Selection of “High Performance Work Systems” in U.S. Manufacturing

This paper analyzes the use of two important human resource practices (self-managed work teams and formal training programs) in U.S. manufacturing. These practices are often used in conjunction with each other and their use is associated with improved firm performance, thus the term “high performance work systems.” The results of this paper raise concerns about the interpretation of studies that show a relationship between the use of particular systems of practices and higher performance but do not account for selection of practices by the firm. The paper uses a theoretical model to analyze the mechanism via which these practices improve firm performance. The results of the theoretical model are tested using an empirical model that allows practices to be chosen simultaneously, allows for the choice of practices to interact, and allows for this interaction to vary based on observable characteristics of the firm. The paper shows that the value of individual practices to a firm depends on characteristics of the firm’s product market, and on the choice of other practices by the firm. ∗The author thanks in particular Larry Samuelson for all his help and suggestions and also Deena Ackerman, and Phil Haile, John Kennan, Aileen Thompson and colleagues at FTC. The views of expressed in this paper do not necessarily reflect those of the Federal Trade Commission or its Commissioners. All errors are my own.