Human Resource Management in Privately-Owned SMEs in China: Determinants, HRM Practices and Employee Outcomes

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Abstract

The role of small and medium-sized enterprises (SMEs) in stimulating economy, promoting employment and enhancing social stability is increasingly recognised, especially in developing countries. Given SMEs’ considerable contribution, it is necessary to facilitate their healthy growth. Human resource management (HRM) is highlighted for SMEs as ‘people’ are the key factors in determining the future of these organisations. Given that the existing HRM literature is largely centred upon western contexts and large-sized enterprises, the main aim of this research is to develop an understanding of how HRM practices function in privately-owned SMEs in the mainland of China by exploring the current situation regarding the adoption of HRM practices, the influential factors in shaping HRM practices, and how HRM practices impact on employee outcomes. A conceptual framework is constructed by drawing on concepts found within existent HRM frameworks and theories. The resulting research framework sheds light on the connections among three types of influential factors, five groups of HRM practices by function, and two HR outcomes at the individual level in the chosen context. This research adopts a mixed methodology approach to answering the set of research questions emerging from the literature review. The data were collected by 227 valid self-completed questionnaires (Cronbach’s α=0.923) and 48 semi-structured interviews in 24 privately-owned SMEs located in Jiangsu and Shaanxi provinces in China. The research findings reveal a number of similarities and differences in HRM practices in the SME sector in China. More importantly, they suggest that SMEs have tended to adopt increasingly formal HRM practices over time though informalities remain in some aspects, providing a positive indication that SMEs are moving forward in formalising the practices. The findings also reveal that different HRM practices exist in different locations in China, suggesting distinct HRM patterns might exist across or even within provinces in China. The findings further reveal that institutional factors force SMEs to improve the practices in order to better cope with the emerging problems and conflicts embedded in the labour market and the changes in legislation. Given the market orientation of SMEs and the younger generations’ characteristics, the impacts of cultural values of respect for hierarchy and seniority appear to have become increasingly weakened in the sector. The examination of relationship between HRM practices and HR outcomes demonstrates that all five groups of HRM practices are predictors for affective commitment, normative commitment and turnover intention, among which training and development and reward management practices have the strongest predictive power. It is noted that continuance commitment is not found applicable to the Chinese sample, indicating the partial transferability of the western three-component model of organisational commitment into the Chinese context. Therefore, theoretically, the findings extend the knowledge in the field of HRM in SMEs by developing the framework of determinants-HRM practices-outcomes and revealing the causality of HRM practices-employee outcomes in the SME sector in China. Practically, the findings are likely to be helpful to SME owners and practitioners in formulating effective HRM policies and practices to achieve desirable outcomes. The findings in relation to the impacts of institutional factors offer a potential contribution to national policy development for the purpose of assisting the growth of SMEs.

Keyword(s)

China; HRM; SMEs

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