The impact of upper and lower echelon human capital and HR practices on innovation in start-ups.

Abstract

Abstract Innovative start-ups have become the center of attention in government policy. They are considered to be the driving force of economic growth and international competitive advantage. Despite this growing interest, little is known about firm internal determinants of and critical success factors for innovation in newly established firms. Innovation is a function of a firm's ability to create, manage and maintain knowledge. Since knowledge is created by and stored within individuals, human resources as well as HR practices may play an important role as drivers of innovation in start-ups. We expect that start-ups having superior human resources (both owners/managers and employees) and an intensive HRM, are more able to innovate. Results show that unless employees' human capital is managed, it provides little benefit to start-ups in terms of innovation. Moreover, the impact of HRM intensity is higher in start-ups with high human capital as compared to newly established firms with low human capital. Next, innovation is indirectly (through the mediating effect of employees' human capital and/or HRM) and positively affected by the owners/managers' educational level and the appeal to certified experts. Industry experience, in turn, has an indirect negative impact. The number of independent board members directly and positively influences innovation.Employees; Human capital; Human resource management; Innovation; Startups;