Impact of Human Capital Practices on the Performance of Small and Medium Enterprise’s in Pakistan: Examining the Mediating Role of Innovation

Abstract

Small and Medium Industries play an important role in the development of the economy of any country. The current study aimed to examine the impact of human capital and social capital on the SMEs performance with the mediating role of innovation. SMEs were divided into various categories and then the respondents were reached out with convenience random sampling due to large size of the population. A sample of 307 SMEs was chosen and the data were analyzed through SMART PLS version 3.0.The findings of the study indicated that human capital has positive impact on the SMEs performance and when checked the mediating effects of innovation shows a partial between Human Capital and firm performance. It is recommended that SMEs in Pakistan must embark innovation to improve their performance and when planning human resource strategy they must concentrate on human capital carefully because it is positive linked with firm performance.

Keywords: SMES, Human Capital, Innovation, Firm Performance.