High Performance Work System and Firm-Level Performance of SMEs in the Southern Region of Thailand: Examining the Antecedent Role of CEO Leadership and the Mediating Roles of Perceived Organizational Support and Psychological Empowerment

Abstract

Most small and medium-sized enterprises (SMEs) in developing countries lack the internal capabilities required to achieve superior business performance. The present study examines the relationship between High Performance Work Systems (HPWS) and SMEs’ performance in Thailand. Drawing from several theoretical perspectives, the present study also seeks to examine the antecedent role of CEOs’ relationship-focused and the mediating roles of perceived organizational support (POS) and employees’ psychological empowerment. Based on the structural equation modeling (SEM) analyses of the data collected from 951 employees and 110 CEOs in 110 SMEs located in the southern region of Thailand, the results showed that the effects of CEOs’ leadership on SMEs’ performance are sequentially mediated by the aggregated employee perceptions of HPWS, perceived organizational support (POS) and psychological empowerment. Firms with higher levels of CEOs’ relationship-focused leadership are more likely to adopt and implement HPWS, in turn leading to higher levels of POS, psychological empowerment, and ultimately organizational performance. An important implication for management research that arises from this present study is that, in order for SMEs to achieve higher performance, business leaders will need to provide a supportive work environment for their employees so that they could feel supported and empowered to engage in superior performance behaviors. This highlights the importance of CEOs and their employees’ perceptions and motivation in linking HPWS and firms’ performance. This study is among the first to shed light on the role of CEOs’ leadership on HPWS and firms’ performance.