The impact of innovative human resource management (HRM) practices on performance is investigated using panel data for all units of a retail firm. Our rich data include measures of the operating environment, important dimensions of core inputs, and information on HRM environments, and output is measured as value added. We estimate augmented production functions, including both establishment and manager fixed effects. When employees have opportunities to participate, and receive appropriate information and feedback from their supervisors, productivity is enhanced. Thus, even in settings where employees do simple tasks and are relatively low-skilled, participatory work environments can enhance business performance. © 2009 Regents of the University of California.