The Effects of Talent Management on the United Kingdom SMEs’ Innovation Capacity


The problem of SMEs’ human capital management is of significant importance in modern-day business and management conditions due to the critical role of competency development in building sustainable and competitive companies. The rapid development of the techniques and approaches to managing companies forces businesses to deal with numerous challenges on a daily basis.

Research of the key elements in the field helps enterprises to accommodate the requirements of the market and develop in the crucial spheres for better business outcomes for their organizations. In the contemporary business world, talent management effectiveness determines the competitive advantages of enterprises. The rationale for the topic choice is validated by the insufficient attention of research to the management issues in SMEs and the increasing influence of SMEs on the domestic economy and employment rates.

The research questions that are intended to be answered within the research include the general research question: How do SMEs’ talent management procedures impact employee performance? And the specific research question: How do the SMEs’ human resource techniques aimed at developing talents and improving candidates’ skills affect the innovation capabilities of workers? Importantly, the impact of talent management on employee outcomes in SMEs is under-addressed in the academic circles due to the increased attention concerning human resource practices allocated to global corporations and large enterprises.

Since the issue under investigation is linked to human resource management, such business and management theories as a knowledge-based approach and organizational learning will help in answering the identified research questions. The proposal will summarize, analyze and critically evaluate the scope of academic literature on the topic of talent management’s effects on the innovation capacity of SMEs in the UK. Also, the overview of the most applicable research methods will be provided with the outlining and validation of the research design that will provide for the most effective tackling of the problem.

Summary Critical Review of the Relevant Literature

The Role of SMEs in Economy

The scope of scholarly resources on the identified topic allows for collecting a substantial body of information. According to Wacker (1998, p. 368), “the role of the literature … is extremely important since it provides the accepted definitions, domains of where a theory applies” and the current state of knowledge on a given topic. According to literature, the UK economy is reliant on the existence and effective performance of SMEs because they constitute a significant share of the private sector economy, contribute to the economic development of the country, and can potentially reduce the level of unemployment.

Indeed, according to Elmagrhi et al. (2017, p. 459), “SMEs contribute up to 60 percent to total private sector employment… account for about 99 percent of all private sector businesses and 47 percent of total private sector turnover”. SMEs become more influential stimulators of economic advancement by contributing to “capital formation … and job creation byways of entrepreneurial augmentation” (Kapoor and Goel, 2020). Consequently, the successful performance and continuous growth of small and medium businesses and entrepreneurship are directly linked to the overall economic stability of the country.

There are several reasons why the growth of SMEs is critically important. In case of a failure of the UK SMEs to meet the requirements and competitive challenges of their respective markets, the private sector environment of the country might be adversely impacted (Elmagrhi et al., 2017). Moreover, under the current political circumstances of Brexit, the UK’s economy might encounter significant difficulties in maintaining economic independence (Brown, Linares-Zegarra, and Wilson, 2019; Lakhawat and Singh, 2019; Savlovschi and Robu, 2011).

Also, the world trends, in general, and American data, in particular, demonstrate that the majority of small businesses that do not have specifically designed effective human resource strategies fail to sustain their operations for more than five years (Rice, 2018). Therefore, the importance of the implementation of effective management techniques in the SMEs sector is currently of crucial importance for both the private sector and the national economy.

The analysis of literature allows for stating that the SMEs-related research topic tends to be of a general scope with insufficient attention to specific management issues. Some studies refer to the concerns around SMEs within a general realm of human resource management. Indeed, a study by Sancho et al. (2018) investigates the contributors to SMEs’ competitive development and identifies that socially responsible human resource management has a major influence on building and maintaining the company’s favorable reputation and ultimately leads to successful performance on the market. However, this study concentrates on the concept of social responsibility as the main contributor to enterprise success and does not integrate the links between particular talent management efforts and corporate outcomes.

Talent Management

When it comes to defining talent management, the concept itself is represented in multiple manifestations. It is defined as a strategy, a tool, and an implementation of specific procedures, “including recruitment and selection, career development, and employee retention” (Kravariti and Johnston,2020, pp. 6-7). The concept of talent management has entered the sphere of business and management research within the last two decades and has already occupied a significant niche in human resource practices (Ibrahim and AlOmari, 2020). Talent management, as a concept, is one of the human resource-related elements that are capable of leading companies toward increased performance and better business outcomes.

The creative decision-making, innovation, and resiliency of any company depend on the people who constitute its leadership and staff. The ability to manage human capital, which is an influential asset, is a necessity for any enterprise that strives to compete in the market. In particular, human capital incorporates employees’ competencies, including “their knowledge, skills, talents, experience, qualifications and education” (AlQershi, N., Abas, ZB and Mokhtar, 2019, p. 59). Ultimately, if companies can obtain human capital and maintain it with the help of developing, training, and educating interventions, they will have more chances to “extend their goals in competitive and risky environments” (AlQershi, N., Abas, ZB and Mokhtar, 2019, p. 59). Thus, talent management, within the scope of other human resource management strategies, is a crucial element for the continuous development of an enterprise on the way to success and sustainability.

Talent Management in SMEs

The increasing attention paid to talent management during the past decades has been focused on companies that manage large numbers of employees, namely big corporations and global companies. Leaders in global organizations are using talent management techniques and strategies to manage large corporations and ensure the sustainability and efficiency of human capital (Krishnan and Scullion, 2017). The utilization of talent management in human resource management is vastly researched for large enterprises, while little academic attention is paid to the investigation of talent management manifestations and effects in small and medium enterprises.

As Pauli and Pocztowski (2019, p. 200) state, the current research of the topic of talent management lacks an adequate context-sensitive approach, but “the application of a contextual framework can be of the highest importance when analyzing talent management processes in small and medium-sized enterprises.” Also, the current academic literature on the topic reveals that the representation of talent management in research lacks an evidential basis (McDonnell et al., 2017; Pauli and Pocztowski, 2019; Sheehan, Grant and Garavan, 2018). Thus, it is vital to fill this gap and apply evidence-driven research placed in an under-represented economic setting, which is SMEs.

Available Research Body on Talent Management in SMEs

There is an array of studies conducted on the topic of talent management in business that might be located on scholarly databases. However, there are few specific studies that tackle the particular impact of talent management on the innovation capacity of employees in SMEs. Nonetheless, it is important to review several valuable studies that have addressed the issues under discussion. The idea that prevails in the research is that talent management is a key component of business growth in the contemporary volatile economic environment where the skills and competencies of people are the most valuable asset. Indeed, a study found that “73% of executives in the USA agree on the positive relationship between talent management and business strategy to obtain the success of the organizations” meaning that companies extensively integrate human resource management systems in their corporate strategy (Mohammed, 2016, p. 147).

Similarly, Glaister et al. (2018) interpret the data collected from 198 firms to conclude that talent management is a key mediator between the human resource management systems of an organization and its performance excellence. Thus, the scope of the impact of talent management on enterprise performance cannot be overestimated.

Since people and relations between them constitute the main part of the modern-day talent-driven business environment, much research has been devoted to the investigation of the application of talent management in a corporate setting. The survey conducted by Kianto, Saenz, and Aramburu (2017) showed that knowledge-based human resource management systems positively influence structural and relational capital, thus improving the innovative potential of the companies.

This study has identified that innovation is reliant on knowledge; thus, the development of skill, knowledge, and talent ultimately contributes to innovative strategies of enterprise growth. Similarly, Kusuma and Kautsar (2020) introduce an overview of the positive impact of general human resource management and change management strategies on SMEs without particular addressing of employee-specific outcomes of such practices. Moreover, these general research studies do not refer to the links between talent management and innovation.

Importantly, innovation is a cornerstone of modern-day economic growth, which might facilitate the development of small and medium companies. The study carried out by Akay and Kunday (2018) tested the influence of human and social capital on company innovation in Turkish companies. The study provides valuable information since the sample used for the questionnaire included employees from large-, small-, and medium-sized companies, which allows for obtaining general implications of human resource management techniques on innovation facilitation.

In particular, Akay and Sunday (2018, p. 33) found that talent management, when “integrated with high-profile personal and collaborative HRM systems, are important determinants of human and social capital development and innovation.” Nonetheless, this study does not explicitly address talent management procedures with regard to their particular contribution to innovation. At the same time, there can be found multiple studies on various regions and countries’ SMEs, including Poland, Slovenia, India, Indonesia, USA, and others while only a few address the UK (Pauli and Pocztowski, 2019; Sayyida and Alwiyah, 2020; Skoumpopoulou, Stalker and Kohont, 2019). Thus, the chosen research topic is relevant, and its investigation will contribute to the scope of academic literature.

Outline of the Proposed Research Design and Methods

In order to answer the research questions, specific research approaches need to be utilized. The application of epistemological orientations and aligning research accordingly is anticipated to provide a practical, real-world investigation of the problem manifestations and possible ways of solution to it (Lancaster, 2007). Within this perspective, the usage of deductive research will allow for analyzing the observed problem in the field of business and management on the basis of previously introduced theory. Indeed, deductive research allows for observing and testing a hypothesis or theory by applying it to real-world issues and developing knowledge concerning the solution of the observable problem (Lancaster, 2007).

The knowledge-based and organizational learning theories are considered the adequate theoretical background for investigating the impact of human resource strategies on employee outcomes (Eveleens, van Rijnsoever, and Niesten, 2017). The deductive approach will consequently allow for validating a theory and answering the research questions that investigate the causes of some problems (why) and the ways of possible resolving the issues (how), which provides for better validation of applicable solutions.

To apply a deductive approach to the research, it is necessary to address a hypothetical perspective on the investigated research questions based on the available research literature. Many research studies have been conducted to explain and measure the extent to which diverse talent management techniques influence employee performance (Akay and Kunday, 2018; Kianto, Saenz, and Aramburu, 2017; Mohammed, 2016).

They all conclude that adequately applied talent management strategies contribute to human capital retention and consecutive successful performance of the whole organization but concentrate on large enterprises. However, modern management and business-related academia require placing the research of talent management in the context of SMEs to retrieve the most realistic evidence (Gallardo-Gallardo, Thunnissen, and Scullion, 2020). The results are expected to be different for enterprises with fewer workers due to the differences in talent management philosophies developed in enterprises of different scales (Meyers et al., 2020). With this hypothesis in mind, one might design research investigating if the same outcomes may be achieved in the SME setting under challenging economic circumstances.

The research method of a case study might be an effective way to tackle the identified research questions. This method is very specific due to the concentration of the researcher on one particular issue placed in a specific, easily identifiable setting. The qualitative approach will allow for describing the scope of effects with the emphasis on their practical outcomes within the innovation area (Wiblen, 2016). When investigating how SMEs’ talent management affects the innovation capabilities of workers, an analysis of the manifestations of the problem within one organization will allow for interpreting the situation in the sector.

At the same time, the method of case study allows for observing and evaluating the effectiveness of particular solutions to the problem. According to Gray (2019), the case study method “is particularly useful when the researcher is trying to uncover a relationship between a phenomenon and the context in which it is occurring” (p. 124). Therefore, when researching the problem of talent management in SMEs with an emphasis on the effectiveness of possible outcomes, the case study will potentially provide the most valuable information for answering the research questions.

The methods for data collection should be a combination of first-hand information received from the participants and the secondary data available from the company reports. Therefore, documentary sources, interviews, and questionnaires will be effective tools for collecting multifaceted and credible data on the topic (Forsman, 2008; Martelli and Greener, 2018). Therefore, the outlined research process will require choosing a UK-based small enterprise that implements talent management programs.

The company’s documented reports on employee performance and innovative capabilities before and after the intervention will be analyzed. Also, interviews and questionnaires will be carried out for both employees and leadership to evaluate the perceived performance effects of the implemented practices. The results of the case study will allow for answering the research questions and providing a ground for further research in the field for a better understanding of the methods to improve SMEs’ performance.


In summation, the issue of talent management has been broadly addressed in the academic literature for the past two decades. Although it is thoroughly defined and conceptualized in the context of multicultural and global corporations, little attention is paid to its manifestations and effects in the SME sector. Moreover, since the role of SMEs in the economy steadily grows under the influence of political factors, the relations between talent management and innovation, as a way of increasing company performance, need to be addressed.

The overview of the literature shows that the current research field in the area lacks an evidential basis and contextual investigation. Therefore, the study will be conducted with the help of a qualitative study method using a deductive epistemological approach. Documentary sources utilization, interviews, and questionnaires will allow for adequate data collection for further interpretation of the effects of talent management on the innovation capacities of SMEs. The research is expected to make a significant contribution to the scholarly literature on business and management by filling the identified gaps.

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