Abstract

Human resources management (HRM) is not on the top priority of entrepreneurial firms and HRM practices are comparatively unsophisticated. However, the efficient management of employees’ knowledge, skills, and abilities can provide a competitive advantage that results in firm performance. The question therefore remains as to which HRM practices need to be implemented in entrepreneurial firms in order to strengthen firm performance. Traditional HRM practices (planning, recruitment, selection, compensation, and performance management) are often not affordable for entrepreneurial firms. Moreover, such HRM practices have been suggested for large firms and may not be efficient in entrepreneurial firms. We argue that HRM practices need to be aligned with the strategic aims of entrepreneurial firms. Entrepreneurial firms have to convert knowledge into new products and services. Therefore, entrepreneurial firms need to adopt HRM practices that support exploration and exploitation. HRM practices focusing on exploration emphasize flexibility, empowerment, training and cooperation. Exploitative HRM practices emphasize communication and commitment.

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