Human resources and firm performance in service SMEs: Empirical evidence from the UK

Abstract

We investigate the relationship between Human Resources (HR), and superior firm performance, as well as the role of business strategy as a key mediating factor of this relationship, for Small and Medium Sized Enterprises (SMEs) in the UK Tourism Hospitality and Leisure (THL) sector. Our results suggest that high-performing SMEs in the THL sector are managed by more experienced entrepreneurs. We also find that more profitable SMEs combine a highly skilled workforce with technological and know-how-based firm differentiation strategies, and/or product differentiation strategies, based on quality of service and personal attention to customers alongside generous compensation and attention to employee development.