Entrepreneurs' human resources development

• Published date: 01 December 2018
• Author: Sylvia Veronique Hubner,Matthias Baum
• Date: 01 December 2018
• DOI: http://doi.org/10.1002/hrdq.21328

QUALITATIVE STUDY

Entrepreneurs' human resources development

Sylvia Veronique Hubner

1

| Matthias Baum

2

1

TUM School of Management, Technical

University of Munich, Munich, Germany

2

University of Kaiserslautern, Kaiserslautern,

Germany

Correspondence

Sylvia Veronique Hubner, Post-Doctoral

Researcher, Chair of Research and Science

Management, Technische Universität

München, TUM School of Management,

Arcisstrasse 21, 80333 Munich, Germany.

Email: sylvia.hubner@tum.de

This study explores how entrepreneurs develop human resources

within their firms. Based on an analysis of interviews with entrepre-

neurs and new venture consultants, we describe entrepreneurs'

human resources development (HRD) approaches. We found that

entrepreneurs rely on networking and creativity, aim to leverage

employees' interest and competencies, and allow cocreation by

employees; current requirements and situational conditions shape

entrepreneurs' HRD decisions. To elaborate on our findings, we

draw on the distinction between causation and effectuation. We

describe an entrepreneurial HRD process that combines both a

causation-based and an effectuation-based HRD approach.

KEYWORDS

decision-making, employee development|, entrepreneurial

learning, training/training and development

1|INTRODUCTION

For entrepreneurs, human resources development (HRD) is a vehicle to create inimitable, valuable human resources,

laying the foundation for competitive advantage (Hatch & Dyer, 2004). HRD is repeatedly deemed to be important

not only in mature and established firms but also in entrepreneurial firms (Hayton, 2003; Hornsby & Kuratko, 2003;

Marvel, Davis, & Sproul, 2016; Unger, Rauch, Frese, & Rosenbusch, 2011). HRD also is an alternative to recruiting

and selecting highly qualified employees, which is particularly difficult for new ventures given their lack of a strong

reputation, inability to offer high salaries and job security, and high costs associated with recruitment and selection

processes (Cardon & Stevens, 2004).

Entrepreneurs, the founders and owner managers of firms in dynamic environments, are usually confronted with

resource constraints, their firms are characterized by informality, and they are particularly in high need for ideas and

engagementfrom their employees.In entrepreneurial settings, HRD is usuallyon-the-job, experiential, reactivelychosen,

unsophisticated, or nonexistent (Hornsby& Kuratko, 1990, 2003; Nolan& Garavan, 2016). Entrepreneurs often cannot

enjoy fullyfledged human resource departments; theyinitially are responsiblefor the development of employees them-

selves (Fox, 2013; Katz & Welbourne, 2002). Accordingly, the worksetting and resource-constraints in entrepreneurial

firms differentiate the possibilities for HRDprocesses from possibilitiesin established firms, engendering challenges for

entrepreneurs when tryingto ramp up a structured HRD architecture (Hornsby& Kuratko, 2003).

DOI: 10.1002/hrdq.21328

Human Resource Development Quarterly. 2018;29:357–381. wileyonlinelibrary.com/journal/hrdq © 2018 Wiley Periodicals, Inc. 357

Although many studies analyzed the impact of entrepreneurs' competencies on firm-level outcomes (Crook,

Todd, Combs, Woehr, & Ketchen, 2011; Man, Lau, & Chan, 2002; Tehseen & Ramayah, 2015; Volery, Mueller, &

von Siemens, 2015; Wolff, Pett, & Ring, 2015), previous research neglected the importance of employees' compe-

tencies in entrepreneurs' firms. Which HRD approach is appropriate in the dynamic,uncertain, and informal envi-

ronment of entrepreneurs is unclear so far (Cardon & Stevens, 2004; Marvel et al., 2016; Unger et al., 2011). More

specifically, theoretical development of what potentially underlying strategic logic looks like remains lacking

(Katz & Welbourne, 2 002; Nolan & Garavan, 2016). In this s tudy, we aimed to answer the question o f how entre-

preneurs develop human resources within their firms, and whether their approaches—althou gh informal—could be

considered strategic.

We begin this article by describing the particularities of HRD in small and young firms. Then, we i ntroduce

causation and effectuation, decision-making logic applied by entrepreneurs, which we use to develop our theoriz-

ing about entrepreneurs' HRD approaches. Next, we describe our qualitative research design and our analysis of

interviews with entrepreneurs (i.e., founders and owner managers of firms in dynamic environments) and inter-

views with new venture consultants. Drawing on an analysis of these data, we explore entrepreneurs' HRD

approaches. To investigate differences that occur while a firm matures (Reymen et al., 2015), we contrast the

HRD approaches of entrepreneurs whose firms are in earlier (firm age ≤6 years) vs., in later (10 years ≤firm

age ≤25 years) development stages. To expose the specifics of the entrepreneurial context, we also interviewed

HRD managers in established firms to contrast their statements to the statements from entrepreneurs and new

venture consultan ts.

In the course of our analysis, we used the distinction between causation and effectuation (Sarasvathy, 2001) to

develop our theorizing about entrepreneurs' HRD approaches and moved from an inductive to a more deductive

approach of analysis. Effectuation can be described as a creative, means-orientated approach that leverages contin-

gencies, builds on partnerships, and applies an affordable loss principle; Causation, in contrast, is characterized by a

goal-orientated and predictive view that avoids contingencies, sees outsiders as competitors, and applies expected

return calculations (Sarasvathy, 2001; Wiltbank, Read, Dew, & Sarasvathy, 2009). Causation and effectuation helped

us to explain entrepreneurs' HRD decisions.

Our study contributes to the literature in several ways. Based on our empirical findings, we describe an HRD pro-

cess that accounts for the informal structures, dynamic environment, and resource constraints that usually confront

entrepreneurs. Thereby, our study addresses recent calls for a better understanding of the particular issues that make

entrepreneurs' HRD initiatives and challenges unique (Garavan, Watson, Carbery, & O'Brien, 2016; Nolan & Garavan,

2016), while also adding to the understanding of what HRD looks like within the entrepreneurship domain. This per-

spective suggests an extended understanding of what HRD decisions can be considered “strategic”and might be

appropriate—although informal—in some contexts. Additionally, we show in what way the distinction between causa-

tion and effectuation is a frugal way to understand how HRD processes are designed in entrepreneurial firms and

which circumstances shape entrepreneurs' HRD decisions. Our elaboration on entrepreneurs' HRD approaches paves

the way for a better understanding of the scope of effectuation and causation processes.

2|HRDINENTREPRENEURS'FIRMS

To situate our investigation in previous research, we first discuss how we define HRD for our investigation and

describe what we already know from previous studies about HRD in firms of entrepreneurs. Next, we explain the

decision-making logic that previous entrepreneurship research found to describe entrepreneurs' decision-making,

effectuation and causation, because we will use this logic to develop our theorizing about entrepreneurs' HRD

approaches.

358 HUBNER AND BAUM