Human resource practices, employee competencies and firm performance: a 2-1-2 multilevel mediational analysis

Purpose This study aims to understand the role of employee competencies in terms of the relationship between Human Resource Practices (HRPs) and firm performance. Design/methodology/approach A sample of 60 HR managers and 546 employees from large-scale food processing firms were considered for the study. The study presents a 2-1-2 multilevel mediational analysis in which HRPs and firm performance are measured at the firm level (Level-2) and employee competencies are measured at employee level (Level-1). Findings Positive relationship was found between HRPs and firm performance, which was partially mediated by employee competencies. Practical implications The study highlights the importance of employee-related factors by focusing on the wider dimensions of human capital (e.g. academic qualification, job experience) in HRPs–performance relationship. Originality/value The study undertakes a 2-1-2 multilevel mediational analysis, which is rarely applied in HRM studies; however, this interaction between macro- and microlevel effects will create a better understanding of organization studies from an integrated and multilevel context.