Human resource management in growing new ventures core team formation, core team characteristics and core team effects on employment models

HUMAN RESOURCE MANAGEMENT IN GROWING NEW VENTURES: CORE TEAM FORMATION, CORE TEAM CHARACTERISTICS AND CORE TEAM EFFECTS ON EMPLOYMENT MODELS AEGEAN LEUNG OI KAM (MA, MSc) A THESIS SUBMITTED FOR THE DEGREE OF DOCTOR OF PHILOSOPHY DEPARTMENT OF MANAGEMENT AND ORGANIZATION NATIONAL UNIVERSITY OF SINGAPORE Acknowledgements After years of working in the industry, I decided to go back to school to pursue my doctorate degree in a topic I have come to regard as one of the most important elements for the success of growing new ventures – human resource management during the early years of those firms. During the years of the doctorate course, thanks to the faith and support of my supervisors/advisors in the NUS Business School, and the encouragement from various faculty members and friends, I have been able to stay on that set course and devote my research efforts to studying a phenomenon I am passionate about. I am also grateful for the tangible (in the forms of scholarships and fellowships, etc.) and intangible (in terms of training and recognition) support provided by the University, the Business School and the Department of Management and Organization during my years in the program. Especially, I would like to express my sincere thanks to my two supervisors, Dr. Ronald Rodgers (my initial supervisor) and Dr. Foo Maw Der (my current supervisor) for their invaluable guidance and inputs during the whole process of my doctorate course, from the development of the research proposal to the implementation of data collection, to the final organization and writing of the thesis. I would also like to thank Dr. Wong Poh Kam and Dr. Daniel McAllister, who were kind enough to be my thesis committee members, and who have allowed me to leverage on their networks and domain expertise for my research pursuits. My thanks also go to Dr Rao Kowtha, who is always there to offer advice, in and outside of his capacity as the director of the PhD program, and my fellow PhD student, Mr. Sankalp Chaturvedi, who is always there for me whenever I need some advice concerning statistical procedures, and Mrs. Mavis McAllister for carefully reading through several chapters of my manuscript. Last but not least, I must state that I could not have gone through the PhD program with such speed and focus without my very loving, supportive and understanding husband, Dr. Frederick H. Willeboordse. My children, Alpha, Beta and Gamma deserve their share of credits in putting up with a rather absent-minded mom who on occasions got all absorbed into her research problems and forgot some of the finer details of day to day life. Table of Contents ACKNOWLEDGEMENTS TABLE OF CONTENTS SUMMARY LIST OF TABLES . LIST OF FIGURES AND CHARTS CHAPTER 1: INTRODUCTION . CHAPTER 2: DIFFERENT TIES FOR DIFFERENT NEEDS - THE USE OF NETWORKS IN CORE TEAM RECRUITMENT IN NEW VENTURES . 17 2.1 2.2 2.3 2.3.1 2.3.2 2.3.3 2.4 2.4.1 2.4.2 2.4.3 2.5 2.5.1 2.5.2 2.6 2.7 2.7.1 2.7.2 INTRODUCTION 17 A SYSTEM APPROACH OF FIT 19 MULTIPLE CONSIDERATIONS OF FIT IN CORE TEAM RECRUITMENT 20 Organizational Constraints and Core Team Recruitment . 20 Strategic Consideration in Team Member Selection . 22 P-O Fit Considerations in Team Member Selection 23 DIFFERENT TIES FOR DIFFERENT NEEDS . 24 Network Recruitment as the Dominant Practice in Team Member Acquisition 24 From Social Ties to Business Ties . 26 The Persistence of Strong Ties . 27 METHODS 28 Samples and Data Collection . 28 Measures of Key Concepts and Data Analysis 30 FINDINGS AND INTERPRETATIONS . 32 DISCUSSION . 38 Implications of the Current Study 38 Limitations and Future Research . 41 CHAPTER 3: OWNERSHIP IMPRINTING ON NEW VENTURE TEAM FORMATION AND COMPOSITION 43 3.1 INTRODUCTION 43 3.2 CURRENT LITERATURE ON NEW VENTURE TEAM FORMATION AND COMPOSITION 46 3.3 OWNERSHIP STRUCTURE AND NEW VENTURE TEAMS . 47 3.3.1 Founding ownership structure and the use of networks in recruiting the startup team . 49 3.3.2 Founding ownership structure and diversity of startup teams . 52 3.3.3 Imprinting of founding ownership structure on growth teams . 54 3.4 METHODS 56 3.4.1 Sample and Data Collection 56 3.4.2 Measures of Key Variables and Data Analysis 57 3.5 ANALYSIS AND RESULTS . 59 3.5.1 Networks versus market recruitment . 59 3.5.2 Ownership structure and new venture team composition 59 Descriptive statistics 59 3.6 DISCUSSION . 63 3.6.1 Founding ownership structure and the use of networks in recruiting core team members. 64 3.6.2 Founding ownership structure and functional diversity of the core team 65 3.6.3 Limitations and implications of this study . 66 CHAPTER 4: CHANGE AND STABILITY OF EMPLOYMENT MODELS IN GROWING NEW VENTURES: A SIMULTANEOUS EXAMINATION OF CORE TEAM IMPRINTING, STRUCTURAL INERTIA, AND ADAPTIVE PRESSURES 69 4.1 4.2 INTRODUCTION 69 EMPLOYMENT MODEL AND ITS CHANGE AND STABILITY . 73 4.2.1 4.2.2 4.2.3 4.3 4.3.1 4.3.2 4.4 4.4.1 4.4.2 4.5 4.5.1 4.5.2 4.5.3 4.5.4 4.5.5 4.6 Typologies of Employment Models Based on Core Values 73 Typologies of Employment Models Based on HR Practices 75 Change and Stability of Employment Models 78 IMPRINTING EFFECTS AND ADAPTIVE PRESSURES ON EMPLOYMENT MODELS 79 The Imprinting Mechanism 79 The Intervening Effects of Adaptive Pressures 89 METHODS 92 Sample and Data Collection 92 Measures of Key Variables 94 DATA ANALYSIS AND RESULTS . 99 Descriptive Statistics 99 Imprinting Effects of New Venture Core Team on the Startup Employment Model . 101 Structural Imprinting of the Initial Employment Model . 102 The Moderating Effects of Core Team Change 102 The Moderating Effects of Adaptive Pressures 104 DISCUSSION . 106 CHAPTER 5: DISCUSSION AND FUTURE RESEARCH DIRECTION 113 5.1 5.2 5.3 5.4 RESEARCH FINDINGS . 114 THEORETICAL CONTRIBUTIONS OF THIS RESEARCH 117 PRACTICAL IMPLICATIONS OF THIS RESEARCH 120 LIMITATIONS AND FUTURE RESEARCH DIRECTIONS 122 REFERENCES 125 APPENDICES 141 SUMMARY New ventures face significant challenges in attracting and acquiring critical human resources, as well as in building a coherent human resource management system that not only binds people together during the startup phase when the firm is struggling for survival, but also caters to changing human resource needs when the firm has transited to the growth phase. Our knowledge on how growing new ventures manage their human resource challenges is still very limited. Existing research on human resource management has been based largely on the context of established firms. Human resource practices in large organizations, however, not automatically apply to young and small entrepreneurial firms with fewer resources at their disposal, which are at the same time facing a volatile operating environment Hence, there is a need to study human resource challenges and practices of growing new ventures in their unique context. This research attempts to capture unique human resource management phenomena in new ventures, specifically on how core team members are acquired during the startup and the growth phases, and some of the internal and external contexts that may affect the choice of team members. It also explores the change paths of the employment model in new ventures from their startup to their growth phases, taking into account influences from the core team, the initial model design, and the external pressures for change. Findings from this research suggest that entrepreneurs tend to leverage personal network ties (in both social and business circles) at the startup phase in recruiting core team members. The extent to which entrepreneurs can continue to rely on their direct network ties to acquire core team members during their growth phase, however, varies with their personal endowment in network range and reach, which may be influenced by factors such as industrial experience. The business partnerships built through the initial years of the firm, moreover, may also lead to the increased use of business ties and indirect ties in acquiring core human resources. Furthermore, team members can be chosen based more on affective considerations of similarity-attraction, or on instrumental concerns of strategic fit, depending on different types of ownership influence (the presence or absence of institutional ownership at founding as examined in this research). The different decision criteria can in turn lead to teams with different levels of diversity. Meanwhile, the characteristics of the core team can also exert an influence on the design and evolution of the employment model in new ventures. Startup teams with shared organizational experience tend to be able to design more coherent initial employment models. The coherence level of the initial employment model in turn relates to the coherence of the employment model of the firm at the growth phase, but is subject to the impact from changes in core team membership, and pressures from the institutional and competitive environment. An understanding of the phenomena of people management in new ventures is the first step in formulating effective HRM strategies for those firms to survive their startup phase, and effectively transit to their growth phase. This research contributes to knowledge building with regard to human resource challenges and practices in relatively young and small firms. The theoretical models used in the studies can also serve as the basis for future research in conducting more rigorous tests of the relationships among the key variables identified, advancing and synthesizing research in the field of human resource management in the specific context of young and growing entrepreneurial firms. List of Tables Table 2.1 Growth phases and recruitment channels by position 35 Table 2.2 Growth phases and types of networks used in hiring 36 Table 2.3 Growth phases and strength of ties used in hiring 37 Table 3.1 Founding ownership structure and recruitment channels 60 Table 3.2 Correlations matrix 60 Table 3.3 Founding ownership structure and startup team composition 61 Table 3.4 Founding ownership structure and growth team composition 62 Table 3.5 Regression results on the mediating role of startup team composition 63 Table 4.1 Means, standard deviations, and correlations of key variables 100 Table 4.2 Regression results on effects of startup team on coherence of initial employment model 101 Table 4.3 Regression results of effects of startup model coherence on growth model coherence 102 Table 4.4 Moderating effects of change in team membership 103 Table 4.5 Moderating effects of adaptive pressures 105 List of Figures and Charts Figure 1.1 Scope of research covered in this thesis 11 Figure 2.1 Multiple fit considerations in core team recruitment 20 Figure 3.1 Ownership imprinting on new venture core teams 45 Figure 4.1 Change and stability of employment models from startup to growth 72 Figure 4.2 Different types of employment models 77 Chart 4.1 Hypothesized interaction effects between shared organizational experience and functional diversity 85 Chart 4.2 Moderating effects of change in team membership 104 Chart 4.3 Moderating effects of coercive pressures 105 Chart 4.4 Moderating effects of normative pressures 106 Chart 4.5 Moderating effects of environmental dynamism 106 Chapter 1: Introduction How people are managed can drive companies to success or failure (O'Reilly and Pfeffer, 2000). This is especially true for new ventures with organizational foundations that are still fragile. Entrepreneurs unable or unwilling to deal effectively with HRM-related issues find it difficult to attract and retain top employees, and motivate those who remain. These entrepreneurs will in general not be able to realize their business vision and create value with their business ideas (Baron, 2003; Katz and Welbourne, 2002). On the other hand, the maximization of the value of human resources through proper management can provide a competitive advantage for the firm (Barney and Wright, 1998). While there is abundant literature studying human resource management in large, established organizations, relatively little research has covered human resource challenges in young, small and growing new ventures (Baron, 2003; Cardon and Stevens, 2004; Tansky and Heneman, 2003). Human resource management theories and practices applicable to large, established firms may not necessarily fit the context of young and small firms (Heneman and Tansky, 2002). The different concerns and challenges faced by younger and smaller firms, such as ‘the liability of newness and smallness’ amplified by the lack of resources and legitimacy, and a high level of uncertainty, lead to the adaptation of different practices in human resource acquisition and management (Barber, Wesson, Robertson and Taylor, 1999; Heneman and Berkley, 1999; Ram, 1999). In recent years, repeated calls have been made for more research to develop deeper insights into the phenomenon of human resource management in relatively young and small entrepreneurial firms by developing additional observa- tions, taxonomies, and theories (Baron, 2003; Katz and Welbourne, 2002; Tansky and Heneman, 2003). Traditionally, studies on human resources in new ventures focus on the persona of the founder (see for example, Boeker, 1988, and Schein, 1983). A growing amount of literature in recent years, however, challenges the position that the entrepreneur is the lone hero in the entrepreneurial process (Boeker and Wiltbank, 2005; Cooney, 2005; Eisenhardt and Schoonhaven, 1990; Forbes Borchert, Bruhn and Sapienza, 2006; Kor, 2003). The venture creation process usually begins with a lead entrepreneur with an idea for a new enterprise. He or she then approaches people who may buy into the idea to build the enterprise together. It is the characteristic of such a core team, rather than that of the single entrepreneur, that influences venture performance and success (Eisenhardt and Schoonhaven, 1990; Ensley and Pearce, 2001; Hambrick and Crozier, 1985). Hence, an initial step in understanding human resource manage- ment in new ventures can start with an examination of how new ventures put together their core teams. In this thesis I focus on examining how entrepreneurs put their initial core human resources (new venture core teams) together (Chapter 2), contextual factors that influence the characteristics of that core team (Chapter 3), and how the characteristics of the startup core team imprint themselves on the change and stability of the employment model adopted by new ventures (Chapter 4). Figure summarizes my research scope. 10 Higgins, M. C., 2005. Career Imprints: Creating Leaders Across an Industry. John Wiley and Sons, Inc. Hite, J. M. and Hesterly, W. S. 2001. “The evolution of firm networks:” From emergence to early growth of the firm. Strategic Management Journal, 22: 275-286 Hoang, H. and Antoncic, B., 2003. Network-based research in entrepreneurship: A critical review. Journal of Business Venturing, 18: 165-187 Johnson, D. E. and Bishop, K., 2002. Performance in fast-growth firms: The behavioral and role demands of the founder throughout the firm’s development. In Katz, J. A. and Welbourne, T. M. (Eds), Advances in entrepreneurship, firm emergence and growth, Vol 5: Managing People in Entrepreneurial Organizations: 1-22. Greenwich, Conn.: JAI Press Inc Jones, G. R. and George J. M. 1998. The experience and evolution of trust: Implications for cooperation and teamwork. Academy of Management Review, 23(3): 531-546 Kamm, J. B. and Nurick, A. J. 1993. The stages of team venture formation: a decisionmaking model. Entrepreneurship Theory and Practice, Winter: 17-27 Kaplan, S. N. and Stromberg, P. 2001. Venture capitalists as principles: Contracting, screening, and monitoring. The American Economic Review, 91(2): 426-430. Kaplan, S. N. and Stromberg, P. 2004. Characteristics, Contracts, and Actions: Evidence from Venture Capitalist Analyses. The Journal of Finance, 59(5), 2177–2210 Katz, J. A, Aldrich, H. E, Welbourne, T. M and Williams, P. M., 2000. Guest editor’s comments: Special issue on human resource management and the SME: Toward a new synthesis, Entrepreneurship Theory and Practice, 25(1): 7-10 Katz, J. A. and Welbourne, T. M. (Eds), 2002. Advances in entrepreneurship, firm emergence and growth, Vol 5: Managing People in Entrepreneurial Organizations, Introduction. Greenwich, Conn.: JAI Press Inc. Keck, S. L. and Tushman, M. L. 1993. Environmental and organizational context and executive team structure. Academy of Management Journal, 36(6): 1314-1344 Kelly, L. M., N. Athanassiou and WF Crittenden, 2000. Founder centrality and strategic behavior in the family-owned firm. Entrepreneurship: Theory and Practice, 25: Kimberly, J. R. 1975. Environmental constraints and organizational structure: A comparative analysis of rehabilitation organizations. Administrative Science Quarterly, 20: 19. Kimberly, J. R. 1979. Issues in the creation of organizations: Initiation, innovation and institutionalization. Academy of Management Journal, 22: 437-457. 133 Kimberly, J. R. and Miles, R. H. 1980. (Eds.). The Organizational Life Cycle: Issues in the Creation, Transformation, and Decline of Organizations. San Fancisco: Jossey-Bass. Klimoski, R. and Mohammed, S. 1994. Team mental model: construct or metaphor? Journal of Management, 20: 403-438. Kor, Y. T. 2003. Experience-based top management team competence and sustained growth. Organization Science, 14: 707-719. Kozlowski, S. W. J. and Klein, K. J., 2000. A multilevel approach to theory and research in organizations: Contextual, temporal and emergent processes. In K. J. Klein and S. W. Kozlowski (Eds.), Multilevel theory, research and methods in organizations: 3-91. San Francisco: Jossey-Bass. Krackhardt, D., 1992. The strength of strong ties: The importance of philos in organizations. In N. Nohria and R. G. Ecckes (Eds.), Networks and Organizations: Structure, Form, and Action, 216-239. Boston, MA: Harvard Business School Press Kristof, A.L. 1996. Person-organization fit: An integrative review of its conceptualization, measurement, and implications. Personnel Psychology, 49(1): 1–49. Larson, A. 1992. Network dyads in entrepreneurial settings: A study of the governance of exchange relationships. Administrative Science Quarterly, 37: 76-104. Larson A. and Starr, J. A. 1993. A network model of organization formation. Entrepreneurship: Theory and Practice, 17(2): 5-15. Lawrence, B. 1984. Historical perspective: Using the past to study the present. Academy of Management Review, 9: 307-312. Leana, C. R. and Barry, B., 2000. Stability and change as simultaneous experience in organizational life. Academy of Management Review, 25 (753-759) Lepak, D. P., and Snell, S. A. 2002. Examining the human resource architecture: The relationships among human capital, employment, and human resource configurations. Journal of Management, 28(4): 517-543 Leung, A. 2003. Different ties for different needs – Recruitment practices of entrepreneurial firms at different developmental phases. Human Resource Management, 42(4), 303320 Leung, A., Zhang, J., Wong, P. K. and Foo, M. D., 2006. The use of networks in human resource acquisition in entrepreneurial firms: Multiple fit considerations. Journal of Business Venturing, 21(5): 664-686. Lichtenstein, B. M. B. and Brush, C. G. 2001. How "resource bundles" develop and change in new ventures? A dynamic model and longitudinal exploration. Entrepreneurship: Theory and Practice, 25(3): 134 March, G. M., 1981. Footnotes to organizational change. Administrative Science Quarterly, 26: 563-577 March, G. M., 1996. Continuity and change in theories of organizational action. Administrative Science Quarterly, 41: 278-87 March, J. G. and Simon, H., 1958. Organizations. New York: Wiley. Markman, G. D and Baron, R. A. 2002. Individual differences and the pursuit of new ventures: A model of person-entrepreneurship fit. In Katz, J. A. and Welbourne, T. M. (Eds), Advances in entrepreneurship, firm emergence and growth, Vol 5: Managing People in Entrepreneurial Organizations: 23-54. Greenwich, Conn.: JAI Press Inc McEvily, B. and Zaheer, A. 1999. Bridging ties: a source of firm heterogeneity in competitive capabilities. Strategic Management Journal, 20: 1133-1156. Miles, R. E. and Snow, C. C. 1984. Designing strategic human resources systems. Organizational Dynamics, 13: 36-52. Miller, D. 1981. Toward a new contingency approach: The search for organizational gestalts. Journal of Management Studies, 18(1): 1-26 Miller, D. 1987. Strategy making and structure: analysis and implication for performance. Academy of Management Journal, 30(1): 7-32. Miller, D. 1991. The Icarus Paradox: How exceptional companies bring about their own downfall. New York: Harper Miller, D., 1992. Environmental fit versus internal fit. Organizational Science, 3(2): 159-78 Miller, D. and Droge, C. 1986. Psychological and traditional determinants of structures. Administrative Science Quarterly, 31: 539-560. Nightingale, D. V. and Toulouse, J. M. 1977. Toward a multilevel congruence theory of organization. Administrative Science Quarterly, 22: 264-280 O’Reilly, C. and Pfeffer, J. 2000. Hidden Values: How great companies achieve extraordinary results with ordinary people. Boston: Harvard Business School Press. Panayotopoulou, L. and Papalexandris, N., 2004. Examining the link betIen human resource management orientation and firm performance. Personnel Review, 33(5): 499520. Pelled, L. H., Eisenhardt, K. M. and Xin, K. R., 1999. Exploring the black box: An analysis of work group diversity conflict, and performance. Administrative Science Quarterly, 44(1): 1-28 Penrose, E. 1959. The theory of growth of the firm. New York: John Wiley and Sons. 135 Pettigrew, A. M., 1987. Context and action in the transformation of the firm. Journal of Management Studies, 24: 649-670 Pettigrew, A. M., 1992. On studying managerial elites. Strategic Management Journal, 13: 163-181 Pfeffer, J. 1994. Competitive advantage through people. Boston, MA: Harvard Business School Press. Powell W. W. and DiMaggio P. J. 1991. (Eds.) The New Institutionalism in Organizational Analysis: Chicago: University of Chicago Press. Quinn, R. E. and Cameron, K., 1983. Organizational life cycles and shifting criteria of effectiveness: Some preliminary evidence. Management Science, Vol. 29(1): 33-51 Quinn, R. E. and Rohrbaugh, J., 1983. A spatial model of effectiveness criteria: Towards a competing values approach. Management Science, 29(3): 363-377 Quinn, R. E. and Spreitzer, G. M., 1991. The psychometrics of the competing values culture instrument and an analysis of the impact of organizational culture on quality of life. Research in Organizational Change and Development, Vol. 5: 115-142 Ranger-Moore, J., 1997. Bigger may be better, but is older wiser? Organizational age and size in the New York life insurance industry. American Sociological Review, 62: 903-920 Ruef, M. 1997. Assessing organizational fitness on a dynamic landscape: An empirical test of the relative inertia hypothesis. Strategic Management Journal, 18(11): 837-853. Ruef, M., H. E. Aldrich, and N. M. Carter, 2003. The structure of founding teams: Homophily, strong ties, and isolation among U. S. entrepreneurs. American Sociological Review, 68(2): 195-222. Salancik, G. R. and J. Pfeffer, 1980. “Effects of ownership and performance on executive tenure in U.S. corporations.” Academy of Management Journal, 23(4): 653-664. Sarasvathy, S. D. 2001. Causation and effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency. Academy of Management Review, 26(2): 243-263. Schefczyk, M and T. J. Gerpott, 2001. Qualification and turnover of managers and venture capital-financed firm performance. Journal of Business Venturing 16: 145-163. Schein, E. H. 1983. The role of the founder in creating organizational culture. Organizational Dynamics, 12(1): 13-28. Schein, E.H. 1990. Organizational culture. American Psychologist, 45: 109-119. Schneider, B. 2001. Fit about fit. Applied Psychology: An International Review, 50(1): 141-152 136 Schneider, B., 1987. The people make the place. Personnel Psychology, 40: 437- 453. Schneider, B., Kristof-Brown, A., Goldstein, H. W., and Smith, D. B. 1997. What is this thing called fit? International Handbook of Selection and Assessment, N. Aderson and P. Herriot, (Eds): 393-412 Schneider, B., Smith, D. B. and Sipe, W. P., 2000. Personnel selection psychology: Multilevel considerations. In K. J. Klein and S. W. J. Kozlowski (Eds.), Multilevel Theory, Research and Methods in Organizations: Foundations, Extensions, and New Directions, 91-120. San Francisco: Jossey-Bass. Schneider, B.; Smith, D. B.; Paul, M. C. 2001. P-E Fit and the attraction-selectionattrition model of organizational functioning: Introduction and overview. In Work Motivation in the Context of a Globalizing Economic. Erez. M.; Kleinbeck, U.; Thierry, H. (Eds), 231-246 Schneider, B.; Smith, D. B.; Taylor, S.; Fleenor, J. 1998. Personality and Organization: A test of the homogeneity of personality hypothesis. Journal of Applied Psychology, Vol 83(3): 462-470 Selznick, P., 1996. Institutionalism “old” and “new”. Administrative Science Quarterly, 41: 270-7 Shane, S. and Cable, D. 2002. Network ties, reputation, and the financing of new ventures. Management Science, 48 (3): 364-381 Siggelkow, N., 2001. Change in the presence of fit: The rise, the fall, and the renaissance of Liz Claiborne. Academy of Management Journal, 44(4): 838-857 Siggelkow, N., 2002. Evolution toward fit. Administrative Science Quarterly, 47: 125159 Simons, T., Pelled, L. H. and Smith, K. A., 1999. Making use of differences: Diversity, debate, and decision comprehensiveness in top management teams. Academy of Management Journal, 42(6): 662-673 Smith, K. G., Mitchell, T. R. and Summer, C. E., 1985. Top level management priorities in different stages of the organizational life cycle. Academy of Management Journal, 28(4): 799-820 Smith, K. G., Smith, K. A., Olian, J. D., Sims, H. P., O’Bannon, D. P. and Scully, J. A., 1994. Top management team demography and process: The role of social integration. Administrative Science Quarterly, 39(3): 412-438 Starr, J.A., Macmillan, I.C., 1990. Resource cooptation via social contracting: resource acquisition strategies for new ventures. Strategic Management Journal, 11: 79–92. Stearns, T. M. 1996. Strategic alliances and performance of high technology new firms. Frontiers of Entrepreneurship Research 1996, 268-281 137 Stinchcombe, A. L. 1965. Social structure and organization. In J. G. March (Ed), Handbook of Organizations: 142-194. Chicago: Rand-McNally and Co. Swaminathan, A. 1996. Environmental conditions at founding and organizational mortality: A trial-by-fire model. Academy of Management Journal, 39: 1350-1377. Tabachnick, B. G. and Fidell, L. S. 2001. Using Multivariate Statistics (4th edition). Boston: Allyn and Boston. Tansky, J. W. and Heneman, R. 2003. Guest editor's note: Introduction to the special issue on human resource management in SMEs: A call for more research. Human Resource Management, 42(4): 299-302 Thompson, J. D., 1967. Organizations in action. New York: McGraw-Hill Tosi, H. L. and Slocum, J. W. 1984. Contingency theory: Some suggested directions. Journal of Management, 10(1): 9-26 Tsui, A. S., Pearce, J. L., Porter L. W., and Tripoli, A. M. 1997. Alternative approaches to the employee-organization relationship: Does investment in employees pay off? Academy of Management Journal, 40(5): 1089-1121 Tucker, D. J., Singh, J. V., and Meinhard, A. G. 1990. Founding characteristics, imprinting and organizational change. In J. V. Singh (ed.), Organizational Evolution: New Directions: 182-200. Newbury Park, CA: Sage. Tushman, M. L. and Rosenkopf. L., 1996. Executive succession, strategic reorientation and performance growth: A longitudinal study in the U.S. cement industry. Management Science, 42: 939-953. Ucbasaran, D., Lockett, A., Wright, M. and Westhead, P. 2003. Entrepreneurial founder teams: Factors associated with member entry and exit. Entrepreneurship Theory and Practice, 28(2): 107-127. Ulrich, D. 1997. Human resource champions: The next agenda for adding value and delivering results. Cambridge, M.A: Harvard Business School Press. Uzzi, B. 1996. The sources and consequences of embeddedness for the economic performance of organizations: the network effect. American Sociological Review, 61: 674498. Van de Ven, A. H and Drazin, R. 1985. The concept of fit in contingency theory. In B.M. Staw and L.L. Cummings (eds.), Research in Organizational Behavior, 7: 333-365. Greenwich, CT: JAI Press Van de Ven, A. H. and Poole, M. S., 1993. Explaining development and change in organizations. Academy of Management Review, 20(3): 510-540 138 Venkatraman, N. and Prescott, J. E. 1990. Environment-strategy coalignment: An empirical examination of its performance implications. Strategic Management Journal, 11: 1-23. Volberda, H. W. and Lewin, A. Y., 2003. Co-evolutionary dynamics within and between firms: From evolution to co-evolution. Journal of Management Studies, 40: 2111-2136 Waller, M. J., G. P. Huber and W. H. Glick, 1995. Functional background as a determinant of executives’ selective perception. Academy of Management Journal, 38 (4): 943974 Walsh, J. J., 1988. Top management turnover following mergers and acquisitions. Strategic Management Journal, 9: 173-184. Washington, M. and Ventresca, M. J., 2004. How organizations change: The role of institutional support mechanisms in the incorporation of higher education visibility strategies, 1874-1995. Organization Science, 15(1): 82-97 Weinzimmer, L. G. 1997. Top management team correlates of organizational growth in small business context: A comparative study. Journal of Small Business Management, 35: 1-9. Welbourne, T. M. and Andrews, A. O. 1996. Predicting the performance of initial public offerings: Should human resource management be in the equation? Academy of Management Journal, 39(4): 891-919. Werbel, J. and Demarie, S. M. 2001. Aligning strategic human resource management and person-environment fit: A strategic contingency perspective. Academy of Management Proceedings 2001 HR:G1 Wiersema, M. F. and Bantel, K. A. 1992. Top management team demography and corporate strategic choice. Academy of Management Journal, 35: 91-121. Wiklund, J. and Shepherd, D., 2005. Entrepreneurial orientation and small business performance: A configurational approach. Journal of Business Venturing, 20: 71-91. Williamson, I. O. and Cable, D. M., 2003. Organizational recruitment patterns, interfirm network ties, and interorganizational imitation. Academy of Management Journal, 46: 349-358. Williamson, I. O. 2000. Employer legitimacy and recruitment success in small businesses. Entrepreneurship Theory and Practice, 25 (1): 27-42 Williamson, I.O.; Cable D.M.; Aldrich, H.E., 2002. Smaller but not necessarily weaker: How small business can overcome barriers to recruitment. In Katz, J. A. and Welbourne, T. M. (Eds), Advances in entrepreneurship, firm emergence and growth, Vol 5: Managing People in Entrepreneurial Organizations, 83-106 Wolcott, H.F., 1990. Writing up qualitative research. Qualitative Research Methods Series, vol. 20. Sage Publications. 139 Wright, P. M., Dunford, B. B.and Snell, S. A. 2001. Human resources and the resource based view of the firm. Journal of Management, 27: 701-721 Wright P. M and McMahan, G. C. 1992. Theoretical perspectives for strategic human resource management. Journal of Management, 18: 295-320 Wright, P. M. and Snell, S. A., 1998. Toward a unifying framework for exploring fit and flexibility in strategic human resource management. Academy of Management Review, 23(4): 756-772 Yeung, A. K. O., Brockbank, J. W., and Ulrich, D. O., 1991. Organizational culture and human resource practices. Research in Organizational Change and Development, Vol. 5: 59-81 Yin, R. K. 1984. Case Study Research: Design and Methods. Sage Publications Youndt, M. A., Dean, J. W. and Lepak, D. P., 1996. Human resource management, manufacturing strategy, and firm performance. Academy of Management Journal, 39(4): 836-866. Zenger, T. R. and Lawrence, B. S., 1989. Organizational demography: The differential effects of age and tenure distributions on technical communications. Academy of Management Journal, 32: 353-376. Zimmerman, M. A. and Zeitz, G. J. 2002. Beyond Survival: Achieving new venture growth by building legitimacy. Academy of Management Review, 27(3):414-431. 140 Appendices Appendix I Questions and Data Sheets used during the Interview Company Name: Name and Designation of the Respondent: Date of Establishment: When did the firm enter the growth phase: (Major milestones); Ownership Current number of employees: Number of employees three years ago: Compound growth rate (sales) in the last years: Compound growth rate (net profit) in the last years: Section I. The entrepreneur 1. Education background 2. Work experience before becoming an entrepreneur Section II: Core values and culture I am interested in understanding the characteristics and the types of operating values which might have existed in your organization during the startup stage (within the first two years). Could you please fill out the Question for me before we proceed to more open ended discussions? Open-ended questions (if time permits): 1. When you founded the firm, did you have an organizational model or blueprint that you tried to implement? 2. Were there specific companies whose employment practices you wanted to emulate or avoid emulating? 3. Do you set out to create a particular kind of organizational culture? What are the core values of the firm? 4. Where did they (core values) come from? 5. Have the core values/culture of the firm change over time? Why and How? 6. In your view, have your firm’s HR philosophies and practices change over time? If so, how? 141 Section III Information on Core team members A. The current team Positions Year recruited Channel recruited and ties strength* Educational level Years of Functional industrial role in immeexperience diate prior employment** Entry position Reasons for selection/joining Channel recruited and ties Educational strength* level Years of Functional industrial role in immeexperience diate prior employment** Entry position Reasons for selection/joining B. The start-up team Positions 142 Year recruited *Ties strength to be coded based on duration of the relationship and intimacy of the relationship Duration of the relationship: How many years have you known each other before the recruitment? 1) for less than a year 2) for 1-2 years 3) for 2-3 years 4) for 3-5 years 5) for longer than years Intimacy of the relationship 1. Stranger 2. Distant 3. Somewhat close 4. Close 5. Especially close **Functional background categories: 1. Production/Operations 2. Research and development 3. Finance/Accounting 4. General Management 5. Marketing/Sales/Customer Service 6. Administration 7. Personnel and labor relations/HR 8. Others Section IV. Environmental conditions of the firm As the background information for the study, we would like to gain a general understanding of the operational environment your firm is in. Could you fill out Q2 for me? Before ending: We would like to collect some information specifically on the current HR policies and practices of your firm through a follow-up survey. Could you recommend the best person to fill out the survey for us? 143 Appendix II NUS Business School Department of Management and Organization Survey with Founder/CEO of the firm Q1. Please indicate the extent to which each statement described the core values and characteristics of your firm during your startup phase. 1= to very little extent; = to a very large extent. Core values of the firm during the startup phase 1. Participation, open discussion 2. Empowerment of employees to act 3. Assessing employee concerns and ideas 4. Human relations, teamwork, cohesion 5. Flexibility, decentralization 6. Expansion, growth, and development 7. Innovation and change 8. Creative problem solving processes 9. Control, centralization 10. Routinization, formalization and structure 11. Stability, continuity, order 12. Predictable performance outcomes 13. Task focus, accomplishment, goal achievement 14. Direction, objective setting, goal clarity 15. Efficiency, productivity, profitability 16. Outcome excellence, quality 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 7 7 7 7 7 7 7 7 Characteristics of the firm during the startup phase 1. A very personal place. It is like an extended family. People seem to share a lot of themselves. 2. A very dynamic and entrepreneurial place. People are willing to stick their necks out and take risks. 3. A very formal and structured place. People pay attention to procedures to get things done. 4. A very production oriented place. People are concerned with getting the job done. 5. Emphasizes loyalty and tradition. Commitment runs high. 6. Emphasizes commitment to innovation and development. There is an emphasis on being first with products and services 7. Emphasizes formal rules and policies. 8. Emphasizes on tasks and goal accomplishment. A production and achievement orientation is shared. 9. Emphasizes human resources. Morale is important. 10. Emphasizes growth through developing new ideas. Generating new products or services is important. 11. Emphasizes permanence and stability. Efficiency is important. 12. Emphasizes outcomes and achievement. Accomplishing goals is important. 144 Q2. To what extent does the statement represent your firm’s current operating environment (1 = to a very little extent; = to a very large extent). 1. Our firm rarely changes its marketing practices to keep up with the market and competitors. 2. 3. 4. 5. 6. The rate at which products/services are getting obsolete in the industry is very slow (eg. Basic metal like copper). The production/service technology is not subject to very much change and is well established (eg., in steel production) Our firm must change its marketing practices extremely frequently (eg. semiannually). The rate of obsolescence for our products/services is very high as in some fashion goods. The modes of production/service change often and in a major way (eg., advance electronic components). 145 Appendix III NUS Business School Department of Management and Organization Survey on HRM Philosophies and Practices Company Name: Name and Designation of the Respondent: Date joining the organization: I. Characteristics of the firm Please indicate to what extent the following statements describe the characteristics of your firm. (1= to very little extent; = to a very large extent. 1. A very personal place. It is like an extended family. People seem to share a lot of themselves. 2. A very dynamic and entrepreneurial place. People are willing to stick their necks out and take risks. 3. A very formal and structured place. People pay attention to procedures to get things done. 4. A very production oriented place. People are concerned with getting the job done. 5. Emphasizes loyalty and tradition. Commitment runs high. 6. Emphasizes commitment to innovation and development. There is an emphasis on being first with products and services 7. Emphasizes formal rules and policies. 8. Emphasizes on tasks and goal accomplishment. A production and achievement orientation is shared. 9. Emphasizes human resources. Morale is important. 10. Emphasizes growth through developing new ideas. Generating new products or services is important. 11. Emphasizes permanence and stability. Efficiency is important. 12. Emphasizes outcomes and achievement. Accomplishing goals is important. II. Human resource management philosophy and practices A. The following statements describe types of operating values which may exist in your organization. Please indicate the extent to which each statement describes your organization. 1= to very little extent; = to a very large extent. 1. 2. 3. 4. 5. 146 Participation, open discussion Empowerment of employees to act Assessing employee concerns and ideas Human relations, teamwork, cohesion Flexibility, decentralization 1 1 2 2 3 3 4 4 5 5 6 6 7 7 6. Expansion, growth, and development 7. Innovation and change 8. Creative problem solving processes 9. Control, centralization 10. Routinization, formalization and structure 11. Stability, continuity, order 12. Predictable performance outcomes 13. Task focus, accomplishment, goal achievement 14. Direction, objective setting, goal clarity 15. Efficiency, productivity, profitability 16. Outcome excellence, quality 1 1 1 1 1 2 2 2 2 2 3 3 3 3 3 4 4 4 4 4 5 5 5 5 5 6 6 6 6 6 7 7 7 7 7 B. Please indicate to what extent the following practices are being implemented in your organization (1= to very little extent; = to a very large extent) Employees perform jobs that 1. allow them to routinely make changes in the way they perform their jobs 2. empower them to make decisions 3. include a wide variety of tasks 4. involve job rotation 5. are standardized throughout industry 6. are designed around their individual skills 7. are extremely simple 8. are well-defined 9. require them to participate in cross-functional teams and networks The Recruitment/selection process for employees 10. emphasizes promotion from within 11. focuses on value fit 12. places priority on their potential to learn 13. assesses their specific skills 14. uses open recruiting sources (agencies, universities, etc.) 15. places priority on their willingness in subjecting to strict discipline and follow instructions 16. assesses their industry knowledge and experience 17. emphasizes their ability to collaborate and work in teams Our training activities for employees 18. are comprehensive 19. are continuous 20. require extensive investment of time/money 21. strive to develop firm-specific skills/knowledge 22. emphasize improving current job performance 23. focus on compliance with rules, regulations, and procedures 24. focus on team building and interpersonal relations Our performance appraisals 25. emphasize on employee learning 26. include developmental feedback 27. seek to increase short-term productivity 28. are based on objective, quantifiable results 29. assess quality of output 30. assess quantity of output 31. measures productivity and efficiency 32. assess compliance with preset behaviors, procedures, and standards 33. are based on team performance 1=not at all ; 7=to a very large extent 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 7 1 1 2 2 3 3 4 4 5 5 6 6 7 7 7 1 1 2 2 3 3 4 4 5 5 6 6 7 7 7 1 1 1 2 2 2 3 3 3 4 4 4 5 5 5 6 6 6 7 7 7 7 147 34. focus on their ability to work with others Our compensation and rewards 35. are designed to ensure equity with peers 36. include an extensive benefits package 37. include employee stock ownership programs 38. are based on market wage (going rate) 39. have an individual incentive/bonus component 40. are based on straight salary 41. focus on short term performance 42. value seniority 43. have a group-based incentive component (gain-sharing, etc.) 44. place a premium on their industry experience 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 7 7 III. Please indicate to what extent you feel the followings exert influence on the current HR philosophies and practices of your firm (1= to very little extent; = to a very large extent) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. Government regulations, legislations, and directories Governmental incentives and rewards Advocates from professional associations our firm (or core team members) belongs to Suggestions/requirements from the institutional investor(s) Recommendation by HR consultants Practices of leading firms in our industry Practices adopted by most firms in our industry Practices of our major customers Practices of our suppliers/competitors Practices of a firm(s) we know well Pressures from trade union Practices of the firm(s) the entrepreneur or other core team members used to work for Learning from business class(es) or business gurus Knowledge of the HR personnel(s) within our firm Cultural norms in the society Thank you!! 148 7 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 7 1 1 2 2 3 3 4 4 5 5 6 6 7 7 [...]... covered in this thesis Team Formation Chapter 2 Different ties for different needs: The use of networks in human resource acquisition in growing new ventures Team Characteristics Chapter 3 Ownership imprinting on new venture team formation and composition Team Effects Chapter 4 Change and stability of employment models in growing new ventures: A simultaneous examination of core team imprinting, structural... the presence of institutional ownership at founding Chapter 4, “Change and stability of employment models in growing new ventures: A simultaneous examination of core team imprinting, structural inertia and adaptive pressures”, proposes and tests a theoretical model which traces the influence of new venture core teams on the change and stability of employment models during the startup and growth phases... period of interactions, which are much better transmitted through strong and direct ties than via weak ties To further examine how different organizational context can influence new venture team compositions, Chapter 3, “Ownership imprinting on new venture core teams formation and composition”, consists of a study I conducted to examine the effects of founding owner- 11 ship structure on core team recruitment... of employment models in growing new ventures is therefore an important research agenda My research examining how core team characteristics influence the design, change and stability of employment models in growing new ventures represents an initial attempt to implement such a research agenda Scholars conducting research in human resource management in entrepreneurial firms have pointed out that “at a... business visions Strong ties from personal social networks Strong ties from business networks 2.3 Multiple Considerations of Fit in Core Team Recruitment 2.3.1 Organizational Constraints and Core Team Recruitment Defined as young, small, and growing (Baker and Aldrich, 2000; Markman and Baron, 2002), entrepreneurial firms in general are saddled with the “liability of newness and smallness” (Aldrich and Auster,... structural inertia and adaptive pressures In chapter 2, “Different ties for different needs: The use of networks in human resource acquisition in growing new ventures , I argue and find support for the proposition that due to multiple considerations of organizational constraints, strategic needs, and value fit, entrepreneurs may rely mainly on informal recruitment channels such as networks in acquiring their... adaptation from the external environment Changes in the competitive environment, as well as isomor- 12 phic pressures from the institutional environment, can cause changes in the employment model deviating from the prediction of structural imprinting Hence change and stability of employment models in growing new ventures should be understood amidst an intricate balance between imprinting effects and adaptive... organizational incentives encouraging creativity and risk taking by organizational members The studies in 14 my thesis contribute to the important but relatively under-researched area of human resource management in growing entrepreneurial firms I hope my research effort, in capturing and explaining some specific aspects of human resource management in growing new ventures using multiple theoretical perspectives,... (Werbel and Demarie, 2001) Furthermore, new ventures face unique challenges in human resource management, due to organizational constraints associated with liabilities of newness and smallness (Cardon and Stevens, 2004; Williamson, 2000; Williamson et al., 2002) Hence, over and above the consideration of strategic fit and P-O fit, new ventures may also need to take into account their organizational constraints... and Brabander, 2004; Carpenter, Geletkanycz and Sanders, 2004), in the specific context of growing new ventures Extant research on top management teams (TMT) focuses mainly on large, established firms, and in examining the effects of TMT characteristics on firm strategies and performance (see recent review by Carpenter, et al., 2004) Given the importance of team characteristics to organizational outcomes, . HUMAN RESOURCE MANAGEMENT IN GROWING NEW VENTURES: CORE TEAM FORMATION, CORE TEAM CHARACTERISTICS AND CORE TEAM EFFECTS ON EMPLOYMENT MODELS . an initial step in understanding human resource manage- ment in new ventures can start with an examination of how new ventures put together their core teams. In this thesis I focus on examining. OWNERSHIP IMPRINTING ON NEW VENTURE TEAM FORMATION AND COMPOSITION 43 3.1 INTRODUCTION 43 3.2 CURRENT LITERATURE ON NEW VENTURE TEAM FORMATION AND COMPOSITION 46 3.3 OWNERSHIP STRUCTURE AND NEW VENTURE