Human resource management practices, entrepreneurial orientation and firm performance: what is the link?

Abstract

PurposeBuilding on the little guidance in the existing literature regarding the relationship between human resource management (HRM) practices, entrepreneurial orientation and firm performance, this study aims to generate theoretical propositions that underpin an integrative framework following a systematic literature review, then to test such a framework within the context of a small and medium enterprise (SME) to demonstrate how employees’ knowledge and competencies are translated into added value while fostering the company’s entrepreneurial capabilities and culture.Design/methodology/approachFor the purpose of this research, a systematic literature review was adopted to build the propositions underpinning an integrative theoretical framework linking HRM practices, entrepreneurial orientation and firm performance. A single case study approach was then followed to test the propositions of the integrative theoretical framework within the context of an SME, while adopting a triangulation methodology for data collection, including questionnaires, interviews and archival data. Data analysis was conducted following the procedures of a pattern-matching methodology.FindingsThis research confirms the strategic role of HRM practices in fostering the firm’s entrepreneurial orientation and capabilities, while nurturing, enriching and bundling employees’ knowledge, skills and distinctive competencies within the context of a company’s innovation-driven strategy. HRM practices through a strategic alignment with the company’s business strategy, contribute to shaping up organizational attitudes, behaviors and cultural determinants that are, in turn, conducive to better innovativeness, risk propensity and initiative-taking. Theoretical and empirical evidence shows how such corporate entrepreneurialism is then translated into adding value activities, individual and group productivity and overall organizational performance.Research limitations implicationsThis research generates meaningful insights on how HRM practices contribute to shaping up corporate entrepreneurship attitudes and transforming them into both individual and organizational results while building on conceptual assumptions and empirical evidence. The authors believe such insights have the potential to lay the foundations of a comprehensive theoretical model that disentangles the complexities and the dynamics of how strategically-oriented HRM interventions could help an organization redirect its employees’ competencies into innovation and entrepreneurial capabilities to generate a competitive advantage in an ever-changing business environment. Future research should emphasize mainly on multiple case study approaches and ethnographic methodologies for the sake of result generalizability and holistic understandings.Practical implicationsThis research draws significant conclusions for SMEs to cope with the change and the fierce competitive dynamics affecting current business environments. To consolidate and further develop their strategic positioning, this research suggests that SMEs could leverage distinctive individual and group competencies, through strategically aligned HRM actions and investments, to foster learning and generate entrepreneurially-oriented cultural values and management style conducive to innovation, performance and competitive advantage.Originality/valueThis research offers integrated and holistic views of how HRM practices affect organizational performance while leveraging on learning to create the necessary cultural and managerial conditions for corporate entrepreneurialism. This research builds on both theoretical propositions and empirical evidence to lay the foundations of a comprehensive model linking HRM practices, entrepreneurial orientation and firm performance. From a practical perspective, the research findings suggest new human resource developmental venues while placing much emphasis on the value of creating the innovation-driven managerial culture and fostering entrepreneurially-oriented attitudes to achieve better performance results.