Enhancing Chinese SME performance through innovative HR practices

Purpose – The purpose of this paper is to show how understanding of human resource (HR) management practices which have been adopted in the emerging markets such as that in China is particularly interesting to academia and management practitioners. The purpose of this study is to shed some light on the implementation of innovative HR practices among 74 Chinese small and medium‐sized enterprises (SMEs) and to explain how the HR practices influence their firm performance. Design/methodology/approach – Cluster analysis is used to group Chinese SMEs according to their adoption of innovative human resource (HR) practices and examine how the practices are associated with HR outcomes and firm performance. Findings – It is found that the membership of clusters is influenced by several factors, including ownership, age and size of firms. These characteristics have influenced the motivation, capacity and ability of firms in the sample to adopt high performance human resource practices. The extent to which firms have adopted innovative human resource practices is shown to be closely associated with human resource outcomes and firm performance. Originality/value – The key implication is that SMEs, especially those rapidly developing domestic and collectively owned small firms, as well as those state‐owned enterprises in China, may see clearly the benefits of devoting greater attention to HR practices to achieve their future growth potential.