Entrepreneurial Finance and HRM Practices in Small Firms

Abstract

Abstract As new ventures grow, they face significant challenges to their internal operations and organizational structure. These challenges are particularly evident in small, entrepreneurial firms, who have limited resources, under‐developed capabilities and often seek funding from external investors to enable growth. We draw on institutional theory, particularly institutional logics, to explore the role of different investors on human resource management (HRM) in small, entrepreneurial firms. Using qualitative multiple‐case study analysis of seven firms within the Irish agrifood industry, our study shows how external investors can prompt changes to HRM, illustrating three approaches to HRM practice: operational – aimed at improving efficiency and internal functioning through human resources; strategic – aimed at improving firm performance and competitive advantage; and transformational – leading to a fundamental redirection of the firm. These findings facilitate the development of a framework for how investor logic prompts changes to HRM practices of small, entrepreneurial firms. By examining the interaction of institutional logics, this paper contributes a more nuanced understanding of entrepreneurial finance and its implications on HRM practices in small, entrepreneurial firms.

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