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The impact of human resource management practicesand corporate entrepreneurship on firm performance:evidence from Turkish firmsNihat KayaPublished online: 02 Jan 2007.

To cite this article: Nihat Kaya (2006) The impact of human resource management practices and corporate entrepreneurshipon firm performance: evidence from Turkish firms, The International Journal of Human Resource Management, 17:12,2074-2090, DOI: 10.1080/09585190601000204

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The impact of human resource managementpractices and corporateentrepreneurship on firm performance:evidence from Turkish firms

Nihat Kaya

Abstract This paper outlines the important role of human resource managementpractices with a link between corporate entrepreneurship and firm performance. Data werecollected from a survey of 124 firms operating in different industries in Turkey. Thefindings of this study indicated that human resource management (HRM) practicespartially mediated the relationship between corporate entrepreneurship and firmperformance. In other words, corporate entrepreneurship affects firm performance, bothdirectly and through its effects on HRM practices. In addition to corporate entrepreneur-ship, it is found that HRM practices explain a significant level of additional variance (9 percent) in firm performance. The theoretical and managerial implications are discussed.

Keywords Human resource management practices; corporate entrepreneurship; firmperformance; Turkish firms.

Introduction

The relevance of human resources as a source of competitive advantage in developingcountries has been realized as these countries engage more and more in internationalcompetition. Turkey, as a candidate for the enlarging European Union, is one of the testexamples where decision makers try to shift the base of the competitive advantage fromcheap labour to high-quality human resources. Turkish firms are trying to increase theconfidence of domestic and international investors, reconstructing, and helpingthe business sector to increase investment and productivity. If these efforts becomesuccessful, additional resources (i.e. EU funds and direct investment) will becomeavailable for Turkish firms. Being aware of this imperative, more and more Turkishentrepreneurs focus and invest on their human resources in order to increase theirorganizational performance. The main objective of Turkish firms is to enhancetheir international competitive competences by increasing the effectiveness of humanresources.

Hofstede (1980) showed that Turkish culture has high collectivism and powerdistance. Schwartz (1994) asserted that Turkish culture is at high levels in regard toconservatism, hierarchy, egalitarian commitment and harmony. Aycan (2001) pointedout that Turkish culture owns more paternalistic values. In another survey conducted on

The International Journal of Human Resource Management

ISSN 0958-5192 print/ISSN 1466-4399 online q 2006 Taylor & Francis

http://www.tandf.co.uk/journals

DOI: 10.1080/09585190601000204

Nihat Kaya, Associate Professor, Gebze Yuksek Teknoloji Enstitusu, Turkey, Faculty of Business,

Department ofManagement andOrganization, Istanbul Cad, CayirovaFabrikalar, Yolu, 41400Gebze-

Kocaeli, Turkey (tel: þ90-262-653-1414; fax:þ90-262-654-3224; e-mail: nkaya@gyte.edu.tr).

Int. J. of Human Resource Management 17:12 December 2006 2074–2090

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62 national cultures worldwide, it is found that Turkish culture is at a relatively low level

in performance orientation, future orientation, human orientation and uncertainty

avoidance (Kabasakal and Bodur, 1998). But, Turkish sociocultural characteristics have

changed in recent years. Some studies show that the Turkish sociocultural structure has

began to become less collectivistic, less hierarchical (Aycan et al., 2000; Yilmaz et al.,

2005) and low at uncertainty avoidance (Kabasakal and Bodur, 1998). Turkey has a very

young population (57 per cent of the population are under the age of 30) (Aycan, 2001).

Turkish firms generally are small and medium-sized enterprises operating conventional

manufacturing industries rather than technology-based industries. Approximately 95 per

cent of businesses in Turkey are family businesses with a highly concentrated and

centralized ownership structure (Kula, 2005). Therefore, management positions in these

businesses are generally held by family members. The main characteristics of

these businesses are: centralized decision making, strong leadership, limited delegation.

However, some Turkish firms have gained enough know-how on management and HRM

systems through interactions with foreign counterparts in recent years (Aycan, 2001). As

a result of these interactions, the working culture of Turkish firms has started to become a

mixture of Western and Eastern values and systems.The need to develop best human resource management practices (hereafter, HRM

practices) is becoming increasingly important as rival firms become global and global

firms become your rivals in your once-protected local market. Therefore, many firms

have made an effort to develop an effective HRM system. An effective HRM system

includes activities, functions and processes that are directed at attracting, developing and

maintaining a firm’s human resources (Lado and Wilson, 1994).Covin and Miles (1999: 50) describe corporate entrepreneurship as ‘the presence of

innovation plus the presence of the objective of rejuvenating or purposefully redefining

organizations, markets, or industries in order to create or sustain competitive

superiority’. Zahra (1995: 226) describes corporate entrepreneurship as ‘the sum of a

company’s innovation, venturing and renewal efforts’. Many researchers supposed that

corporate entrepreneurship (hereafter, CE) improved organizational results (e.g. Naman

and Slevin, 1993; Zahra, 1991, 1993; Zahra and Covin, 1995). In addition, Covin and

Slevin (1991) advocated the approach of CE as a facilitator for management practices.

However, most of the literature on the CE-HRM practices–performance relationship has

been conducted on large-scale Western firms. Therefore, the exploration of possible

effects of these variables on the performance of firms with a set of data collected from an

emerging market, i.e. Turkey, seems to be an interesting theme of research.In this study, the main goal is to contribute to this growing research stream by

investigating the roles of CE – an internal, cultural factor – and HRM practices – an

internal, process factor – in achieving superior organizational performance in firms. This

stream of research is valuable because a firm’s ability to increase its performance is

largely determined by compatibility of its cultural factors with its process factors. The set

of antecedents that affects corporate entrepreneurship is HRM practices (i.e. staffing,

rewarding, training) and organizational values and beliefs (Antoncic and Hisrich, 2001;

Stevenson and Jarillo, 1990). The beliefs and values are the key components of a firm’s

culture. Organizational beliefs and values are viewed as important drivers of corporate

entrepreneurship because they affect the attitude of the individuals within the firm

(Antoncic and Hisrich, 2001; Guth and Ginsberg, 1990; Zahra, 1991). To this end, a

conceptual model (shown in Figure 1) that posits both of these factors as direct

antecedents of firm performance is developed. The main postulate of this research is that

HRM practices and CE exert positive effects on firm performance.

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Human resource management practices

In prior studies on internal organizational resources, the resources that are rare,

inimitable and valuable are considered as sources of sustainable competitive advantage

and organizational effectiveness (Barney et al., 2001; Lado and Wilson, 1994). In

addition, HRM practices contribute a lot to accomplish firm objectives and to create

value. Hence, an organization must invest in human resource to guarantee long-term

success.HRM practices in every type of organization must support relations among

organizational departments. Especially, organizations should consider systematic,

cultural and structural alignment of HRM practices (Way and Johnson, 2005).

Systematic, cultural and structural alignment of HRM practices supports organizational

goals, objectives and strategies. In addition, HRM practices should enhance the value of

an organization’s employees (Welbourne and Andrews, 1996). The enhancing

value of employees forces commitment to job and firm.HRMpractices have been explained in the literature. HRMcontains staffing, developing,

retaining, empowering and motivating. They are (1) employment security, (2) selective

hiring, (3) extensive training, (4) interaction facilitates, (5) team activities, (6) sharing

information-feedback, (7) performance review (8) incentives tomeet objectives, (9) written

policy, (10) communication strategy (Ahmad and Schroeder, 2003; Pfeffer, 1998).In the HRM system, selective hiring has an important place. During the selection

process, firms should find out which attitudes and behaviours employees have toward

problem solving and team working. In addition, firms have to attract skillful employees

and align them with the firm’s values and goals. These skillful employees should be kept

longer in the firm. In addition, the supply of talented and skilled employees to firms may

serve to enhance entrepreneurial insight. Successful hiring practice provides firms with

employees who can initiate and make appropriate decisions. Firms that have such a

human resource can react quickly against unexpected opportunities and change. Training

and development are critical for the firm performance (Leede et al., 2002) and

competitive advantage (De Saa-peres and Garcia-Falcon, 2002). In addition, training is a

good way to overcome the factors that decrease employee’s job performance and

satisfaction (Xiao, 1996). To achieve effectiveness in training, the training programmes

should fit with firm’s strategy and work process. Further, employee’s learning efforts that

enhance individual performance have to be rewarded (Guest, 1997; Lee and Miller,

1999). Training can be performed in different forms. These different forms can be

realized by means of extensive training, training in multiple functions and training on job

skills (Ahmad and Schroeder, 2003). In many studies, it is found that incentives have

Figure 1 Conceptual model

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impacts on firm performance (Bae et al., 2003; Park et al., 2003). A general objective ofincentives is to change attitudes and motivate employees. Incentives that enhancepositive attitude and motivation of employees can contribute to firm’s growth. Thisgrowth can be proved through stimulating employees to achieve higher business results.Some studies noted that HR systems that supported team activities were critical toorganizational competitiveness and innovativeness (Lau and Ngo, 2004; Mirvis, 1997).While team activities improve co-operation and communication among employees, atthe same time they create an appropriate work culture. Feedback on performance is apractice that is needed by supervisors and employees to enhance effectiveness. Itis a means of improving communications between supervisors and employees. Sharinginformation on the individual performance of employees fosters organizational openness.It enhances loyalty and trust of the employees to the firm. This increased trust motivatesco-operative behaviours in the firm (Grzelak, 1988; Stone, 1998).

As mentioned above, HRM practices reinforcing one another seem to contribute tofirm performance and employees’ effectiveness. For instance, Pfeffer (1998) and Ahmadand Schroeder (2003) have stated that HRM practices enhance firm performance.Therefore:

Hypothesis 1: HRM practices is positively related to firm performance.

Corporate entrepreneurship

Corporate entrepreneurship as a firm level phenomenon – in contrast to that ofSchumpeter (1936, 1950), i.e. individual entrepreneurship – can be defined as a firm’sorientation to be more proactive, innovative and risk taking (Barringer and Bluedorn,1999). In the case of CE, innovativeness is explained as willingness of a firm to supportnew ideas and introduce new products, production processes and organizational systems(Lumpkin and Dess, 1996). This dimension is seen as incubation period of creativenessin organizations. Proactiveness is a firm’s process with two stages: (1) anticipatingchanges in the environment and (2) acting according to these changes and future needs(Venkatraman, 1989). Risk taking shows a firm’s willingness to engage in risky projects.Ruefli et al. (1999) suggest that risk taking is also an essential element of strategicmanagement; and according to Zahra (1993) employees’ risk taking behaviour is a veryrelevant aspect of CE. Therefore, encouraged to pursue opportunities by developing theinnovative and proactive ideas, employees are welcomed to take risks as the intrepreneursin a firm. Hostager et al. (1998: 11–12) defines intrapreneur as ‘individuals and groupsworking within the corporation to: (1) identify ideas for new products or services; (2) turnthese ideas into profitable products or services’. Here, the level of risk taking byemployees shows the level of commitment of firm resources to a market’s newopportunities – rather than to status quo – but still with an equal chance of costly failure(Liu et al., 2002) and naturally with the strong belief that the decision of taking this risk isreasonable – not a gamble – (Bhuian et al., 2005). CE also contains new businessventuring (Kuratko et al., 1990) and organizational self-renewal (Sathe, 1989).

The CE approach particularly has been considered as a resource-based view to explorethe effect of CE on performance. It provides important benefits by providing effectiveuse of organizational resource. In several studies that investigated therelationship between CE and firm performance, it is found that CE leads to improvementin firm performance (Naman and Slevin, 1993; Zahra, 1991, 1993; Zahra andCovin, 1995). Therefore:

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Hypothesis 2: Corporate entrepreneurship is positively related to firm performance.

According to the resource-based view categorization, entrepreneurial resources are moreintangible (co-ordinated knowledge of an opportunity, of how to obtain and exploit humanresource, etc.), socially complex and difficult to understand and imitate (Bratnicki, 2005).The contributions to firm outcomes of intangible resources are enhanced by theeffectiveness of organizational processes and practices. Kuratko et al. (2001) suggest thatthe amount of entrepreneurial actions can be enhanced by HRM practices. Hayton (2003)asserts that corporate entrepreneurship is an indicator of the effectiveness of a firm’sHRMpractices. HRM practices provide a culture of innovative, creative and initiative taking(through practices, i.e. training and development, empowerment) (Brockbank, 1999). Inother words, HRM practices lead to an increase in corporate entrepreneurship whileincreasing the performance impact of corporate entrepreneurship. Therefore, thefollowing hypotheses were developed:

Hypothesis 3: Corporate entrepreneurship is positively related to formal humanresource management practices.

Hypothesis 4: HRM practices are a mediator between CE and firm performance.

Method

Data collection

The data were collected through face-to-face interviews with top executives and firms’human resource directors. The sampling frame consists of 311 firms in differentindustries. A top executive from each firm was first contacted via mail and then via phonein order to solicit their co-operation for the study. After these contact attempts, a totalof 124 valid responses were received, given an effective response rate of 39 per cent. Ofthese 124 respondent companies, 19 belonged to the metal industry, 21 the automotiveindustry, 11 the chemical industry, 13 machine industry, 25 the service industry. Theremaining 36 firms belonged to the construction, logistics, textile, food and otherindustries. The demographic characteristics of responding firms are shown in Table 1.Tests for non-response bias were conducted by comparing the respondents who agreed to

Table 1 The demographic characteristics of responding firms

Number of employees

Less than 50 50

51–250 45

Over 251 29

Ownership status of firms

Number of family firms 63

Number of other firms 61

Industries

Manufacturing firms 99

Service firms 25

Age of firms

Less than 5 25

6–15 44

Over 15 55

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participate after the first contact attempt with those who participated after the secondcontact attempt. No significant differences were found in the construct means of the twogroups, suggesting that non-response bias may not be a major problem in my samplingprocess.

Measures and analyses

The scales in this study were adopted from items used for HRM practices in priorstudies. The HRM practices’ independent variables were measured by multi-item scales.HRM practices and CE constructs were measured using five-point Likert scales withanchors strongly disagree ( ¼ 1) and strongly agree ( ¼ 5). Items for measuring HRMpractices were adopted from Ahmad and Schroeder (2003) and Rogg et al. (2001). Thisscale consists of items that measure the behaviour and attitude (4 items), extensivetraining (6 items), training on job skills (2 items), written policy (3 items), team activities(3 items), training in multiple functions (4 items), incentive to meet objectives (4 items),communication of strategy (3 items), interaction facilitates (4 items), feedback onperformance (4 items). Ten items are adopted from Liu et al. (2002) and Birkinshaw et al.(1998) to measure CE. Finally, items for measuring firm performance are adopted fromBarringer and Bluedorn (1999) and Wiklund and Shepherd (2003). In this study,firm performance is measured as multidimensional, and nine different dimensions ofperformance are measured. These dimensions are sales growth, market share growth,return on sales, return on assets, overall profitability, product/service quality, newproduct/service development capability, job satisfaction of employees, customersatisfaction. Respondents were asked to compare with a competitor of their own firmover the past 3 years, using five-point scales anchored at much worse than competition( ¼ 1) and much better than competition ( ¼ 5). Measurement items are displayed in theAppendix A, B and C. (The reported reliabilities and validities of the measures reportedin the literature were: coefficient alphas of all constructs exceed the 0.70 level and allEFA factor loadings . 0.40.)

Measure validation

In this study, traditional techniques (i.e. exploratory factor analyses, item-totalcorrelations, and coefficient alpha) were used to assess the psychometric properties ofthese measurement scales. First, exploratory factor analysis of the HRM practices scalewas conducted using a varimax rotation procedure. As shown in Table 2, each item has afactor loading well above 0.40, a common threshold for acceptance (Basilevsky, 1994).In line with expectations, a ten-factor solution (behaviour and attitude, extensive training,training on job skills, written constructions and procedures, team activities, training inmultiple functions, incentive to meet objectives, communication of strategy, interactionfacilitates, feedback on performance) was extracted (using eigenvalue ¼ 1 as the cutoffpoint). All items were loaded (1) with high coefficients onto their respective factorsand (2) with substantially lower coefficients onto other dimensions of HRM practices.Next, a second exploratory factor analyses was conducted using CE items, a three-factor(risk-taking, innovativeness and proactiveness) solution was extracted, and itemswithin each scale displayed high loadings onto their respective factor (Table 3).Construct means, standard deviations, coefficient alphas and correlations are presented inTable 4.

Using these adequately reliable scales that constituted this study’s variables, thefollowing analyses were conducted, namely analyses of descriptive statistics to see

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Table 2 Factor loadings: HRM practices

Variables 1 2 3 4 5 6 7 8 9 10

BEH1 2.923E-02 .105 2 .323 21.776E-02 6.690E-02 9.649E-02 .132 .731 1.868E-02 4.569E-02

BEH2 .173 .102 2 .116 24.768E-02 3.563E-02 -7.060E-03 .138 .792 .127 3.561E-02

BEH3 9.342E-02 26.799E-02 6.238E-02 9.987E-02 .220 .160 29.407E-02 .715 23.532E-02 -.179

BEH4 4.816E-02 9.200E-03 .103 7.389E-02 26.323E-02 .213 26.020E-02 .666 22.875E-02 .334

EXT1 .681 1.032E-02 2.768E-02 .218 7.026E-03 .292 .237 .232 9.349E-02 3.735E-02

EXT2 .748 3.066E-02 28.388E-03 6.414E-02 1.512E-02 .223 .208 .246 .141 .196

EXT3 .634 .290 .241 23.245E-02 2 .142 28.195E-03 .279 5.820E-02 .217 .175

EXT4 .764 .293 .208 5.051E-02 .150 9.999E-02 4.518E-02 5.214E-03 6.362E-02 9.596E-02

EXT5 .756 .212 .299 26.810E-02 .178 .143 .103 .113 2 .110 2.426E-02

EXT6 .714 .317 .186 .120 .137 .178 .112 25.487E-02 .171 -.105

WRIT1 .166 .138 .183 4.214E-02 .651 .105 8.430E-02 5.020E-02 9.379E-02 -.333

WRIT2 21.965E-02 26.140E-02 1.847E-02 .105 .825 2.061E-02 .114 4.990E-02 .146 .124

WRIT3 .105 8.381E-02 6.051E-02 2.323E-02 .798 .188 .112 .212 .111 .239

INTER1 .324 21.099E-02 23.191E-02 9.738E-02 27.258E-02 .566 28.703E-02 .293 .276 8.580E-02

INTER2 .303 .206 25.571E-02 21.475E-02 .149 .655 .183 .170 2 .230 6.968E-02

INTER3 .220 .171 26.042E-02 .138 .182 .722 24.782E-03 .146 .299 -6.177E-02

INTER4 8.175E-02 .225 .125 21.131E-02 9.385E-02 .745 .288 3.490E-02 6.883E-02 7.854E-02

TRA1 2.814E-02 24.764E-02 2 .115 .671 .288 .188 8.035E-02 21.328E-02 9.084E-02 9.418E-02

TRA2 8.546E-02 .165 25.878E-02 .850 21.958E-02 2.508E-03 9.221E-02 22.215E-02 5.571E-02 23.507E-02

TRA3 8.073E-02 7.726E-02 3.602E-02 .881 2 .117 2 .105 22.894E-03 .104 2.498E-02 7.078E-02

TRA4 5.973E-03 .193 .112 .667 .133 .105 1.644E-02 1.581E-02 5.130E-02 .115

INCEN1 .108 .718 .135 .269 26.626E-02 .190 .194 .144 2 .124 26.362E-03

INCEN2 .122 .836 .172 2.401E-02 .115 7.526E-02 27.936E-03 9.665E-02 .125 5.236E-02

INCEN3 .262 .819 3.021E-02 .156 .114 8.035E-02 6.923E-02 2.132E-03 4.512E-02 .101

INCEN4 .244 .749 .128 .104 27.632E-03 .189 .237 26.367E-02 .118 4.359E-02

COM1 .171 .267 26.830E-02 6.618E-02 .320 .178 .635 26.332E-04 7.750E-03 2 .258

COM2 .213 .113 .182 6.666E-02 2.942E-02 3.983E-02 .836 .113 4.898E-02 .177

COM3 .209 .140 .117 7.510E-02 .111 .119 .801 2.364E-02 .158 .160

FEED1 .141 .170 .860 21.376E-02 8.437E-02 -4.342E-02 4.847E-02 26.149E-02 3.075E-02 4.047E-02

FEED2 .161 5.546E-02 .881 22.037E-02 6.259E-02 -3.219E-02 1.418E-02 25.910E-02 .135 3.077E-02

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Table 2 (Continued)

Variables 1 2 3 4 5 6 7 8 9 10

FEED3 .210 .230 .744 1.727E-02 7.296E-02 .111 .240 2 .108 .102 1.527E-02

FEED4 .369 27.322E-02 .432 8.112E-02 .139 .217 .429 26.078E-02 .170 .193

TEAM1 .232 .122 .121 .101 3.321E-02 .449 4.195E-02 .198 8.276E-02 .541TEAM2 .131 7.527E-02 2.599E-03 .189 .166 3.580E-02 .227 7.584E-02 .161 .671TEAM3 .136 .178 .161 7.082E-02 .526 22.705E-02 3.208E-02 27.205E-02 2 .166 .533SKILL1 .150 5.003E-02 8.931E-02 5.748E-02 .144 .157 8.446E-02 22.030E-02 .794 .171

SKILL2 .154 .135 .258 .176 .132 7.820E-02 .178 .133 .685 -6.967E-02

Eigenvalue 4.07 3.28 2.93 2.74 2.65 2.63 2.60 2.58 1.71 1.71

% variance 11.00 8.86 7.93 7.41 7.18 7.12 7.03 6.99 4.62 4.62

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the central tendency values for each variable, correlation analyses to calculate one-to-onerelationship among the variables, and finally hierarchical regression analyses to discoverthe impacts of CE and HRM practices on firm performance.

Analyses

Hierarchical regression analysis was used to assess the effect of the demographiccharacteristics of responding firms, CE and HRM practices on firm performance and, theeffect of the HRM practices on CE. In the first model, CE and the demographiccharacteristics of responding firms are posited as the independent variable and HRMpractices are posited as the dependent variable. There was not a significantrelationship between the demographic characteristics of responding firms and HRMpractices, while CE was positively related to HRM practices (b ¼ .64; p , .01). Thus,Hypothesis 3 was supported. In the second model, corporate entrepreneurship and thedemographic characteristics of responding firms are posited as the predictors of firmperformance. In this model, CE was positively related to firm performance (b ¼ .43;p , .01). Thus, Hypothesis 2 was supported. Next, firm performance is posited as thedependent variable and all independent variables used in the first two models (CE andHRM practices) are posited as its predictors. Model 3 showed that CE and HRMpractices had significant effects on firm performance (HRM practices ! firmperformance, b ¼ .35; p , .01). Thus, Hypothesis 1 was supported. The results of theseanalyses are provided in Table 5.

Table 3 Factor loadings: corporate entrepreneurship

Variables 1 2 3

RISK1 .102 1.058E-03 .920RISK2 .123 .365 .742INNOV1 .602 .119 .203

INNOV2 .685 .394 .159

INNOV3 .751 .270 .118

INNOV4 .780 .233 28.035E-03

INNOV5 .736 .237 .105

PRO1 .320 .848 21.809E-03

PRO2 .360 .668 .341

PRO3 .292 .604 .440

Eigenvalue 2.88 2.01 1.79

% variance 28.89 20.16 17.97

Table 4 Descriptive statistics and construct correlations

Variables M SD Coeff. a 1 2 3

Corporate entrepreneurship 3.89 .59 .85 1.000

HRM practices 3.83 .48 .91 .60** 1.000

Firm performance 3.64 .58 .71 .52** .58** 1.000

Notes:

N ¼ 124; ** p , .01; * p , .05.

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Table 5 Results of analyses

Independent variables Dependent variable

HRM practices (Model 1) Firm performance (Model 2) Firm performance (Model 3)

Std B t value Std B t value Std B t value

Age of firms .05 .67 2 .09 2 .99 2 .07 2 .74

Number of employees 2 .02 2 .24 .03 .35 .04 .50

Ownership status of firms .11 1.36 .11 1.21 .07 .85

Industry 2 .01 2 .21 2 .14 21.52 2 .14 21.49

CorporateentrepreneurshipHRM

practices

.64** 8.20 .43** 4.90 .23*.35**

2.06

3.17

R2 ¼ .42

F(d.f.) ¼ 14.039(5.96)

P , .01

R2 ¼ .22

F(d.f.) ¼ 5.743 (5.10)

P , .01

R2 ¼ .31

F(d.f.) ¼ 7.265 (6.95)

P , .01

D R2 ¼ .09

Notes:

N ¼ 124; ** p , .01; * p.

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The results of regression analysis revealed that both CE and HRM practices help us tounderstand variation in firm performance. When Model 1 and Model 2 are compared, CEis more related to HRM practices than firm performance. However, when CE and HRMpractices are considered as independents together, we see that significance andcoefficient of CE decrease (from b ¼ .43; p , .01 to b ¼ .23; p , .05).

Mediation was tested using the three-step approach recommended by Baron and Kenny(1986). In the first step, the mediator was regressed on the independent variables; in thesecond step, the dependent variable was regressed on the independent variables; and inthe final step, the dependent variable was regressed on both the independents andthe mediator simultaneously. Mediation is evident if the following conditions aremet: the independent variable influenced the mediator in the second equation; themediator influenced the dependent variable in the third equation while the influence ofthe independent variable on dependent variable was either diminished (partial mediation)or completely disappeared (full mediation). The findings show a partial mediating effectof CE on firm performance. That is, HRM practices partially mediate therelationship between CE and firm performance. In other words, CE affects firmperformance, both directly and through its effects on HRM practices. Thus, Hypothesis 4was partially supported.

The results are highly provocative for future research such that, in addition to the CE,HRM practices are found to explain a significant level of additional variance (9 percent)in firm performance. Thus, the primary finding of this research is that HRM practices arelikely to enhance the effect of corporate entrepreneurship on firm performance.

Discussion and conclusion

This study examined the role of HRM practices and CE in firm performance. Thefindings showed that HRM practices play a mediation role between CE and firmperformance. In addition, it was confirmed that on the HRM practices (which emphasizebehaviour and attitude, extensive training, training on the job skills, written constructionsand procedures, team activities, training in multiple functions, incentive to meetobjectives, communication of strategy, interaction facilitates, feedback on performance)are important for enhancing firm performance. CE has both direct and indirect (due toeffect on HRM practices) effects on firm performance.

Another important finding of this study is the relationship between HRM practices andfirm performance. This finding may be explained as a tool of maximizing the impact of afirm’s HRM practices to accomplish firm objectives. HRM practices help to create value,to sustain competitive advantage, to enhance firm performance. To realize those, itshould be considered that these HRM practices are consistent with other importantorganizational practices and processes. In addition, an effective design andimplementation of HRM contains staffing, developing, retaining, empowering andmotivating. Such a HRM system provides vertical alignment to firm objectivesand outcomes, not only horizontal alignment to other key firm processes (Way andJohnson, 2005).

HRM practices promote the impacts of entrepreneurial efforts. Effective HRMpractices provide more proactive, risk taking and innovative firms. The results of thisstudy highlight some important issues for the HRM practices. Firms seeking to enhancetheir entrepreneurial level should give importance to promoting investment in HRMpractices. These efforts enhance employee contribution to firm performance. Employeesof firms that have effective HRM practices are encouraged to help and co-operate

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voluntarily in order to be innovative, proactive and risk taking. Therefore, a firm maydevelop an entrepreneurial culture by managing the HRM practices properly.

HRM practices in Turkish firms have newly developed (the concept of personnelaffairs is more dominating in a lot of firms). Therefore, The HRM practices in thesebusinesses are often limited to practices such as compensation and personnel affairs. Theviewpoint of these firms towards HRM practices must be changed as functional (frompersonnel affairs to human resource management), because, generally, Turkish firms donot see the employees as a precious resource contributing a lot to growth and success.Especially, small and medium-sized enterprises (SMEs) evaluate HRM practices asnothing but a cost element. Only some of the large-sized firms in Turkey are rathereffective in creating and growing successful HR systems (Aycan, 2001). Whereas, allfirms, both small and large, may enhance levels of performance orientation and futureorientation through HRM practices, i.e. effective selective hiring, team working,training, performance appraisal, rewarding. Entrepreneurial behaviours within a firmmay be enhanced by HRM practices by supporting participative decision making, risktaking and implementation of innovations. To be successful, Turkish firms shoulddevelop effective and proactive HRM strategies, systems and practices. The HRMsystem and strategies should be in harmony with the firm’s overall business strategies.

HRM practices are also important for all firms in other countries, because, a firm’s HRMpractices are the implementations that form and guide its behaviour. In addition,HRM practices provide a high level of employee involvement that improves the firm’soutcomes. Tomake the entrepreneurial behaviours effective in a firm, the intensity of HRMpractices must be enhanced.

Limitations

Limitations of this study provide new ideas for further research. The variables wereselected to represent different aspects of the theoretical relations. To representorganizational culture and strategy, I employed the construct of CE; to incorporate themanagement process, I investigated the effects of HRM practices. Future research couldreplicate this research in broader sampling contexts and extend the theoretical model bystudying the effects of a larger set of variables. For instance, beside CE, other strategicorientations (e.g. learning orientation and market orientation) could be investigated.

In this study, cross-sectional data were used to test the relations among HRMpractices, CE and firm performance. With such data, the perceptions of managers at acertain point in time can be determined. In other words, this may be helpful in predictingrelationships among variables. But, it can not be considered as relationships that existamong the constructs on a temporal dimension. Therefore, future research mayinvestigate these relationships on a longitudinal basis.

In this study, there was not too much suggestion regarding the process ofimplementing HRM practices. Although implementation of HRM practices is easy, thesepractices are a process that has to be good in implementing knowledge and experience(Pfeffer, 1994). Therefore, future longitudinal research could examine the process ofimplementing HRM practices.

Finally, only respondents from Turkey were used in the study. This may limit thegeneralizability of the findings to other countries. In contrast, were data to be collectedfrom different countries it may help to generalize the results and to understanddifferences in cultural and social contexts. To generalize the results for other countries,replication of this study in different countries is recommended.

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Appendix A. Items: HRM practices

1 Behaviour and attitudes

BEH1 We use attitude/desire to work in a team as a criterion in

employee selection

BEH2 We use problem-solving aptitude as a criterion in employee selection

BEH3 We use work values and behavioural attitudes as a criterion in

employee selection

BEH4 We select employees who can provide ideas to improve

the manufacturing process

2 Extensive training

EXT1 Sufficient time is allocated for training

EXT2 Sufficient money is allocated for training

EXT3 Training currently provided is leading to satisfactory results

EXT4 Training plans are developed and monitored for all employees

EXT5 Training programmes are consistently evaluated

EXT6 At this firm, all employees continually train

3 Written policy

WRIT1 Employees are required to sign a form indicating they have

reviewed the employee handbook

WRIT2 This firm has a formal and written discipline policy

WRIT3 In this firm, the written procedures and instructions are

given a special importance

4 Interaction facilitates

INTER1 During problem-solving sessions, we make an

effort to get all team members’ options and ideas before making a

decision

INTER2 Supervisors encourage the persons who work for them

to work as a team

INTER3 Supervisors encourage people who work for them to

exchange opinions and ideas

INTER4 Supervisors frequently hold group meetings where the people who work

for them can really discuss things together

5 Training in multiple functions

TRA1 The longer an employee has been at this firm, the more tasks

or jobs that employee learns to perform

TRA2 Employees are cross-trained at this firm so that they can fill

in for others if necessary

TRA3 Employees receive training to perform multiple tasks

TRA4 At this firm, employees are encouraged to learn skills in depth,

rather than develop a broad skill base

6 Incentives to meet objectives

INCEN1 Our incentive system encourages us to pursue firm

objectives vigorously

INCEN2 The incentive system at this firm is fair at rewarding people

who accomplish firm objectives

INCEN3 Our reward system really recognizes the people who contribute

the most to our firm

INCEN4 Our incentive system at this firm encourages us to reach firm goals

7 Communication of strategy

COM1 In our firm, goals, objectives and strategies are communicated

to all employees

COM2 Our employees know how we are planning to be competitive

at this firm

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COM3 Our employees understand the long-run competitive strategy

of this firm

8 Feedback on performance

FEED1 Charts showing defect rates are posted on the shop floor

FEED2 Charts showing schedule compliance are posted on the shop floor

FEED3 Charts plotting the frequency of machine breakdowns are

posted on the shop floor

FEED4 Information on productivity is readily available to employees

9 Team activities

TEAM1 Our firm forms teams to solve problems

TEAM2 Problem-solving teams have helped improve manufacturing

processes at this firm

TEAM3 Employee teams are encouraged to try to solve their

problems as much as possible

10 Training on job skills

SKILL1 At this firm, all employees have important skills

SKILL2 Employees at this firm have skills that are above average

in this industry

Appendix B. Items: corporate entrepreneurship

1 Risk taking

RISK1 Relative to our competitors, our company has higher propensity to take risk

RISK2 Relative to our competitors, our company is not averse to high-risk projects

2 Innovativeness

INNOV1 Relative to our competitors, our company is willing to apply new ideas

INNOV2 Relative to our competitors, our company has higher ability to identify

customer needs and wants

INNOV3 Relative to our competitors, our company has higher level of innovation

INNOV4 Relative to our competitors, our company has higher ability to persevere

in making our vision of the business a reality

INNOV5 Relative to our competitors, our company has a tendency to engage in

strategic planning activities

3 Proactiveness

PRO1 Relative to our competitors, our company has higher ability to

identify new opportunities

PRO2 Relative to our competitors, our company is effort to early action in

each opportunity

PRO3 Relative to our competitors, our company is effort to do comprehensive

and pretentious strategic actions

Appendix C. Items: firm performance

Sales growth

Market share growth

Return on sales

Return on assets

Overall profitability

Product/service quality

New product/service development capability

Job satisfaction of employees

Customer satisfaction

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