ABSTRACT
Although attracting human resources is a challenging task and necessary for small firm survival, research on predictors of small firm recruitment success remains underexplored. This study examines whether signaling entrepreneurial orientation (EO) influences applicant’s attraction to a small firm, and whether CEO age moderates this relationship. To test our hypotheses, we conducted a conjoint experiment, and analyzed data on 1,560 decisions made by 65 job applicants. While we find support for the main effects of EO subdimensions (firm’s behavior towards innovativeness and proactiveness, and firm’s attitude towards risk) on applicant’s likelihood of long-term job commitment, the interaction effects of CEO age remain largely non-significant. Our study primarily contributes to the literature on the intersection of small firm recruitment and entrepreneurship.
Research Paper 2 is co-authored by Prof. Dr. Matthias Baum
INTRODUCTION
Recruitment is the foundation of organizational performance (Phillips & Gully, 2015) but particularly small firms face great challenges to recruit new talents (Greer, Carr, & Hipp, 2016; Heneman & Berkley, 1999; Hornsby, & Kuratko, 1990), which, in turn, might limit their ability to grow (Cardon & Stevens, 2004). However, growth-oriented small firms are driven by entrepreneurial behaviors as reflected by the dimensions of Entrepreneurial Orientation (EO) including innovativeness, proactiveness and risk-taking (Covin & Wales, 2019). EO is a firm’s strategic posture that seeks to exploit opportunities for growth and is associated with small firm performance (Rauch, Wiklund, Lumpkin, & Frese, 2009). Thus, it is not surprising that an increasing attention has been paid to the effects of signaling EO to external stakeholders, such as venture capitalists (Wales, Cox, Lortie, & Sproul, 2019), which seems to be a successful strategy to acquire financial resources (Moss, Neubaum, & Meyskens, 2015). However, not only financial but also human resources are essential for small firms with an EO to achieve superior performance and to realize growth (Hayton, 2005). But how does EO affect the acquisition of human resources? As stated by Miller (2011), an “interesting question is which resources do EO give rise to: does innovation attract talented people who lead to more innovation?” (Miller, 2011, p. 884).
EO signals to external stakeholders, such as job applicants, small firm’s potential to grow (Moss et al., 2015). It might also signal that an entrepreneurial mindset is highly pronounced among both CEO and employees (Messersmith & Wales, 2013), because an EO involves organizational practices that enhance employee empowerment, skills, and motivation (Rauch & Hatak, 2016). Thus, applicants might process EO as a signal about who the firm usually hires, what working culture and opportunities for human resources development they can expect (Brettel, Chomik, & Flatten, 2015). Prior research on small firm recruitment (e.g., Greer et al., 2016; Moser, Tumasjan, & Welpe, 2017; Zhao, 2013) suggest that an
entrepreneurially-oriented firm culture or offering a wide array of development possibilities are key success factors in the recruitment of new talent. Thus, we assume that signaling EO will influence job applicant’s likelihood to work for a small firm, because EO signals underlying firm qualities such as a firm’s growth-intention or an organizational culture that reinforces an entrepreneurial mindset.
A small firm’s organizational strategy, such as EO, is assumed to be closely interwoven with CEO characteristics, such as age (Hambrick, 2007). CEO’s age has been shown to have a negative effect on small firm’s growth, because older CEOs are less focused on opportunities (Gielnik, Zacher, & Schmitt, 2017). Similarly, the entrepreneurship literature indicates that individual’s age is correlated with entrepreneurial intentions (e.g., Kautonen, Tornikoski, &
Kibler, 2011; Levesque & Minniti, 2006). In the same vein, age-related stereotype literature argues that behaving entrepreneurially (e.g., being innovative) in the work context is expected from younger than older individuals (Posthuma & Campion, 2009). Thus, leading an entrepreneurially-oriented business might not be perceived as a typical behavior of an older CEO, which, in turn, could limit their ability to access resources (Boulton, Shohfi, & Zhu, 2019). A small firms CEO is the “face” of the organization to job applicants, and age is an easily accessible facial cue that individuals automatically use to make inferences about leader abilities (Spisak, Grabo, Arvey, & van Vugt, 2014). Thus, there is reason to believe that CEO age might be a boundary condition for recruiting in small firms with a high entrepreneurial attitude.
Considering the importance of an EO for growing small firms (Rauch et al., 2009), we develop arguments based on the signaling theory (Spence, 1973, 2002) on how a small firm’s EO signals credible information about the firm’s underlying qualities to job applicants.
However, we also argue based on the theory of age norms (Lawrence, 1988, 1996) that a CEO’s age moderates the effect between EO and job applicant’s likelihood of long-term job
commitment, because an entrepreneurial behavior on an individual level (e.g., innovative, proactive and risk-taking) is typically seen as a young people’s game (Levesque & Minniti, 2006). We formalize these statements in five hypotheses, which are tested in a conjoint experiment on a sample of 1,560 job decisions nested within 65 job applicants. A conjoint experiment is a research method that is popular among entrepreneurship and recruitment scholars for studying decision makers’ preferences (e.g., Hauswald, Hack, Kellermanns, &
Patzelt, 2015; Moser et al., 2017; Zacharakis & Shepherd, 2018). Following recommendations by Aiman and colleagues (2002), we used realistic stimulus material in our conjoint experiment.
More specifically, we manipulated CEO’s age with pictures of male faces which is a frequently used method in leadership research (e.g., Elgar, 2016; Spisak et al., 2014) but remains largely unknown among entrepreneurship scholars.
The primary contribution of this study lies in its nuanced examination of the relationship between signaling EO and job applicant’s likelihood to enter a long-term employment relationship with a small firm. Thus, this study offers a broader perspective on EO as we suggest that EO is not only directly related to performance (Rauch et al., 2009) but may also contribute to organizational processes (e.g. staffing) that are predecessors of small firm’s performance (Cardon & Stevens, 2004). Moreover, the recruitment literature has largely used signaling theory to explain how job applicants infer unobservable characteristics of potential employers from observable firm characteristics, but the notion of sending credible signals, which are either costly to obtain or hard to fake, has gone unacknowledged (Bangerter, Roulin, & König, 2012).
We address this scarcity as we develop and test theory that explains why EO is a credible signal in small firm recruitment context. Finally, we also contribute to the sparse and fragmented body of literature on the age-leadership linkage (Walter & Scheibe, 2013) and extend knowledge in this field by proposing that a CEO’s age plays a central role for recruitment in small firms.
THEORY AND HYPOTHESES