Human resource management practices as predictors of innovation among Johor SMEs

SMEs have been recognized as a key source of innovation in many developed and developing countries. However, much of existing research on predictors of innovation was aimed at identifying the effects of structural and external factors that are more appropriate for larger firms. Fewer studies have considered the role of HRM practices on SMEs innovativeness. Furthermore, empirical evidence in existing studies draws mainly from samples in developed countries which limit their external validity. Therefore, this study aimed to investigate whether HRM practices are significant predictors of innovation, as measured by the number of new products, products improvements as well as manufacturing improvements among Johor SMEs. Forty-four SMEs in the food and beverages sector in Batu Pahat district participated in the cross sectional survey. It is found that HRMPs explained 57% variance in innovation among SMEs. However, only recruitment and selection and job security were significant predictors. In the face of limited resources, SMEs' owner managers tend to opt for immediate measure to promote innovation through recruitment of innovative employees.