High Performance Work Systems and SMEs' Performance: Does CEOs' Leadership Matter?

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' benevolent leadership and the mediating roles of employees' psychological empowerment and customer service behaviors. Based on the structural equation modeling (SEM) analyses of the data collected from 951 employees in 110 SMEs located in the southern region of Thailand, the results showed that CEOs' benevolent leadership is positively related with HPWS (beta = .62, p < .001). Furthermore, the effects of CEOs' leadership (beta = .02, p > .05) and HPWS (beta = .11, p > .05) on SMEs' performance are fully mediated by employees' psychological empowerment (beta = .22, p < .001) and customer service behaviors (beta = .18, p < .01). An important implication for behavioral science 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 empowered to engage in superior customer service behaviors. This highlights the importance of employees' motivation and behaviors in linking HPWS and firms' performance. This study is among the first to shed light on the role of CEOs' leadership on HPWS and the firms' performance.