Effects on innovation.
As hypothesis 1 predicts, employee human capital has a strong and positive effect on innovation. The same goes for the intensity of human resource management: in small, newly established firms innovation is stimulated by developing the management of human resources. As such, hypothesis 2 is also confirmed. So, even when controlled for an elaborate series of control variables (including management professionalism and company history), both employee human capital and human resource management are to be considered as important elements of the creating process leading to innovation. As such, it is confirmed that the development, acquisition or transformation of new knowledge (innovation) in small newly established enterprises depends not only on the human resource pool (the ‘position’ aspect of the resource-based view) but also on the way in which these human resources are managed (‘managerial process’) (Baldwin & Gellatly, 2003; Hayton, 2003; Laursen & Foss, 2003; Sundbo, 1999; Youndt et al., 1996).