Mediation of Psychological Capital on Human Resource Management Practices and Firm Financial Performance

Abstract

The purpose of the study is to examine the mediating effect of psychological capital on the relationship between human resource management practices and financial performance in small businesses in South Africa. A cross-sectional survey design was utilised to collect data from a sample of 401 small businesses operating within the Eastern Cape Province of South Africa. The findings show that human resource management practices, psychological capital and financial performance are positively correlated to one another. Moreover, through hierarchical regression analyses, psychological capital was found to partially mediate the relationship between human resource management practices and financial performance. Based on the findings of the research, small business owners/managers can use the study results to develop strategies and interventions that can enable their firms to thrive.