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Background: In this paper, the effects of four groups of factors on organizational performance are examined. Those are human resource management (HRM) policies and practices, financial and business indicators, location, and firm characteristics. A review of selected literature confirmed that a similar set of factors, through its positive effects on boosting organizational performance, may significantly improve competitive advantage of firms.

Methods: An empirical analysis using firm-level data is conducted on the sample of enterprises operating in Serbia. A microeconometric approach is employed in order to specify and estimate empirical models. Two statistical models are applied. The ordered probit model is used for investigating organizational performance and the standard binary probit model for examining the decision of a firm to integrate the human resource development (HRD) department into its organizational structure. The goodness of fit measures confirmed the statistical reliability of estimated models.

Results: Estimation results revealed that optimization of the number of employees, sales and revenues, firm age, increased market demand and competitive environment, as well as the ‘right decisions’ of the top management have significantly positive effects on boosting organizational performance. Significance of on-the-job training for boosting organizational performance was not empirically supported. In the same group of factors are firm size, industry and region. An auxiliary model shown that large- and medium-sized firms, firms with high level of revenues, privately owned, foreign and those located in or near to the capital city are more likely to have HRD departments.

Conclusions: This paper provides a survey of the theoretical literature and explains empirical findings that are relevant for understanding to what extent on-the-job training, managing human resource, as well as some other internal and external organizational and financial factors are important for enhancing competitive advantage of firms.

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