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Better Working Conditions

Can better working conditions improve the performance of SMEs? An international literature review

Commissioned by the International Labour Office (ILO)

This systematic review of the international literature focused on the links between good practices in terms of working conditions, safety, health and skills, and business benefits such as improved productivity and profitability.  It was led by Professor Richard Croucher with contributions from academics across the Business School.  The study reviews the empirical relevance of the assumption that a 'win-win' scenario exists in SMEs, including in the context of developing economies, and the circumstances under which the 'business case' for owner-managers to invest in good working conditions, skills and training is strongest.  The review was informed by an understanding that firms' resources and capabilities, and owner/manager motivations, have a role in this relationship, as do external interactions – i.e. the diverse market and regulatory/institutional contexts that condition competitive advantage and enterprise survival.  The report identifies indicative evidence of some links between good practices in all the areas examined, and various types of positive enterprise-level outcomes, such as reduced employee turnover, higher discretionary contributions by employees to enterprise capacities, improved productivity and profitability. Although a win−win scenario may exist in certain circumstances, the report also underlines that more empirical research is needed, particularly in developing and emerging economies.

This report will inform the ILO's future work on "Productivity and Working Conditions in Small and Medium Enterprises", which has been identified as an Area of Critical Importance for the Organisation.

The full report can be accessed here

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