Journal : SmallExtended 11482 Article No : 9965 Pages : 22 MS Code : 9965 Dispatch : 6-7-2021

Applied Research in Quality of Life

https://doi.org/10.1007/s11482-021-09965-z

1 Do High Performance Work Systems Improve Workplace

2 Well‑Being in SMES? Implications for Financial Performance AQ1

3 Mercedes Rubio‑Andrés1 · Mª del Mar Ramos‑González1 ·

4 Miguel Ángel Sastre‑Castillo2,3

5 Received: 16 February 2021 / Accepted: 28 June 2021

6 © The International Society for Quality-of-Life Studies (ISQOLS) and Springer Nature B.V. 2021

7 Abstract
8 SMEs that create employment and wealth in economies face ever-more turbulent
9 environments, such that they need to manage their employees by using advanced

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10 systems which enable them to gain a competitive advantage and generate financial

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11 performance. Based on the link between HRM and financial performance, this paper
12 first explores their direct relation and then analyses the mediating variables involved

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13 in workplace well-being, reputation, and the creation of social value, which play a
14 key role in said relation, drawing on the postulates of HPWS since these are proac-
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15 tive and well-developed HRM practices. This is a key research topic as it allows us
16 to understand better the antecedent variables of well-being, reputation, and social
17 value associated with HPWS and how they affect financial performance. For the
empirical analysis, we use a sample of 1,136 Spanish SMEs and model a system
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19 of structural equations using Partial Least Squares (PLS). Results show the firm’s
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20 capacity to enhance workplace well-being, create a better reputation and create

21 social value, and how these function as an intervening mechanism in the relation
22 between HPWS and financial performance, exerting an individual as well as a joint
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23 mediating effect that explains how the former has a positive impact on the latter.

24 Keywords HPWS · Reputation · Financial Performance · Social Value · SMEs

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A1 * Mercedes Rubio‑Andrés
[email protected]
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A2

A3 Mª del Mar Ramos‑González

A4 [email protected]
Miguel Ángel Sastre‑Castillo
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A5
A6 [email protected] AQ3

1
A7 Department of Business Administration, CEU, San Pablo University, Madrid, Spain AQ4
2
A8 Complutense University of Madrid, Madrid, Spain
3
A9 ISDI University, Mumbai, India

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M. Rubio‑Andrés et al.

25 Introduction

26 The expansion and digitisation of economies worldwide has meant that firms
27 must face the enormous challenge of competing in increasingly turbulent envi-
28 ronments and must strive to cope with global crises. As a result, firms, and in
29 particular SMEs, which are the cornerstone of the Spanish and European business
30 fabric and which are key creators of employment and wealth, are in ever-greater
31 need of competitive and better prepared workforces in a globalised world and
32 must also embrace the theories of workplace well-being. Over the last few years,
33 this reality has sparked many debates concerning which human resource practices
34 should be used in organisations in order to achieve worker prosperity and well-
35 being and so secure skilled worker retention, and thereby help SMEs to achieve
36 greater efficiency and better financial performance.
37 Indeed, HRM had to a large extent been addressed in the literature due to its

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38 impact in terms of enhancing productivity and organisational performance based
on the mutual gains approach and good human resource practices. Yet, HRM has

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39
40 not always been studied from this approach. In fact, according to the conflicting

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41 outcomes perspective, certain human resource management systems may prove
42 to be detrimental to employees and might evenly negatively impact their inter-
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43 ests and well-being, basically because employees who carry out their work under
44 the premises of HRM work harder and are subject to greater workplace pressure
45 (Peccei et al., 2013). Nevertheless, as research into HRM and financial perfor-
mance evolves, the role played by employees in organisations has become a key
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47 factor, to a large degree because of employees’ influence on attitudes and behav-
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48 iours (Guest, 2017) as a result of human resources policies grounded on high per-
49 formance work systems (HPWS). Figure 1 AQ5
50 As a result of this, our study specifically addresses HPWS. Although it should
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51 be noted that there is a lack of agreement amongst academics concerning its defini-
52 tion and components (Zhang & Morris, 2014), there does seem to be general con-
53 sensus with regard to what its principal indicators are. Prominent amongst these
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54 are recruitment and selection procedures, job security, teamwork, extensive train-
55 ing activities, professional career development, information that is shared and open
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56 amongst the organisation’s members, strong employee commitment and participa-

tion, performance assessment, and contingent pay (Arthur, 1994; Pfeffer, 1994;
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58 Huselid, 1995; Jackson & Schuler, 1995; MacDuffie, 1995; Milgrom & Roberts,
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59 1995; Ichniowski et al., 1997; Becker & Huselid, 1998; Cappelli & Neumark, 2001;
60 Wood & de Menezes, 2008; Martí-Audí et al., 2013). AQ7
61 HPWS can therefore be understood as an advanced system of human resource
practices which lead to improved employee skills, participation, commitment and
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62
63 a greater degree of involvement in the organisation, boosting their productivity
64 and making them a source of competitive advantage (Datta et al., 2005), such that
65 firms can achieve enhanced financial performance, which is today key to enabling
66 SMEs to compete. In contrast to other more conventional HRM systems, HPWS
67 encourage organisational flexibility, highlight worker autonomy and foster knowl-
68 edge transfer (Arthur, 1994).

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Do High Performance Work Systems Improve Workplace Well‑Being…

0.015 Financial
Perfomance
HPWS
R2=0.484

0.425*** 0.107**

Reputaon
0.392***
R2=0.181

0.302***
Social
0.399*** 0.217*** Value

R2=0.443
0.665***

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Wellbeing

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R2=0.280

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Fig. 1  Note: This data is mandatory. Please provide
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Yet implementing certain human resource practices, no matter innovative they

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70 may be, is no guarantee of improved financial performance (Gutiérrez-Broncano
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71 et al., 2011), such that we do not focus exclusively on this relation, but base our
72 approach on the existence of moderating and mediating variables between HPWS
73 and financial performance (Rubio-Andrés & Gutiérrez-Broncano, 2014). Specifi-
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74 cally, our research takes into account the mediating variables of reputation, well-
75 being, and social value to explore how they impact this relation. The present study
76 aims to create a complex model under the premise that generating workplace well-
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77 being is vital vis-à-vis retaining talent and securing competitive advantage. Moreo-
78 ver, well-being generates a business reputation and helps to create social value in
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79 SMEs. When taken together, it is these variables that drive financial performance.
Based on the theory of the mutual gains model, we empirically create an initial
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81 model that measures the direct influence of the effect that HPWS have on financial
performance. We then create a second model that allows us to gauge the mediating
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83 effects of well-being (Gould-Williams, 2003; Lu, 2001; Ryan & Deci, 2001), reputa-
84 tion (Barney, 1991; Hall, 1992; Deephouse & Carter, 2005; MacMillan et al., 2005),
and social value (Spector, 1997; Van De Voorde et al., 2012; Mihail & Kloutsiniotis, AQ8
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85
86 2016). Therefore, the present study attempts to gain a better understanding of these
87 relations, both individually and jointly, may prove useful vis-à-vis gaining an insight
88 into the consequences of SMEs’ commitment to these variables, such that if SMEs
89 strive to achieve workplace well-being, they can generate a good reputation and cre-
90 ate social value, and thereby boost HRM’s impact on financial performance.
91 Given all of the above, we pose the following research questions: (1) Is there
92 empirical evidence of the direct relation reflected in the literature of the influence

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M. Rubio‑Andrés et al.

93 of HPWS on financial performance in Spanish SMEs? (2) What mediating role do

94 well-being, reputation, and social value play individually in the relation between
95 HPWS and financial performance in Spanish SMEs? (3) And what mediating role
96 do these variables play jointly?
97 The work is structured in the following sections. After the introduction, we
98 explain the direct effect between HPWS and financial performance. Following the
99 literature, we then analyse the mediating effects of well-being, reputation and social
100 value, and establish the corresponding hypotheses. We subsequently set out the pro-
101 posed model and the empirical analysis. A specific section then comments on the
102 results obtained. Finally, the most significant conclusions are provided and future
103 lines of research are proposed.

104 Literature Review and Hypotheses

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105 The Direct effect of HPWS on Financial Performance

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106 The literature offers a number of studies exploring the influence of HPWS on finan-
107 cial performance, although these mainly focus on large firms (Datta et al., 2005;
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108 Zhang et al., 2013). Nevertheless, SMEs, which have been the subject of less study
109 in the literature despite their importance in economies, also require flexible human
110 resource practices that enable them to accomplish their aims. One prominent study is
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111 that of Lai et al. (2017) applied to SMEs, and which shows how HPWS within a uni-
112 versalist framework are positively and significantly linked to financial performance.
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113 Huselid (1995) examined the effects of HRM systems scale on firm level turnover,
114 labour productivity, gross rate of return on assets, and a variant of Tobin’s q (firm
115 market value/book value). Results strongly confirmed the hypothesis that HPWS have
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116 a positive effect on the described indicators of company performance. A subsequent

117 study by Becker and Huselid (1998) again confirmed the positive correlation between
118 human resource management systems and company performance. Other key studies
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119 include those which link HPWS to the resulting relevant variables, such as increased
productivity (Datta et al., 2005), lower occupational injury (Zacharatos et al., 2005),
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121 company turnover (Arthur, 1994; Guthrie, 2001; Huselid, 1995), greater empower-
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122 ment (Lawler, 1992), and lower work–family conflict for employees (Batt & Valcour,
123 2003). For Lepak et al. (2006), on the basis of the theory of the human resources sys-
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124 tem, implementing HPWS can help to develop employees’ skills for better financial
125 performance, and can motivate them to align with the firm’s objectives. To study the
126 direct relation between HPWS and financial performance, we propose a first simple
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127 model with both variables.

128 The Mediating Effect of Well‑Being

129 Employers play an active role in their employees’ well-being (Grant et al., 2007)
130 and responsibility (Chia & Kern, 2020). Well-being is a comprehensive concept of
131 happiness (Ryan & Deci, 2001) that includes personal satisfaction (Lu, 2001) and

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Do High Performance Work Systems Improve Workplace Well‑Being…

132 commitment (Gould-Williams, 2003) as well as health that encompasses stressors

133 and strain as variables, thus becoming the current paradigm in organisations.
134 For decades, many empirical studies have been exploring the triangular relation
135 between HRM (particularly HPWS), well-being, and organisational performance
136 (Peccei et al., 2013). Bowen and Ostroff (2004) establish a multi-level model of
137 HRM and posit that the HRM-performance relation is at least partially mediated
138 by employee well-being. Some of these studies consider all of the dimensions of
139 well-being while others address each one independently. Two major dimensions in
140 particular can be distinguished: one the one hand, happiness (commitment and sat-
141 isfaction), and on the other, health (stressors and strain). More studies have focused
142 on happiness than on health (Peccei et al., 2013), and prominent within the latter are
143 studies on satisfaction (Ahlstrom, 2014 and Ahlstrom et al., 2010). AQ9 AQ10
144 As regards the conclusions to emerge, we distinguish different results concerning
the link between HPWS and well-being. Although most studies find a positive relation

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146 in the happiness dimension (Ahmad & Schroeder, 2003; Guest & Peccei, 2001; Huang

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147 et al., 2016; Nishii et al., 2008; Park et al., 2003; Riordan et al., 2005,), in the health
148 dimension the impact might be negative (Truss, 2001 and Ramsay et al., 2000) given

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149 that the positive influence is offset by greater work intensity (Ogbonnaya et al., 2017).
White et al. (2003) consider that HPWS have negative indirect effects on the work-life
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151
152
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balance, since employees are ultimately required to work more hours, which leads to
increased weariness and stress (Ehrnrooth & Björkman, 2012; Green, 2004; Kroon
153 et al., 2009; Ramsay et al., 2000).
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154 Previous research has used the indicators proposed in our study. Beltrán-Martín
155 & Bou-Llusar (2018) found evidence that HR bundles have a positive influence
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156 on employees’ skills, motivation and opportunities to participate, which positively

157 impacts financial performance (Xiaomei et al., 2013; Petros, 2014; Cafferkey &
158 Dundon, 2015; Chen et al., 2016; Akhtar et al., 2016; Husin & Gugkang, 2017; AQ11
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159 Ximenes et al., 2019; Miao & Cao, 2019). For its part, absenteeism is an image indi-
160 cator of employee health that is often used to measure this dimension in the well-
161 being variable, and which we have considered in the model.
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162 Babic et al. (2019) discovered which factors in HPWS contribute most notably AQ12
163 to employee well-being such as the chance to acquire skills and abilities, variety
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164 at work, job safety and opportunities for promotion (Wood & de Menezes, 2011),
increased job involvement (Mihail & Kloutsiniotis, 2016; Zhang et al., 2013), and
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166 level of participation (Mackie et al., 2001; Macky & Boxall, 2008; Vandenberg
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167 et al., 1999). Boxall and Macky (2014) showed that when workers’ levels of partici-
168 pation and autonomy are higher, the degree of stress, fatigue and work overload is
169 reduced: in other words, there is greater work satisfaction.
There are other factors to be taken into account in the HPWS-well-being-finan-
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170
171 cial performance relation, such as those linked to the individual character of the
172 employees or the organisational and institutional culture, which can affect employ-
173 ees’ degree of commitment, as is the case in the oriental context where this is less
174 evident (Huang et al., 2018; Miao & Cao, 2019; Yang et al., 2019).
175 If we bear in mind the model of mutual gains, Peccei & Van De Voorde (2019)
176 posit a positive effect of well-being on performance and, consequently, suggest
177 that the relation between HRM and performance is at least partially mediated by

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178 employee well-being. Taking into account the mutual gains approach, we propose
179 the following hypothesis:

180 H1 The effect of HPWS on financial performance is positively mediated by work-

181 place well-being

182 The Mediating Effect of Reputation

183 Reputation is considered a valuable intangible asset that provides the firm with sus-
184 tainable competitive advantages (Barney, 1991; Hall, 1992) that can help to gain the
185 upper hand over competitors (Deephouse & Carter, 2005). For Ruiz et al. (2014)
186 firms can have as many reputations as they do stakeholders. Firms should find ways
187 to enhance their reputation and avoid damaging it unwittingly (Love and Kraatz,

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188 2009). Some authors explore the negative effects stemming from the lack of a good AQ13
reputation (He et al., 2016; Kölbel et al., 2017; Nardella et al., 2020; Sweetin et al.,

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190 2013). As a result, SMEs should be aware that a lack of social responsibility often

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191 entails paying a high price in terms of image and market position. Applying HPWS
192 in the workplace makes the organisation attractive when it comes to retaining tal-
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193 ent (Lange et al., 2011; Turban & Cable, 2003), thus favouring more qualified staff
194 selection, which will have an impact on securing a good internal reputation (Stigler,
195 1962; Williamson, 1985) and thereby strengthen the company’s prestige and name
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196 (Fombrun, 1996).
197 For MacMillan et al. (2005), reputation is not only a goal. According to these
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198 authors, reputation focuses on stakeholders’ expected behaviour and directly influ-
199 ences firms’ financial performance in terms of shareholder value. Money and
200 Hillenbrand (2006) place reputation at a strategic level at the heart of value crea-
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201 tion through the development of intangible assets, markets assets and, ultimately, the
202 firm’s financial performance.
203 Researchers have examined how reputation can lead to positive (Brammer &
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204 Pavelin, 2006; Sánchez and Sotorrío, 2007), negative or neutral firm performance
205 (Miller et al., 2020). It proves positive if there is a growth in business (Saeidi et al.,
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206 2015) or negative if there is a drop in profits. Although the link between financial
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207 performance and company reputation is not straightforward and one-way (Lange
208 et al., 2011), Deephouse (2000) found that firm reputation in the media predicted
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209 the performance of a company’s assets, and reported a positive relation (Roberts &
210 Dowling, 2002). In this regard, Dimov et al. (2007) explain reputation as an indica-
211 tion of future performance based on perceptions of past performance.
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212 Sound financial performance, as with high levels of returns on assets (ROA), is
213 linked to a healthy corporate strategy, good staff management and efficient resource
214 allocation, all of which have been linked to a solid reputation (Brammer & Pavelin,
215 2006; Fombrun & Shanley, 1990; Roberts & Dowling, 2002). Nejati et al. (2017)
216 consider that if SMEs concern themselves with employees’ interests through respon-
217 sible practices, then they will enhance their social reputation and, at the same time,
218 their financial performance.

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219 Following the literature, we consider that a good corporate reputation conveys a
220 positive image of the firm, generating better financial performance and acting as a
221 mediating variable in the relation between HPWS and financial performance, such
222 that we put forward the following hypothesis:

223 H2 The effect of HPWS on financial performance is positively mediated by repu-

224 tation in the SME.

225 Researchers who explore corporate social performance tend to focus on external
226 stakeholders and argue that a good social performance helps firms to build a favour-
227 able reputation by enhancing organisational appeal for employees and potential cli-
228 ents (Gond et al., 2010; Zheng, 2010). Organisations that are felt to be legitimate
229 project a good reputation, which is usually seen to be essential vis-à-vis achieving
workplace well-being (Oliver, 1991; Suchman, 1995).

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231 Appelbaum et al., 2000 consider that firms which apply HPWS automatically

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232 create more positive workplace environments, although there is not always a clear
233 theoretical reason for assuming this (Peccei et al., 2013; Takeuchi et al., 2007), since

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234 this will depend on the creation of a positive workplace atmosphere based on the
proposed work conditions, which occurs when forging a reputation through HPWS.
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236
237
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This is because a good reputation indicates that a firm has been investing effort and
resources in HRM, which is reflected in employee well-being within the company
238 (Shim & Yang, 2016). It can therefore be stated that reputation mediates in this rela-
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239 tion. In contrast, the lack of reputation generates a lack of well-being in SMEs. In
240 our model, we propose reputation as a mediating variable between the two variables
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241 and, as a result, set out the following hypothesis:

242 H3 The effect of HPWS on well-being is positively mediated by the SME’s repu-
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243 tation
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244 The Mediating Effect of Social Value

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245 It is important for SMEs to obtain good business performance in terms of creat-
ing economic and social value. One of the main advantages of achieving workplace
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246
247 well-being is its impact on the creation of social value and subsequent improved
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248 financial performance. Some studies find that employee well-being in the workplace
249 has a positive influence on organisational performance, reduces absenteeism and
250 staff turnover (Spector, 1997), enhances work performance (Cropanzano & Wright,
2001) and boosts employees’ willingness to look beyond their own personal interests
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251
252 and seek the benefit of the organisation (Van De Voorde et al., 2012).
253 Mihail and Kloutsiniotis (2016) provide empirical evidence to show that work
254 participation is positively linked to job satisfaction, confirming that satisfied employ-
255 ees are more likely to engage with their jobs and to be less emotionally drained,
256 which will improve their social value. According to the findings of Chapman et al.
257 (1997), there is a positive correlation between the quality of the firm as a whole
258 (a reflection of the firm’s social value) and financial performance indices. Garvin

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259 (1988) highlights the close link between profitability (ROI) and quality. Auerswald
260 (2009) considers the creation of social value to be a source of opportunities and ben-
261 efits to reinvest economic and financial resources. Said author also understands that
262 SMEs have a higher capacity for creating social value than large companies, given
263 that the latter are more limited due to the greater complexity in terms of govern-
264 ance and centralisation of authority. SMEs make the markets work more efficiently,
265 increasing transparency and accountability.
266 As a result, we value how those SMEs which have generated well-being enhance
267 their impact on financial performance because they previously create social value.
268 We establish the following hypothesis concerning the mediation of social value:

269 H4 Social value generates a mediating effect between well-being and financial
270 performance

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271 As a final hypothesis, we establish the combined effect of all the mediating vari-
ables contained in our study which, when merged, improve the effect of HPWS on

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273 financial performance, and we propose that:

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274 H5 The joint mediating effect generated by the mediating variables of reputation,
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275 well-being and social value, intensify the direct effect of HPWS on financial per-
276 formance

Taking into account these hypotheses, we establish a second model called the full
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278 causal model, in which we study the mediating effects of well-being, reputation, and
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279 social value in the relation between HPWS and financial performance.
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280 Methodology
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281 Population and Sample

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282 The population of firms to be researched corresponds to mercantile companies

employing between 6 and 249 workers in the manufacturing, construction, retail and
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283
284 service industries in Spain. The distribution of companies in the population was esti-
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285 mated based on the Central Companies Directory published by the National Institute
286 of Statistics (DIRCE, 2018). The selection framework was the SABI database. Sam-
287 pling was performed through stratification of the population. Stratification criteria
were established in accordance with the aims of the study and the information avail-
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288
289 able concerning the population structure. The final sample was 1136 Spanish SMEs
290 (459 micro, 576 small and 101 medium-sized) for a confidence level of 95%. Data
291 collection was carried out during February-April 2018 by questionnaire.
292 The initial criterion to determine the size of the sample was set out such that the
293 maximum error (assuming the greatest uncertainty p = q = 0.5) when estimating a
294 proportion for the whole population was below five percentage points at a confi-
295 dence level of 95%

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Do High Performance Work Systems Improve Workplace Well‑Being…

296 Measurement Indicators

297 The latent variables were measured through the following indicators:

298 High performance work systems: latent exogenous variable that indicates how
299 SMEs manage their human resources in accordance with these practices. Follow-
300 ing Jackson & Schuler, 1995; MacDuffie, 1995; Milgrom and Roberts (1995);
301 Pfeffer (1994); Ichniowski et al. (1997); Huselid and Becker (1997), Boxal and AQ14
302 Macky (2014), Takeuchi et al. (2007), Guerci et al. (2019), in order to measure
303 this we use 11 indicators described as HPWS: job safety, employee participation
304 in decision making, professional career development, selective hiring, investment
305 in training, life-long learning, employee information, performance assessment
306 and feedback, pay equality, work flexibility, contingent pay.
Well-being: latent endogenous variable that reflects the two dimensions of well-

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307
308 being (Peccei et al., 2013). We measure happiness through the motivation indica-

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309 tor, which reflects the feeling of happiness (Van De Voorde et al., 2012; Fisher,
310 2014; Warrick, 2017), and health through the degree of work absenteeism (Ram-

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311 say et al., 2000; Truss, 2001).
Reputation: latent endogenous variable that is measured through three indica-
312
313
314
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tors: the development of external reputation, the experience the client has in their
relation with the services provided (Bhattacharya & Sen, 2003), and transparency
315 in management with regard to the main external stakeholders (De los Ríos et al.
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316 2012).
317 Social value: endogenous latent variable that is estimated through five indicators:
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318 SME concern with creating social and economic value (Juscius & Jonikas, 2013;
319 Moon et al., 2011; Porter & Kramer, 2011; Vaidyanathan & Scott, 2012), the
320 quality of the products the SME offers its clients (Little & Little, 2000; Shapiro,
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321 1982, 1983), knowledge of the client’s level of satisfaction, anticipating changes
322 in the environment, and process efficiency.
323 Financial performance: endogenous latent variable that reflects the creation of
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324 SMEs’ financial value through seven indicators: economic growth, profitability,
325 cost reduction, improved sales forecasts, financing costs, volume of financing,
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326 and the expenses and commissions which SMEs must pay.
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327 Data Processing

328 For the analysis model, we use partial least squares structural equation modelling
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329 (PLS-SEM) which enables us to estimate the chains of causal relations defined
330 between the latent variables that are not observable using statistical methods (Wil-
331 liams et al., 2009).
332 We create two empirical models that allow us to determine whether it is rel-
333 evant to study the mediating effect of well-being, reputation and social value in
334 the relation between HPWS and financial performance. For this reason, we first
335 estimate a model where we only consider the direct impact of the independent

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M. Rubio‑Andrés et al.

336 variable (HPWS) on the dependent variable (financial performance), and then a
337 second model derived from an analysis of previous literature where we include the
338 mediating variables referred to. We find a significant and previous relation in the
339 initial model between HPWS and financial performance which disappears in the
340 second model (causal model), such that we confirm that the conditions proposed
341 by Baron and Kenny (1986) are met, which supports the use of the second model in
342 our research.

343 Results

344 Measurement Model Evaluation

The individual reliability of each indicator or manifest variable is tested by

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345
346 examining the weights obtained by PLS (λ) or simple correlations of the mani-

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347 fest variables with their specific construct. An initial iteration was carried out of
the algorithm using SmartPLS. Indicators with standardised weights below 0.4

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348
349 (Churchill Jr., 1979, cited in Henseler et al., 2009) were removed, and the model
350
351
was reformulated.
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The Cronbach alphas obtained in the present research were also considered sat-
352 isfactory because the values are over 0.70 (Hair et al., 2006) (between 0,886 and
353 0,758), which confirms the constructs’ high reliability. All constructions comply
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354 with the criteria recommended by the authors, even reaching values above the rec-
ommended values (Fornell & Larcker, 1981).
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355
356 The criterion establishes AVE values of at least 0.5 for values of the latent var-
357 iables, which represents the construct’s capacity to explain, on average, over half
of the variance of its indicators (Fornell & Larcker, 1981, cited in Henseler et al.,
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358
359 2009). All the constructs are higher than the indicated value, highlighting the values
360 corresponding to the latent variables well-being and reputation which show a high
AVE with values of 0.803 and 0.865 respectively (Table 1).
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361
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Discriminant Validity
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362
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363 The factor loading matrix and the cross‐loadings show that the load of an indica-
364 tor in its corresponding latent variable is greater than its loads crossed with the
365 rest of the latent variables. The discriminant validity implies that each construct
must be significantly different from the rest of the constructs with which it is not
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366
367 related (Table 2).
368 Moreover, in the cross‐loading matrix, we observe the loads between the indica-
369 tors of all the latent variables and see how an indicator’s load in its associated con-
370 struct is much greater than its load in the other constructs (Table 3).
371 Henseler et al. (2016) showed that lack of validity is best detected through the
372 Heterotrait–Monotrait ratio indicator. We found that the Heterotrait–Monotrait
373 ratio is below one. In line with the criteria established, the proposed constructs are

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Do High Performance Work Systems Improve Workplace Well‑Being…

Table 1  Discriminant and convergent validity of constructs AQ15

INDICATORS Loads (λ) CA CR AVE

HPWS 0,886 0,908 0,524

Employee participation in decision making HPWS_2 0.757
Professional career HPWS_3 0.819
Selective Hiring HPWS_4 0.721
Investment in training HPWS_5 0.775
Continuous training HPWS_6 0.748
Employee information HPWS_7 0.638
Performance evaluation & feedback HPWS_8 0.673
Pay Equity HPWS_9 0.718
Contingent Compensation HPWS_10 0.648
WELL-BEING 0,758 0,890 0,803

F
Motivation of workers WB_1 0,923

O
Work absenteeism WB_2 0,868
REPUTATION 0,843 0,927 0,865

O
Positive image and reputation REP_1 0,931
Transparency REP_2 0,929
SOCIAL VALUE
Quality of the products SV_1
PR 0,783
0,845 0,895 0,681

Efficiency of the processes SV_2 0,820

D
Customer satisfaction SV_3 0,863
Rapid anticipation of environmental changes SV_4 0,835
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FINANCIAL PERFORMANCE 0,847 0,929 0,867

Economic growth FV_2 0,928
Profitability FV_4 0,934
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Source: own based on SmartPLS

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374 fully complied with. We examined the residual matrix of correlations and found
there were no significant residual values that would indicate a substantial predic-
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375
376 tion error for the indicators or manifest variables that make up each of the con-
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377 structs in the model.

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Table 2  Fornell-Larcker Criterion

FINANCIAL HPWS REPUTATION SOCIAL VALUE WELL-BEING
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PERFORM

FINANCIAL PERFOR 0,931

HPWS 0,388 0,724
REPUTATION 0,385 0,425 0,930
SOCIAL VALUE 0,642 0,458 0,394 0,826
WELL-BEING 0,612 0,491 0,386 0,665 0,896

Source: own based on SmartPLS

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M. Rubio‑Andrés et al.

Table 3  Cross Loadings

INDICATORS FINANCIAL SOCIAL VALUE WELL-BEING REPUTATION HPWS
PERFORM

FV_2 0,928 0,588 0,556 0,340 0,342

FV_4 0,934 0,607 0,583 0,376 0,381
SV_1 0,430 0,783 0,458 0,303 0,352
SV_2 0,563 0,820 0,531 0,293 0,367
SV_3 0,523 0,863 0,600 0,357 0,375
SV_4 0,586 0,835 0,591 0,346 0,415
WB_1 0,623 0,643 0,923 0,365 0,516
WB_2 0,455 0,541 0,868 0,325 0,346
REP_1 0,374 0,374 0,354 0,931 0,390
REP_2 0,341 0,359 0,364 0,929 0,400
HPWS_2 0,247 0,304 0,333 0,270 0,757

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HPWS_3 0,300 0,351 0,363 0,296 0,819

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HPWS_4 0,302 0,329 0,375 0,306 0,721
HPWS_5 0,305 0,363 0,363 0,333 0,775

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HPWS_6 0,282 0,330 0,356 0,294 0,748
HPWS_7 0,375 0,378 0,457
PR 0,415 0,638
HPWS_8 0,231 0,304 0,301 0,282 0,673
HPWS_9 0,208 0,325 0,322 0,300 0,718
HPWS_10 0,194 0,238 0,233 0,176 0,648
D

Source: own based on SmartPLS

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378 Structural Model Evaluation

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379 Variance inflation factor

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380 The assessment of the structural model comprises various evaluations (Hair et al.,
381 2014; Henseler et al., 2009). We studied multicollinearity in the structural model
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382 through tolerance evaluation, in other words below 0.20, and the variance inflation
factor, with values below 5.
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383
384 Table 4 shows the results for the beta (β) coefficient, degree of significance, and
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385 importance of the value distribution using Student’s t-test. To test the hypotheses, a boot-
386 strapping procedure with 500 subsamples was used, as recommended by Chin (1998).
387 As can be seen, the direct relation between HPWS and financial performance
tested in model 1 is significant (β = 0.391 and t = 14.838). As regards model 2, we
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388
389 see how variations in the levels of HPWS significantly affect the variations in the
390 mediating variables (well-being, reputation, and social value) and also how the
391 mediating variables significantly affect the variations in financial performance. In
392 the full causal model, the previously significant relation between HPWS and finan-
393 cial performance from model 1 (p = 0.000) ceases to be significant (p = 0.600). If we
394 also observe the confidence interval is confirmed, because zero is included within
395 it. As a result, and in line with Baron and Kenny (1986), the mediating effect of

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Table 4  Structural modelling results

Model 1: Direct relation- Model 2: complete causal model Support

ship between HPWS-
Financial performance
and HPWS-Reputation
Standardised coefficients Standardised coefficients Indirect
effect

HPWS- financial performance 0.391 (14.838)*** 0.015 (0.524) Yes / No

[-0,041–0,071]
H1: HPWS-wellbeing- 0.399 (12,735)*** 0.1205 yes
Financial performance 0.302 (7.192)***
H2: HPWS-reputation- 0.425 (16.599) *** 0.045 Yes
Financial performance 0.107 (3.480) **
H3: HPWS-reputation- 0.425 (16.599) *** 0.092 Yes

F
wellbeing 0.217 (6.545) ***
H4: Wellbeing-Social Value- 0.665 (29.006) *** 0.261 yes

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Financial performance 0.392 (10.618) ***
H5: HPWS-reputation-well- 0.425 (16.599) *** 0.322 Yes

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being-social value-financial 0.399 (12.735) ***
performance 0.665 (29.006) ***
PR
0.107 (3.480) **
0.302 (7.192) ***
0.392 (10.618) ***
***
p < 0.001 ** p < 0.01 * p < 0.1
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396 well-being (H1), reputation (H2), and social value (H4) in the relation between
397 HPWS and financial performance may be seen, with the indirect effects being
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398 0.1205, 0.045, and 0.261, respectively. Particularly worthy of note, therefore, is this
399 latter mediating effect of social value.
400 The results also show there is a mediating effect of the variable reputation in the relation
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401 of HPWS and well-being (H3). It is also interesting to note that there is a direct significant
402 relationship, with the mediating effect being 0.092, and the total effect being 0.492.
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403 We confirm hypothesis 5 concerning the joint mediating effect generated by the
variables reputation, well-being, and social value, which are able to amplify the
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404
405 direct effect of HPWS on financial value. The total effect is 0.337, which comes
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406 from a low direct effect (0.015) and a high mediating effect (0.322).
407 The confidence intervals also confirm the other four hypotheses.
408 The t values are significant when above 1.96 (τ ≥ 1.96), notable amongst which
are the relations established in the hypotheses, particularly the one achieved through
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409
410 the influence of well-being on social value (τ = 29.006).

411 Predictive Relevance of the Model

412 The proposed model’s capacity to explain the dependent variables it is composed
413 ­ 2 (Chin et al., 2003; Falk &
of is shown through the coefficient of determination, R
414 Miller, 1992).

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M. Rubio‑Andrés et al.

415 According to the ­R2 results obtained, the predictive power of financial perfor-
416 mance and social value are considerable. Specifically, for financial performance,
417 48.4% of the variability is explained by the latent variables HPWS, reputation, well-
418 being and social value, and for social value 44.3% of its behaviour is explained by
419 well-being.
420 The most notable results obtained in our model for f2 correspond to the effect
421 of HPWS on reputation (0.220) and well-being (0.181), social value on financial
422 performance (0.155), all of which are medium-sized effects, and the very important
423 effect of well-being on social value (0.794), which is very high.
424 As a complement to consider predictive relevance, the Q2 criterion of Stone
425 (1974) and Geisser (1975) is used. There is predictive relevance in the dependent
426 construct considered, when the Q2 is positive, and the higher its value, the greater
427 the relevance (Henseler et al., 2009). In accordance with the results obtained, the
428 predictive relevance of the model is ensured in this research, given that a positive

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429 value is reached for each endogenous variable.

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Discussion of the Results

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430

431 Theoretical Implications

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432 The first point to be highlighted about the research carried out is the impor-
tance of the mediating role of well-being, reputation, and social value which
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433
434 improve the relation between HPWS and financial performance. We show how
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435 employee participation in decision making, selective hiring, investment in train-

436 ing, life-long learning, performance assessment, equal pay, and contingent pay
437 enable SMEs to enhance their economic growth and profitability (Cavanagh
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438 et al., 2013; Lepak et al., 2006). By implementing HPWS, workplaces improve
439 because greater motivation, reputation and transparency reduce levels of
440 employee absenteeism, thus confirming the study by Boxall and Macky (2009)
and their conclusion that greater employee autonomy, transparency, pay, and
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441
442 promotion (HPWS) can influence workplace well-being and job satisfaction.
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443 Secondly, the importance of the positive influence of well-being on financial

performance can be confirmed, with the greatest impact being if social value
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444
445 plays a mediating role between the two variables. When employee motivation
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446 is higher, absenteeism is reduced and the social value is also greater, leading to
447 more efficient processes, higher quality products, more satisfied clients and a
448 greater capacity to adapt to changes in the environment, all of which trigger bet-
ter financial performance, specifically higher growth and profitability.
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449
450 Thirdly, we consider the key role played by the variable reputation to be inter-
451 esting in the model created. This is linked to the independent variable HPWS,
452 and has a direct impact on the variables well-being and financial performance,
453 and indirectly on social value. If SMEs are able to improve their transparency
454 and image, they will increase their financial performance (leverage effect). In the
455 results obtained, it is also worth highlighting the indirect effect that the latent
456 variable reputation generates between HPWS and well-being.

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457 Practical Implications

458 The research also offers an interesting tool, given its implications for SME man-
459 agement. Owners-managers should focus their efforts in SMEs towards imple-
460 menting HPWS in their organisations, through selective selection processes,
461 employee involvement in decision making, contribution-based pay, and life-long
462 learning. It is these high-performance human resource practices based on good
463 praxis that generate employee well-being, a good reputation and which create
464 social value, and it is through these that financial performance improves, such
465 that this variable becomes a consequence of good human resource management.
466 Finally, knowing that financial performance is so important and necessary in
467 SMEs if they are to compete in the market, we see how such performance is
468 achieved when firms commit to HPWS, a link that becomes even more evident
thanks to the multiple mediation effect of the three latent variables that form part

F
469
470 of the model presented; well-being, reputation, and social value. Efforts must be

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471 directed towards procedures which lead to greater levels of employee motiva-
472 tion in the workplace, achieving greater transparency and reputation, whilst also

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473 generating higher quality products, more efficient processes and more satisfied
clients, which will undoubtedly lead to superior financial performance.
474
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475 Conclusions
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476 The "win–win" perspective (employer and employee) posits that the firm’s objec-
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477 tives are consistent with employees’ interests and minimises any conflict of inter-
478 ests between the two (Zhan et al. 2013). Our research is based on this mutual AQ16
479 gains approach, according to which HRM enhances employee well-being, produc-
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480 tivity, and company performance.

481 Peccei et al. (2013) point to a knowledge gap in the area of HRM, such that
482 research must be carried out to help gain a better understanding of the link between
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483 HRM, well-being and performance. In this regard, exploring HRM and well-being
484 offers a promising line of enquiry in SMEs. In our research, we address this recom-
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485 mendation, replacing generalist human resource management with specific high per-
formance practices, given that HPWS are considered to be advanced human resource
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486
487 practices. We also value the impact of HPWS on financial performance, with the
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488 triangulation of well-being in the workplace, as recommended by the authors cited.

489 In this regard, most studies into HPWS and well-being reflect only one of the
490 dimensions of well-being, such that more complex models need to be developed
(Peccei et al., 2013). Following this recommendation, we opt for an integrated
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491
492 measurement model of the two dimensions of well-being, through specific indica-
493 tors, thereby adding an empirical study to the thus far scant number of existing
494 studies. Studies also suggest that in the happiness component of well-being, there
495 is a positive experience, an indicator which we take into account and which we
496 measure through motivation. We also incorporate the second dimension of well-
497 being in our study through the workplace absenteeism indicator, given that low
498 absenteeism reflects good employee health.

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M. Rubio‑Andrés et al.

499 In our research, we include HPWS from the ethical perspective in organisa-
500 tions, where owners-managers of SMEs engage in responsible human resources
501 management that improves well-being in their organisations, which is justified by
502 the fact that employees are seen as an end rather than as a means.
503 We believe that we have contributed in the review of the literature carried out
504 to create our own model, reviewing in detail previous studies that have considered
505 the hypotheses proposed: for example, Lai et al. (2017) in their study into SMEs
506 and HPWS and financial performance, studies addressing the dimensions of well-
507 being (Truss, 2001) or reputation as a result of HPWS, and employee well-being
508 (Shim & Yang, 2016).
509 We show that well-being, together with reputation and the creation of social
510 value, enhance the relation between HPWS and financial performance, such that
511 achieving optimum values in this variable implies responsible human resource
512 management, prioritising policies and practices that promote employee well-

F
513 being (Guest, 2017). Indeed, HPWS improve employee well-being because they
send out positive signals about the level to which employees are valued by the

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514
515 organisation (Van De Voorde & Beijer, 2015). Employees perceive these signals
as an indication that they are being treated fairly by the firm and based on the

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516
517 notion of reciprocity, respond through greater levels of organisational commit-
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518 ment and management trust (Macky & Boxall, 2007; Paré & Tremblay, 2007).

Future Lines and Limitations

D
519
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520 While our study provides excellent opportunities for future research, it also
521 has several limitations. First, we asked owners-managers to evaluate the extent
522 to which HPWS are implemented in their organisations. As such, the rating of
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523 HPWS perceptions may be influenced by several unobserved factors.

524 Although we have taken into account the mutual gains approach, we cannot
525 ignore that there is also the conflicting outcomes perspective that considers that
HPWS can have a negative effect on wellbeing (White et al., 2003). In future
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526
527 research new mediating variables could be proposed, such as sustainable innova-
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528 tion and its role between HPWS and well-being.

Although well-being is in line with the revised theory and was identified with
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529
530 the level of motivation at work and a low degree of absenteeism, due to its rel-
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531 evance, a deeper and more complete analysis of this latent variable could be car-
532 ried out, through other indicators. For example, as indicated by Gallie (2007),
533 some measurable variables could be the quality of life that employees have in
SMEs, accompanied by other variables that take into account health and safety in
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534
535 the workplace, prevention measures, as well as the establishment of instruments
536 that allow for an improved stay in the workplace (Guerci et al., 2019).
537 As a limitation of the study it should be highlighted that the empirical study
538 has been carried out exclusively for Spain. It would be interesting to expand the
539 analysis to European scale given the importance of SMEs throughout Europe.
540 A further limitation concerns the use of questionnaires for self-diagnosis, based
541 on the opinion of entrepreneurs of their own firms, such that the information they

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542 provide might be deemed subjective. Nevertheless, in the bibliometric study con-
543 ducted by Bikefe et al. (2020) of articles reviewed between 2010 and 2019, most
544 were found to use surveys as a means of obtaining empirical information. This
545 information could even be supplemented by the opinions of other interested par-
546 ties, such as consumers or employees themselves.
547

548 Declarations

549 Conflict of Interest The authors declare that they have no conflict of interest.

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