Master Thesis Masters of Agility A Study of How Small- and Medium-Sized E-Businesses Use Their Human Resource Management to Succeed in a Complex Environment Author: Miguel Carnero and Laura Weishaupt Supervisor: Richard Owusu Examiner: Mikael Hilmersson Date: 26.05.2016 Subject: International Business Strategy Level: Master Level Course code: 4FE80E Abstract SMEs are a type of business that has been intensively studied with regards to many different aspects, given that they are known as the engines of economies. Also, the adoption of the e-channel by SMEs has been researched widely. Yet, scarce research exists on e-businesses that do not have a physical point of sale – a rather new phenomenon that has changed the business world permanently. Especially the number of SME e-businesses increases rapidly and this type of business has not sufficiently been researched. E-businesses, given their own nature, are very exposed to external factors and competition, thus they have the need to be agile to remain relevant. Furthermore, it is known that HR are one of the most important resources in every business, and weigh even more in small businesses. This study aims at researching the existing gap in academic literature on e- businesses by shedding light on the general structures of the businesses HRM. Moreover, the concept of business agility in the context of SME e-businesses, which enables the businesses to cope with a complex and ever-changing environment, and how this characteristic can be fostered through HRM, is researched by this study. This study is based on a qualitative multiple case study of seven SME e-businesses from Germany and Sweden. The interviews were conducted face-to-face or via Skype with the HR responsible of the companies. The general HRM structures and activities were analyzed in SME e-businesses, as well as their contribution to eight agility characteristics, identified by previous research in different contexts: contextual clarity, common purpose, commensurate returns, flexible organizational structures, continuous learning, autonomy and accountability, personal growth and collaboration. Furthermore, three agility characteristics that can be revealed by the workforce of a company were analyzed: proactivity, adaptability and generativity. We conclude that the general HRM structures and activities reveal characteristics of typical SMEs as well as of large e-businesses. Furthermore, this study found, that business agility is generally fostered through surprisingly well-formalized HRM activities. Common purpose, commensurate returns, continuous learning, collaboration and generativity are the characteristics towards business agility that are fostered the most through HRM in SME e-businesses. i Keywords Business agility, human resource management, e-businesses, small- and medium- sized enterprises Acknowledgements The writing of this thesis would not have been possible without the support of many people that accompanied us on stages of our way and we are very thankful to all those that left their footprints during the process of elaborating this study. First of all, we would like to thank all companies, and especially the interviewees that participated in our study for their precious time and their incredible openness during the interviews. The input of the interviews gave us unique insights for our study but also gave us the opportunity to get to know very interesting companies that will surely make big steps in the future. We would also like to thank our supervisor Richard Owusu who invested a lot of energy and time to our thesis, who unwarily revised our drafts and guided us with very valuable advices during the ups and downs of the research process. We would like to further thank our examiner Mikael Hilmersson for his guidance, his useful comments and the insights in the world of research. Our gratitude also goes to Susanne Sandberg, the coordinator of the master program, who created the administrative frame for our thesis and also devoted her energy in assisting us during the process. We would also like to express our gratitude to all opponents that dismantled our manuscript during the seminars and helped us to develop a holistic research project. Lastly, we would like to express a big ‘thank you’ to our families and friends, who actively and mentally supported us during the last months. Thank you all very much! Kalmar, May 2016 _____________________________ _____________________________ Miguel Carnero Laura Weishaupt ii Contents Abbreviations _______________________________________________________ viii List of Figures _______________________________________________________ viii List of Tables _______________________________________________________ viii 1 Introduction _________________________________________________________ 1 1.1 Background ___________________________________________________ 1 1.1.1 Business Agility _____________________________________________ 2 1.2 Problem Discussion _____________________________________________ 3 1.3 Research Questions _____________________________________________ 5 1.4 Purpose _______________________________________________________ 6 1.5 Thesis Outline _________________________________________________ 6 2 Literature Review ____________________________________________________ 7 3 Theoretical Framework ______________________________________________ 17 3.1 Business Agility _______________________________________________ 17 3.1.1 Agile Organizations ________________________________________ 18 3.2 Human Resource Management ___________________________________ 19 3.2.1 Human Resource Management and Business Agility _______________ 21 3.3 E-Businesses _________________________________________________ 23 3.3.1 Human Resource Management in E-Businesses ___________________ 25 3.4 Small- and Medium-Sized Enterprises _____________________________ 26 3.4.1 Human Resource Management in Small- and Medium-Sized Enterprises 28 3.5 Conceptual Framework _________________________________________ 29 4 Methodology _______________________________________________________ 33 4.1 Research Approach ____________________________________________ 33 4.2 Research Method ______________________________________________ 34 4.3 Research Strategy _____________________________________________ 35 4.4 Case Study Design _____________________________________________ 36 4.5 Selection of Case Companies ____________________________________ 37 4.6 Company Presentation __________________________________________ 38 4.7 Data Collection _______________________________________________ 38 4.7.1 Primary Data Collection ____________________________________ 38 4.7.2 Secondary Data Collection ___________________________________ 40 4.8 Operationalization _____________________________________________ 40 4.9 Data Analysis _________________________________________________ 43 4.10 Quality of the Research ________________________________________ 44 4.10.1 Construct Validity _________________________________________ 44 4.10.2 Internal Validity __________________________________________ 45 4.10.3 External Validity __________________________________________ 45 4.10.4 Reliability _______________________________________________ 46 4.10.5 Semi-Structured Interview Quality Issues _______________________ 47 iii 5 Empirical Findings __________________________________________________ 48 5.1 Alpha Corporation _____________________________________________ 48 5.1.1 General Human Resource Management Structures and Activities ____ 48 5.1.2 Contextual Clarity __________________________________________ 49 5.1.3 Common Purpose __________________________________________ 49 5.1.4 Commensurate Returns ______________________________________ 49 5.1.5 Flexible Organizational Structures ____________________________ 50 5.1.6 Continuous Learning _______________________________________ 50 5.1.7 Autonomy and Accountability _________________________________ 51 5.1.8 Personal Growth ___________________________________________ 51 5.1.9 Collaboration _____________________________________________ 51 5.1.10 Proactivity _______________________________________________ 52 5.1.11 Adaptability ______________________________________________ 52 5.1.12 Generativity _____________________________________________ 52 5.2 Beta Corporation ______________________________________________ 52 5.2.1 General Human Resource Management Structures and Activities ____ 53 5.2.2 Contextual Clarity __________________________________________ 53 5.2.3 Common Purpose __________________________________________ 53 5.2.4 Commensurate Returns ______________________________________ 54 5.2.5 Flexible Organizational Structures ____________________________ 54 5.2.6 Continuous Learning _______________________________________ 54 5.2.7 Autonomy and Accountability _________________________________ 55 5.2.8 Personal Growth ___________________________________________ 55 5.2.9 Collaboration _____________________________________________ 55 5.2.10 Proactivity _______________________________________________ 55 5.2.11 Adaptability ______________________________________________ 56 5.2.12 Generativity _____________________________________________ 56 5.3 Delta Corporation _____________________________________________ 56 5.3.1 General Human Resource Management Structures and Activities ____ 56 5.3.2 Contextual Clarity __________________________________________ 57 5.3.3 Common Purpose __________________________________________ 57 5.3.4 Commensurate Returns ______________________________________ 57 5.3.5 Flexible Organizational Structures ____________________________ 57 5.3.6 Continuous Learning _______________________________________ 58 5.3.7 Autonomy and Accountability _________________________________ 58 5.3.8 Personal Growth ___________________________________________ 58 5.3.9 Collaboration _____________________________________________ 59 5.3.10 Proactivity _______________________________________________ 59 5.3.11 Adaptability ______________________________________________ 59 iv 5.3.12 Generativity _____________________________________________ 59 5.4 Easyfy/Litenleker ______________________________________________ 60 5.4.1 General Human Resource Management Structures and Activities ____ 60 5.4.2 Contextual Clarity __________________________________________ 60 5.4.3 Common Purpose __________________________________________ 61 5.4.4 Commensurate Returns ______________________________________ 61 5.4.5 Flexible Organizational Structures ____________________________ 61 5.4.6 Continuous Learning _______________________________________ 62 5.4.7 Autonomy and Accountability _________________________________ 62 5.4.8 Personal Growth ___________________________________________ 62 5.4.9 Collaboration _____________________________________________ 62 5.4.10 Proactivity _______________________________________________ 63 5.4.11 Adaptability ______________________________________________ 63 5.4.12 Generativity _____________________________________________ 63 5.5 Epsilon Corporation ____________________________________________ 63 5.5.1 General Human Resource Management Structures and Activities ____ 64 5.5.2 Contextual Clarity __________________________________________ 64 5.5.3 Common Purpose __________________________________________ 65 5.5.4 Commensurate Returns ______________________________________ 65 5.5.5 Flexible Organizational Structures ____________________________ 65 5.5.6 Continuous Learning _______________________________________ 66 5.5.7 Autonomy and Accountability _________________________________ 66 5.5.8 Personal Growth ___________________________________________ 67 5.5.9 Collaboration _____________________________________________ 67 5.5.10 Proactivity _______________________________________________ 67 5.5.11 Adaptability ______________________________________________ 67 5.5.12 Generativity _____________________________________________ 68 5.6 Gamma Corporation ___________________________________________ 68 5.6.1 General Human Resource Management Structures and Activities ____ 68 5.6.2 Contextual Clarity __________________________________________ 69 5.6.3 Common Purpose __________________________________________ 69 5.6.4 Commensurate Returns ______________________________________ 69 5.6.5 Flexible Organizational Structures ____________________________ 69 5.6.6 Continuous Learning _______________________________________ 70 5.6.7 Autonomy and Accountability _________________________________ 70 5.6.8 Personal Growth ___________________________________________ 71 5.6.9 Collaboration _____________________________________________ 71 5.6.10 Proactivity _______________________________________________ 71 5.6.11 Adaptability ______________________________________________ 71 v 5.6.12 Generativity _____________________________________________ 71 5.7 Rebtel _______________________________________________________ 71 5.7.1 General Human Resource Management Structures and Activities ____ 72 5.7.2 Contextual Clarity __________________________________________ 72 5.7.3 Common Purpose __________________________________________ 73 5.7.4 Commensurate Returns ______________________________________ 73 5.7.5 Flexible Organizational Structures ____________________________ 73 5.7.6 Continuous Learning _______________________________________ 74 5.7.7 Autonomy and Accountability _________________________________ 74 5.7.8 Personal Growth ___________________________________________ 75 5.7.9 Collaboration _____________________________________________ 75 5.7.10 Proactivity _______________________________________________ 75 5.7.11 Adaptability ______________________________________________ 75 5.7.12 Generativity _____________________________________________ 76 6 Cross-Case Analysis _________________________________________________ 77 6.1 Analysis of General Human Resource Management Structures and Activities _______________________________________________________________ 77 6.2 Analysis of Human Resource Management- and Workforce Characteristics towards Business Agility ___________________________________________ 79 6.2.1 Contextual Clarity __________________________________________ 80 6.2.2 Common Purpose __________________________________________ 81 6.2.3 Commensurate Returns ______________________________________ 83 6.2.4 Flexible Organizational Structures ____________________________ 84 6.2.5 Continuous Learning _______________________________________ 85 6.2.6 Autonomy and Accountability _________________________________ 87 6.2.7 Personal Growth ___________________________________________ 88 6.2.8 Collaboration _____________________________________________ 89 6.2.9 Proactivity ________________________________________________ 90 6.2.10 Adaptability ______________________________________________ 91 6.2.11 Generativity _____________________________________________ 92 7 Conclusion _________________________________________________________ 94 7.1 Purpose and Research Questions __________________________________ 94 7.2 Managerial Implications ________________________________________ 96 7.3 Theoretical Implications ________________________________________ 97 7.4 Limitations ___________________________________________________ 98 7.5 Suggestions for Further Research _________________________________ 98 References __________________________________________________________ 100 Interviews ______________________________________________________ 107 Appendices ___________________________________________________________ I Appendix A Interview Guide __________________________________________ I vi Appendix B Priorities of Interview Questions ____________________________ V Appendix C Summary of the Empirical Findings ________________________ VI vii Abbreviations CEO Chief Executive Officer CHRO Chief Human Resource Officer CTO Chief Technology Officer GDP Gross Domestic Product HR Human Resource HRM Human Resource Management ICT Information- and Communication Technologies IT Information Technology MNC Multinational Company PPP Purchasing Power Parity SME Small- and Medium-Sized Enterprise SME e-business Small- and Medium-Sized e-business UK United Kingdom USA United States of America USP Unique Selling Proposition VP Vice President List of Figures Figure 1-1: Thesis outline _____________________________________________ 6 Figure 3-1: Conceptual framework for HRM towards business agility in SME e- businesses ________________________________________________________ 29 List of Tables Table 2-1: Literature review ___________________________________________ 8 Table 4-1: Company presentation ______________________________________ 38 Table 4-2: Operationalization of the interview questions ____________________ 42 Table 4-3: Assessment scale for the analysis _____________________________ 43 Table 6-1: Summary of the cross-case analysis regarding general HRM characteristics _____________________________________________________ 79 Table 6-2: Summary of the cross-case analysis regarding agility characteristics __ 80 viii 1 Introduction In this chapter we outline the background to our study to give the reader a knowledge base to understand the concepts we unveil. In the problem discussion, we present the gap in the existing literature that this study targets. The chapter concludes with the research questions and the purpose of the thesis. 1.1 Background Globalization was once driven mostly by the world’s governments, large multinational companies (MNC), and important financial institutions (Manyika and Lund, 2016). Lately, globalization has developed faster than before and technology is the leading cause for this phenomenon; the developments of telecommunication technologies have made it possible to communicate across the globe for a fraction of the cost and the time needed before (Lassere, 2012). Furthermore, internet is now at anyone’s reach and it has enhanced the speed of globalization; this ongoing occurrence is opening doors for many countries and entrepreneurs (Wright and Dyer, 2000). Moreover, online digital platforms have helped small businesses, artisans, entrepreneurs, app developers, freelancers, and even individuals to participate in the global market directly (Ibid). The internet as a global network has abolished physical borders and made the global transmission of data possible (Lasserre, 2012). Also, it is seen that the impact of the internet increased vastly, thus, the internet has become an economic sector of its own and has disrupted our everyday lives and rearranged the flow of how things go around the globe: supporting research shows that if the internet were a national economy, it would rank in the world’s top five (Manyika and Roxburgh, 2011). Another report mentions that the internet is contributing up to eight percent of the gross domestic product (GDP) in some economies, powering growth and creating jobs (BCG, 2016). Some forecasts have consistently shown that the internet will continue expanding and incorporating itself in both, emerging and developed economies. To exemplify, it is forecasted that the internet economies of the G-20 major countries will grow at an annual rate of eight percent over the next five years starting in 2016 (BCG, 2016). This annual growth rate outpaces every traditional economic sector regarding wealth and job creation (Ibid). Nonetheless, it is important to mention that the world is still far from being fully connected, yet it is beginning to touch a far broader range of countries, enterprises, and people (Manyika and Lund, 2016) and will keep spreading and rooting itself into markets that are not fully 1