Human Resource Management's Effects on Firm-Level Relative Efficiency

Abstract

Using stochastic frontier production functions methodology with data from 1579 private-sector establishments, we demonstrate that HR practices are significantly associated with differences in relative firm-level efficiency. Supplemental analysis implies that this efficiency analysis is substantively different than the common approach to evaluating HRM's relationships with firm-level labor productivity. The results suggest that HR practices' contributions to relative firm-level efficiency are an important but heretofore overlooked factor in the relationship between HRM and firm performance. © 2012 Regents of the University of California.