A quarter‐century review of HRM in small and medium‐sized enterprises: Capturing what we know, exploring where we need to go

• Author: Hadeel Alkhalaf,Brian Harney
• DOI: http://doi.org/10.1002/hrm.22010
• Published date: 01 January 2021
• Date: 01 January 2021

SPECIAL ISSUE ARTICLE

A quarter-century review of HRM in small and medium-sized

enterprises: Capturing what we know, exploring where we

need to go

Brian Harney

1

| Hadeel Alkhalaf

2

1

Dublin City University Business School,

Dublin City University, Dublin, Ireland

2

College of Administration Science and

Humanities, Buraydah Private Colleges,

Buraydah, Saudi Arabia

Correspondence

Brian Harney, Dublin City University Business

School, Dublin City University, Dublin, Ireland.

Email: brian.harney@dcu.ie

Funding information

European Union's Horizon 2020 Research and

Innovation Programme, Grant/Award Number:

734824

Abstract

Despite the proliferation of HRM research, only a small fraction explores the context

of small and medium-sized enterprises (SMEs). Where HRM in SMEs has received

attention, the literature base remains fragmented and variable, comprising a plurality

of definitions, explanations, and methods. To advance understanding, this paper uses

a quarter-century systematic review drawing on an evidence base of 137 peer-

reviewed articles. A cumulative framework is presented capturing key developments

and synthesizing existing areas of research focus. Analysis of limitations and

knowledge-gaps finds a failure to differentiate across various types of SMEs, limited

appreciation of SME characteristics and contextual conditions, and a dominance of

managerial perspectives. An agenda for future research on HRM in SMEs is outlined

with respect to definitional parameters, HR practices, HRM–performance, key deter-

minants, and presenting issues. The paper concludes that SMEs offer a unique, fruit-

ful, and timely context for investigations of HRM.

KEYWORDS

entrepreneurship, HRM in context, small- and medium-sized enterprises, small firms,

systematic literature review

1|INTRODUCTION

Reviews of theoretical developments and methodological progress

suggest that the field of HRM has blossomed (Bainbridge, Sanders,

Cogin, & Lin, 2017; Wright & Ulrich, 2017). Yet understanding has

proceeded in a skewed fashion, paying much less attention to the

population of small and medium-sized enterprises (SMEs)

(Hayton, 2003; McClean & Collins, 2019; Sheehan, 2014; Wapshott &

Mallett, 2016). The “sparseness”of the current empirical record in

SMEs (Chadwick & Li, 2018, p. 1415) is surprising given that SMEs

account for the vast majority of private sector employment and net

job creation across the globe (OECD, 2015). In the United States, for

example, 97% of all firms can be classified as small, while 99.8% of

firms in the European Union are SMEs (Dilger, 2017). Despite on-

going calls for more dedicated SME research (Bryant & Allen, 2009),

including assessments of the applicability and conceptualization of

HRM in this context (Allen, Ericksen, & Collins, 2013; Heneman,

Tansky, & Camp, 2000; Rauch & Hatak, 2016), research on HRM in

SMEs remains “underdeveloped and equivocal”(Chadwick, Way,

Kerr, & Thacker, 2013, p. 311). It is difficult to disagree with Burton,

Fairlie, and Siegel that “employment scholars have largely ignored

entrepreneurship-related topics”(2019, p. 1051). Roumpi and

Delery (2019) recently reinforced that SMEs provide “a unique but

under-researched context”(2019, p. 431), adding to longstanding

claims that the SME context can provide invaluable insights for HRM

research (Katz, Aldrich, Welbourne, & Williams, 2000).

The deficient state of HRM understanding is problematic as SMEs

are known to confront particular HR challenges stemming from

resource poverty (Welsh & White, 1981) and the liability of smallness

(Cardon & Stevens, 2004). These same characteristics mean that

SMEs are especially reliant on the performance of people, thereby

rendering HRM interventions strategic to the viability and success of

DOI: 10.1002/hrm.22010

Hum Resour Manage. 2021;60:5–29. wileyonlinelibrary.com/journal/hrm © 2020 Wiley Periodicals LLC. 5

SMEs (Barrett & Mayson, 2007; Patel & Cardon, 2010). Exploring

HRM in SMEs is therefore a topic of “major theoretical and practical

importance”(Soriano, Dobon, & Tansky, 2010, p. 220). In order to

advance understanding, this paper details a quarter-century system-

atic review of HRM in SME research, before leveraging this evidence

base to outline pathways for future research. In so doing we make a

number of contributions. First, one on-going concern for HRM is a

failure to adequately accommodate context and incorporate boundary

conditions (Chadwick et al., 2013; Cooke, 2018). SMEs evidently have

distinguishing characteristics which open up interesting questions for

HRM research (McClean & Collins, 2019). The labor-intensive nature

of SMEs, their inherent resource poverty, owner-manager influence,

and the predominance of informality suggests distinctive HRM formu-

lation and implementation challenges (Baron & Hannan, 2002; Klaas,

Semadeni, Klimchak, & Ward, 2012). Equally, some question whether

the hierarchically contracted structure and tighter span of control in

SMEs mean that more sophisticated or extensive HRM practices

(e.g., formal voice mechanisms) may not be viable or even necessary

(Brand & Bax, 2002). Unsurprising therefore that the transferability of

HRM as it has been found in larger firms directly to the SME context

has been described as “equivocal”(Chadwick & Li, 2018, p. 1416) and

even “contentious”(Bryson & White, 2019, p. 750). Similarly, when it

comes to accommodating SME characteristics extant HRM theory has

been found wanting (Bryant & Allen, 2009; Harney & Dundon, 2006).

More informed contextual understanding obtained by systematically

acknowledging and building upon dedicated SME research will help us

to better navigate this fragmented and variable research base and

make sense of contradictory evidence.

Our second contribution relates to the timing, substance, and

scope of our review. This quarter-century review is the first compre-

hensive summary of SME research evidence since the work of

Heneman et al. (2000) and Cardon and Stevens (2004). Reflecting the

“emerging and embryonic”nature of SME research, Heneman et al.

found that most SME research comprised of thought pieces and

descriptive cases. In their review only 17 empirical articles were iden-

tified from 129 contributions, with analysis limited to comparing sin-

gle HR areas with the priorities identified by practitioners. Cardon and

Stevens (2004) similarly used a functional framework of individual

HRM practices to review 37 articles. By contrast, and following the

recommendations of both these earlier reviews, we draw on an exten-

sive analysis of 137 contributions which have addressed HRM holisti-

cally as a suite of practices. The HRM bundle concept is judged more

relevant to the way owner-managers view people management in

their organizations as it appreciates the flow of “interrelated”HR

activities (Heneman et al., 2000, p. 22; Cardon & Stevens, 2004,

p. 318) and “knock on impact”of HR practices (Allen et al., 2013). This

approach aligns with more strategic conceptualizations of HRM as

multiple practices, systems or bundles (Bainbridge et al., 2017), as well

as empirical work which has explored HRM in an SME context

(Samnani & Singh, 2013). In terms of breadth of analysis, our review

can also be distinguished from those that have taken a narrow focus

to conceptualize HR issues in emerging organizations (Bryant &

Allen, 2009), with respect to culture and change in small

entrepreneurial firms (Jack, Hyman, & Osborne, 2006), or that focus

on a specific context such as China (Cunningham & Rowley, 2007).

These reviews have certainly enhanced our overall understanding of

HRM in SMEs, albeit with a partial emphasis on one piece of the larger

HRM in SME puzzle.

Our third contribution involves the exhaustive process of con-

ducting the review and the identification of subsequent limitations

and evidence-based gaps in understanding. Although HRM in SMEs

have received some dedicated interest, including via special issues

(Bartram & Rimmer, 2010; Katz et al., 2000), we still lack systematic

insights on progress akin to those found with respect to human

resource development (HRD) (Nolan & Garavan, 2016) or marketing

(Bocconcelli et al., 2016) in the SME context. Systematic literature

reviews are particularly powerful tools as the application of a struc-

tured protocol helps avoid prospective limitations of narrative

reviews, including the risk of uncritical selection of research, publica-

tion bias and methodological favoritism (Briner & Walshe, 2014;

Markoulli, Lee, Byington, & Felps, 2017). By way of example, an

extensive systematic review enables us to move beyond an exclusive

focus (or bias) on a particular type of SME (e.g., IPO or growth-ori-

ented), sectoral emphasis (e.g., high-tech and knowledge-intensive) or

singular methodology. This more inclusive approach to understanding

SMEs has been separately called for across both HRM (Burton,

Fairlie, & Siegel, 2019) and entrepreneurship research (Welter, Baker,

Audretsch, & Gartner, 2017).

Pursuing a systematic approach ensures broad coverage of out-

lets, while aggregating a body of individual studies in a transparent

and reproducible manner lends credibility to the assessment and

implications for future research (Gubbins, Harney, van der Werff, &

Rousseau, 2018; Tranfield, Denyer, & Smart, 2003). Noteworthy in

this respect is that we move beyond previous reviews by extending

the depth of analysis to include a critical assessment of study compo-

nents, including underlying theories, methodologies and respondent

details. This form of analysis has been absent from HRM in SME

reviews to date (for one exception see Dabic, Ortiz-De-Urbina-Criado,

and Romero-Martínez (2011), although their focus on corporate

entrepreneurship extends beyond SMEs). Overall, pursuing a system-

atic literature review enables us to understand and develop the “sci-

ence”of HRM in SMEs (Mayson & Barrett, 2006). Critically, based on

an assessment and synthesizing of progress, our final contribution is

to provide an evidence-informed roadmap to guide future investiga-

tions in this area. This means we are finally, and systematically, able to

“frame out future work on HR in SMEs”(Huselid, 2003, p. 297) con-

tributing knowledge and recommendations to take the field forward.

2|SYSTEMATIC LITERATURE REVIEW:

RATIONALE AND METHODOLOGY

Based on the above-mentioned rationale, we employed a systematic

approach guided by the following overarching research questions:

(RQ 1) What is the extent of the SME focus in HRM and where are

such articles published? (RQ 2) What theoretical lenses are most

6HARNEY AND ALKHALAF