Acquisition-based HR practices and the firm’s innovative performance in the high-tech and low-tech industry: the mediating role of the pool of R&D personnel
Master thesis, MSc Human Resource Management University of Groningen,Faculty of Economics and Business
January 29, 2017
M.P.B. WOLFS Student number: 3069362
Enterstraat 136 7461 CL Rijssen Tel: + 31 (0)6 20 47 37 31 E-mail: m.p.b.wolfs@student.rug.nl
1st supervisor:
Y.Yuan
2nd supervisor:
T. de Vries
ABSTRACT
This research investigated the relationships between seven acquisition-based HR practices, the pool of R&D personnel, and the firm’s innovative performance. I used longitudinal survey, which was recorded over 8 years. Literature in the field of strategic human resource
management has shown that there is a link between strategic HR practices and the firm’s innovative performance, but this is currently still limited to motivation-based practices. This study tries to find an answer to the question of how a bigger pool of R&D personnel mediates the positive relationship between the acquisition-based HR practices and the firm’s innovative performance. However, this study did not find evidence that a bigger pool of R&D personnel mediates the positive relationship between the acquisition-based HR practices and the firm’s innovative performance. Moreover, the pool of R&D personnel is only a predictor for innovation performance in the high-tech industry. Theoretical and practical implications of the results are discussed.
Keywords: strategic HR practices, the number of R&D people, firm’s innovative performance, acquisition-based HR practices
INTRODUCTION
The field of strategic human resource management acknowledges that innovation is a critical part for firms to create value and to sustain competitive advantages in the turbulent and complex business environment (Chen & Huang, 2009). Innovative firms can respond to the rapidly changing environment and will be more successful in developing new capabilities that allow them to achieve better performance (Lloréns Montes, Ruiz Moreno, & Miguel Molina Fernández, 2004). R&D employees are considered as critical elements that influence the innovation performance of a firm (Love & Mansury, 2007). Hence, in order to obtain innovation success, firms need to invest in R&D, and particularly in human capital that R&D employees are part of (Shefer & Frenkel, 2005).
As strategic HR practices carry out the human capital investments of a firm (Jackson, Schuler, & Jiang, 2014), previous studies have already paid attention to the link between HR practices and organizational outcomes such as financial performance, productivity and flexibility(Jackson et al., 2014). However, the link between HR practices and innovation performance remains underexplored. There have been some preliminary studies that
investigated this link, but the research on this direct link is currently still limited (Jackson et al., 2014). The current literature has only examined the motivation mechanisms and
contingencies that link strategic HR practices to innovation performance and creativity (Jackson et al., 2014; Jackson, Schuler, & Rivero, 1989). Through the work of Chen and Huang (2009) we know that strategic HR practices relate positively to knowledge management capacity, which in turn is positively related to innovation performance.
Strategic HR practices are beneficial to a company’s innovation performance since they facilitate knowledge sharing, acquisition and application. This implies that firms need this knowledge capacity and processes in order to achieve innovative performance. Besides, there is also a motivational understanding that firms can use strategic HR practices, such as
staffing, training, participation, performance appraisal and compensation, as techniques to motivate employees’ commitment and getting employees involved in creativity and
innovation (Chen & Huang, 2009; Laursen & Foss, 2003).
Despite the wide-used logic that strategic HR practices stimulate corporate innovation through improving employees knowledge capacity and motivation, an intuitive mechanism that lies at the core of strategic HRM remains elusive. Given that strategic HR practices strongly influence the attraction of employees, it is surprising how the recruitment of innovative employees plays a part in this path. An increase of the number R&D employees should have a positive effect on innovation performance for a firm. Hence, proper HR
practices may have a positive effect on the number of R&D people, which then increases firm innovation. Therefore, the link between HR investments and firm innovative performance depends on the number of dedicated R&D employees in firms, but only a few studies address this issue.
The aim of this paper is to investigate whether a bigger pool of R&D personnel mediates the positive relationship between strategic HR practices and the firm’s innovative performance. As proper strategic HR practices increase the pool of R&D personnel, this bigger pool will possess more knowledge and creativity to increase the firm’s innovative performance. The strategic HR practices that I am going to use in this paper are: the use of bonus plans, alternative work schedules, paid sick leave, paid vacation, stock options, tuition reimbursement and retirement plans. Because previous studies also focused on similar
compensation, participation and training HR practices (Chang, Gong, Way, & Jia, 2013; Chen
& Huang, 2009). In this paper I will use a longitudinal panel survey of new firms to examine this effect and all data will be derived from the public dataset of this survey. Each of them will be measured independently in this paper, as each of them should have benefits for the
R&D employees, which will help firms to increase and prevent a decrease in the number of R&D employees.
Overall this paper will contribute to the understanding how strategic HR practices and innovation performance are related. I will show how acquiring HR practices influence the pool of R&D personnel, and show how the pool is a predictor for innovation performance.
Through this, I will contribute to the literature on HR and innovation (Jackson et al., 2014).
Specifically for the innovation fields, it will show that each strategic HR practice in an unique way that will increase the firm’s innovation performance, where some HR practices are maybe more positively related to this outcome. This paper also will contribute to the literature of human capital in organizations (Marvel, Davis, & Sproul, 2014; Ployhart, Nyberg, Reilly,
& Maltarich, 2014), because it will show that some strategic HR practices will attract more R&D capital than others for the firms. I will also contribute to the HR field by showing a new mediator which positively link acquiring strategic HR practices to innovation.
THEORECTICAL FRAMEWORK Strategic HR practices and innovation performance
Organisational innovation can be defined as the development of new products,
services or administrative systems (Damanpour, 1991). Therefore organisational innovation is an important source of a competitive advantage (Damanpour, 1991). Innovation is considered important to firms as a factor for a firm’s survival, in which companies that fail to innovate will lose ground to their competitors (Boone, 2000). Hereby innovation can help firms to explore what opportunities exist now or will emerge in the future, where they later can exploit these opportunities to increase their profitability (Damanpour, 1991). Furthermore firms which are more successful do not only respond to customer and organisation needs, but often anticipate future trends and develop an idea, product or service which can meet these needs
rapidly and effectively (Boone, 2000). As we can see, innovation will help firms to stay ahead of their competition in markets, technologies and/or trends shifts (Boone, 2000;
Damanpour, 1991).
Strategic HR practices refer to the means in which employees are attracted, motivated and retained for the benefit of both the employees as individuals and the company(Jackson et al., 2014). Each strategic HR practice that I use in this paper can have a positive influence on innovation performance according to literature, which I will explain below.
The first one is a bonus plan, which can be defined as a practice or policy of paying out bonuses to their employees(Horwitz, Heng, & Quazi, 2003). A bonus plan includes details on eligibility, this means the conditions under which the bonuses are paid and how the
amounts are determined. Bonus plans are about giving employees financial interests, for different kinds of reasons. A bonus plan can hereby increase commitment and motivation of employees (Horwitz et al., 2003). Highly committed and motivated employees can contribute to the innovation performance of the firm, since they will generate more creativity for the firm (Chen & Huang, 2009; Laursen & Foss, 2003). Also, the use of a bonus plan increases the pool of talented workers, as these workers look for firms which give them higher incentives.
A larger pool of talented workers can contribute to innovation performance (Chen & Huang, 2009).
The next strategic HR practice is the use of stock options and can be defined as giving common stock of the company to their (potential) employees where it is becoming part of their remuneration package (Oyer & Schaefer, 2005). Stock ownership creates an incentive for employees to be more involved in the firm’s operations, because employees get more monetary incentive if the firm grows (Horwitz et al., 2003; Oyer & Schaefer, 2005). More employee involvement leads to a higher innovation performance (Chen & Huang, 2009).
Employees also want to get the most out of this practice, as they are committed to increase the
firm’s outcomes, as it also serves their interest. As a result of this, the commitment of the employees leads to more innovation for a firm (Chen & Huang, 2009; Laursen & Foss, 2003).
Next, the use of alternative working schedules can be defined as the provision of work-life programmes such as flexible working arrangements and flexible hours towards employees (Schlechter, Hung, & Bussin, 2014). The use of alternative working schedules gives employees non-monetary benefits for achieving more work-life balance (Schlechter et al., 2014). These non-monetary benefits cause that the workers are more satisfied with their job, which then elicits more commitment and motivation of the workers (Tangthong,
Trimetsoontorn, & Rojniruntikul, 2014). Where we know that committed and motivated employees are more creative and generate more ideas, which increases innovation
performance (Chen & Huang, 2009). Through this practice, employees are more able to work more hours, as they do not always have to be at the office but also could work from home to increase their productivity. This increase of workers productivity hereby causes more innovative performance, as workers would generate more ideas for example(Chang et al., 2013).
The use of paid vacation can be defined as paid time off that is granted by the
employers towards their employees (Klonoski, 2016). A firm can hereby differ in a number of days in which an employee gets their pay during his absence. The use of paid vacation has financial benefits for employees and can elicit more commitment from the workers as they are more motivated (Klonoski, 2016; Schlechter et al., 2014). A practice which focuses on
increasing commitment of the workers also would cause that these are more involved in creativity and innovation, so this increases innovative performance(Chen & Huang, 2009;
Laursen & Foss, 2003).
The next strategic HR practice is the use of paid sick leave, which can be defined as an employee who is getting paid during his time of illness until he fully recovers (Klonoski,
2016). This practice causes financial security for employees over this period, because an employee has to worry less about having enough money to pay his bills (Klonoski, 2016). The use of paid sick leave hereby has financial benefits for employees which are mainly based on the compensation packages of the firm (Schlechter et al., 2014). This financial security causes that workers feel more valued by their employers, as they see that the firm cares about their psychical health (Klonoski, 2016). This increases the motivation and commitment of workers, which then has a positive influence on the innovation performance(Chen & Huang, 2009; Laursen & Foss, 2003).
Further, tuition reimbursement can be defined as an employer who is willing to pay for the education of an employee (Horwitz et al., 2003). Where the employee will possess more knowledge afterwards, which can be ideal for the company but also the employee himself.
More knowledge also means more innovative performance for the firm, as employees are more capable of responding to trends or can address a problem in new ways for example (Boone, 2000). Tuition reimbursement also increases the motivation of the workers, because tuition reimbursement provides room for self-improvement and more challenging job designs in the future (Chen & Huang, 2009; Horwitz et al., 2003). Finally, as mentioned before, motivated employees increases innovative performance (Chen & Huang, 2009).
Lastly firms can use a retirement plan as a strategic HR practice to increase innovation performance, this strategic HR practice can be defined as an employer which makes
contributions into a pool of funds set aside for a worker's future benefit (D'Annunzio-Green, Maxwell, Watson, Christensen Hughes, & Rog, 2008; Perrin, 2005). Where this practice brings the benefits of increasing the income of an employee after his retirement age and also can help employees to retire a few years earlier than the obligatory retirement age. This practice causes financial security for future situations, where healthcare expenses may be higher. As this practice increases the monetary incentive of employees, which this leads to
more motivation, this eventually increases innovation performance (Chen & Huang, 2009;
Laursen & Foss, 2003).
According to arguments made in the previous paragraphs, it seems that these seven strategic HR practices have a positive effect on firm’s innovative performance. This will lead to the following hypothesis:
Hypothesis 1: strategic HR practices positively influence the firm’s innovative performance.
The growth of R&D personnel and Innovation performance
To succeed in today’s global business environment, firms must possess more knowledge, skills and capabilities than their competitors (Youndt, Snell, Dean, & Lepak, 1996). A way to do that is to increase the number of knowledge workers, which R&D employees are a part of. The number of R&D people can be defined as the total number of employees who are working at R&D department at the company (Love & Mansury, 2007).
Therefore it makes sense that the number of R&D should increase a firm’s innovative performance, but in what way?
In order to achieve innovation, firms must manage, maintain and create knowledge (Andries & Czarnitzki, 2014). Much of the knowledge required for innovation resides in the employees of the firm because they are the primary agents of knowledge creation and the storage of tacit knowledge (Andries & Czarnitzki, 2014; Grant, 1997). The knowledge and skills of the employees are often rare and socially complex, and therefore difficult to imitate.
Thus human capital can be seen as a critical resource in developing innovations, where individual knowledge is important for generating ideas which in turn can become relevant when used in the innovation process (Andries & Czarnitzki, 2014). Human capital possesses all different kinds of knowledge which are good for innovation, like for example industry- specific where employees possess a lot of information about the products and services in this
industry which then can evolve in ideas how these products and services can be improved (Dakhli & De Clercq, 2004). Or employees know the needs of customers and develop a new product or service which can fulfil these needs (Dakhli & De Clercq, 2004). Moreover, a higher level of the knowledge of human capital would increase the number of new ideas which drives innovation. Therefore, the knowledge capacity of human capital seems to affect innovation performance of a firm (Chen & Huang, 2009). Hereby the knowledge of the human capital should be efficiently managed in their processes of acquisition, sharing, and application by a firm as this enhances innovation performance (Chen & Huang, 2009).
R&D personnel is seen as important human and social capital for a firm. Losing talented R&D employees implies a decrease in human and social capital and leads to lower innovation performance for firms(Ernst & Vitt, 2000). Talented R&D employees can possess specific knowledge which is not easily transferrable or replicated, since it is highly complex or specialized and can thus not be easily shared amongst others (Ernst & Vitt, 2000).
Therefore this can turn out in a loss of creativity and innovative ideas for the firm, as these R&D employees are seen as the key to the firm’s innovative performance and organizational success(Horwitz et al., 2003; Stone & Deadrick, 2015). Firms, therefore, should retain talented workers as much as possible in keeping them satisfied, also because it is easier to retain key employees than to attract new qualified applicants to replace (Stone & Deadrick, 2015). Yet also the acquisition of new R&D employees is also important, as this leads to more knowledge in a firm (Knudsen & Schleimer, 2015). More knowledge will cause more innovative ideas and creativity which is good for the innovation performance. Overall, a higher number of R&D employees increases the scope and scale of a firm’s product-specific knowledge, leading to the creation of more novel products and ideas that increase
organizational innovation and success (Knudsen & Schleimer, 2015).
According to the above reasoning, it seems that R&D employees, as human capital, are an important contributor towards increasing a firm’s innovative actions. A higher number of R&D employees therefore should increase the innovation performance. This will lead to the following hypothesis:
Hypothesis 2: The growth in the number of R&D employees of a firm will increase a firm’s innovative performance.
The mediation effect of R&D people growth on the relationship between strategic HR practices and innovation performance
In the context of the relationship between strategic HR practices and a firm’s innovative performance, previous studies already found a positive relationship in which particular strategic HR practices may be uniquely supportive towards employee behaviour which is required for innovation (Jackson et al., 2014; Jackson et al., 1989). Also, previous studies investigated this link between strategic HR practices and firm’s innovative
performance, where knowledge management capacity as mediator caused a positive effect between these two (Chen & Huang, 2009). The contribution of having a large number of R&D employees lies in the knowledge pool R&D employees, in which knowledge is an important source for achieving innovation.
Investments in human capital through acquiring HR practices seems to have a more positive effect on a firm’s innovative performance than motivating HR practices and therefore could be more important. Committed R&D employees are considered as critical elements that influence the innovation performance of a firm (Ernst & Vitt, 2000). To get these R&D
employees to be more committed, firms need strategic HR practices that are primary means in which they can shape and influence the behaviour, skills and attitudes of their employees to perform their job and achieve organizational goals (Chen & Huang, 2009). Each single
practice hereby should increase the number of R&D people, where afterwards the number of R&D people should increase a firm’s innovative performance. For each single practice, this effect will be explained here below.
The use of bonus plans is a popular strategic HR practice to acquire new R&D
employees for a firm, where potential R&D employees look for financial rewards in their job hunt (Wallace, Lings, Cameron, & Sheldon, 2014). R&D employees are more difficult to find than other employees, because they are more highly educated and possess more skills and abilities (Wallace et al., 2014). Therefore, firms which seek to acquire more potential R&D employees should use bonus plans in the form of giving them an initial sign bonus for
example (Horwitz et al., 2003). Another option is to give certain bonuses for achievements to the R&D employees to help firms acquire these employees (Horwitz et al., 2003). Firms, therefore, give attention to using bonus plans for increasing their number of R&D employees.
As this number has increased, a firm would possess more knowledge, capabilities, and skills in their R&D capital (Andries & Czarnitzki, 2014). This increase in R&D capital will be more creative and can generate more new ideas which increase innovative performance. This leads to the following hypothesis:
Hypothesis 3a: The increase in the number of R&D people mediates the positive relationship between the use of bonus plans and a firm’s innovative performance
Next, the use of alternative work schedules will help to increase the number of R&D employees, because they value a work-life balance more than other employees. R&D employees do not want to be seen as only workers, but as humans in the eyes of firms (Schlechter et al., 2014). They do not want to be only fixated on their work but want to be challenged, in their working life and in their private life, as this makes them a more complete person. The use of alternative work schedules gives employees more freedom to plan their
own work times and therefore are less restricted by a company (Tangthong et al., 2014). All of these aspects are considered by potential R&D employees in their job search (Schlechter et al., 2014). Where these aspects increase the intrinsic work quality of the job. A higher work quality helps a firm to make a vacancy more attractive and therefore these firms can more easily acquire R&D employees (Schlechter et al., 2014). Through the higher number of R&D people a firm will possess more talented and highly educated workers, where the firm possess more knowledge to increase innovative performance (Knudsen & Schleimer, 2015). This leads to the following hypothesis:
Hypothesis 3b: The increase in the number of R&D people mediates the positive relationship between the use of alternative work schedules and a firm’s innovative performance.
The use of paid sick leave, increases the monetary incentive for the R&D employees and also provides more security. R&D employees look for jobs with relatively high monetary incentive (Horwitz et al., 2003). This practice also increases the intrinsic quality of the job, as employees will notice that firms care about their mental and psychical health (Klonoski, 2016). R&D employees also look for a high intrinsic quality job, in which the corporate image is important to acquire these new employees (Klonoski, 2016). As we can see, this practice can be a good practice to increase the number of R&D people. Because of this result, the firm would acquire new committed R&D employees. These R&D employees have new knowledge and ideas to increase a firm’s innovative performance(Knudsen & Schleimer, 2015). This leads to following hypothesis:
Hypothesis 3c: The increase in the number of R&D people mediates the positive relationship between the use of paid sick leave and a firm’s innovative performance.
Next is the use of paid vacation as a strategic HR practice, which also can help to increase the number of R&D employees to a firm. The use of paid vacation increases the
rewards and salary of an employee. Factors like financial benefits and commitment of this practice have a positive influence on acquiring R&D employees of a firm (Horwitz et al., 2003). Also the use of paid vacation days gives employees time off from their work and this leads to more of a work-life balance, which potential R&D employees consider as an
important factor to sign for a firm (Schlechter et al., 2014). Thus this option helps to acquire more R&D employees for a firm. Because of this increase, a firm would possess more committed R&D employees, in which the knowledge capacity of the firm increases. Where more knowledge capacity causes that the firm’s innovative performance increases. This leads to the following hypothesis:
Hypothesis 3d: The increase in the number of R&D people mediates the positive relationship between the use of paid vacation and a firm’s innovative performance.
The use of stock options, can be seen as a popular practice to acquire employees to a firm. Potential and optimistic R&D employees look for higher compensation features that will serve their interest. The use of stock options also causes potential R&D employees to become more directly involved in the firm’s operations (Horwitz et al., 2003; Matejka, Merchant, &
Van der Stede, 2009; Oyer & Schaefer, 2005). The use of stock options as a strategic HR practice is the most expensive one to use for firms, as they sell their future gains to new potential employees (Matejka et al., 2009), and therefore very interesting for potential R&D employees. Overall, the use of stock options is a good practice to increase the number of R&D employees. This increase in R&D employees will cause that a firm possesses more knowledge, capabilities and skills(Knudsen & Schleimer, 2015). These new R&D employees are more involved in increasing the firm’s innovative performance (Chen & Huang, 2009;
Laursen & Foss, 2003). This leads to the following hypothesis:
Hypothesis 3e: The increase in the number of R&D people mediates the positive relationship between the use of stock options and a firm’s innovative performance.
Also, tuition reimbursement should have a positive influence on the number of R&D employees. It is known that most R&D employees look for challenging jobs, in which they can improve themselves (Horwitz et al., 2003). Tuition reimbursement is one of the career policies, which can achieve these desires of potential R&D employees (Klonoski, 2016).
Tuition reimbursement is a practice that is favoured by potential R&D employees, as the employer (fully or partially) pays for their education which decreases the cost for these employees (Perrin, 2005). Also, firms with favourable career policies will attract more and better employees than those who do not have these policies (Horwitz et al., 2003). R&D employees look for a firm with a good employer image, where they know that they have the opportunity to grow or where they know that the firm is willing to invest in them (Horwitz et al., 2003; Perrin, 2005). Therefore tuition reimbursement can be of value for attracting new R&D employees. These new R&D employees also will be more motivated to increase innovation performance because of this practice, and these new R&D employees possess more knowledge as of this practice which increases innovation performance. This leads to the following hypothesis:
Hypothesis 3f: The increase in the number of R&D people mediates the positive relationship between the use of tuition reimbursement and a firm’s innovative performance.
The last strategic HR practice retirement plans, also has a positive influence on the acquisition of new R&D employees, as this practice offers a high monetary incentive towards these employees (D'Annunzio-Green et al., 2008; Perrin, 2005). It provides financial security for future situations like, for example, expensive healthcare cost. This is also an aspect which
is considered by R&D employees in their job search, as it also increases the image of a company of being a good employer (Perrin, 2005). So this practice causes that firms hereby invest more in their employees, because they want to build a long-term relationship with the employees. This long-term relationship is also valued by potential R&D employees as it provides more security (D'Annunzio-Green et al., 2008). So overall we can see that the use of a retirement plan increases the number of R&D people. This increase of R&D employees causes a larger pool of talented workers in the company, which then increases innovation performance. This leads to the following hypothesis:
Hypothesis 3g: The increase in the number of R&D people mediates the positive relationship between the use of retirement plan and a firm’s innovative performance.
Figure 1: conceptual model
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METHOD Sample
In this paper, I used the Kaufmann Firm Survey (KFS) publicly available database for the period 2004 to 2011. This survey started with a cohort of 4928 companies which started
Strategic human resource practices:
-the use of bonus plans -the use of alternative work schedules
-the use of stock options -the use of paid vacation -the use of paid sick leave -the use of tuition reimbursement -the use of retirement plan
The Number of R&D People
Firm's innovative performance
their operations in 2004. The range of these start-up companies is only limited to the United States, and all the types of industries are coded according to the North American industry classification system (NAICS). This cohort was tracked annually and asked an extensive set of detailed questions that cover a range of issues such as the background of the owners, firm strategies and innovations, the sources and amounts of financing, and outcomes such as profits, sales, and survival. The results of this survey were reported each year up to 2011, to help users to make valid inferences in their work. A reason why I use this dataset is because it includes sufficient information on each single measure of the strategic HR practices and other variables that I use in this paper. In my sample, I excluded firms which are not focused on increasing their innovative performance. Therefore I only selected firms which are based in five of the North American Industry Classification System codes(ICs): information (i.e., software, and telecom; IC= 51), scientific, professional and technical services (IC=54), and manufacturing (IC=31, 32 and 33). According to the NAICS, the sample will be split up in two, where IC 31,32, and 33 is one sample and IC 51 and 54 the other. Further, I will
exclude firms that did not report sufficient information on the studied variables, where the two final samples thus include sufficient information to examine the hypothesized effects. The sample hereby will be observed at time 0, time 4, and time 7, in which the final two samples would consist of 169 and 251 cases.
Measures
Firm’s innovative performance. To capture a firm’s innovation performance and
intellectual property creation, I will count the number of patents that the firms have produced.
Patents are a valid measure for firm’s innovative performance, as it measures the
technological progress of the company (Jung, Wu, & Chow, 2008). In the sample, each year firms reported the number of patents they licensed and owned for completing the survey. This
variable will be measured at time 7, since it takes time for R&D people to develop new patents, before these patents will be applicable for the company.
Strategic HR practices. The KFS includes seven different strategic HR practices, in
which these strategic HR practices have been cited by past literature that helps companies to acquire employees (Horwitz et al., 2003; Jackson et al., 2014; Klonoski, 2016; Schlechter et al., 2014), and also have a reasonable frequent use by companies in the KFS sample (Chen &
Huang, 2009). The practices that I use in this paper are: the use of bonus plans, alternative work schedules, stock options, paid vacation, paid sick leave, tuition reimbursement and retirement plans (Jackson et al., 2014). Owners were asked if they annually offer these strategic HR practices to their full-time employees. These variables have a binary nature, where the answers are coded in 0=no and 1=yes. Each of them will be measured
independently at time 0 as it must give an explanation towards the measure the number of R&D people, why this number increases for example.
The number of R&D people. In the sample, companies reported the number of
employees which are responsible for the research and development department. The variable was measured at time 4, to see if there is an increase or decrease due to the implementation of strategic HR practices at time 0. This measure only includes full- and part-time employees in the Kaufmann Survey, contract workers are left out as they are not part of the core workforce of a company, in which they stay for a relatively short time period at the companies a nd this could cause errors for the output.
Industrial Sectors (low-tech vs. high-tech). The sample that I am going to use will be
split up into two, according to the NAICS. Hereby NAICS 31, 32, and 33 will be formed into low-tech industry sector and NAICS 51 and 54 into the high-tech industry sector. The reason why I make this variable is, because NAICS 51 and 54 is more based on the knowledge economy, where the development of innovative knowledge of human capital is considered as
more important compared to firms in low-tech industry sectors (Anand, Gardner, & Morris, 2007). This variable is being made to filter out potential industry effects, as the mediation effect in the high-tech industry may differ from in the low-tech industry.
Controls. In my model I will control for the effects of gender (operationalized as the
percentage of individuals of owners who are female and measured at Time 0) and race (operationalized as the percentage of individuals as owners who are not white, measured at Time 0), because previous studies on entrepreneurship have shown that these variables are related to firm outcomes, like for example profitability or quality of products and services (Cooper, Gimeno-Gascon, & Woo, 1994; Klapper & Parker, 2011). Furthermore, I will control both my mediator and outcome variable at time 0, which are the number of R&D people and firm’s innovative performance, to check if the results happen over time and not due to the influence of aggregated trends which have nothing to do with the theoretical model.
Analysis
For my first and second hypotheses, I will analyse my data with linear regression.
This method will determine if the variables mentioned in the hypotheses are significant predictors of firm’s innovative performance and will explain the variance in the data. For the other hypotheses, which focus on mediation, I will analyse my data using the regression analysis procedure developed by Hayes (2013), which is Process. The reason why I use this method for the other hypotheses is, that Process wins out on its convenience and it suits more complex models. Process analyses on confidence intervals and effect sizes, and also give a total effect model. Process also easily controls if the effects are due to my actual conceptual model or effects are due to the effects of control variables like for example gender. Hereby the confidence interval that I will use for my analysis is 95%, to correct the bias in the results.
Also, the confidence intervals will give the distribution of the different variables if they
positive or negative. I will use model 4 from Process for mediation, in which the standard bootstrapping samples default of 5000 will be used in this analyses to calculate the indirect effects of mediation.
RESULTS Correlations
Table 1 shows how the different variables are correlated, in which it also give the means and standard deviation of each variable.
Table 1 Mean, Standard Deviations and Correlations See appendix.
Regressions Results
Hypothesis 1 stated a positive relationship between all the strategic HR practices and the firm’s innovative performance. According to table 2, we found a positive non-significant for the low-tech industry, in which bonus plan had B= .07, t=0.50, p=.62, 95% CI= -.20, .33., flex time had B=.09, t=0.87, p=.39, 95% CI=-.11, .28, paid sick leave had B=.03, t=0.23, p=.82, 95% CI=-.19, .24, paid vacation had B=.07, t=0.64, p=.52, 95% CI=-.14, .27, stock ownership had B=.30, t=1.78, p=.71, 95% CI=-.03, .62, tuition reimbursement had B=.15, t=0.83, p=.41, 95% CI=-.20, .50, and retirement plan had B=.25, t=1.16, p=.25, 95% CI= -.18, .68. For the high-tech industry the effects were more different for each other, as it showed a non-negative significant effect for bonus plan B=-.04, t=-0.63, p=.53, 95% CI= -.16, .08, and for tuition Reimbursement B=-.08, t=-0.95, p=.25, 95% CI= -.26, .09. A positive non-
significant effect for flex time B=.00, t=.02, p=.99, 95% CI=-.09, .10, paid sick leave B=.24, t=1.16, p=.25, 95% CI= -.04, .16, paid vacation had B=.06, t=1.23, p=.22, 95% CI=-.04, .16, and retirement plan had B=.01, t=.11, p=.92, 95% CI=-.17, .19. And a positive significant effect for stock ownership B=.17, t=1.97, p=.05, 95% CI=.00, .33 Therefore in this sample,
we only have evidence to support this hypothesis 1 for stock ownership in the high-tech industry, as all the other strategic HR practices showed non-significant results.
Table 2 Main effect Strategic HR practices on Firm’s Innovative Performance
low-tech high-tech
Variables B T p R² 95% CI
B t P R² 95% CI
Lower Upper Lower Upper
Bonus Plan 0.07 0.50 0.62 0.10 -0.20 0.33 -0.04 -0.63 0.53 0.39 -0.16 0.08 Flex Time 0.09 0.87 0.39 0.10 -0.11 0.28 0.00 0.02 0.99 0.39 -0.09 0.10 Paid Sick Leave 0.03 0.23 0.82 0.10 -0.19 0.24 0.06 1.16 0.25 0.38 -0.04 0.16 Paid Vacation 0.07 0.64 0.52 0.10 -0.14 0.27 0.06 1.23 0.22 0.39 -0.04 0.16 Stock Ownership 0.30 1.78 0.08 0.11 -0.03 0.62 0.17 1.97* 0.05* 0.39 0.00 0.33 Tuition Reimbursement 0.15 0.83 0.41 0.10 -0.20 0.50 -0.08 -0.95 0.34 0.39 -0.26 0.09 Retirement Plan 0.25 1.16 0.25 0.10 -0.18 0.68 0.01 0.07 0.94 0.39 -0.13 0.14
Dependent variable: Firm's innovative performance 7
N =169 and 251
† p < .1, * p < .05, ** p < .01, *** p < .001.
Note: for stock ownership high tech N=250
Hypothesis 2 was stated as a positive relationship between the number of R&D people and firm’s innovative performance. According to table 3, I found a positive significant effect for the high-tech industry B=.08 , R²=.43. I also found a positive non-significant effect for the low-tech industry B=.08, R²=.11. Therefore we will accept hypothesis 2 only for the high- tech industry, where the low-tech industry has no evidence to support this hypothesis in this sample. So it seems that only for the high innovative industry sectors, the number of R&D people has a positive effect on the firm’s innovative performance.
Table 3 The number of R&D people on firm’s innovative performance
low-tech high-tech
Variables B T p 95% CI
B t p 95% CI
Lower Upper Lower Upper
Number of R&D people 4 0.08 1.45 0.15 -0.03 0.19 0.08 2.15* 0.03* 0.01 0.16
R2 0.11 0.43
Dependent variable: Firm’s Innovative Performance 7
N =169 and 251
† p < .1, * p < .05, ** p < .01, *** p < .001.
For the mediation effect, I have seven hypotheses namely hypotheses 3a-3g. The first one, hypothesis 3a, stated that the number of R&D people mediates the positive relationship between the use of bonus plan and the firm’s innovative performance, with the total model explaining statistics and the indirect effect of statistics. Table 4 shows for the low-tech industry a negative non-significant mediation effect of the number of R&D people on the relationship between bonus plan and innovative performance, where the effect= -.01, 95%
CI= -.09, .01. This also counts for the high-tech industry, where the effect=-.00, 95% CI =- .03, .02. Therefore, we have no evidence to support hypothesis 3a in this sample.
Table 4 Bonus Plan
low-tech high-tech
Variables B t P 95% CI
B t P 95% CI
Lower Upper Lower Upper
Constant -0.12 -0.48 0.63 -0.63 0.38 0.17 1.17 0.24 -0.12 0.46
Number of RD People 4 0.08 1.46 0.15 -0.03 0.19 0.08 2.13* 0.03* 0.01 0.15
Bonus Plan 0.04 0.29 0.77 -0.23 0.32 -0.08 -0.99 0.32 -0.23 0.08
Number of RD People 0 0.19 3.21** 0.00** 0.07 0.31 0.01 0.36 0.72 -0.06 0.09 Firm’s Innovative Performance 0 0.01 0.78 0.43 -0.02 0.05 0.58 12.98*** 0.00*** 0.49 0.66 White Owner -0.02 -0.66 0.51 -0.09 0.05 -0.02 -1.21 0.23 -0.06 0.01
Gender 0.09 0.60 0.55 -0.20 0.38 -0.07 -0.77 0.44 -0.23 0.10
R2 0.12 0.00** 0.43 0.00***
Indirect Effect -0.01 -0.10 0.01 -0.00 -0.03 0.02
Dependent variable: Firm’s Innovative Performance 7
N =169 and 251
† p < .1, * p < .05, ** p < .01, *** p < .001.
Subsequently, hypothesis 3b formulated that the number of R&D people mediates the positive relationship between the use of alternative work schedules and firm’s innovative performance. Table 5 shows a positive non-significant mediation effect for the low-tech industry, where the effect= .01, 95% CI= -.00, .03, this also counts for the high-tech industry as the effect=.00, 95% CI= -.01, .03. So, we also have no evidence to support hypothesis 3b.
Table 5 Alternative Work Schedules
low-tech high-tech
Variables B t P 95% CI
B t P 95% CI
Lower Upper Lower Upper
Constant -0.16 -0.62 0.54 -0.66 0.34 0.16 1.07 0.29 -0.13 0.44
Number of RD People 4 0.08 1.34 0.18 -0.04 0.18 0.08 2.15* 0.03* 0.01 0.16
Flex Time 0.10 1.02 0.31 -0.10 0.31 -0.02 -0.38 0.71 -0.15 0.10
Number of RD People 0 0.19 3.27** 0.00** 0.08 0.31 0.02 0.40 0.69 -0.06 0.09 Firm’s Innovative Performance 0 0.02 0.85 0.40 -0.02 0.05 0.57 12.91*** 0.00*** 0.49 0.66 White Owner -0.02 -0.68 0.49 -0.09 0.04 -0.02 -1.18 0.24 -0.06 0.01
Gender 0.08 0.57 0.57 -0.20 0.37 -0.06 -0.71 0.48 -0.23 0.11
R2 0.12 0.00** 0.43 0.00***
Indirect Effect 0.01 -0.00 0.10 0.00 -0.01 0.03
Dependent variable: Firm’s Innovative Performance 7
N =169 and 251
† p < .1, * p < .05, ** p < .01, *** p < .001.
Hypothesis 3c also stated a mediation effect of the number of R&D people on the
positive relationship between the use of paid sick leave and firm’s innovative performance.
Table 6 shows negative non-significant mediation effect for the low-tech industry=-.02, 95%
CI= -.10, .00, which also applies for the high-tech industry=-.00, 95% CI= -.02, .02. In this line, we also have no evidence to support hypothesis 3c in this sample.
Table 6 Paid Sick Leave
low-tech high-tech
Variables B t P 95% CI
B t p 95% CI
Lower Upper Lower Upper
Constant -0.17 -0.66 0.51 -0.68 0.34 0.13 0.88 0.38 -0.16 0.42
Number of RD People 4 0.09 1.55 0.12 -0.02 0.19 0.08 2.15* 0.03* 0.01 0.15 Paid Sick Leave 0.11 1.01 0.32 -0.11 0.33 0.05 0.71 0.48 -0.08 0.18 Number of RD People 0 0.19 3.18** 0.00** 0.07 0.31 0.01 0.31 0.76 -0.06 0.09 Firm’s Innovative Performance 0 0.01 0.80 0.43 -0.02 0.05 0.57 12.81*** 0.00*** 0.48 0.66 White Owner -0.02 -0.62 0.54 -0.09 0.05 -0.02 -1.12 0.27 -0.05 0.02
Gender 0.09 0.65 0.52 -0.19 0.38 -0.06 -0.71 0.48 -0.23 0.11
R2 0.12 0.00** 0.43 0.00***
Indirect Effect -0.02 -0.10 0.00 -0.00 -0.02 0.02
Dependent variable: Firm’s Innovative Performance 7
N =169 and 251
† p < .1, * p < .05, ** p < .01, *** p < .001.
For hypothesis 3d we stated that the number of R&D people mediates the positive
relationship between paid vacation and firm’s innovative performance. Table 7 shows a negative non-significant mediation effect for the low-tech industry=-.01, 95% CI=-.08, .01, the same applies for the high-tech industry effect=-.01, 95% CI =-.04, .01. For that reason, we also have no evidence to support hypothesis 3d in this sample.
Table 7 Paid Vacation
low-tech high-tech
Variables B T P 95% CI
B t p 95% CI
Lower Upper Lower Upper
Constant -0.16 -0.64 0.52 -0.66 0.34 0.13 0.88 0.38 -0.16 0.41
Number of RD People 4 0.08 1.53 0.13 -0.02 0.19 0.08 2.19* 0.03* 0.01 0.16
Paid Vacation 0.12 1.13 0.26 -0.09 0.33 0.06 0.88 0.38 -0.07 0.19
Number of RD People 0 0.18 3.07** 0.00** 0.07 0.30 0.01 0.27 0.79 -0.06 0.08 Firm’s Innovative Perfomance 0 0.02 0.86 0.39 -0.02 0.05 0.57 12.79*** 0.00*** 0.48 0.66 White Owner -0.02 -0.72 0.47 -0.09 0.04 -0.02 -1.16 0.25 -0.05 0.01
Gender 0.10 0.68 0.49 -0.19 0.39 -0.06 -0.70 0.48 -0.23 0.11
R2 0.12 0.00** 0.43 0.00***
Indirect Effect -0.01 -0.08 0.01 -0.01 -0.04 0.01
Dependent variable: Firm’s Innovative Performance 7
N =169 and 251
† p < .1, * p < .05, ** p < .01, *** p < .001.
Next for hypothesis 3e was formulated, that the positive relationship between stock
ownership and firm’s innovative performance is mediated by the number of R&D people.
Table 8 hereby shows that a positive non-significant mediation effect exist for the low-tech industry=.06, 95% CI= -.01, .24, the same effects applies for the high-tech industry=.01, 95%
CI=-.01, .08. As of this result, we have no evidence to support hypothesis 3e in this sample.
Table 8 Stock Options
