Human Resource Management, Environmental Dynamism and Firm Innovation: A Study of Small Businesses

Small and medium-sized enterprises (SMEs) have become a key driver of the development of the world economy. Despite its recognized role, the study of human resource management (HRM) in SMEs is in its fancy and requires further empirical studies in order to fill its research gaps. This study aims to address these gaps by examining the relationships between HRM practices and firm innovation in Vietnamese SMEs. We draw upon open systems theory and motivator-hygiene theory, and relevant literatures to hypothesize the working relationships between HRM practices and firm innovation using the moderating role of environmental dynamism. We examine these relationships from a panel dataset of more than 7,000 SMEs. Results mainly support and partially do not support their hypotheses, which highlight the circumstances under which HRM practices may influence firm innovation. We discuss both theoretical and practical implications of these findings, and thus offer avenues for future research.