HR management practices are influenced by the values of financial investors in small businesses, research by Trinity Business School has found.
According to the study of seven small Irish firms in the agrifood sector, companies take an operational, strategic or transformational approach to HR depending on the type of investor and their values.
SMEs that receive financial backing from ‘angel’ investors – private investors who often have high net worth – tend to adopt an operational approach to HR management. This means their focus is on improving efficiency and internal functions.
Meanwhile, companies backed by private equity firms often adopt a more strategic approach, whereby they seek to accelerate growth and return on investment in a relatively short time frame. The researchers found that government venture capital also led to firms taking this approach.
And SMEs that receive corporate venture capital – where a large company takes an equity stake in the small firm – adopt either a strategic or transformational HR practice depending on the level of investment.