Firm performance: is organizational learning capability the magic wand?

Abstract

PurposeThe purpose of this paper is to focus on human resource practices contribution to retail SMEs performance through its role in developing organizational learning capability (OLC).Design/methodology/approachA cross-sectional design was adopted, where data were collected from a sample of 214 managers of retail SMEs, utilizing a survey questionnaire. Structural equation modeling was used to test the hypothesized relationships.FindingsThe results indicate that incentive reward has the strongest significance on firm performance with a stronger influence on economic performance. Performance appraisal has the greatest effect on system perspective, followed by the impact of employee selection on managerial commitment (MC). MC strongly affects firm performance while openness and experimentation influences satisfaction performance. Additionally, OLC fully mediates the relationship between high-performance human resource management (HRM) practices and firm performance.Research limitations/implicationsIt did not include large organizations nor consider other SME contextual variables which may otherwise exert significant impact on OLC.Practical implicationsA profound understanding of distinctive high-performance HRM practices effect on firm performance and the needed employee capabilities that would assist organizations to implement strategies to attain sustainable competitive advantage.Originality/valueThe study advances knowledge on HRM practices among SMEs by proposing that distinctive high-performance HRM practices can leverage OLC to enhance firm performance.