The Embeddedness of Productivity and Performance: Towards a Framework Based on Small Firms

Abstract

The role of human resource management practices in promoting the performance of firms is widely debated. Yet much of the debate has reached an impasse, with uncertain results as to which practices in fact work and why. It has, moreover, rarely gone beyond the context of large firms. This paper offers a different approach to small firms. It draws on institutional theory to outline the contexts in which small firms operate and the resources on which they draw. It then develops a formal framework (reflecting firms' economic context, strategies, and resources) that is illustrated through seven distinct types of firm and two real cases. The meaning of performance, and the relevance of ideas of high performance, is shown to vary between these types. Performance is embedded in the structure and operation of firms, and institutional analysis helps us move beyond approaches dominated by a search for a disembodied set of best practices.