Human Capital Flows in Failing Organizations: An Integrated Conceptual Framework

Amankwah-Amoah, Joseph (2017): Human Capital Flows in Failing Organizations: An Integrated Conceptual Framework. Forthcoming in: Journal of Intellectual Capital

Abstract

Purpose – The paper examines the dynamics of human capital accumulation and human capital depletion in the processes leading to business failure. Design/methodology/approach – Building on the human capital theory, strategic human resource and business failure literature, this paper develops a conceptual framework which links the inward and outward dimensions of human capital flows in the business failure process. Findings – The analysis sheds light on why some highly skilled individuals may opt to flee declining firms to avoid being stigmatised whilst others become motivated to joint such firms. Research limitations/implications – The paper suggests that understanding the nature and dynamics of both flows are essential when seeking to avert collapse. Originality/value –In spite of a growing body of research on business failure and intense competition for top talent, much of the existing literature has circumvented the relationship between them. This study develops a unified model towards enhancing our understanding of the human capital flows.

• Item Type: MPRA Paper
• Language: English
• Keywords: failing organizations; human capital; business failure; personnel poaching.
• Subjects: M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M14 - Corporate Culture ; Diversity ; Social Responsibility; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M16 - International Business Administration; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising

References

Altman, E. I. (1984), “The success of business failure prediction models – an international survey”, Journal of Banking and Finance, Vol. 8 No. 2, pp. 171–198.

Altman, E. I. and Hotchkiss, E. (2010), Corporate financial distress and bankruptcy: Predict and avoid bankruptcy, analyze and invest in distressed debt. John Wiley & Sons.

Amankwah-Amoah, J. (2011), “Learning from the failures of others: The effects of post-exit knowledge spillovers on recipient firms”, Journal of Workplace Learning, Vol. 23 No. 6, pp. 358–375.

Amankwah-Amoah, J. (2015a), “A unified framework for incorporating decision-making into explanations of business failure. Industrial Management and Data System, Vol. 115 No. 7, pp. 1341–1357.

Amankwah-Amoah, J. (2015b), “Where will the axe fall? An integrative framework for understanding attributions after a business failure”, European Business Review, Vol. 27 No.4, pp. 409–429.

Amankwah-Amoah, J. (2015c), “An integrative review of the antecedents and consequences of lateral hiring”, Journal of Management Development, Vol. 34 No. 7, pp. 754–772.

Amankwah-Amoah, J. (2016), “An integrative process model of organisational failure”, Journal of Business Research, Vol. 69 No. 9, pp. 3388–3397.

Amankwah-Amoah, J. (2017). Cultivating greater self-confidence in African management research. Thunderbird International Business Review, 1-32.

Amankwah-Amoah, J. and Debrah, Y. (2017), “Toward a construct of liability of origin”, Industrial and Corporate Change, Vol. 26 No. 2, pp. 211–231.

Amankwah-Amoah, J. and Debrah, Y. A. (2010), “The protracted collapse of Ghana Airways: lessons in organizational failure”, Group & Organization Management, Vol. 35 No. 5, pp. 636–665.

Amankwah-Amoah, J. and Debrah, Y. A. (2014), “Air Afrique: The demise of a continental icon”, Business History, Vol. 56 No. 4, pp. 517–546.

Amankwah-Amoah, J. and Zhang, H. (2015). “Tales from the grave”: What can we learn from failed international companies? ”, Foresight, Vol. 17 No. 5, pp. 528–541.

Amankwah-Amoah, J., Antwi-Agyei, I. and Zhang, H. (2017), “Integrating the dark side of competition into explanations of business failures: Evidence from a developing economy”, European Management Review, Vol. 0 No. 0. DOI: 10.1111/emre.12131.

Amankwah-Amoah, J., Boso, N. and Antwi-Agyei, I. (2016), “The effects of business failure experience on successive entrepreneurial engagements: An evolutionary phase model”, Group and Organization Management, Vol. 0 No. 0, 1-35.

Avery, J., Steenburgh, T.J., Deighton, J. and Caravella M (2012), “Adding bricks to clicks: Predicting the patterns of cross-channel elasticities over time”, Journal of Marketing, Vol. 76 No. 3, pp. 96–111.

Barney, J. B. (1991), “Firm resources and sustained competitive advantage”, Journal of Management, Vol. 17 No. 1, pp. 99–120.

Bayus, B. L., and Agarwal, R. (2007), “The role of pre-entry experience, entry timing and product technology strategies in explaining firm survival”, Management Science, Vol. 53 No. 12, pp. 1887–1902.

Becker, G. (1964), Human Capital. Chicago: The University of Chicago Press.

Bergh, D. D. and Gibbons, P. (2011), “The stock market reaction to the hiring of management consultants: a signalling theory approach”, Journal of Management Studies, Vol. 48 No. 3, pp. 544–567.

Bernstein, F., Song, J. S. and Zheng, X. (2008), “Bricks-and-mortar” vs.“clicks-and-mortar”: An equilibrium analysis”, European Journal of Operational Research, Vol. 187 No. 3, pp. 671-690.

Bibeault, D. B. (1982), Corporate turnaround: how managers turn losers into winners. McGraw-Hill, New York.

Brüderl, J., Preisendörfer, P. and Ziegler, R. (1992), “Survival chances of newly founded business organizations”, American Sociological Review, Vol. 57 No. 2, pp. 227-242.

Byrne, O. and Shepherd, D. A. (2015), “Different strokes for different folks: Entrepreneurial narratives of emotion, cognition, and making sense of business failure”, Entrepreneurship Theory and Practice, Vol. 39 No. 2, pp. 375-405.

Cannella, A. A., Fraser, D. R. and Lee, D. S. (1995), “Firm failure and managerial labor markets: Evidence from Texas banking”, Journal of Financial Economics, Vol. 38, pp.185–210.

Cappelli, P. (2008a), “Talent management for the twenty-first century”, Harvard Business Review, Vol. 86 No. 3, pp. 74–81.

Cappelli, P. (2008b), Talent on demand: Managing talent in an age of uncertainty. Boston: Harvard Business School Press.

Chen, G. and Hambrick, D. C. (2012), “CEO replacement in turnaround situations: Executive (mis)fit and implications”, Organization Science, Vol. 23 No. 1, pp. 225-243.

Coff, R.W. 1997. Human assets and management dilemmas: coping with hazards on the road to resource based theory”, Academy of Management Review, Vol. 22 No. 2, pp. 372–402.

Crook, T. R., Todd, S. Y., Combs, J. G., Woehr, D. J. and Ketchen, D. J., Jr. (2011), “Does human capital matter? A meta-analysis of the relationship between human capital and firm performance”, Journal of Applied Psychology, Vol. 96 No. 3, pp. 443–456.

Dambolena, D., Khoury, I. G. and Sarkis, J. (1980), “Ratio stability and corporate failure”, Journal of Finance, Vol. 35 No. 4, pp. 1017–26.

Dash, E. (2011), “Outsize severance continues for executives, even after failed tenures”, September 29, http://www.nytimes.com/2011/09/30/business/outsize-severance-continues-for-executives-even-after-failed-tenures.html.

D'Aveni, R. A. (1990), “Top managerial prestige and organizational bankruptcy”, Organization Science, Vol. 1 No. 2, pp. 21–142.

Debrah, Y.A., and Ofori, G. (2006), “Human Resource Development of Professionals in an Emerging Economy: The Case of the Tanzanian Construction Industry”, International Journal of Human Resource Management, Vol. 17 No. 3, pp. 440–463.

Desai, V. (2011), “Mass media and massive failures: Determining organizational efforts to defend the field’s legitimacy following crises”, Academy of Management Journal, Vol. 54 No. 2, pp. 263–278.

Doganis, R. (2005), The Airline Business. New York: Routledge.

Fee, C. E. and Hadlock, C. J. (2003), “Raids, rewards and reputations in the market for managerial talent”, Review of Financial Studies, Vol. 16 No. 4, pp. 1315–1357.

Finlay, W. and Coverdill, J. E. (2002), Headhunters: Matchmaking in the labor market. Ithaca, NY: Cornell University Press.

Freeman, J. (1979), “Going to the well: School district administrative intensity and environmental constraint”, Administrative Science Quarterly, Vol. 24, No. 1, pp. 119-133.

Gardner, T. M. (2002), “In the trenches at the talent wars: Competitive interaction for scarce human resources”, Human Resource Management, Vol. 41 No. 2, pp. 225–237.

Gardner, T. M. (2005), “Interfirm competition for human resources: Evidence from the software industry”, Academy of Management Journal, Vol. 48 No. 2, pp. 237–256.

Gardner, T. M., Stansbury, J. and Hart, D. (2010), “The ethics of lateral hiring”, Business Ethics Quarterly, Vol. 20 No. 3, pp. 341–369.

Golan, L. (2005), “Counteroffers and efficiency in labor markets with asymmetric information”, Journal of Labor Economics, Vol. 23 No. 2, pp. 373–395.

Groysberg, B. (2010), Chasing stars: the myth of talent and the portability of performance. Princeton, NJ: Princeton University Press.

Groysberg, B. and Abrahams, R. (2006), “Lift outs: How to acquire a high-functioning team”, Harvard Business Review, Vol. 84 No. 12, pp. 133–140.

Groysberg, B. and Lee, L. (2009), “Hiring stars and their colleagues: Exploration and exploitation in professional services firms”, Organization Science, Vol. 20 No. 4, pp. 740–758.

Groysberg, B., Lee, L.-E. and Nanda, A. (2008), “Can they take it with them? The portability of star knowledge workers’ performance”, Management Science, Vol. 54 No. 7, pp. 1213–1230.

Hambrick, D. and D’Aveni, R. A. (1988), “Large corporate failures as downward spirals”, Administrative Science Quarterly, Vol. 33 No. 1, pp. 1–23.

Hambrick, D. and D’Aveni, R. A. (1992), “Top team deterioration as part of the downward spiral of large corporate bankruptcies”, Management Science, Vol. 38 No. 10, pp. 1445–1467.

Hambrick, D. and Mason, P. (1984), “Upper echelons: The organization as a reflection of its top managers”, Academy of Management Review, Vol. 9 No. 2, pp. 193–206.

Hamilton, E. A. (2006), “An exploration of the relationship between loss of legitimacy and the sudden death of organizations”, Group & Organization Management, Vol. 31 No. 3, pp. 327–358.

Heracleous, L. and Werres, K. (2016), “On the road to disaster: Strategic misalignments and corporate failure”, Long Range Planning, Vol. 49 No. 4, pp. 491-506.

Jiang, H., Cannella, A. A, Xia, J. and. Semadeni, M. (2017), “Choose to fight or choose to flee? A network embeddedness perspective of executive ship jumping in declining firms”, Strategic Management Journal. DOI: 10.1002/smj.2637.

Kiggundu, M. N. (1989), Managing organizations in developing countries: An operational and strategic approach. Kumerian Press, West Hartford, CT.

Kumar, S., Savani, K., Sanghai, A., Pochkhanawalla, S., Dhar, S., Ramaswami, A. and Markus, H. R. (2015), “Indian employees' attitudes toward poaching”, Business Perspectives and Research, Vol. 3 No. 2, pp. 81-94.

Laing, D. (1994), “Involuntary layoffs in a model with asymmetric information concerning worker ability”, Review of Economic Studies, Vol. 61 No. 2, pp. 375–392.

Madsen, T.L., Mosakowski, E. and Zaheer, S. (2002). The dynamics of knowledge flows: human capital mobility, knowledge retention and change. Journal of Knowledge Management, Vol. 6 No. 2, pp.164-176.

Marcel, J. J. and Cowen, A. P. (2014), “Cleaning house or jumping ship? Understanding board upheaval following financial fraud”, Strategic Management Journal, Vol. 35 No. 6, pp. 926–937.

Mellahi, K. and Wilkinson, A. (2004), “Organizational failure: A critique of recent research and a proposed integrative framework”, International Journal of Management Reviews, Vol. 5 No. 1, pp. 21–41.

Miller, D. (1990), The Icarus paradox: How exceptional companies bring about their own downfall, New York: Harper Business.

Millward, R. (2005), Private and public enterprise in Europe: energy, telecommunications and transport, 1830-1990. Cambridge University Press.

Nutt, P. C. (2002), Why decisions fail: Avoiding the blunders and traps that lead to debacles. San Francisco, C. A.: Berrett-Koehler.

Nyberg, A. J. & Ployhart, R. E. (2013), “Context-emergent turnover (CET) theory: A theory of collective turnover”, Academy of Management Review, Vol. 38 No. 1, pp. 109-131.

Pennings, J. M., Lee, K. and Van Witteloostuijn, A. (1998), “Human capital, social capital, and firm dissolution”, Academy of management Journal, Vol. 41 No. 4, pp. 425-440.

Perri, T. J. (1995), “Is there a winner's curse in the labor market?”, Journal of Economic Behavior & Organization, Vol. 28 No. 1, pp. 79–89.

Ployhart, R. E. and Moliterno, T. P. (2011), “Emergence of the human capital resource: A multilevel model”, Academy of Management Review, Vol. 36 No. 1, pp. 127-150.

Ployhart, R. E., Van Iddekinge, C. and MacKenzie, W. (2011), “Acquiring and developing human capital in service contexts: The interconnectedness of human capital resources”, Academy of Management Journal, Vol. 54 No. 2, pp. 353-368.

Pozner, J-E. (2008), “Stigma and settling up: An integrated approach to the consequences of organizational misconduct for organizational elites”, Journal of Business Ethics, Vol. 80 No. 1, pp. 141-150.

Price, J. L. (1977), The Study of Turnover. Iowa State University Press: Ames, IA.

Ramadan, B. M., Ramadan, B. M., Dahiyat, S. E., Dahiyat, S. E., Bontis, N., Bontis, N., ... & Al-dalahmeh, M. A. (2017). Intellectual capital, knowledge management and social capital within the ICT sector in Jordan. Journal of Intellectual Capital, Vol. 18 No. 2, pp. 437-462.

Rao, H. and Drazin, R. (2002), “Overcoming resource constraints on product innovation by recruiting talent from rivals: A study of the mutual fund industry, 1986-94”, Academy of Management Journal, Vol. 45 No. 3, pp. 491–507.

Rothaermel, F. T. (2001), “Incumbent's advantage through exploiting complementary assets via interfirm cooperation”, Strategic Management Journal, Vol. 22 No. 6‐7, pp. 687–699.

Schultz, T. (1961), “Investment in human capital”, American Economic Review, Vol. 51 No. 1, pp. 1–17.

Semadeni, M., Cannella, A. A., Fraser, D. R. and Lee, D. S. (2008), “Fight or flight: Managing stigma in executive careers”, Strategic Management Journal, Vol. 29 No. 5, pp. 557–567.

Shaw, J. D., Park, T. Y. and Kim, E. (2013), “A resource‐based perspective on human capital losses, HRM investments, and organizational performance”, Strategic Management Journal, Vol. 34 No. 5, pp. 572-589.

Shepherd, D. A. (2003), “Learning from business failure: Propositions about the grief recovery process for the self-employed”, Academy of Management Review, Vol. 28 No. 2, pp. 318–329.

Shepherd, D. A. (2009), “Grief recovery from family business failure: A multi- and meso-level theory”, Journal of Business Venturing, Vol. 24 No.1, pp. 81–97.

Sturdy, A., Handley, K., Clark, T. and Fincham, F. (2009), Management consultancy: Boundaries and knowledge in action. Oxford: Oxford University Press.

Suarez, F.F. andd Utterback, J.M. (1995), “Dominant designs and the survival of firms”, Strategic Management Journal, Vol. 16 No. 6, pp. 415–30.

Sutton, R. I. (1987), “The process of organizational death: Disbanding and reconnecting”, Administrative Science Quarterly, Vol. 32 No. 4, pp. 542–569.

Sutton, R. I. and Callahan, A. L. (1987), “The stigma of bankruptcy: Spoiled organizational image and its management”, Academy of Management Journal, Vol. 30 No. 3, pp. 405–436.

The Economist (2016), “High noon on the high street”, Vol. 419 No. 8994, pp. 60-61.

Tung, R. L. (2008), “Human capital or talent flows: Implications for future directions in research on Asia Pacific”, Asia Pacific Business Review, Vol. 14 No. 4, pp. 469–472.

Verma, I. M. (2015), “Impact, not impact factor”, Proceedings of the National Academy of Sciences, Vol. 112 No. 26, pp. 7875-7876.

Walsh, I. J. and Bartunek, J. M. (2011), “Cheating the fates: Organizational foundings in the wake of demise”, Academy of Management Journal, Vol. 54 No. 5, pp. 1017–1044.

Wiesenfeld, B. M., Wurthmann, K. A. and Hambrick, D. C. (2008), “The stigmatization and devaluation of elites associated with corporate failure: a process model”, Academy of Management Review, Vol. 33 No. 1, pp. 231–251.

Yang, H., Phelps, C. and Steensma, H. K. (2010), “Learning from what others have learned from you: the effects of knowledge spillovers on originating firms”, Academy of Management Journal, Vol. 53 No. 2, pp. 371-389.