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CEP discussion paper
The Interrelationship between HR, Strategy and Profitability in Service SMEs: Empirical Evidence from the UK Tourism Hospitality and Leisure Sector
Andreas Georgiadis and Christos N. Pitelis March 2010
Paper No' CEPDP0972:
Full Paper (pdf)

JEL Classification: J2

Tags: value capture strategies; human capital; organisation commitment to employees; profitability

We investigate the strategies, HR attributes and their synergies that are associated with superior performance in service SMEs using data from the UK Tourism Hospitality and Leisure (THL) sector. A major advantage of our analysis is that our sample includes information also on very small firms which makes results representative of the industry but also sheds light on a very little investigated area related to the nature of HRM and its link with performance of micro businesses. Our results suggest that high-performing SMEs in the THL sector are managed by more experienced entrepreneurs. Moreover, they employ a combination of technological and know-how firm differentiation strategies together with a highly skilled workforce, and/or a combination of (product) differentiation strategies based on quality of service and personal attention to customers, and a generous compensation package and attention to employees development.