Unintended Outcomes? Human Resource Practices, Information, and Employee Entrepreneurial Activity

Abstract

The vast majority of entrepreneurs originate from large established firms; however our knowledge of how specific firm characteristics impact employee entrepreneurial outcomes remains remarkably sparse. This paper addresses this gap by developing a theoretical framework explaining how certain high performance human resource practices that are designed to promote competitive advantage may in fact lead to increased levels of employee entrepreneurial activity. Accordingly, the incumbent firm may not capture the value created by such human resource practices; rather the value may be transferred to a competing new venture started by an ex-employee. Using theoretical rationale from the jack-of-all-trades theory of entrepreneurship (Lazear, 2004; 2005), social cognitive theory (Bandura, 1986), and equity theory (Adams, 1963; 1965), I argue that high performance human resource practices which (1) reduce perceived organizational complexity and (2) signal the value that an employee creates for the firm and the value that the organization creates as a whole, will be positively related to employee entrepreneurial activity. The proposed effects are expected to be stronger for individuals who are high in cognitive ability and weaker in industries that are capital-intensive. Implications for scholarship and practice are discussed.