The HR executive effect on firm performance and survival

Abstract

Research summary: This article replicates and extends Welbourne and Cyr's (1999) pioneering study of the relationship between the presence of human resource executives (HREs) and firm performance in initial public offering (IPO) firms. We employ a larger, more generalizable sample, a model better fitted to the IPO context, and alternative performance measures to execute a more robust examination of this relationship. Using Welbourne and Cyr's model specifications, our results parallel theirs: there is no significant relationship between HREs and firms' post-IPO financial performance. Moreover, extending Welbourne and Cyr's study, we find that the presence of HREs at the time of firms' IPOs is positively related to the ultimate success measure: post-IPO firm survival. Additionally, for firms that had executives at the time of IPO, the negative effect of firm size on firm mortality is greater and the positive effect of leverage on firm mortality is smaller. Managerial summary: Does paying attention to HRM help firms to succeed?This study examines that question in a sample of generally small, young firms that went public from 1996 to 2008. Only about 10 percent of these firms had human resource executives (HREs) at the time of their IPOs, allowing us to examine the effects of the presence of HREs on firm performance. While we find that the presence of an HRE at IPO is not related to firms' post-IPO financial performance, firms that had HREs at IPO are significantly more likely to survive in the long run. Since approximately 20 percent of the sample firms do not survive, this is a very meaningful outcome. Indeed, survival may be the ultimate measure of firm performance.

A quarter‐century review of HRM in small and medium‐sized enterprises: Capturing what we know, exploring where we need to go

“…A common factor is a lack of replication across studies. One notable exception, while focusing on IPOs versus SMEs per se, is Chadwick et al's (2016) replication of Welbourne and Cyr (1999) on the impact of the presence of HR executives on success and subsequent post‐IPO survival.…”

Growth or profit? Strategic orientations and long‐term performance in China

“…Firms can choose to pursue growth or profit only if they survive. Firm survival is thus the ultimate measure of firm performance (Chadwick, Guthrie, & Xing, 2016). Second, besides viewing growth and profit as performance measures, we can also view them as strategies (Pe'er, Vertinsky, & Keil, 2016) chosen by firms to achieve other higher‐level performance goals, such as survival.…”

An integrative approach to HRM–firm performance relationship: a missing link to corporate governance

“…The year 1995 was the earliest date of interest because in that year Huselid (1995) published his pioneering empirical study about HRM practices and firm performance (Van De Voorde et al, 2012;Kaufman, 2015a). A few years later Welbourne and Cyr (1999) published also a pioneering study of the relationship between the presence of human resource directors and firm performance in initial public offering firms (Chadwick et al, 2016). However, in contrast to previous reviews (for example, Boselie et al, 2005;Wright et al, 2005), which comprehensively examine the first decade of HRM-performance research, we decided to focus primarily upon developments in the more recent literature in an attempt to understand how the literature has since evolved.…”

“…The role of the HR department / HR professional as a strategic partner (Ulrich and Brockbank, 2005;Singh et al, 2012;Martin and Gollan, 2012;Sheehan et al, 2014;Chadwick et al, 2016) has been considered in the literature on HRM -firm performance link in terms of the support this department provides to a TMT in pursuing company strategy. However, the literature also points to the possibility that some of the most critical HR decisions take place in executive suites without the input of HR professionals (Campbell et al, 2012).…”

“…With some exceptions (e.g., Welbourne and Cyr, 1999;Hope Hailey et al, 2005;Singh et al, 2012;Martin and Gollan, 2012;Sheehan et al, 2014;Chadwick et al, 2016), most studies of the so-called "black box" of the HRM -performance relationship focus upon HR practices (processes/systems/policies/strategies), rather than the role played by the HR department in making strategic HR decisions. On the other hand, the stream of research that focuses on the influence of HR department/professionals on strategic decision making on the board (e.g., Ulrich and Brockbank, 2005;Kelly and Gennard, 2007;Charan et al, 2015) tends to exclude a more indepth consideration of HR practices and their relationship to firm performance.…”