Human resources, invaluable investors or weakest links


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Human resources, invaluable investors or weakest links

  1. 1. This paper was presented at The XXIII ISPIM Conference – Action for Innovation: Innovating from Experience – in Barcelona, Spain on 17-20 June 2012. The publication is available to ISPIM members at Human Resources – Invaluable Inventors or Weakest Links? Heidi Olander* Technology Business Research Center, Lappeenranta University of Technology, P.O. Box 20, FIN-53851, Lappeenranta, FINLAND. E-mail: Miia Kosonen Technology Business Research Center, Lappeenranta University of Technology, P.O. Box 20, FIN-53851, Lappeenranta, FINLAND. E-mail: Pia Heilmann School of Business, Lappeenranta University of Technology, P.O. Box 20, FIN-53851, Lappeenranta, FINLAND. E-mail: Pia Hurmelinna-Laukkanen Oulu Business School, University of Oulu, P.O. Box 4600, FIN-90014 Oulu, FINLAND E-mail: * Corresponding author Abstract: Human resources in knowledge intensive industries create the basis for continuing innovativeness. At the same time they pose risks for the competitiveness of the firm: Unwanted knowledge leaking to outsiders expose firm-critical knowledge, and knowledge leaving with a departing key-employee may leave the company in a less than convenient situation with knowledge assets being lost and projects being left in jeopardy. While some of the knowledge within a company can be protected by intellectual property rights, these are not unproblematic. Moreover, the tacit knowledge within employees cannot be patented. Companies subsequently need some complementary means to sustaining prerequisites for innovativeness and enhancing company-critical knowledge protection. We empirically examine how human resources management related practices as an appropriability mechanism can enhance loyalty and commitment of employees and thus enhance knowledge protection using interview data from 22 interviews within two Finnish R&D intensive large firms. Keywords: HRM; knowledge protection; commitment; loyalty; trust; sense of responsibility 1
  2. 2. This paper was presented at The XXIII ISPIM Conference – Action for Innovation: Innovating from Experience – in Barcelona, Spain on 17-20 June 2012. The publication is available to ISPIM members at 1 Introduction Human resources are invaluable sources for innovation. Insightful, experienced and enthusiastic R&D personnel can produce new ideas themselves and/or in collaboration. However, human resources are one of the most volatile resources, and not much is known about their management in terms of sustaining competitiveness. It is, after all, the employees of the firm that deal with the highly-confidential innovation related knowledge that should not leak outside of the company. A resource can only be valuable as long as it is unique and distinct for the company. Besides leakages, leaving of a key employee may pose serious risks for the firm's innovation performance. Motivation of employees to stay within the firm as productive resource and willingness to share and protect knowledge consistently can be influenced by human resources management (HRM) related mechanisms. That is why it is important for innovation managers to understand and manage human resources. Earlier research on protecting firm’s intellectual assets has concentrated to a large extent on the use of formal mechanisms of protection and appropriation, such as contracts and patents, while informal mechanisms have not attracted sufficient research interest (excluding a few exceptions such as Hurmelinna-Laukkanen and Puumalainen, 2007), even though it has been recognized that not everything can be protected by formal means. Especially the HRM related mechanisms for knowledge protection in innovation management have so far received rather limited attention despite their recognized value (Hurmelinna-Laukkanen and Puumalainen, 2007). In fact, even if some researchers (e.g. Baughn et al., 1997, Hurmelinna-Laukkanen and Puumalainen, 2007, Liebeskind, 1996 and 1997) have tried to tackle the issue of using HRM related practices for knowledge protection in innovation management, the findings have been contradictory. For this reason, more in-depth qualitative research design is needed. Additionally, informal mechanisms have been studied mostly in the context of SMEs (e.g. Leiponen and Byma, 2009, Olander et al., 2009 and 2011), and not much is known to what extent larger companies would find them useful. Previous research has identified that knowledge, and especially know how, are important for achieving new innovations and creating and combining knowledge in new ways. Furthermore, the competitive benefits of innovations and the related knowledge become from their uniqueness (Barney, 1991). Both these aspects come to life in the human resources of the firm. Yet ‘employees as the database for tacit knowledge’ has not received much other attention in terms of knowledge protection on top of examination of employment contracts and non-disclosure agreements. Therefore, there lies a research gap in scrutinizing the importance of employees for sustaining the knowledge and competitiveness of the company. Olander et al. (2011) examined the importance of HRM related practices for protecting the firm-critical knowledge and sustaining innovativeness within the company in Finnish SMEs. They found HRM to be important especially for SMEs even though it may not be actively and consciously used. Studies within large firms have mainly been quantitative, and the results have been inconsistent. Based on these findings, HRM related practices and managing employees need to be examined further in large firms, and qualitative means can offer new insight on the issues left uncovered by quantitative means. Based on the research identified gaps, we present a research question: How important 2
  3. 3. are human resources for the innovative efforts of large firms, and how can large companies use HRM related protection mechanisms in order to preserve their knowledge? This issue can be approached by examining what the roles of commitment, loyalty, trust, and sense of responsibility toward the employer are in preparing for knowledge leaking and leaving related risks. We aim to tackle the research question by examining literature related to knowledge and innovation management as well as knowledge protection, strategic management and in particular HRM related literature. We use qualitative interview data from two Finnish large firms’ R&D departments in Finland, and reflect between the data and theory in order to find new areas of knowledge protection related issues to provide insights to managers in large firms. We also aim to extend theory related to knowledge protection. 2 Protecting tacit knowledge within companies A great deal of research has concentrated on protecting the firms’ intellectual assets in the last decades. Knowledge as one form of intellectual asset is a company’s strategic asset (Nonaka et al., 2000). Knowledge can be roughly divided into explicit and tacit. The most valuable knowledge reserve of a company lies in the knowledge reserves of its employees (Ståhle and Grönroos, 1999). This form of knowledge is mostly tacit. Tacit knowledge is the knowledge that is hard to codify and transfer and is not easily visible when observed (Nonaka and Takeuchi, 1995, Zander and Kogut, 1995). Tacit knowledge, by nature, offers protection for the company-critical knowledge, as it is difficult transfer in the first place. This creates on the on one hand benefits for the company, as tacit knowledge cannot easily be leaked outside the company. However, loosing tacit knowledge through knowledge leaving is another issue. Tacit knowledge can walk out of one company and in to another with transfer of key employees with critical skills (Boxall, 1998). Besides, if tacit knowledge is transformed into codified form, the protection provided by complexity, unobservability, and other such features of tacit knowledge is lost for good. Therefore, knowing how to protect and appropriate tacit knowledge is relevant. The appropriability regime (Teece, 1986) of a firm refers to factors that govern an innovator's ability to capture the profits generated by the innovation. Recent research has suggested that the appropriability regime consists of several mechanisms, both formal and informal. The formal mechanisms include the use of intellectual property rights (IPRs) (Cohen et al., 2000, Davis, 2004, Hannah, 2005, Hertzfeld et al., 2006), contracts, and labor legislation. The informal mechanisms include the creation of lead time, the use of HRM related mechanisms, and practical and technical means of protection (Hurmelinna-Laukkanen and Puumalainen, 2007). Formal means of protection offer relatively little protection for tacit kind of knowledge. Regarding IPRs, for example, grant of a patent even requires the knowledge to be explicit and made publicly available in the patent application. Also, enforcing company rights to trade secrets can be difficult. Labor legislation and contracts may suffer similar shortcomings. Surely, non disclosure agreements (NDAs) can be made with employees that have access to company-critical knowledge and they oblige the employee not to divulge company secrets outside of the company even after the expiration of the employment relationship. Their efficacy has been questioned in practice, however. In addition to the protective features of NDAs, some norms, like the Finnish labor
  4. 4. This paper was presented at The XXIII ISPIM Conference – Action for Innovation: Innovating from Experience – in Barcelona, Spain on 17-20 June 2012. The publication is available to ISPIM members at legislation, include concepts such as the employer’s direction right, which means that the employer may choose which tasks each employee should be part of – which can be used as a protective measure in terms of knowledge leaks. Likewise, the loyalty principle built in the labor legislation assumes the employee to be loyal to the employer and not, for example, compete with the employer or reveal company-critical information. However, emphasizing the rights of the employer may hurt the innovativeness or actual loyalty felt by the employees (Hannah, 2005). In fact, the possibilities of a company to protect tacit knowledge depend quite heavily on its employees. In the present day labor markets the employees change more and more often between jobs after short periods. This is partly due to the competitive situation in many industries and the geographic centralization and urbanization giving employees more to choose from. On the other hand, economic pressure pushes companies to lay-offs. However, this transition seems to be the trend in all of the industrialized countries. The leaving of employees in their best work age, no matter what the reason is, is always a loss for the company as the tacit knowledge stored in the heads of the employees is likely to disappear with a leaving employee. Especially in knowledge-intensive industries where companies rely heavily on knowledge assets of the employees the consequences can be critical (Droeger and Hoobler, 2003). Labor law seems to support knowledge from not leaving or leaking the company as long as the employees follow the rules of labor law. Enhancing the employees’ willingness to protect the knowledge from leaking and leaving could improve the level of protection. The next chapter will introduce mechanisms for enhancing loyalty of the employees to create a mutually beneficial situation. 3 Enhancing loyalty by HRM practices Labor legislation and HRM as appropriability mechanisms are quite distinct ways to protect tacit knowledge. For example, the law may allow an employer to give a task for the employees to take part in IPR training, but it cannot determine whether the employees are willing to learn. HRM, for its part, can be utilized to ensure that. HRM as an appropriability mechanism includes several different areas. In the heart of it are means that increase loyalty of employees. The role of loyalty enhancing practices will be emphasized in the future because of the competition for competent workforce. It is important to success in recruiting but also in retaining current personnel. Employee commitment, psychological contract, and motivation are important in enhancing employee’s loyalty toward organization and in preventing information leaks from organization. 3.1 Employee commitment Organizational commitment is commonly conceptualized as an affective attachment to an organization characterized by shared values, a desire to remain in the organization, and a willingness to exert effort on its behalf (Mowday et al., 1979). Organizational commitment is an individual attitude that reflects one’s identification with and involvement in a particular organization (Mowday et al., 1982). It can be characterized by three related factors: 1) strong belief in the organization’s goals and values, 2) 4
  5. 5. willingness to exert extra effort on its behalf, and 3) strong desire to maintain membership (Mowday et al., 1982). Especially the two last-mentioned factors are relevant for knowledge protection – one tackling the knowledge leaking and the other knowledge leaving risks. Reichers (1985) conceptualizes commitment as side-belts (the rewards and costs of organizational membership), attributions (the “binding” of the individual to behavior over a period of time) and goal congruence between the employee and the organization. Most theorists agree that organizational commitment can be seen in terms of two dominant dimensions: affective and calculative, or continuance commitment. Affective commitment is an attitudinal phenomenon related to personality traits and job-related factors, and leads to the willingness of an employee to support organizational goals. Calculative or continuance commitment is the result of an employee’s perception that organizational membership will serve his/her self-interest and results in the continued participation of the individual in the organization. Commitment to an organization and its goals as well as the intent to stay with the organization are seen as desirable outcomes promoting positive organizational citizenship behaviour, reduced turnover, increased productivity and job satisfaction (Mir et al. 2002). According to Allen and Mayer (1997) factors that affect the commitment of a person are personal characteristics, working experience (e.g. fulfilment of expectations, reward system, career progression possibilities, personal relations in the organization, personal ranking in the organization), work role (wide and challenging tasks, interest, autonomy, significance, responsibility and power in the organization, clarity of work role) and organizational structure (organization’s age, managerial traditions, size of the organization, control system). 3.1.1 Psychological contract Psychological contract theory refers to the implicit, reciprocal rights and obligations that individuals perceive within exchange relations (Rousseau, 1995), and can also be used to understand commitment (Rousseau and Wade-Benzoni, 1995). Commitment and loyalty are two-way contracts. Commitment is connected to a psychological contract between the employer and the employee. The concept of the psychological contract can be defined as an exchange agreement of promises and contributions between two parties, an employee and an employer (Janssens et al., 2003). Chris Argyris (1960) is originally responsible for the concept of psychological contract. Psychological contracting between an individual and an organization is the process which holds the whole organizational enterprise together. It is the invisible glue which binds individuals to the organization over time. The individual’s objective, external career is the sequence of the positions he/she holds in the organization, but his/her subjective internal career is the process of psychological contracting (Herriot, 1992). Psychological contracts in employment are the belief systems of individual workers and employers regarding their mutual obligations (Rousseau and Schalk, 2000). From the employees’ point of view, the psychological contract is the agreement that they have with their employer about what they will contribute to the employer through their work, and what they can expect in return. A relational contract refers to a long-term relationship based on trust and mutual respect. The employees offer loyalty, conformity to requirements, and commitment to their employer’s goals, and trust that their employer will not abuse their goodwill. In return, the organization is supposed to offer security of employment, promotion prospects, training and development and some flexibility about the demands made on employees if they are in difficulties.
  6. 6. This paper was presented at The XXIII ISPIM Conference – Action for Innovation: Innovating from Experience – in Barcelona, Spain on 17-20 June 2012. The publication is available to ISPIM members at However, global competition, new technology, downsizing, delayering and the rest have put an end to all this. Many employers no longer keep their side of the bargain. Instead of a contract being based on a long-term relationship, it is much more likely a short-term transactional, economic exchange (Arnold, 1997). Lawler (2003) argues that the shear concept of loyalty is starting to disappear in the organizational context because of moving employees and global competition. Also lay-offs related to the increasing competitive situation and global financial crises may send a signal to the employees that it may not be wise to commit to any one company. In this situation however, it is more important than ever to attract new talent, and keep the existing key talents in house for example by substantial efforts creating high-level of motivation. 3.2 Motivation Herzberg’s motivation-hygiene theory (or two-factor theory or satisfier-dissatisfier theory) is widely used in motivation research (Herzberg, 1974). The two ‘factors’ in this theory refer to sets of hygiene factors and motivation factors, or ‘motivators’. If the hygiene factors are not satisfied, employees are dissatisfied and unmotivated. If only the hygiene factors are satisfied, personnel are not dissatisfied but not motivated either. If both hygiene and motivation factors are satisfied, employees are happy and motivated. According to Herzberg, the hygiene factors are: • company policy and administration • level and quality of supervision • quality of interpersonal relations • working conditions • salary and other forms of remuneration • status • job security Motivators are: • achievement • recognition for achievement • work itself • responsibility • advancement • growth For example, to provide someone a larger office is a quick fix which just ensures the employee is not dissatisfied. Building in more responsibility to the individual’s work is a motivator that makes the employee more satisfied. 6
  7. 7. 4 Cross-industry qualitative study on HRM-related protection and the roles of commitment, trust, and sense of duty towards the organization 4.1 Methods and analysis As the research questions that our study aims to answer were how important human resources are for the innovative efforts of large firms and how large companies can use human resources management related protection mechanisms in order to preserve their knowledge, and what the roles of commitment, trust, and sense of duty toward the employer are in preparing for knowledge leaking and leaving related risks, we took a qualitative research approach and examined two Finnish large companies’ Finnish R&D units. The case companies were engineering company and an IT company. The two industries varied considerably in the speed of the technological change, for example, the first one having relatively long product life cycle with incremental innovation and the second one being in a fast changing industry with continuous radical and incremental innovation with short product life cycles and an environment known for its fierce competition. We conducted 22 interviews: 12 interviews in the engineering company and 10 interviews in the IT company. We took a multi-level research setting examining interviewees from four levels within the R&D units: strategy, expert (HR-managers, R&D managers, legal experts), superiors, and operative level employees. The interviews were conducted in Fall 2011. We constructed a semi-structured theme interview form covering issues related to the role of human resources management related practices in knowledge protection based on literature review. This enabled taking theoretical background into consideration already when conducting the interviews, but also allowed for further in-depth questions during the interviews. The interviews lasted approximately 90 minutes each, and were recorded with the permission of the interviewee and later transcribed for analysis purposes. The analysis was conducted using the transcribed material which consisted of 262 pages of interview transcripts. Abductive logic was applied for the analysis. In the first analysis round, we adopted content-analysis technique where the coding frame was based on the themes arising from the theory including dependency on employees, loss of tacit knowledge with leaving employee, enhancing commitment and loyalty, and sense of responsibility towards employer. In the second analysis round, we adopted a comparative case study approach (Eisenhardt and Graebner, 2007) comparing the cases from different industries as well as comparing the conceptions of employees across different levels within the companies. In both rounds of analysis, research triangulation was applied, as two authors participated in the coding phase and contributed to the key findings individually. The findings were then discussed and agreed upon jointly to enhance their consistency. Table 1 Case companies and number of interviewees per level Company (A & B) Strategy (# e Operativ e Altogether
  8. 8. This paper was presented at The XXIII ISPIM Conference – Action for Innovation: Innovating from Experience – in Barcelona, Spain on 17-20 June 2012. The publication is available to ISPIM members at m p l o y e e s ) (A) Engineering 2 4 2 4 12 (B) IT 2 2 2 4 10 Altogether 4 6 4 8 22 4.2 Dependency on key individuals in a large company As noted earlier, tacit knowledge constitutes a key asset for also the case firms’ innovativeness. In both engineering and IT companies, human resources were considered critical for innovativeness and competitiveness. Across all organizational levels in both companies, the interviewees emphasized the role of professional knowledge and skills residing in firm employees. “We have an organization of professional software developers, it is a type of organization that always depends on what people know, and we have different skills and competence areas. Which means that the role of individual employees is accentuated.” (R&D employee, company A) “Of course you may store knowledge in systems, but to be able to use that documentation meaningfully, you need people and their brains. The potential to apply knowledge and solve problems, it can only reside on people.” (manager, company A) “This is knowledge-intensive business and it means our core knowledge is in our personnel.” – “It is accentuated in the early stages, when you only have a fuzzy idea, or belief this is truly important, it all derives from the individual. But in the later phases, some of that core knowledge already resides in technology and processes as well.” (managers, company B) In terms of formal mechanisms, on-going employment contracts were made and non-disclosure agreements were a regular practice on all levels interviewed. As the on-going employment contracts may be a good sign of the company’s commitment to the employee, and non-disclosure agreements were seen to provide with formal reminder of responsibilities related to confidential knowledge, these were considered inadequate to cover for both leaking and leaving related knowledge risks. In the engineering company (firm A) continuous effort had been placed on reducing dependency on single actors by careful documentation which was especially clear on the 8
  9. 9. strategy level interviews. In company B documentation was also considered important, even though not an unproblematic ways to prevent knowledge from leaving. Also company B seems to be in favour of more informal ways of preparing for risks of knowledge leaking and leaving. “We can only hope we’ve done a good job in documenting everything in advance, in case a key employee leaves.” (Manager, company B) “In case someone left, their job had been focusing on documentation during the last weeks of employment.” (R&D employee, company B) However, the operative level employees of company A felt the knowhow within the employees could not be captured so easily and sustaining the competitiveness was more about keeping the people, and keeping them committed and motivated. In sum, it can be seen that leaving of an employee could cause serious harm for the company, and thus different kinds of means were taken not to lose all of the tacit knowledge with leaving employee. 4.3 The roles of enhancing commitment and loyalty As Mowdy et al. (1982) recognized, commitment can enhance individual’s willingness to exert extra effort on the company’s behalf and also increase the willingness of an individual to stay within the company. In both firms, this had been grasped and effort had been taken to succeed in keeping employees within the firm. The means used to enhance commitment were different kinds of rewards and career paths with varying tasks according to working years in the company and considered accumulated abilities. Across all organizational levels, the role of intangible rewards in increasing commitment was accentuated. Even if there were tangible reward systems applied, they were considered either not very well matching with the content of work (company B) or favouring top management instead of operational level (company A). This was seen to erode the positive atmosphere. While not giving as much weight to bonuses or other concrete rewards, many interviewees noted the role of giving positive feedback and appraisal of good work. Yet there was significant concern how the Finnish culture does not seem to favour openness in giving feedback. It was also not systematic but more coupled with the personality of managers and supervisors, which was seen as a challenge. “We should have more means to give intangible rewards to our employees.” – “It is a problem that we do not usually thank employees in public.” (managers, company A) “It depends much on the person you are dealing with, people have quite different habits in how they give feedback.” (R&D employee, company B) However, in terms of enhancing commitment, getting feedback for a job well done was considered very important on the operative level in both companies: “Feedback has a quite a lot of effect, of course it is nicer to get some positive than
  10. 10. This paper was presented at The XXIII ISPIM Conference – Action for Innovation: Innovating from Experience – in Barcelona, Spain on 17-20 June 2012. The publication is available to ISPIM members at negative feedback but the most essential thing is it is based on honesty and reality.” (R&D employee, company A) “Definitely it feels good to hear that you have done things right.” – “For instance, successful projects have been highlighted in shared events and people are given recognition.” (R&D employees, company B) Affective commitment was looked for rather than calculative commitment, which does not create long-term commitment towards the company. As it could be seen from many of the interviews, the employees felt quite enthusiastic about their work and willing to give their best input to the company. Even with the company B being under considerable challenges with competitive environment and having had to do lay-offs in the past, the employees were still quite affectively committed. This was also related to the unique work opportunities offered, as one interviewee pointed out. “For me, all this commitment thing is that we are working on a Finnish company, with good managers, and with an opportunity to get a job for years.” (R&D employee, company A) “We have people who share this thing, interest in advances in technology and willing to do certain type of work to advance it further. This is why we may openly and informally discuss with each other, not based on formal roles. I think it is the best way to make people committed.” (R&D employee, company B) “It is a bit difficult to say if the company’s actions have much effect [on commitment], it is more like personal characteristics and choices. And I also have to say that this workplace is quite unique, our people could not find similar job elsewhere.” (R&D employee, company B) In company A, career paths had only recently been taken to the company agenda but there was rapid advance already. Even if not all work positions offered opportunities to promote, overall the company was seen to offer good opportunities for learning and professional development. The same applied for company B. Even if the market situation for these companies was different, short-term thinking was a shared concern. The changes in competitive environment were seen to have resulted in “quarter management” approach and less options for long-term development and technological advance, which still is the key target for R&D employees. 4.3.1 Psychological contract and sense of responsibility towards employer In both companies, the informants from managerial level identified a common “sense of justice” as a typical cultural characteristic in Finland and other Western countries, resulting in shared assumption that people feel sense of responsibility towards their employer and do not aim at harming its business: 10
  11. 11. “Our values here are based on the assumption that you take care of the confidentiality issues, particularly with external stakeholders, and it is taken seriously.” (manager, company A) “If you wanted to leak knowledge, of course you could do that. But protection is based on trust and employee willingness to follow that norm.” – “It starts with our employees realizing the importance of protecting knowledge, and acting morally and ethically right as company representatives.” (managers, company B) In addition to the general sense of justice, employees were seen to demonstrate sense of responsibility towards the company based on their experience on its practices. Both firms were seen as trusted employers with a long tradition, resulting in a shared positive image among employees – particularly among personnel with the most working-years. Even leaving employees were seen to follow the responsibility standards. However, as one interviewee pointed out, in knowledge-intensive business it may be challenging to draw a line between general professional skills and business-critical knowledge to be protected. Again, employees’ own judgement and acting according to the general moral standards was underlined. Relational contract refers to a long-term relationship based on trust and mutual respect. The employees offer loyalty, conformity to requirements, and commitment to their employer’s goals, and trust that their employer will not abuse their goodwill. Also in the interviews, the role of trust and respect was highlighted. The practices related to trust building were open communication and equal treatment of employees. As one interviewee stated, there is a mutual “moral collaboration agreement” between employees and superiors. Therefore, ethical standards are followed, but violating the moral collaboration agreement could be assumed to result e.g. in frustration and purposeful knowledge leaks. 4.4 Motivation With the salary, working conditions and job security (e.g. safety at work) as hygiene factors (Herzberg, 1974) being on fair levels, the interest turns into the internal motivation factors. In addition to above mentioned recognition for achievement, the companies were also using advancement and giving more responsibility with recognized talent and according to years in the company. Quite naturally in a unit with researchers interested in special professional domains, challenging and motivating tasks in their specific fields were found important in keeping the employees happy and motivated with their work. It was also a question of empowerment: people were allowed more freedom in completing tasks and organizing their work. “The important thing is that we have meaningful tasks that are of interest for our employees.” (manager, company A) “We need to give our people jobs and tasks which inspire them, based on their areas of expertise.” (manager, company B)
  12. 12. This paper was presented at The XXIII ISPIM Conference – Action for Innovation: Innovating from Experience – in Barcelona, Spain on 17-20 June 2012. The publication is available to ISPIM members at Even if the above-mentioned career paths and opportunities to promote were noted in both companies, their role did not turn out as significant as being motivated. Many interviewees described how the “burning desire” to achieve and create new pushes them forward as professionals. On operational level, the following notion well demonstrates the internal motivation that many employees seem to possess: “Even if there were no means to reward people, they might still work as much as they do now, because we want to innovate and create new.” (R&D employee, company A) This kind of internal motivation together with affective commitment to the company creates a rather stable situation in both companies. As long as the hygiene-factors are at a reasonable level and the job keeps motivating the personnel, knowledge protection in terms of knowledge leaving seems to remain at an acceptable level. 5 Discussion A variety of mechanisms and practices were identified in order to prevent knowledge leaving. Across different organizational levels, it was also seen as a greater challenge than the actual knowledge leakages in these case companies. Even though in many of the previous studies the emphasis in terms of employee-related knowledge risks has been on knowledge leaks (e.g. Mohamed, 2007, Norman, 2001) and also in the general opinion, in our study these were not considered to be the greatest risk in terms of employees. Instead, in both large firms the leaving of core knowledge (i.e. loosing of core tacit knowledge) was considered the bigger risk. This result is in line with what has been found in the study by Olander et al. (2011) in the context of SMEs. The firm B considered knowledge leaking to be a rather small chance and only critical close to product launches, and could be diminished by restricting exclusive core knowledge, whereas both companies identified they had a lot invested in the intellectual assets of the key employees and their talent, and leaving of such employee could be somewhat bigger a problem. In terms of decreasing unwanted turnover of key talent, we examined the use of HRM related means. Firstly, we focused on the roles of enhancing commitment and loyalty. All in all, affective commitment (Mir et al., 2002) was perceived as rather high in both companies. The presence of more calculative type of commitment could be more expected from employees in company B due to turbulences in the organizational environment. Rather surprisingly, the commitment seemed to be affective and on relatively same levels within both of the companies. While rapid change and turbulence were seen to erode the “family-like” atmosphere and opportunities for long-term technological development - thus making it more challenging to enhance employee commitment - it did not seem to hamper the employees’ internal motivation greatly. Uncertainty often comes together with researcher’s interesting and challenging occupation in different types of organizational environments in Finland. We suspect that employees having a professional status and long experience may have accepted the turbulence in the current working environments, have gotten used to it, and found means to adapt to the new situation. It could also be that employees are more than previously committed to their professional competence than on the organization, and thus have trust 12
  13. 13. in their own “market value”, and can thus bear some uncertainty with one aspect of job security as hygiene factor (Herzberg, 1974). In order to enhance commitment, the companies offered various opportunities for advancing career and also applied rewards systems. Interestingly, positive feedback and appraisal for a good job was recognized as important, yet not sufficiently common across all organizational levels, and pronounced on operative researcher level. Currently the R&D employees felt that rewarding was too focused on tangible outcomes. More attention should thus be paid to giving feedback on an on-going basis. We believe this too could have something to do with the researcher mindset and aim for accomplishment. Secondly, enhancing sense of responsibility seemed to be tightly coupled with the trust-building practices. Hereby, we noted the focal role of immediate superiors and middle managers who “give face” to the organization, act as role models, and guide their subordinates to act in line with sense of duty and obligation. Trust was seen to derive from the simultaneous presence of R&D employees and supervisors, engaging in mutual problem-solving and open communication in their everyday work. It is important to note it was mainly the operative personnel who pinpointed the importance of interpersonal and mutual trust, whereas for upper level managers it was more like role-based expectations of acting as an example and listening to employees. Open communication, in turn, was emphasized across all organizational levels, but it may not be perceived in the same vein: operational-level interviewees in both companies noted how trust in top management remained lower than in one’s immediate superiors, as decision-making was not considered open enough and there was also lower level of presence and interaction. In order not to erode trust on institutional levels, it is important to give face also to top management and particularly to respond quickly in challenging situations. Thirdly, the role of internal motivation among dedicated and enthusiastic R&D personnel became salient in the interviews. It is important to note that motivation was not seen just as a passive state - outside the sphere of influence by the company - but some appropriate means to cultivate employee motivation were identified. Most of all it was an issue of empowering employees, allowing them enough freedom and selecting optimally challenging tasks. 6 Conclusions In this study it was recognized that the firms are to an extent dependent on talented key-employees, even if the firms employ practices to reduce the dependency on single actors, and at the same time hold on to valuable resources by increasing commitment. It seems that for people in R&D, who may have a greater internal motivation, HR practices related to increasing commitment play an important role. At the same time, the R&D professionals feel a strong loyalty towards their employer as long as they feel their employer is perceived to be trustworthy. We believe this could be special to the Finnish work ethics and appear especially with personnel with several years within the company. At the operational level, the role of trust and appreciation is recognized much more important than on the management and strategy levels, which implies there may be a mismatch between the wishes of employees and the message that is coming through from managers. In sum, while the focal role of employees in sharing/protecting knowledge has been identified within large firms, it has thus far not been managed consistently. In sum,
  14. 14. This paper was presented at The XXIII ISPIM Conference – Action for Innovation: Innovating from Experience – in Barcelona, Spain on 17-20 June 2012. The publication is available to ISPIM members at it seems that employees within R&D intensive large firms indeed are invaluable inventors, and not the weakest links, as long as they are being managed the right way. Loyalty and commitment can be enhanced, but there may be signs of the present day competitive situation calling for new kinds of approaches for enhancing loyalty and commitment of employees. Loyalty of employees was considered to be on rather good levels in the studied companies, which (apart from management culture) could have something to do with Finnish culture and mindset as well as reputation issues in a rather small country. Also characteristics of the Finnish market area, such as the legal system known to be viable and effective, may enhance the use of trust-based approaches within and between companies. Therefore, it would be relevant to study these issues in large firms in different market areas. The qualitative approach taken in this study allows reaching in-depth views, but for wider generalization, other industries and more quantitative studies should be carried out. References Allen, N. & Mayer, J. (1997). Commitment on the Workplace – Theory, Research, Application. Sage Publications, Thousand Oaks. Argyris, C. (1960). Understanding Organisational Behaviour. Dorsey Press, Homewood, Illinois. Arnold, J. (1997). Managing Careers into the 21st century. Sage Publications, London. Barney J. 1991. Firm resources and sustained competitive advantage, Journal of Management, Vol. 17, No. 1, pp. 99-120. Baughn, C.C., Stevens, J.H., Denekamp, J.G. & Osborn, R.N. (1997). Protecting intellectual capital in international alliances. Journal of World Business, Vol. 32, No. 2, pp. 103-117. Boxall, P. (1998). Achieving competitive advantage through human resource strategy: Towards a theory of industry dynamics. Human Resource Management Review, Vol. 8, No. 3, pp. 265-288. Cohen, W.M., Nelson, R.R. & Walsh, J.P. (2000). Protecting their intellectual assets: Appropriability conditions and why US manufacturing firms patent (or not). NBER Working paper 7552. Davis, L. (2004). Intellectual property rights, strategy and policy. Economics of Innovation and New Technology, Vol. 13, No. 5, pp. 399-415. Droeger, S. B. & Hoobler, J.M. 2003. Employee Turnover And Tacit Knowledge Diffusion: A Network Perspective, Journal of Managerial Issues, vol. 15, No. 1, pp. 14
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