Paving the way to Post Initial Public Offering (IPO) Performance: Human Resource Growth Orientation

Abstract

Firm growth takes multiple forms, yet the preponderance of firm growth research considers only one form of growth and implicitly treats the various other forms as interchangeable. We merge the firm growth and strategic human resource management (SHRM) literatures to create the HR growth orientation construct, which refers to how a firm grows its employees relative to its sales. We suggest that congruent growth between employees and sales (a “balanced” HR growth orientation) is positively related to firm performance as there are sufficient human resources to exploit opportunities available to the firm. Incongruent growth, however, has a nuanced relationship with firm performance. Growing sales faster than employees (a “lagging” HR growth orientation) could leave a firm lacking the necessary human resources to exploit new opportunities, and therefore is less positively related to firm performance than growing employees faster than sales (a “leading” HR growth orientation). Two contingencies to this relationship are then proposed: the level of human capital risk, which influences the firm’s ability to hire and sustain a workforce, and industry dynamism, which may exert sudden, unexpected demands on a firm’s human resources. We test our hypotheses on a cohort sample of 399 firms that underwent an IPO. Our findings support the notion that different forms of growth have unique performance implications.