How Automation and High-Involvement Work System(HIWS) Shape Firm Performance: A Multifaceted Analysis of Sales growth, Innovation, and Profit

This study examines the intersection of automation and High-Involvement Work Systems (HIWS) in small and medium-sized enterprises (SMEs), focusing on their combined impact on firm performance, including sales growth, innovation, and profitability. While automation is generally known to enhance HIWS by improving employee engagement and labor productivity, the relationship between the two is complex. In certain cases, automation may displace skilled workers, reducing employee engagement and conflicting with HIWS objectives. Analyzing data from 2,576 SMEs included in the Workplace Panel Survey (WPS), this study finds that the mediating effects of automation through HIWS on firm performance vary in magnitude and pattern, with the largest effect observed on sales growth, followed by innovation and profitability. This suggests that the combined effects of technology diffusion and Human Resource Management (HRM) practices differ according to performance measures. Furthermore, the impacts of automation and HIWS can vary depending on contextual factors such as internal processes, employee engagement level, and organizational culture. In conclusion, this study provides strategic implications for SMEs seeking to integrate automation and HIWS effectively to optimize decision-making, resource allocation, and responses to market changes, thereby securing sustainable competitive advantages.