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An empirical study of the internal factors influencing the application of compensation incentives in SMEs

Gábor Balogh (Department of Leadership and Organizational Sciences, Faculty of Business and Economics, University of Pécs, Pécs, Hungary)
Norbert Sipos (Department of Leadership and Organizational Sciences, Faculty of Business and Economics, University of Pécs, Pécs, Hungary)
András Rideg (Department of Management Science, Faculty of Business and Economics, University of Pécs, Pécs, Hungary)

Competitiveness Review

ISSN: 1059-5422

Article publication date: 2 November 2020

Issue publication date: 21 May 2021

1049

Abstract

Purpose

Competitiveness is a multidimensional construct, related to a number of external and internal company factors. This paper aims to provide empirical evidence on the relationship between the application of small- and medium-sized enterprises’ (SMEs) compensation incentives as an index/element of human system development and competitiveness.

Design/methodology/approach

A unique primary data set drawn from the Global Competitiveness Project on SMEs’ competitiveness was analysed, using cross-sectional data of 784 firms. First, descriptive statistics were used to show the data set peculiarities. Second, a forward logistic regression was applied to show the effects on the application of compensation incentives. A 25.1% of explanatory power was found by targeting the application of compensation systems by 7 firm-level principal factors and 30 control variables.

Findings

The findings suggest that there is a higher chance of the application of compensation incentives in cases when the employees possess a more substantial tacit knowledge and formal and informal relationship networks. It is also positively impacted by the higher level of intra-company manifestation of knowledge.

Research limitations/implications

The research was conducted among SMEs from eight countries, based on a unique questionnaire designed for small enterprises. The respective countries are from Europe and Latin America, which serve as a reference category for Hungary. Also, there is a high level of 0 answers for the involved variables. The binary logistic regression methodology is suitable for filtering out some of these; nevertheless, the proportion of uncertain factors remains high as it is indicated by the explanatory power.

Originality/value

The majority of the literature is dealing with large companies in the topic of competitiveness, whereas in this data set, a deeper analysis was carried out among SMEs from eight countries, comparing their results to the Hungarian ones. The findings can be used as reference points for future studies, and the understanding of the HR cycle within SMEs.

Keywords

Acknowledgements

The research was financed by the Higher Education Institutional Excellence Programme of the Ministry for Innovation and Technology in Hungary, within the framework of the 4th thematic programme “Enhancing the Role of Domestic Companies in the Reindustrialization of Hungary” of the University of Pécs”.

This publication/research was supported by the European Union and Hungary and co-financed by the European Social Fund through the project EFOP-3.6.2–16-2017–00017, titled “Sustainable, intelligent and inclusive regional and city models”.

Citation

Balogh, G., Sipos, N. and Rideg, A. (2021), "An empirical study of the internal factors influencing the application of compensation incentives in SMEs", Competitiveness Review, Vol. 31 No. 3, pp. 542-570. https://doi.org/10.1108/CR-01-2020-0016

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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