Untangling the Relationship between Human Resource Management and Corporate Entrepreneurship: The Mediating Effect of Middle Managers’ Knowledge Sharing

2.1 Corporate Entrepreneurship (CE)

Corporate Entrepreneurship (CE) has attracted scholarly interest because it directs firms to recognize and exploit new opportunities (Ireland, Covin, and Kuratko 2009) through innovative and proactive behavior (Dess, Lumpkin, and McGee 1999) that can revitalize and increase the innovativeness of existing organizations (Covin and Miles 2007; Ireland, Covin, and Kuratko 2009; Zahra, Jennings, and Kuratko 1999). CE is necessary for firms in turbulent, dynamic or highly volatile environments, wherein strategic flexibility and innovativeness are needed to maintain competitive advantages and respond to environmental pressures (Yiu and Lau 2008).

Defined as a “process whereby an individual or a group of individuals, in association with an existing organization, create a new organization or instigate renewal or innovation within that organization” (Sharma and Chrisman 1999: p. 18), CE is associated with the pursuit of opportunities by an established organization. It is the internal environment of the organization that creates the preconditions for CE activities that in aggregate result in entrepreneurial firm behavior. Entrepreneurial firms can thus be identified by their tendency to take risk, to engage in innovation and to challenge their competitors with new processes and products (Covin and Slevin 1989, 1991).

2.2 Middle Managers

Managerial strategic actions and behaviors which are often discretionary, spontaneous and beyond explicit role requirements are considered to lie at the very heart of CE (Smith and Di Gregorio 2002). To date, researchers have focused attention on the actions of middle managers as they tend to be most involved in the CE activities within established companies (Hornsby, Kuratko, and Zahra 2002, 2009; Kuratko et al. 2005; Wakkee, Elfring, and Monaghan 2010). There are variations in how middle managers are conceptualized (Csepregi 2012), from focusing the type of workflow middle managers are responsible for (e.g. Floyd and Wooldridge, 2007), to focusing on the location in the managerial hierarchy (e.g. Eaves 2014). For the purpose of this study, we define middle managers as those managers who are not part of the top management team, but still have subordinates reporting to them, which imply that their organizations must be sufficiently large to make use of at least two managerial levels (cf. Csepregi 2012). The organizational positioning of middle managers has also been described as critical for the generation of entrepreneurial ideas and actions. For example, middle managers can facilitate the sharing of knowledge internally and externally because of their unique position in receiving and sharing information (Ghoshal and Bartlett 1994; Mustafa, Richards, and Ramos 2013; Nonaka and Takenuchi 1995), and they can thus play a critical role in organizational change initiatives (Conway and Monks 2011).

2.3 High-Performance Human Resource Practices and Corporate Entrepreneurship

Throughout the past decade, there has been a growing interest among Human Resource (HR) scholars in understanding how human capital management can foster positive organizational outcomes (Subramony 2009). Researchers have thus identified high-performance human resource practices (HPHRP) as a means of driving organizational effectiveness (e.g., Combs et al. 2006). HPHRP refer to “groups of separate but interconnected human resource (HR) practices designed to enhance employees’ skills and effort” (Takeuchi et al. 2007, 1069). Operationalizations of HPHRP often include practices and measures related to the promotion workforce ability and skills, motivation, opportunity seeking, and discretionary efforts (Appelbaum 2000; Sun, Aryee, and Law 2007).

Specifically this study adopts (Sun, Aryee, and Law 2007) conceptualization of HPHRP, which include “provision of job security, extensive skills training, promotion from within, results-oriented appraisal, and broad career paths” (p. 560). An organization’s investment in HPHRP signals its intention to invest in the skills and opportunities of its employees and to develop a long-term relationship with them (Sun, Aryee, and Law 2007). HR practices can thus positively influence and inspire employees’ attitudes and work behaviors, which in turn can affect organizational outcomes (Kehoe and Wright 2013; Messersmith et al. 2011). However, attitudinal and behavioral consequences of HR practices largely depend on the extent to which employees perceive HR practices within their organizations (Kehoe and Wright 2013).

Various studies have demonstrated the positive association between HR practices and CE (Schmelter et al. 2010; Zhang and Jia 2010; Zhang, Wan, and Jia 2008). Hayton (2005) argues that HRM encourages CE through parameters such as decentralization of authority, cooperation, organizational learning, knowledge sharing, trust and encouragement of risk taking. Adopting a systems approach to HR practices, studies have examined the relationship between HPHRP and CE. These studies have found positive empirical links between HPHRP and CE (Zhang and Jia 2010; Zhang, Wan, and Jia 2008). Furthermore, perceived organizational support and organizational citizenship behavior were identified as mediators in HPHRP–CE relationship. From a social exchange theory (Blau 1964) perspective, HPHRP create a climate in which employees reciprocate perceived support through discretionary and strategic actions. There is, however, little guidance in these studies as to which specific employee actions or behaviors’ fostered CE.

In summary, there are strong theoretical arguments and empirical findings that HPHRP are positively related to CE. Although the theoretical approach suggests that organizational learning in general and knowledge sharing in particular are important links between HPHRP and CE (Hayton 2005), there is little quantitative empirical support for such claims.

2.4 High-Performance HR Practices and Middle Managers’ Knowledge-Sharing Behavior

Knowledge represents a critical resource through which organizations can develop sustainable competitive advantages (Davenport and Prusak 1998; Grant 1996). To properly identify and fully utilize their knowledge resources, organizations need to understand how to pass knowledge and skills from experts to novices and to ensure that complementary pieces of knowledge are matched (Damodaran and Olphert 2000). Knowledge sharing among organizational members in the form of “provision of task information and know-how to help others and to collaborate with others to solve problems, develop new ideas, or implement policies or procedures” (Wang and Noe 2010, 117) is an important mechanism for utilizing knowledge within organizations. Knowledge sharing, as conceptualized in this study, includes the sharing of explicit knowledge in the form of externalized sources, such as reports and documents, as well as implicit knowledge in the form of embodied knowledge, such as expertise, know-how and know-whom (Bock et al. 2005). Knowledge sharing is a relational act which involves asynchronous reciprocal exchanges among individuals (van den Hooff and de Leeuw van Weenen 2004; Lundmark and Klofsten 2014). Knowledge represents a resource which is often highly personalized and difficult to express, and thus, employees’ motivation to share their knowledge cannot be taken for granted (Bock et al. 2005; Cabrera and Cabrera 2005; Szulanski 1996). Rather, employees are likely to regulate their knowledge-sharing behaviors based on an analysis of costs and benefits and the existence of trust (Currie and Kerrin 2003; Lundmark and Klofsten 2014).

Individual knowledge-sharing behavior can be fostered through HR practices (Camelo-Ordaz et al. 2011; Scarbrough 2003; see Wang and Noe 2010 for a review). Through a combination of HR practices, firms can influence middle managers’ perceptions of a supportive organizational environment that motivates knowledge sharing (Scarborough and Carter 2001). For example, research has shown that employees are more likely to share their knowledge with co-workers if they perceive them to be competent and if they have been exposed to training programs that equip them with innovative skills (Lin and Lee 2004; Mooradian, Renzl, and Matzler 2006; Wu, Hsu, and Yeh 2007). Thus, through people flow (e.g. mobility, extensive kills training, and selective staffing), HPHRP help firms in selecting, training, and motivating qualified employees, thereby increasing the likelihood that middle managers will engage in knowledge sharing.

Additionally, HPHRP can create work environments which facilitate the interaction through, for example, flexible job assignments, broad job descriptions and encouraging participation in decision making. Interaction is not only a prerequisite for knowledge sharing but also an important fundament for building trustful relationships, which is an important precondition for knowledge sharing (Foss et al. 2009).

HPHRP also signal the firm’s recognition of employee contributions and behaviors (Shore and Shore 1995). Employee appraisals, which consist of clear long-term goals, provide accurate and timely feedback, clearly link efforts to rewards, have been found to also encourage individual knowledge-sharing behaviors (Cabrera and Cabrera 2005). Consequently, if middle managers believe that their efforts are appropriately recognized by the organization, they are more likely to engage in knowledge sharing (Leana and Van Buren 1999). According to the above reasoning we propose the following hypothesis:

Hypothesis 1: HPHRP are positively related to middle managers’ knowledge-sharing behavior.

2.5 Middle Managers’ Knowledge-Sharing Behavior – Linking HPHRP and CE

Hayton (2005) argues that knowledge sharing represents an important mechanism through which HR practices translate to CE. Hayton’s (2005) argument is generally congruent with this paper’s arguments that HPHRP are likely to encourage middle managers’ knowledge-sharing behavior and that this is likely to be positively related to CE. Although we agree with Hayton (2005) that knowledge sharing would generally be expected to have a positive effect on CE, middle managers’ central position makes their knowledge-sharing behavior particularly important to CE as it involves communicating the strategic direction from top-level managers as well as championing new ideas from the operative core and from external sources (Floyd and Lane 2002; Nonaka and Takeuchi 1995; Raes et al. 2011). Thus middle managers play a more important role than other organizational actors not only in regard to CE (Hornsby, Kuratko, and Zahra 2002; Kuratko et al. 2005) but also in regard to knowledge flows (del Mar Benavides-Espinosa and Roig-Dobón 2011). Through collecting external knowledge and distributing it internally, middle managers’ knowledge-sharing behavior can enhance a firms innovation capability, lead to the generation of new ideas, expedite successful completion of projects, and improving existing products and processes thus facilitating CE initiatives (Lin and Lee 2006; Lin 2007; Liebowitz 2003).

Furthermore, it is widely acknowledged that organizational learning lies at the heart of CE (e.g., Crossan and Berdrow 2003; Hayton 2005; Lin 2007), and from an organizational learning perspective, middle managers’ organizational positioning allows them to synthesize and disseminate new and existing forms of knowledge. Such strategic actions are likely to lead to the enhanced idea generation, problem solving and the ability to spot new opportunities (Lumpkin and Lichtenstein 2005; Nonaka and Takeuchi 1995). Therefore, through their knowledge-sharing behavior, middle managers can enable the transformation of knowledge into new products, services and processes in order to exploit opportunities, which constitute central aspects of CE. In essence, middle managers’ knowledge sharing provides strategic alignment of initiatives and it creates an awareness of operational-level problems and opportunities among top-level managers. Furthermore, if middle managers do not engage in knowledge sharing, the link between the top and the bottom of the organization is cut and horizontal knowledge sharing is severely retarded. In addition, as knowledge sharing both within and between organizations is based on reciprocal exchanges (Ensign and Hébert 2010), middle managers’ knowledge sharing is likely to influence and reflect the over-all knowledge sharing in an organization.

Therefore, the relational aspects of favorable organizational conditions, fostered through HPHRP, such as trust and cooperation, which are manifested in middle managers’ willingness to share their knowledge, represent an underlying mechanism through which HPHRP are translated into CE. Based on the above reasoning we propose the following hypotheses:

Hypothesis 2: Middle managers’ knowledge-sharing behavior relates positively to CE.

Hypothesis 3: The positive relationship between HPHRP and CE is mediated by middle managers’ knowledge-sharing behavior.

3.1 Data Collection and Sample

We adopted a similar strategy to Hornsby, Kuratko, and Zahra (2002, 2009) regarding data collection concerning middle managers’ actions and CE. As part of our data collection strategy, we specifically targeted middle managers attending either MBA or executive MBA courses at private and public institutions. While there are many higher education service providers in Malaysia, we specifically targeted 12 institutions (Eight public and four private) which were awarded the highest quality ranking by the Malaysian Ministry of Higher Education.

In early September 2013, a total of 600 survey packages were distributed to 12 higher education institutions. Each survey package contained a cover letter explaining the objectives of the study and ensuring the respondents confidentiality. Additionally, the cover letter also stated clearly that only those individuals identified as middle managers were to complete the attached questionnaire. In addition to the cover letter and questionnaire, the survey package also contained a self-addressed envelope as respondents were asked to mail their completed questionnaires to the authors.

The questionnaire consisted of four main parts, namely the background information of the respondent, their perceptions of their organizations’ CE-related activities, their perceptions of the HPHRP that their organization uses, and the extent of their knowledge-sharing behavior. In the end a total of 182 questionnaires were returned to the authors, representing a response rate of 30%. Removing incomplete questionnaires, final data were obtained from 163 middle managers. Table 1 presents the characteristics of the final respondents.

Research in the area of the HRM–CE relationship predominantly involves Western organization settings. Differences may exist in the organizational practice environments of Asia and the West and cultural factors can influence the adoption and diffusion of Western HR practices in non-Western contexts (Chew 2005; Schaaper et al. 2013; Schneider 1988). The prior literature has tended to suggest that the collectivist emphasis of Malaysian cultural values may work against innovation and the adoption of Western-based HR practices (Chew 2005; Juhdi, Pa’wan, and Hansaram 2013). However, since the late 1990s Malaysia has been experiencing a shift in HR policy (Othman and Teh 2003). There is an increasing emphasis on human resource development rather than cost-cutting practices, and the utilization of talented employees as drivers of superior firm performance (Ngo, Lau, and Foley 2008). Collectively, such evidence suggests that the HR principles and practices of Malaysian firms are consistent with those in Western countries (Zhu, Warner, and Rowley 2007). The utilization of scales developed for a western setting in this study thus represents further test of the applicability of these scales in a Malaysian context (Hornsby, Peña-Legazkue, and Guerrero 2013; Zhang and Jia 2010).

3.2 Measures

5.1 Limitations and Future Research

There are some limitations that should be emphasized. Firstly, the study has relied on self-report data for all variables, which could lead to response biases that may be further compounded in the cross-cultural context and to common method variance (Podsakoff et al. 2003). To address the latter, we used Harman one-factor test, which did not indicate that common method variance, is of particular concern in this study. However, that does not preclude any influence of common method variance. Therefore, we encourage future studies to consider responses from multiple sources, thus helping to alleviate potential problems related common method variance. In order to minimize the problem with self-reported data, we used well-established measures of all our variables. Such measures are, however, designed to assess the principal relationships of this study in a Western context, and thus the employed scales may not truly capture the essence of the constructs under investigation in the Malaysian context. Nevertheless, the high internal consistency exhibited by the scales indicates that the scales work well also in the Malaysian context (the lowest Cronbach’s α was 0.82 which is substantially better that the recommended lower level of 0.7 by Field 2009). It is also important to stress that the reported findings are only tested in a Malaysian context. Therefore it is imperative to be aware that any generalization beyond this setting is based on assumptions of similarity between different contexts. Finally, our study utilized a cross-sectional survey design. An inherent limitation of this approach is that inferences regarding causality cannot be properly deduced. Inferred causality must therefore rely on theoretical considerations.

This study offers some further suggestions for future research. Although prior studies have established an empirical relationship between HPHRP and CE (see Zhang, Wan, and Jia 2008; Zhang and Jia 2010), it is less clear what mechanisms create this relationship. Whereas Zhang, Wan, and Jia (2008) indicate that discretionary behaviors by employees constitute an important foundation for the relationship between HPHRP and CE, this study finds support for a particular type of discretionary behavior, middle managers’ knowledge sharing, being an important factor in explaining this relationship. Yet other kinds of discretionary behaviors (such as coaching and mentoring of co-workers, resource exchanging and networking, opportunity seeking and risk taking) can also be encouraged through HPHRP and may also affect CE (Hayton 2005). Hence, future research should consider additional discretionary variables which might mediate the relationship between HPHRP and CE.

Secondly, given the important role that middle managers’ knowledge-sharing behavior plays in the HRM–CE relationship, further research is needed on how to maximize discretionary behaviors of middle managers. In this study, we only focused on organizational-level factors which can affect middle managers’ discretionary and entrepreneurial behaviors. However, research has revealed that both organizational and individual factors can influence middle managers’ decisions to engage in discretionary behaviors (Kuratko, 2010). The interplay of individual-level factors and HRM practices and their effect on discretionary and entrepreneurial behaviors holds promise for future research.