Hiring Practices and Innovation Performance in Scandinavian SMEs : Analysis of Hiring Practices and Its Relation to Innovation Performance of SMEs in Scandinavia

Sammanfattning

Small and medium firms (SMEs) are a major part of the European economy and play a significant role in innovation, employment and value creation. SMEs often work with limited financial resources, organizational structure, and human capital. These limitations are considerably important during hiring Research and Development (R&D) roles, where employee quality can have an immediate effect on innovation performance. While previous literature has connected Human Resource Management (HRM) with innovation performance, less attention has been given to certain hiring practices. The purpose of this study is to examine the relationship between hiring practices and innovation performance in Scandinavian SMEs. The study focused on four (4) hiring practices dimensions: Job Description Quality, Competency-Based Selection, Structured Recruitment Process and External Recruitment Range.The method selected is a quantitative, cross-sectional research design. The data were collected through an online Microsoft Forms survey, which was sent to people with decision authority for hiring, especially on R&D and technical roles in Scandinavian based SMEs. The final sample is comprised of 39 acceptable responses. Innovation Performance is measured through a Total Innovation Index (TII), that combines Product Innovation, Process Innovation, Patent-Related Innovation Output and Revenue from New Products. The data is analyzed utilizing descriptive statistics, reliability testing with Cronbach’s alpha, and OLS regression analysis in STATA.The results suggested a positive and statistically significant relationship between hiring processes and the Total Innovation Index. The exploratory regression models also suggested positive and statistically significant relationship between innovation performance and three (3) of the hiring processes: Job Description Quality, Competency-Based Selection and Structured Recruitment Process. External Recruitment Range of candidates presented a positive coefficient but is not statistically significant. The findings suggested that internal quality and structured hiring processes may be more strongly associated with innovation performance than the external recruitment range alone. The study contributes to the existing HRM-innovation literature, focused on specific hiring practices, and not on broad HRM systems. Findings suggested that defined job descriptions, hiring based on competences and structured processes relate to higher innovation performance outcomes in Scandinavian SMEs. However, due to the small size of respondents, the cross-sectional design and use of self-reported data, the results should be interpreted as exploratory associations rather than causal evidence. Future research could use larger datasets, longitudinal designs, and objective innovation performance indicators to test the relationships acknowledged in this study. Further studies could also compare different sectors, examine additional HRM practices such as onboarding and training, and investigate whether the effect of hiring practices differs between varied size SMEs.