Human Resource Practices, Employee Competencies and Firm Performance: Comparative Analysis of Public and Private Food Processing Firms of Punjab

Abstract

The present study focusses on the role of employee competencies between Human Resource Practices (HRPs)-firm performance linkage. The study revolves around three main perspectives/views: Resource Based View (RBV), Strategic Human Resource Management (SHRM), and Human Capital Theory (HCT). The study has three key objectives. First, to study the relationship between HRPs, employee competencies, and firm performance. Second, the compare the mediating effect of employee competencies on the relationship between HRPs and firm performance in public and private food processing firms of Punjab. Third, to study the effect of firm age, size, and ownership on firm performance. Six large scale food processing firms of India are targeted for this study. A sample of 660 (600 employees working on production line and 60 HR managers/General managers) were included from which 330 (300 employees and 30 HR managers/General managers) were from public food processing firms and 330 (300 employees and 30 HR managers/General managers) were from private food processing firms. A cross-sectional and descriptive research design was adopted. HRPs are firm level phenomenon whereas employees are unit level phenomenon. Self-designed questionnaire was used for measuring the independent variable: HRPs and mediating variable: employee competencies. Accounting ratios were used for measuring the dependent variable: firm performance. The present research work exhibits multi-level character following 2-1-2 mediational approach using Multi-Level Structural Equation Modelling (MSEM) technique. The results of first two objectives were achieved using MSEM technique on MPlus software version 8.6 developed by Muthen and Muthen. The last objective was achieved using multiple regression technique on IBM SPSS version 25. The results indicated that employee competencies partially mediate HRPs-firm performance linkage. Employee competencies partially mediated the HRPs-firm performance linkage in public and private food processing firms. The results of second objective indicated that the mediational effect was stronger in the case of private food processing firms than the public food processing firms. Finally, firm age, size, and ownership also exhibited significant and positive effect on firm performance. The results offer several theoretical, practical, and methodological contributions. This study substantiates the importance of employee competencies in a country like India, which has dynamic business environment with high levels of uncertainties, etc. HRPs coupled with employee competencies are one of the best ways of enhancing firm performance.