Employee Turnover in Manufacturing SMEs in Japan: An Analysis of the Link with HRM Practices

Abstract

Small and Medium Enterprise (SME) sector is playing a significant role in Japanese economy. However, over the last two decades, SMEs have no longer been a thriving source of growth. The firm entry rate has downward trend while exit rate has trended upward in recent years and considerably exceeded the entry rate. One of the reasons for the high rate of business failures in SMEs, is due to its less attention to the human side of their businesses when compared with their counter parts of large enterprises. High voluntary turnover is considered to be the one of critical problem for SME owner/managers among many other human resource issues. Therefore, the objective of this paper is to examine the relationship between Human Resource Management (HRM) practices and voluntary turnover in SMEs in Japan. Specifically, this study attempts to examine the relationship between HRM practices and voluntary turnover shedding some lights on the mediating effect of the link in between HRM practices and turnover rate. A structured questionnaire was developed and sent to 436 SMEs in Aichi Prefecture and 144 firms responded to the questionnaire resulting in 32 percent response rate. Based on the data analysis it was found that there is negative but weak relationship, partially mediated by HR outcomes, between HRM practices and voluntary turnover rate in manufacturing SMEs in Japan.