Selection

4 Table 4.32 The Assessment of Respondents on HRM in Terms of

Training and Development

5 Table 4.3.3 The Assessment of Respondents on HRM in Terms of

Career Planning System

6 Table 4.3.4 The Assessment of Respondents on HRM in Terms of

Participation and Involvement

7 Table 4.3.5 The Assessment of Respondents on HRM in Terms of

Compensation and Benefits

8 Table 4.3.6 The Asessment of Respondent on HRM in Terms of

Performance Appraisal

9 Table 4.3.7 Perceived Organizational Performance

10 Table 4.4.1 Variables Included in Analyses

11 Table 4.4.2 Descriptive Statistics

12 Table 4.4.3 Correlations Amongst Variables

LIST OF FIGURES

1 Figure 1 Percentage Distribution of Respondents’ Profile in Terms of

Type of Industry

2 Figure 2 Percentage Distribution of Respondents’ Profile in Terms of

Type of Ownership

Title: IMPACT OF HUMAN RESOURCE MANAGEMENT

PERFORMANCE OF THE SMALL AND MEDIUM ENTERPRISES IN THAI NGUYEN PROVINCE

Degree Doctor of Business Administration

Name/ Address of the

Institution

Southern Luzon State University Graduate School

Lucban, Quezon Date Completed October, 2013

ABSTRACT

The study was conducted to assess impact of human resource management practices on the organizational performance of the small and medium enterprises in Thai Nguyen Province A total of 290 managers of the small and medium-sized enterprises in Thai Nguyen City were selected to be the respondents of the study It specifically explored on the profile of the respondents in terms of Types of enterprise; Form of owner ship; Time of operated; Number of employees The study was limited to determine the perception of the respondents on the human resource practices of the small and medium enterprises in Thai Nguyen City which are classified in aspects namely: Recruitment and Selection; Training and development; Career planning System; Participation and Involvement; Compensation and Benefit; and Performance appraisal

The 290 selected respondents were given a questionnaire designed by the researcher and complete the questionnaires after being explained and instructed by the researcher The researcher floated the questionnaire to the respondents after it had been validated by her advisor in June 2013

Recruitment and selection, based on well-defined merit and unprejudiced system developed through managerial expert opinions, using standardized test to scrutinize the exact required attitude, skills and knowledge in potential candidates showed notable significant correlation with employee performance and Perceived Organizational Performance that identification of the right candidate with required skills to perform the job for achieving organizational performance is the output of sophisticated selection system

Training and development programs in organizations based on training need assessment, performance appraisal, customization and practically applicable with skills imparting capability are indicating positive correlation with employee performance and Perceived Organizational Performance

A perception that the Career Planning System (CPS) is significantly correlated with employee performance and Perceived Organizational Performance is true if, the Career Planning System is based on clear career ladder, aligned goals with organizational vision, used for succession planning, transparent internal hiring, and equal unambiguous employment opportunity

Employee participation related to decision-making process based on opportunities

to make company and self-related decisions, suggestion collection for the betterment of organization and employee wellbeing as also on appreciation strategy has significant

positive correlation with perceived organizational performance

Compensation system based on expectancy of employees, comparable with market packages, competency based, performance based, profit sharing based mechanism, covering both financial and non-financial dimensions, is positively correlated with perceived organizational performance

There is a significant relation between Perceived Organizational Performance and performance appraisal system, that seems based on focused counseling, employee feedback, transparent disbursement of bonuses, performance based promotions, training selections and clarity of objectives

CHAPTER I INTRODUCTION Introduction

Human Resource Management is the process of developing, applying and evaluating policies, procedures, methods and programs relating to the employment, motivation, maintenance, and management of people in the organization Human resources management include activities like strategic HRM, human capital management, corporate social responsibility, human resource planning, recruitment, selection, training and development, reward management, performance management, employee relations, health safety and employee well-being as well as provision of employee services It comprises a set of practices and policies designed to maximize organizational integration, employee commitment, flexibility and quality of work (Armstrong, 2009)

Effective human resource practices relate to company performance by contributing to employee and customer satisfaction, innovation, productivity, and development of a favorable reputation of the firm in the industry A number of researchers have reported that HR practices are positively linked with organizational and employee performance

Researchers have argued that human resources may be seen as a source of sustained competitive advantage for organizations (Barney, 1991; Becker & Gerhart, 1996) The underlying assumption is that human resources are unique to the extent that competitors cannot imitate them Research has led to the identification of a number of human resource management practices that contribute to company performance across different organizations (Huselid, 1995) In a literature review, Delery & Doty (1996) identified seven such practices that have been consistently considered HRM practices

They defined HRM practices as those that are theoretically or empirically related to overall organizational performance These practices include internal career opportunities, formal training systems, results-oriented appraisals, employment security, participation, job descriptions, and profit sharing This approach has come to be known as the “best practices” or universalistic approach Within the best practices approach to strategic HRM, the first practice, internal career opportunities, refers to the organizational preference for hiring primarily from within Second, training systems refers to whether organizations provide extensive training opportunities for their employees or whether they depend on selection and socialization processes to obtain required skills Third, appraisals are conceptualized in terms of outcome-based performance ratings and the extent to which subordinate views are taken into account in these ratings Fourth, employment security reflects the degree to which employees feel secure about continued employment in their jobs Although formalized employment security is generally on the decline, organizations may have either an implicit or an explicit policy Fifth, employee participation, both in terms of taking part in decision making and having opportunities to communicate suggestions for improvement, has emerged as a strategic HRM practice Sixth, job description refers to the extent jobs are tightly and clearly defined so that employees know what is expected of them Finally, profit sharing reflects the concern for overall organizational performance on a sustainable basis (Delery & Doty, 1996)

Over the years, researchers have suggested many HRM practices that have the potential to improve and sustain organizational performance These practices include emphasis on employee selection based on fit with the company’s culture, emphasis on behaviour, attitude, and necessary technical skills required by the job, compensation contingent on performance, and employee empowerment to foster team work, among others Purcell et al., (2003) pointed out that the most successful companies had 'the big

idea', they had a clear vision and a set of integrated values They were concerned with sustaining performance and flexibility which reveals a clear evidence of positive attitudes towards HR policies and practices, level of satisfaction, motivation and commitment, as well as overall operational performance

Background of the study

Small and Medium Enterprises (SMEs) have been recognized as important factor

of the economy of many countries and Vietnam is not an exception According to the data from the ministry of planning and investment of Vietnam SMEs occupied for nearly 85% of the total of enterprises in Vietnam and contribute nearly 45% of annual GDP of the nation There is no single theory, which can sufficiently explain growth of an SMEs The aim of this thesis is to investigate the effect as well as the ration between the growth

of business of SMEs and the policies, orientation, create advance condition for the development of SMEs issued by the Government and local authority of Thai Nguyen province The research was conducted with aspiration to describe the role of the HRM practices in helping SMEs in their business

Based on a report by Thai Nguyen Office of Planning and Investment at the end

of June, 2012, there are more than 2,090 enterprises currently doing their business in Thai Nguyen City, more than 98% of which are belonging to small and medium enterprises (SMEs) It is believed that SMEs play an important role in the economic growth of Thai Nguyen and they are currently using around 50% of workforce and contribute more than 40% of GDP Amongst them, only 50% are relatively stable and capable of development, 30% are operating in moderation, and the remainders are loss-making or have given up business

According to statistics from the Department of Planning and Investment of Thai Nguyen province, there were 114 SMEs established while the number of dissolved

businesses is 117 and 20 companies had to temporarily stop their businesses during the first four months of 2012 Many key businesses did not achieve the expected growth, production and business revenue only reached 50-70% that of the same period last year

Prior research suggests that HRM systems as a resource can lead to competitive advantage (Wright, Dunford & Snell, 2001) A number of studies have demonstrated relationships between different bundles of HR practices or philosophies and firms performance in larger firm (see Wright et al., 2005 review) In spite of the significant research in the area of SHRM in large firms, little has been done to test similar relationship in small businesses (Heneman, Tansky, & Camp, 2000)

Employees and employee management practices appear to be one way that companies are able to improve their performance SHRM scholars have argued that an organization’s success is at least partially depends on its employees and their behaviors

in carrying out the strategies of the business (Becker & Gerhart, 1996; Delery & Doty, 1996) Organization that can effectively influence the behaviors and motivation of their employee through HRM system will be to increase their performance and viability (Huselid, 1995) Small firms should also be able to leverage their employees through HRM to improve their performance, but very little research has addressed the role of HRM in SME Therefore, in this research the researcher addressed the relationship between HRM and Firm performance of SME for the study of SHRM

A significant amount of research has been conducted examining the relationship between HRM and firm performance In a recent review of the literature, Wright et al., (2005) found a total of 68 empirical studies looking at relationship between HRM and some aspect of firm performance The review focused specifically on published, empirical studies testing a relationship between an HRM system and performance Notably, all of the review studies reported at least one significant relationship between

HRM system and performance Clearly from this review of the literature, there is an increasing agreement that a relationship does exist between HRM and firm performance

While it is clear that past research on SHRM has consistently shown a positive relationship between various conceptualization of HRM and firm performance (Wright et al., 2005), this research has focused almost exclusively on large multidivisional, multi-product, multinational corporation Very little research has examined the generalizability

of these finding to SME is limited (Cardon & Stevens, 2004)

For all the reasons above, the researcher would like to conduct the study: “Impact

of Human Resource Management Practice on Organizational Performance in Small and Medium Enterprises in Thai Nguyen City”

Objectives of the Study

This study aimed to analyze the “Impact of Human Resource Management Practices on Organizational Performance in Small and Medium Enterprises in Thai Nguyen City” Specifically, it sought to answer the following questions

1 What is the profile of the enterprises, in terms of:

1.1 Types of enterprise;

1.2 Form of owner ship;

1.3 Time of operated; and

1.4 Amount of employees?

2 What are the SMEs’s HR practices as to:

2.1 Recruitment and Selection;

2.2 Training and Development;

2.3 Career Planning System;

2.4 Participation and Involvement;

2.5 Compensation and benefits; and

2.6 Performance Appraisal?

3 What are the perceptual SMEs’s managers in organizational performances?

4 What are the effects of these HR practices on the financial performance of SMEs?

Hypotheses

H1 Recruitment and Selection positively effects SME’s performance

H2 Training and Development positively effects SME’s performance

H3 Career Planning System positively effects SME’s performance

H4 Participation and Involvement positively effects SME’s performance

H5 Compensation and Benefits positively effects SME’s performance

H6 Performance Appraisal positively effects SME’s performance

Significance of the study

Completing this study brings together aspects of theory and practice For theory, this study is an expansion of previous studies on HRM practices of SMEs by focusing on examining the simultaneous impacts of HRM practices on SME’s performance In addition, utilizing data from Thai Nguyen city, one of the emerging economies, contributes to the literature of SME HRM

In practice, this study is significant for HRM practices in Thai Nguyen SMEs Results will indicate relationships between HRM practices and SME performance will assist owner manager and HR managers to improve performance and profitability of their businesses by managing human resource matters efficiently and effectively

Scope and Limitation

The study was conducted to assess impact of human resource management practices on the organizational performance of the small and medium enterprises in Thai Nguyen Province A total of 290 managers of the small and medium-sized enterprises in Thai Nguyen City were selected to be the respondents of the study It specifically

explored on the profile of the respondents in terms of Types of enterprise; Form of owner ship; Time of operated; Number of employees The study was limited to determine the perception of the respondents on the human resource practices of the small and medium enterprises in Thai Nguyen City which are classified in aspects namely: Recruitment and Selection; Training and development; Career planning System; Participation and Involvement; Compensation and Benefit; and Performance appraisal

The 290 selected respondents (college teachers) were given a questionnaire designed by the researcher and complete the questionnaires after being explained and instructed by the researcher The researcher floated the questionnaire to the respondents after it had

been validated by her advisor in June 2013

Definition of terms

Compensation refers to the total cash and non-cash payment offered by the small

and medium enterprises to an employee in return for the services rendered to the enterprises Apart from salary and wages, compensation also includes: Sales commission, Overtime pay, bonuses, Profit sharing, Recognition checks and rewards, Non-cash benefits, such as company-paid accommodations, certain stock options, a company-financed car and other non-cash taxable items The value of compensation received by an employee depends on a number of factors such as the availability of relevant skills, the employer’s desire to retain the employee, the profitability of the enterprises, and salaries for comparable jobs in the marketplace

Financial capital refers to the money used by the small and medium enterprises to

buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e retail, corporate, investment banking, etc

Form of ownership refers to the method of owning real estate, which affects

income tax, estate tax, continuity, liability, survivorship, transferability, disposition at

death and at bankruptcy Ownership forms include: corporation; joint tenancy; limited partnership; partnership; corporation; limited liability company; limited liability partnership; tenancy by the entireties; tenancy in common; and tenancy in severalty

Number of employees refers to the number of people the small or medium

enterprises employ at the time of joining, including any part-time workers

Performance appraisal refers to a review and discussion of an employee's

performance of assigned duties and responsibilities The appraisal is based on results obtained by the employee in his/her job, not on the employee's personality characteristics The appraisal measures skills and accomplishments with reasonable accuracy and uniformity It provides a way to help identify areas for performance enhancement and to help promote professional growth It should not, however, be considered the supervisor's only communication tool Open lines of communication throughout the year help to make effective working relationships Each employee is entitled to a thoughtful and careful appraisal The success of the process depends on the supervisor's willingness to complete a constructive and objective appraisal and on the employee's willingness to respond to constructive suggestions and to work with the supervisor to reach future goals

Promotion refers to the primary elements used in the marketing mix Thus,

promotional efforts should work in harmony with product marketing, pricing, and distribution actions that target prospects and customers When assembling a promotional plan, marketers typically employ one or more of the following five promotional subcategories: personal selling, advertising, sales promotion, direct marketing, and publicity (or public relations) These communication tools serve as tactics within the promotional plan to accomplish objectives such as: increasing sales; launching new products; creating and building brand equity; establishing market positioning; retaliating

against competition; and strengthening brand image

Recruitment refers to the process of finding and hiring the best-qualified candidate

(from within or outside of an organization) for a job opening, in a timely and cost effective manner The recruitment process includes analyzing the requirements of a job, attracting employees to that job, screening and selecting applicants, hiring, and integrating the new employee to the organization After the job description has been approved, the recruitment begins Each organization has a different recruitment process, but it typically includes posting the job opening internally and externally Jobs are posted

on the organization's Internet site, Internet job boards, newspapers and industry professional organizations Recruiting can also include representatives from the organization attending college and career fairs

Time of operated refers to the duration of time that the enterprises have been being run since their foundation

Training and development refers to the official and ongoing educational activities

within an organization designed to enhance the fulfillment and performance of employees Training and development programs offered by a business might include a variety of educational techniques and programs that can be attended on a compulsory

or voluntary basis by staff Training and development is one of the key HR functions Most organizations look at training and development as an integral part of the human resource development activity The turn of the century has seen increased focus on the same in organizations globally Many organizations have mandated training hours per year for employees keeping in consideration the fact that technology is deskilling the employees at a very fast rate

Types of enterprise refers to specialization field that an enterprise is focusing on

CHAPTER II REVIEW OF LITERATUES AND RELATED STUDIES

This chapter presents in summary the review of literature and related studies, which the researcher found closely related to the study being conducted These are incorporated in order to present background with regards to the impact of human resource management practices on the organizational performance of the small and medium enterprises in Thai Nguyen Province

In Europe countries, as extracted from Article 2 of the Annex of Recommendation 2003/361/EC, “The category of micro, small and medium-sized

enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million Euros.”

These definitions are important when assessing which enterprises may benefit from EU funding programs aimed at promoting SMEs, as well as in relation to certain policies such as SME-specific competition rules European Commission policy in relation to SMEs is mainly concentrated in five priority areas, covering:

 the promotion of entrepreneurship and skills;

 the improvement of SMEs' access to markets;

 cutting red tape;

 the improvement of SMEs' growth potential, and;

 strengthening dialogue and consultation with SME stakeholders

A special SME envoy has been set up in the European Commission Directorate - General for Enterprise and Industry with the objective of better integrating the SME dimension into EU policies

In the United States, the Small Business Administration established small business size standards on an industry-by-industry basis, but generally specifies a small business as having fewer than 500 employees for manufacturing businesses and less than

$7 million in annual receipts for most non-manufacturing businesses Size guidelines

define the maximum size that a firm (including its affiliates) can be to qualify as a small business for most SBA programs Size standards usually are a measure of a business's number of employees or its average annual receipts Based on those criteria, the SBA has established the following common standards for a small business, depending on its North American Industry Classification System (NAICS) code:

 500 employees for most manufacturing and mining industries, and

 $7 million in average annual receipts for most non-manufacturing industries There are many exceptions, but these are the primary size standards for most industries

The Vietnamese government, defines SMEs by Decree 56/2009/ND-CP as follows: Small and medium-sized enterprises are business establishments that have registered their business according to law and are divided into three levels: very small, small and medium according to the sizes of their total capital (equivalent to the total assets identified in an enterprise’s accounting balance sheet) or the average annual number of laborers (total capital is the priority criterion), concretely as follows:

Typical features of SMEs

Due to the different in investment capital, employees and revenue, SMEs have some typical features to distinguish them from other kinds of businesses as follows:

- SMEs’ primary competitive advantage is its flexibility; they are often better able to quickly meet customer requests and needs (Temperley, Galloway et al 2004; Antony, Kumar et al 2005; Edwards, Delbridge et al 2005; Murphy and Ledwith 2007)

- Innovation through a research and development program is vital to the existence of a typical SME However, SMEs tend to focus more on incremental innovation, as opposed to radical innovation (Temperley, Galloway et al 2004; Oke, Burke et al 2007)

- Rapid decision-execution in order to mitigate external threats and capitalize on opportunities (Antony, Kumar et al 2005; Murphy and Ledwith 2007)

- SMEs are less vertically-integrated than their counterparts, as there are fewer layers of management and bureaucracy This helps SMEs simplify their management, but also brings the disadvantages that most SMEs focus on operational matters, rather than

planning (Antony, Kumar et al 2005; Deros, Yusof et al 2006; McAdam, Keogh et al 2007)

- The personality of an SME’s chief executive officer or managing director is often a key element in the direction, growth, and success of the company; in this way, SMEs are often people-oriented (Temperley, Galloway et al 2004)

- In SMEs, the working relationship is often loose and informal; the process is often absent of standardization (Antony, Kumar et al 2005)

- Policy-making procedures and resource utilization that are appropriate for large companies are not necessarily appropriate for SMEs (Welsh and White 1981; Deros, Yusof et al 2006)

In his investigation, Ovidiu Nicolescu (2009) also found ten main features of

SMEs’ organization system as stated in the graph below

General features of the SMEs organization system

companies is directly reflected in the low size of their organization systems The

situation is similar for the medium enterprises, corresponding to their organization systems of middle size The low size is always associated, at the level of the organization

system, a low complexity The small size and complexity of the SMEs represent an

important advantage for their management Because of these features, the necessary working volume for the construction and assurance of the functionality of the SMEs organizational systems are relatively low

operational everywhere within each country, in all the fields of activity and in a great

number, is reflected in their high typological diversity A certain type of organizational system corresponds to each type of SMEs It is important to note that each type of organizational system presents certain constructive and functional features

reflecting the specificity of the type of involved company The knowledge of the company’s type and, respectively, organizational system enables the design and assurance of an efficacious functionality of the organization and, implicitly, the management of the companies in question

high, the small number of involved persons, the direct and frequent relationships between them, on one hand, and between them and the entrepreneur, on the other hand, explains the intensity of the human dimension The intensely human dimension of the SMEs presents in the same time advantages – a higher working ethics, a better working climate, more intense consulting and cooperation – and disadvantages – insufficient rigor in

designing and carrying out the activities, reducing of the responsibility, partial negligence

of the economic aspects in favor of the social ones

formalization is amplified with the companies’ size The larger is a company, the more intense must be the formalization Among the SMEs, it is the case of the medium enterprises As within the SMEs, the microenterprises represent 99%, the formalization need is lower

is a consequence of the previous two The strong human dimension of the SMEs, together with the low degree of their formalization is naturally associated with a strong presence of the informal organizational elements

means in the same time a small volume of labor processes involved The low complexity

of a company is reflected in a low diversity of the working processes For this reason, the small size and complexity of the company presents a low procedural organization In other words, only one or a few activities shall be carried out within it, and they are not differentiated in numerous tasks and assignments A low volume of working processes, homogenous or having a low degree of diversification requires, in order to be modeled, a

simple structural system

all with structural and constructive nature – are reflected in a high capacity of the SMEs,

of adjustment to the needs and requirements

the microenterprises It is reduced proportionally with the growth of the company’s size and complexity For example, in the medium size enterprises, the impact of the

entrepreneur’ influence is lower, as the activities growth and complexity require, in order

to obtain business performances, the implementation of certain organizational principles and criteria

performing, as a rule, amplify their size and are developed on many plans The activities become more complex, the personnel more different and numerous, other jobs of managers may appear in the company Under these conditions, especially in the cases of the medium and small to medium companies, the requirement may appear and, not rarely, the possibility of delegating some managerial decisions Thus, it is maintained a high decisional centralization blocking or delaying certain problems from the company

(10) Relatively frequent use of the authoritarian and, respectively, participative

approach

Roles of SMEs in the economy

European Commission stated in the Recommendation 2003/361/EC in 2003 that SMEs play a central role in the European economy They are a major source of entrepreneurial skills, innovation and employment In the enlarged European Union of 25 countries, some 23 million SMEs provide around 75 million jobs and represent 99% of all enterprises SMEs are the engine of the European economy They are an essential source of jobs, create entrepreneurial spirit and innovation in the EU and are thus crucial for fostering competitiveness and employment

In the Impact of Small and Medium Enterprises on Economic Growth and Development in 2012, Muritala Taiwo also expressed that the role of SMEs in the national economy cannot be underestimated These enterprises are being given increasing policy attention in recent years, particularly in third world countries partly because of growing disappointment with results of development strategies focusing on large scale

capital intensive and high import dependent industrial plants The impact of SMEs is felt

in the following ways: Greater utilization of local raw materials, employment generation, encouragement of rural development, development of entrepreneurship, mobilization of local savings, linkages with bigger industries, provision of regional balance by spreading investments more evenly, provision of avenue for self-employment and provision of opportunity for training managers and semi-skilled workers Small and medium enterprises advocates, firstly, it endurance competition and entrepreneurship and hence have external benefits on economy wide efficient, and productivity growth Secondly, SMEs are generally more productive than large firms but financial market and other institutional improvements, direct government financial support to SMEs can boost economic growth and development

Dao Duy Huan (2012) stressed in his article on “Business Development in the direction of Reorganization” that Vietnam has more than 500,000 small and medium-sized enterprises, accounting for 98% of the number of enterprises with registered capital

of nearly 2,313,857 billion (121 billion US dollars) SMEs are a tremendous force which create value-added (GDP) for the economy, especially plays an important role in stabilizing the socio-economic development in the global economic recession

He mentioned that in 2011, SMEs contributed more than 40% of Vietnam GDP, 30% of the total industrial output value, nearly 80% of total retail sales, 64% of freight and 100% of the value of output of goods This section contributed up to 60% of GDP if counting 133,000 cooperatives, farms and individual business households In 2011, SMEs not only contributed significantly to the economic development of the country but also helped to create more than a million new jobs per year (more than 50% of the workforce); contributed to poverty reduction and strengthened social welfare

The resource based view of the firm

In recent years, human resources have been recognized as an important source of sustained competitive advantage Much of the empirical and theoretical works on human resources have been grounded in the Resource-Based View (RBV) of the firm This theory maintains that in order to develop a sustainable competitive advantage, organization must create resources in a manner that is valuable, rare, inimitable, and non-substitutable Barney (1991), has argued that because the resources that have historically provided organizations with competitive advantage are easily and rapidly imitated, the human resources of the organization may be an extremely important source of sustained competitive advantage The RBV of the firm is a theoretical paradigm originating in the field of strategic management The RBV assumes that resources and attributes of the firm are more important to sustained competitive advantage than industry structure and competitors’ actions Resources have been defined as “the tangible and intangible assets a firm uses to choose and implement its strategies” (Barney, 1995) This broad definition includes human, organizational, financial, and physical resources

According to Barney (1995), competitive advantage arises when firms within an industry are heterogeneous with respect to the strategic resources they control, and when these resources are not perfectly mobile across firms, and thus, heterogeneity can be long lasting Technology, natural resources and economies of scale can create value, RBV argued that these sources of value are increasingly available to almost anyone anywhere and they are easy to copy, whilst human resources as defined by Wright & McMahon (1999), as the pool of employees under the firm’s control in a direct employment relationship, can provide the firm with a source of competitive advantage with respect to its competitors The first of these criteria is the value added to the company’s production processes, the contribution made by each employee having its effect on the

results obtained by the organization as a whole Also, since employees are not all the same, their characteristics are in limited supply in the market In addition, these human resources are difficult to imitate Since it is not easy to identify the exact source of the competitive advantage and reproduce the basic conditions necessary for it to occur Finally, this human resources is not easily replaced, though short-term substitutes may be found, it is unlikely that they will result in a sustainable competitive advantage like the one provided by humans Barney (1991) argued that organizations may not obtain the maximum utility from their employees because the employees are not contributing to their fullest potential It was argued that organizations, through the effects of their HRM practices could maximize the knowledge, skills, and abilities of employees From a strategic perspective, Resource-Based View (RBW), suggests that resource advantage of valuable knowledge, unique skill sets, and decision-making capability result in a firm's competitive advantage within the market place (Offstein et al., 2005) The RBW was originally proposed as a shift from an organizational product perspective to a resource perspective in order to better explain strategic management of business From a resource-based view, an appropriate HR system creates and develops organizational capabilities that become sources of competitive advantage (Lau & Ngo, 2004) Intensive competition, shorter product life cycles and volatile product and market environments have contributed to the complexity faced by businesses These emerging changes in global economic environment will present some interesting challenges and opportunities to organizations Some organizations will go under, while some will continue to exist, and some will not only continue but flourish As a result, firms constantly search for newer sources of competitive advantage, and one of the most important being human resource management HRM has the potential to improve and sustain organizational performance by determining the organization's fate (Terpstra,

1994)

The resource-based view of the firm (RBV) has served as the principle theoretical rationale for understanding HR’s role as a strategic asset of the firm (Boselie et al., 2006; Wright & McMahan, 1998; Wright et al., 2001) The RBV stands in contrast to economic and industry based models that assume homogenous and perfectly mobile resources amongst competing firms and, therefore, ignore firm level characteristics in examining performance differences Instead, the RBV is grounded in the assumption that competitive advantage is a product of idiosyncratic attributes internal to the firm Therefore, the RBV focuses very specifically on variability in firm level characteristics This is consistent with research suggesting that the variance in firm performance, as measured by rate of return, is best explained at the firm level rather than industry level (Rumelt, 1991) In this firm level focus, the RBV attempts to explore the ‘black box’ of the firm by identifying those resources and capabilities unique to the firm that account for variance in performance across firms (Amit & Shoemaker, 1993; Barney, 1991) This perspective places an emphasis on factors under the control and direction of the managers (Carmeli & Tishler, 2004) Firm managers capable of developing and evolving these processes and resources can develop competitive advantage When these resources rise

to the definition of being valuable, rare, and not easily imitated or substituted, this advantage can be sustained (Barney, 1991, 2001)

The role of the firm’s human capital characteristics, broadly defined as the nature and extent of the employee’s potential contribution to the firm (Wright & McMahan, 1992), has been long recognized as a potential value creating ‘resource’ capable of resulting in sustained competitive advantage (Barney, 1991) A resource may be thought

of as valuable to the degree that it enables a firm to successfully exploit opportunities and neutralize threats (Amit & Shoemaker, 1993) The capabilities of the firm’s workforce

figure centrally in this ability Moreover, these human capital characteristics are embedded in complex social systems and are not readily observed or replicated (Barney, 1991; Barney, 2001) Given the theorized role of human resource practices in shaping the human capital characteristics of the firm, it is not surprising that the RBV has become the dominant theoretic basis for the study of SHRM (Boselie et al., 2005; Wright et al., 2001)

Strategic Human Resource Management

Historically, research on human resource practices has been conducted primarily

at the individual practice level in which HR practices are studied in isolation and their impact limited to the individual outcomes such as employee attitudes and performance (Wright & Boswell, 2002) However, there has been increasing attention to the impact of groups or bundles of practices and their relationship to firm level performance These bundles or sets of practices, often referred to as high-commitment or high-performance work practices (Huselid, 1995), are generally thought to influence firm performance through three core mechanisms: 1) enhanced employee commitment and motivation 2) enhanced human capital pools in terms of employee skills and abilities and 3) through behavioral outcomes such as information sharing and coordination (e.g Ferris, Hochwarter, Buckley, Harrell- Cook & Frink, 1999; Ostroff & Bowen, 2000; Boxall & Purcell, 2004; Wright et al., 2001)

While the idea of systems of HR practices producing, through selection and training, direct benefits to the firm through the enhanced employee skills and abilities can

be readily understood, the mechanisms through which behaviors and attitudes are influenced in support of competitive advantage merit further discussion

A number of frameworks have been offered suggesting a relationship between the

HR system and these outcomes The ‘high commitment systems’ associated with these

assumptions includes management practices such as job enrichment, flexibility, participation, team working and minimization of status differences among employees These practices are positioned against the Tayloristic assumptions of narrow task assignment, control and limited discretion and are purported to result in higher levels of employee commitment and, therefore, greater intrinsic motivation ( Pfeffer, 2005; Wood

& Albanese, 1995)

Consistent with the non-Tayloristic approach, though less reliant on the employee commitment as the central process mechanism, are Lawler’s (1986, 1992) ‘high- involvement management’ and Huselid’s (1995) ‘high performance work practices’ Like the high commitment systems, these practices operate through the intermediary mechanism of enhanced attitudinal and motivation outcomes as well as by providing the opportunity for greater employee contribution (Ostroff & Bowen, 2000; Boselie et al., 2005) Programs such as employee participation, teams, and information-sharing more fully leverage the human capital of the firm by providing opportunities for employees to invest discretionary behavior in a manner supportive of organization success

Finally, HR systems are believed to impact organizational performance through enhanced structural efficiencies, coordinative behavior and enhanced communication (Ichniowski, Kochan, Levine, Olson & Strauss, 1996) These programs include employee participation or voice mechanism, teams and information-sharing (Ostroff & Bowen, 2000; Boxall & Purcell, 2003) Therefore, while the specific HR practices associated with high-commitment, high- involvement or higher performance work practices are slightly variable, they hold the common assumption that HR practices impact the organization’s employees in a way that produces unique skill, attitudinal and behavioral responses among employees While no consensus exists in SHRM research regarding the specific practices associated with these systems, following Pfeffer (2005),

the term ‘high commitment system’ is used throughout the paper and is consistent with and inclusive of those practices associated with both high involvement and high performance work systems

Second assumption inherent in SHRM research is the idea of management of mutuality, or the alignment of interest, as a key objective of the HR system (Boswell, 2006; Boxall & Purcell, 2003) Bowen & Ostroff (2004) invoke the notion of the ‘strong situation’ in offering a framework for the understanding of the role of the HR system in developing the requisite attitudinal, behavioral and human capital outcomes important to organizational performance Situational characteristics, in a strong situation, dominate otherwise idiosyncratic perceptions of the environment and serve as the primary determinant of affective and behavioral responses (Ross & Nisbett, 1991) The HR System, according to Bowen & Ostroff (2004), has the capacity to create a strong situation when the practices are salient, consistently applied and mutually reinforcing When this occurs, an HR System will create uniform aggregate perceptions and behavioral responses by organizational members These responses can be important to organizational functioning and, when aligned in support of the organizations’ strategic objectives, important to their ability to both develop and sustain competitive advantage For this reason, the presence of HR programs, their application and their salience to employees all become critical dimensions of the HR System

Finally, it is important to note that the relationships between these practices and employee outcomes are not mutually exclusive and can be synergistic and reinforcing For example, selection may focus on both the immediate acquisition of important skills and abilities resulting in the enhancement of the organization’s human capital These practices may also be targeted at selecting individuals who share organizationally important values necessary to building long-term employee commitment to the

organization (Kristof-Brown, Zimmerman & Johnson, 2005) Likewise, organizational training and development initiatives would directly influence immediate human capital outcomes as well as enhance employee commitment and motivation

Therefore, implicit in the study of SHRM is the suggestion that HR practices should be considered as a system—i.e a bundle of practices whose impact exceeds specific practices in isolation (Becker & Huselid, 1998; Huselid, Jackson & Schuler, 1997) As Guzzo & Noonan (1994) argue, it is the collective interaction of HR Practices that affect employee and, ultimately, organizational performance This suggests that it is theoretically appropriate to focus on single comprehensive measures of the HR System Evidence seems to support this idea as sets of HR Practices, when reduced to a single index, outperform individual practices (Combs et al., 2006; Ichniowski et al., 1996) Further, several researchers have argued that different combinations of various practices may have equivalent performance consequences (Delery & Doty, 1996) These system level representations of sets of HR practices allows for this underlying variability Finally, a single index is consistent with the theoretical logic of the HR System as a strategic asset of the organization (Becker & Huselid, 1998)

Strategic Human Resource Management and the Resource Based View of the Firm

As argued by Wright & McMahan (1992) and Cappelli & Singh (1992), the SHRM system becomes a resource, or strategic asset of the firm, capable of producing competitive advantage in so far as it produces unique and strategically important capabilities among the firm’s workforce (Wright & McMahan, 1992; Wright et al., 2001; Ostroff & Bowen, 2000; Ichniowski et al., 1996) These include enhanced skill, motivation and behavioral characteristics of the employees Additionally, because these practices are treated as systems, they bring with them interdependencies, unique historical paths and synergistic effects that are causally ambiguous (Barney, 2001; Lado

& Wilson, 1994; Wright & McMahan, 1992; Wright et al., 2001) Moreover, the HR system, like the resultant human capital capabilities, is embedded in a complex social system that precludes replication (Barney, 1991; Barney, 2002)

Nevertheless, one of the challenges confronting empirical tests of the RBV as a theoretic basis for SHRM research is the need to assess the characteristics of the organization’s workforce It is not enough to demonstrate the relationship between superior firm performance and the presence of systems of high commitment HR Practices A more rigorous test of the RBV requires both establishment of the relationship between HR Practices and the desired employee outcomes and a relationship between these outcomes and the organization’s performance Moreover, the main effect

of HR Practices must be shown to operate through these employee outcomes, through tests of mediation Stated together, in addition to direct effects though improved processes, it must be shown that these relationships pass from practices through people to organizational level performance

Testing these relationships in this manner speaks directly to understanding the

HR System as a source of value creation in the development of strategically important human capital characteristics Few studies have endeavored to test these relationships simultaneously Indeed, unlocking this ‘black box’ which explains HR’s contribution to the firm’s sustained competitive advantage has been described as “the most pressing theoretic challenge facing SHRM” (Becker & Huselid, 2006, pg 899) For this reason, many have argued that though SHRM is commonly positioned within the RBV, it has not experienced a rigorous test of its arguments (Ferris et al., 2001; Ferris, Hall, Royle, & Martocchio, 2004; Wright et al., 2001; Becker & Huselid, 2006)

The intermediary mechanisms between HR practices and firm performance— employee skills, attitudes/motivations and behaviors—despite their conceptual

importance, have received relative little empirical attention within SHRM research Most research has focused exclusively on the relationship between reports of the presence of practices and a variety of organizational outcomes Indeed, in a recent qualitative review

of the extant literature on SHRM, only 20 of the 105 studies reviewed investigated the influence of the practices on proximal employee outcomes (Boselie et al., 2005) Likewise, meta-analytic review of the literature demonstrated that only 23 of the 165 effect sizes reported address these proximal employee outcomes When studied, they are often studied in isolation as dependent variables or individual mediators rather than within a more fully specified system of mediating mechanisms This short-coming has been noted in several reviews (e.g Becker & Huselid, 2006; Wright et al., 2001; Guest, 1997) and has been the subject of recent theoretical developments (Bowen & Ostroff, 2004) Thus, the need to both more fully understand how the HR System impacts these human capital characteristics and the nature of their mediating role is of central importance in the larger literature and a focus of the present study

Measures of the Human Resource Management System

One of the long recognized limitations in the SHRM is the lack of a clear definition of the HR System construct Qualitative and meta-analytic review of the literature reveals considerable variability in how the HR System construct is defined and measured (e.g Arthur & Boyles, 2007; Boselie et al., 2006) Arthur and Boyles (2007) provide a useful discussion of this issue and propose a framework for more clearly defining HR System constructs Specifically, they draw on existing literature and identify four unique construct definitions—HR Principles, HR Programs, HR Practices and HR Perceptions that have been used to measure the HR system HR Principles are high level value and attitudinal orientations of the organization’s leadership regarding the management of employees; HR Programs are objective reports by key organizational

informants of the formal HR Programs in place; HR Practices are also reports of the programs, but differ in so far as they are targeted at measuring their actual use by line level managers and supervisors; finally, HR Perceptions refer to employee experiences with and perceptions of the HR Practices While all these measures have been used to assess the HR System within SHRM research, interpretations of empirical findings are often made without regard to the underlying conceptualization (e.g Combs et al., 2006)

In addition to their meanings, Arthur and Boyles (2007) present arguments that the validity of these conceptualizations is reliant on targeting appropriate respondents Because SHRM research has been dominated by single respondent methodology, most often the senior HR person within the organization (Wall & Wood, 2005), the ability to both more clearly define HR System measures and target appropriate respondent groups

to provide assessments represents an important advance This will enable sounder research designs, validity assessments and ultimately practitioner application Improved conceptualization and measurement of the HR System construct will also allow for the more careful establishment of the links between these measures and the theorized intermediary human capital characteristics—a necessary step in the establishment of the broader mediating relationships In the following section, each of these measures is described along with relevant empirical findings

Human Resource Principles

HR Principles are conceptualized as organization leaders’ general view of the strategic importance of their human assets Early work by McGregor (1960) delineates two basic attitudinal orientations of managers regarding their employees and two corresponding managerial approaches The first, Theory X suggests a managerial attitude that employees are generally unmotivated and largely incapable of self-directed behavior These attitudinal assumptions imply that employees are largely disposable and

interchangeable and manifest operationally in management approaches characterized by rigid hierarchies, narrowly defined jobs and a command and control management This

is consistent with the Tayloristic approach referenced earlier

This high level distinction between the basic assumptions of managers related to the nature of the employee-organization relationship has been further developed by Tsui and colleagues (1995, 1997) They propose a framework of possible organization- employee employment relationships or “modes” Of specific interest here is the distinction between what she refers to as “mutual investment” and “quasi-spot contract” modes of employment In the mutual investment mode employers invest in the employee

in the form of extended consideration of the employee’s well-being, career development and providing employment security

In exchange, the employee develops a similar commitment, a willingness to engage in behavior supportive of firm functioning but not specifically required in their jobs Conversely, a quasi-spot contract is so named to connote “a circumscribed relationship” (Tsui et al, 1997, pg 1092) in which the relationship is characterized by a short-term orientation, narrowly defined work and task specific economic rewards Though not tested at the organizational level of analysis, support was found for the relationship between supervisory reports of a mutual investment mode and employee attitudes and performance (Tsui et al., 1997)

Considered in relationship to organizational level outcomes, a great deal has been written in the practitioner literature suggesting that a distinguishing feature of organizations that achieve sustained competitive advantage is the more effective deployment of their human assets (e.g O’Reilly & Pfeffer, 2000) Though most often anecdotally derived, this process is suggested to begin with a fundamental valuing of and investment in employees by organizational leaders While this line of reasoning has a