Endogenous rural dynamics: an analysis of labour markets, human resource practices and firm performance

Abstract

Some rural locations in industrialized countries have experienced considerable employment growth in the last decades, while others suffer from depopulation and decline. The paper aims to contribute to the development of an evolutionary approach that allows for the identification of those often difficult-to-observe evolving factors that explain success and failure of rural locations. It also wants to show how the combined recognition of evolutionary labour market perspectives, the dynamic capability view of the firm, and human resource management (HRM) theories can serve the operationalisation of evolutionary explanations in this context. According to the derived model, apparent locational disadvantages might be compensated for by subtle, potentially self-enforcing labour market dynamics that generate opportunities for certain firms and industries. Empirically, the ideas are substantiated by means of a mediation model. The empirical analysis is based on latent class analysis and discrete choice models using data from an own survey of 200 food-processing firms in urban and rural locations of one German federal state. For these observations, our results support the idea that the exploitation of HRM opportunities may be more important for good performance in rural labour markets than the direct implementation of specific innovation modes. Investment in HRM allows rural firms in our sample to realise those gains in terms of innovation and growth offered by the creation of a stable and experienced workforce. Their focus on internal labour markets potentially generates external effects, which further encourages neighbouring firms to also invest in involved HRM measures.

One economy, but different growth regimes: why Germany’s rural east is still lagging

“…The complementary development that creates specialized advanced factors, therefore, requires relatively stable industry structures and employment relations (Margarian et al , 2022). Stable employment relations are characteristic of rural locations with their sparse labor markets (Margarian, 2022b).…”

“…1. Due to the descriptive character of our analysis, and as we analyze the whole “population” of 401 districts and do not aim at an empirical extrapolation of our results, we refrain from presenting p -values and significance tests. They are neither required nor appropriate in this case, where the estimates serve only to summarize efficiently and concisely the information obtained from the data (Margarian 2022a). Because the data are a complete sample, the calculated unexplained variances provide a valid indication of the fit of the model as expressed by the point estimates for each observation, even though standard errors are not available.…”

Revisiting the human capital–economic growth nexus in Africa

“…The Newly Industrialized Economies around the globe with models based on the knowledge economy whose levels of developments have been far higher than those of most African countries in the last two decades could be an inspiration to the African economies (Ofori and Asongu 2021) and to a certain extend to motivate industries found in rural areas to apply the human resource management model to boost their performance (Margarian et al 2022;. Among these Newly Industrialized Economies whose growth was similar to those of African economies in the late twentieth century were Asian countries, such as Taiwan, Hong Kong, Singapore, South Korea, China, and Malaysia (Tchamyou et al 2019).…”