Machine Learning-Based Causality Analysis of Human Resource Practices on Firm Performance

Myeongju Lee, Gyeonghwan Lee, Kihoon Lim, Hyunchul Moon and Jaehyeok Doh ()
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Myeongju Lee: School of Business Administration, Gyeongsang National University, Jinju-si 52725, Republic of Korea
Gyeonghwan Lee: College of Business Administration, Dong-A University, Busan 49315, Republic of Korea
Kihoon Lim: School of Mechanical and Material Convergence Engineering, Gyeongsang National University, Jinju-si 52725, Republic of Korea
Hyunchul Moon: School of Mechanical and Material Convergence Engineering, Gyeongsang National University, Jinju-si 52725, Republic of Korea
Jaehyeok Doh: School of Aerospace Engineering, Gyeongsang National University, Jinju-si 52828, Republic of Korea

Administrative Sciences, 2024, vol. 14, issue 4, 1-20

Abstract: An organization’s human resource management practices are essential for its competitive advantage. This study specifically examined human resource (HR) practices that predict corporate performance (employee turnover and firm sales) based on a backpropagation neural network (BPN)-based causality analysis. This study aims to test how to optimize human resource practices to improve organizational performance. This study elucidated the effect of HR practices and organizational-level factors on predicting employee turnover and firm sales. The BPN-based causality analysis revealed the relative importance of explanatory variables on firm performance. To test the model, it employed the Human Capital Corporate Panel open data on Korean companies’ HR practices and other characteristics. The analysis identifies causal relationships between specific HR practices and firm performance. The results show that compensation-related HR practices are most influential in predicting firm sales and employee turnover. Moreover, training-related HR practices were modest, and talent acquisition and performance management practices had relatively weak effects on the two outcomes. The study provides insights into how human resource practices can be optimized to improve firm performance and enhance organizational effectiveness. The findings of this study contribute to the growing body of research on the use of machine learning in HR management and suggest practical implications for managers’ insights to optimize HR practices.

Keywords: BPN-based causality analysis; firm performance; human corporate capital panel; human resource management; machine learning (search for similar items in EconPapers)
JEL-codes: L M M0 M1 M10 M11 M12 M14 M15 M16 (search for similar items in EconPapers)
Date: 2024
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