Human Resource Management in Initial Public Offering Firms: Validation of a Control Orientation Typology

In this paper, we introduce a new typology that focuses on the way employees are managed in smaller, initial public offering (IPO) firms. Unlike many typologies in the human resource management literature, this typology is rooted in theory. Specifically, agency theory and organizational control theory suggest two forms of control over the entire employee population: bureaucratic control and outcome control. Examining IPO firms in terms of their choices to implement bureaucratic or outcome control for all employees results in a typology of four different human resource control orientations. The first type of control orientation uses neither form of control, the second uses only outcome control, the third uses bureaucratic control, and the fourth uses both bureaucratic and outcome control. We validate the typology and the measures used to derive it by analyzing extensive descriptive data from a sample of 107 firms that went public in 1988. Differences emerge between firms in each of the four quadrants of the typology with regard to company characteristics, governance characteristics, approaches to employees, and firm performance. In addition, these differences appear to be related to control orientation rather than merely attributable to age, size and stage in life cycle (variables often examined in other typologies). Lastly, control orientation is linked to firm performance.