Principal Topic

Research has shown that HRM options effect the degree of entrepreneurship in large established corporations. Qualitative case research indicates that emerging fast growth firms focus on a more limited number of HRM program options to overcome managerial capacity problems that hinders sustained rapid growth. This study empirically investigated the extent to which combinations of financial and non-financial incentive options are associated with sustaining growth rates in emerging firms.

Research Method

Surveys was mailed to the CEOs of 800 randomly selected fast growth firms and 400 normal growth firms. The response rates was 22% and 18% respectively. Ten HRM practices were the independent variables. Factor analysis reduced the HRM options to one financial incentive variable and one non-financial incentive variable. Regression analysis examined the impact of the two aggregate independent variables and the 10 individual HRM variables on firm growth, discretionary employee effort, firm creativity, strategic flexibility and corporate entrepreneurship. T-tests were used to compare the HRM practices of fast growth and normal growth firms.

Results and Implications

Overall, the study support qualitative research which show that HRM design decisions can facilitate continued rapid growth. T-test showed that fast growth firms use both financial and non-financial incentives to a greater extent than do normal growth firms. Regression analysis found that the aggregate financial and non-financial incentives variables are associated with each dependent variables. More importantly, the results indicate that non-financial HRM practices are more critical to sustaining rapid growth than individual focused financial incentives. Similar results were found across the other dependent variables. With respect to specific HRM practices, training opportunities, challenging work opportunities, and stock options plans exhibited the strongest relationship with firm growth. Different patterns of the relative importance of specific HRM practices, however, were found across the remaining dependent variables.

CONTACT: Foard Jones, Management Department, University of Central Florida, Orlando, Florida, 32816-1400; (T) 407-823-5101; (F) 407-823-3725