International Handbook of Entrepreneurship and HRM
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International Handbook of Entrepreneurship and HRM

Edited by Rowena Barrett and Susan Mayson

This invaluable reference tool has been designed in response to the growing recognition that too little is known about the intersection between entrepreneurship and human resource management. Paying particular attention to the ‘people’ side of venture emergence and development, it offers unique insights into the role that human resource management (HRM) plays in small and entrepreneurial firms.
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Chapter 19: Would Using the Psychological Contract Increase Entrepreneurial Business Development Potential?

Deborah Blackman and Kevin Hindle


Deborah Blackman and Kevin Hindle Introduction In an Australian national newspaper in 2005 an entrepreneur complained that he could not find an appropriate employee for a certain job (Perrett, 2005). He was advised that his expectations were unrealistic and that he was likely to upset his new employees by taking far more than he was giving in terms of their personal expectations. The entrepreneur was not reflecting good human resource management (HRM) practices but he was also setting the stage for violation of the psychological contract. As will be demonstrated in this chapter, this is not an isolated incident. Such a mismatch of expectations is common throughout small business operations, especially with respect to early stage firms (Massey et al., 2006). A study of the entrepreneurial literature demonstrates a shortage of research into the role of human resources in entrepreneurial businesses (Heneman et al., 2000; Katz et al., 2000) and that entrepreneurs mostly focus on human resources in terms of human capital (Florin et al., 2003; Zhang et al., 2003), not as a fundamental part of the success or failure of their enterprise. In this chapter our focus is on the importance of relationships for successful entrepreneurship and their absence from the most often-used theoretical frameworks underpinning empirical work into the entrepreneurial development process (such as stage models). The lack of an appropriate theoretical model for understanding the nature of an entrepreneur’s employment decision-making processes is promulgated and we then introduce the psychological contract and discuss why its well-developed...

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