Low performance work systems? The deleterious effects of high investment human resource systems on small firm labor productivity

We propose that managerial attention is a critical limited resource for small firms and that informal HRM can be more effective than formal HRM in small firms. In support of these assertions, we find a robust negative relationship between formal HRM systems and labor productivity within a sample of Canadian small firms. Additionally, we find that differentiation strategy magnifies this negative relationship, whereas capital intensity, firm age, industry growth, and industry dynamism mitigate this negative relationship. Thus, our findings rebut the view that formal HRM systems universally enhance firm performance. Implications for small firms and for strategic HRM are discussed.