The Impact of Employees' and Managers' Training on the Performance of Small‐ and Medium‐Sized Enterprises: Evidence from a Randomized Natural Experiment in the UK Service Sector

DOIhttp://doi.org/10.1111/bjir.12094
Published date01 June 2016
AuthorChristos N. Pitelis,Andreas Georgiadis
Date01 June 2016
The Impact of Employees’ and
Managers’ Training on the Performance
of Small- and Medium-Sized Enterprises:
Evidence from a Randomized Natural
Experiment in the UK Service Sector
Andreas Georgiadis and Christos N. Pitelis
Abstract
We investigate the relationship between employees’ and managers’ training and
firm performance using a policy intervention that randomly assigned training
support to small- and medium-sized enterprises in the UK accommodation and
food service sector. Because the number of firms self-selected into training
exceeded available places, training was randomly assigned to some firms, result-
ing in a randomized natural experimental design that allowed us to identify the
average effect of training on treated firms. Our empirical results suggest that
employees’ training had a stronger positive impact on firms’ labour productivity
and profitability than that of managers’.
1. Introduction
Economic theory postulates that firms invest in the training of employees in
anticipation of a return in the form of higher productivity and profitability
(Becker 1962, 1993). In practice, it has been difficult to estimate the return of
investment in training to the employer, mainly because of methodological
problems related to omitted variables, measurement error and reverse cau-
sality (Dearden et al. 2006). Addressing these methodological problems so as
to isolate the impact of training on firm performance has been, and remains,
a key empirical challenge for studies in the economics and human resource
management (HRM) literature (Becker and Huselid 2006; Bloom and Van
Reenen 2011; Guest et al. 2003). A fruitful way to progress in this area,
Andreas Georgiadis is at the University of Oxford. Christos N. Pitelis is at the University of
Bath.
© 2014 John Wiley & Sons Ltd/London School of Economics. Published by John Wiley & Sons Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
British Journal of Industrial Relations
54:2 June 2016 0007–1080 pp. 409–421 doi: 10.1111/bjir.12094

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