Essays on human resource management practices turnover, productivity, and firm performance

The belief that human resource (HR) management policies and practices have implications for firm-level outcomes such as turnover, productivity, and profitability is nearly the conventional wisdom. However, despite frequent claims that investments in sophisticated systems of HR management policies or practices (HRSOPH) produce valued firm-level outcomes, prior empirical work is very limited. Therefore, in two separate essays using a common dataset, I describe the results of a study based on a national sample of firms that matched a firm-specific index of HRSOPH with objective measures of turnover, productivity, and firm profits.; In the first essay I examined the effects of HRSOPH on employee turnover and economic productivity (the log of sales per employee). I found that increasing HRSOPH one standard deviation decreased turnover by 1.36 percent (7.45 relative percent) and raised the present value of sales an average of {dollar}33,287 {lcub}it per employee{rcub}. These values were both economically and statistically significant.; In the second essay I extended the analysis to the influence of HRSOPH on firm financial performance. Using both capital market and accounting dependent measures, I found the use of sophisticated human resource management practices to have a statistically and economically significant effect on overall firm performance as well. On a per-employee, present value basis, a one standard deviation increase in HRSOPH was associated with {dollar}31,417 and {dollar}33,250 higher annual profits and market value, respectively. These results were consistent across diverse measures of firm profitability and corrections for simultaneity and selectivity bias.; In summary, this study represents a substantial conceptual and methodological advance over prior work by operationalizing a global measure of HR management practice sophistication and evaluating the outcomes associated with its use in a large sample of firms across diverse industries. Using a wide range of industries and firm sizes and a number of estimation procedures and specifications, I found broad support for the assertion that higher levels of HR management practice sophistication lead to greater firm profits and productivity, and lower turnover.