HR Practices Protect Firm Knowledge

This paper was presented at The XXIII ISPIM Conference – Action for Innovation: Innovating
from Experience – in Barcelona, Spain on 17-20 June 2012. The publication is available to ISPIM
members at www.ispim.org.
Human Resources – Invaluable Inventors or Weakest
Links?
Heidi Olander*
Technology Business Research Center, Lappeenranta University of
Technology, P.O. Box 20, FIN-53851, Lappeenranta, FINLAND.
E-mail: heidi.olander@lut.fi
Miia Kosonen
Technology Business Research Center, Lappeenranta University of
Technology, P.O. Box 20, FIN-53851, Lappeenranta, FINLAND.
E-mail: miia.kosonen@lut.fi
Pia Heilmann
School of Business, Lappeenranta University of Technology, P.O. Box
20, FIN-53851, Lappeenranta, FINLAND.
E-mail: pia.heilmann@lut.fi
Pia Hurmelinna-Laukkanen
Oulu Business School, University of Oulu, P.O. Box 4600, FIN-90014
Oulu, FINLAND
E-mail: pia.hurmelinna-laukkanen@oulu.fi
* Corresponding author
Abstract: Human resources in knowledge intensive industries create the basis
for continuing innovativeness. At the same time they pose risks for the
competitiveness of the firm: Unwanted knowledge leaking to outsiders expose
firm-critical knowledge, and knowledge leaving with a departing key-employee
may leave the company in a less than convenient situation with knowledge
assets being lost and projects being left in jeopardy. While some of the
knowledge within a company can be protected by intellectual property rights,
these are not unproblematic. Moreover, the tacit knowledge within employees
cannot be patented. Companies subsequently need some complementary means
to sustaining prerequisites for innovativeness and enhancing company-critical
knowledge protection. We empirically examine how human resources
management related practices as an appropriability mechanism can enhance
loyalty and commitment of employees and thus enhance knowledge protection
using interview data from 22 interviews within two Finnish R&D intensive
large firms.
Keywords: HRM; knowledge protection; commitment; loyalty; trust; sense of
responsibility
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1 Introduction
Human resources are invaluable sources for innovation. Insightful, experienced and
enthusiastic R&D personnel can produce new ideas themselves and/or in collaboration.
However, human resources are one of the most volatile resources, and not much is known
about their management in terms of sustaining competitiveness. It is, after all, the
employees of the firm that deal with the highly-confidential innovation related
knowledge that should not leak outside of the company. A resource can only be valuable
as long as it is unique and distinct for the company. Besides leakages, leaving of a key
employee may pose serious risks for the firm's innovation performance. Motivation of
employees to stay within the firm as productive resource and willingness to share and
protect knowledge consistently can be influenced by human resources management
(HRM) related mechanisms. That is why it is important for innovation managers to
understand and manage human resources.
Earlier research on protecting firm’s intellectual assets has concentrated to a large
extent on the use of formal mechanisms of protection and appropriation, such as contracts
and patents, while informal mechanisms have not attracted sufficient research interest
(excluding a few exceptions such as Hurmelinna-Laukkanen and Puumalainen, 2007),
even though it has been recognized that not everything can be protected by formal means.
Especially the HRM related mechanisms for knowledge protection in innovation
management have so far received rather limited attention despite their recognized value
(Hurmelinna-Laukkanen and Puumalainen, 2007). In fact, even if some researchers (e.g.
Baughn et al., 1997, Hurmelinna-Laukkanen and Puumalainen, 2007, Liebeskind, 1996
and 1997) have tried to tackle the issue of using HRM related practices for knowledge
protection in innovation management, the findings have been contradictory. For this
reason, more in-depth qualitative research design is needed. Additionally, informal
mechanisms have been studied mostly in the context of SMEs (e.g. Leiponen and Byma,
2009, Olander et al., 2009 and 2011), and not much is known to what extent larger
companies would find them useful.
Previous research has identified that knowledge, and especially know how, are
important for achieving new innovations and creating and combining knowledge in new
ways. Furthermore, the competitive benefits of innovations and the related knowledge
become from their uniqueness (Barney, 1991). Both these aspects come to life in the
human resources of the firm. Yet ‘employees as the database for tacit knowledge’ has not
received much other attention in terms of knowledge protection on top of examination of
employment contracts and non-disclosure agreements. Therefore, there lies a research
gap in scrutinizing the importance of employees for sustaining the knowledge and
competitiveness of the company.
Olander et al. (2011) examined the importance of HRM related practices for
protecting the firm-critical knowledge and sustaining innovativeness within the company
in Finnish SMEs. They found HRM to be important especially for SMEs even though it
may not be actively and consciously used. Studies within large firms have mainly been
quantitative, and the results have been inconsistent. Based on these findings, HRM
related practices and managing employees need to be examined further in large firms, and
qualitative means can offer new insight on the issues left uncovered by quantitative
means.
Based on the research identified gaps, we present a research question: How important
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are human resources for the innovative efforts of large firms, and how can large
companies use HRM related protection mechanisms in order to preserve their
knowledge? This issue can be approached by examining what the roles of commitment,
loyalty, trust, and sense of responsibility toward the employer are in preparing for
knowledge leaking and leaving related risks.
We aim to tackle the research question by examining literature related to knowledge
and innovation management as well as knowledge protection, strategic management and
in particular HRM related literature. We use qualitative interview data from two Finnish
large firms’ R&D departments in Finland, and reflect between the data and theory in
order to find new areas of knowledge protection related issues to provide insights to
managers in large firms. We also aim to extend theory related to knowledge protection.
2 Protecting tacit knowledge within companies
A great deal of research has concentrated on protecting the firms’ intellectual assets in the
last decades. Knowledge as one form of intellectual asset is a company’s strategic asset
(Nonaka et al., 2000). Knowledge can be roughly divided into explicit and tacit. The most
valuable knowledge reserve of a company lies in the knowledge reserves of its employees
(Ståhle and Grönroos, 1999). This form of knowledge is mostly tacit. Tacit knowledge is
the knowledge that is hard to codify and transfer and is not easily visible when observed
(Nonaka and Takeuchi, 1995, Zander and Kogut, 1995). Tacit knowledge, by nature,
offers protection for the company-critical knowledge, as it is difficult transfer in the first
place. This creates on the on one hand benefits for the company, as tacit knowledge
cannot easily be leaked outside the company. However, loosing tacit knowledge through
knowledge leaving is another issue. Tacit knowledge can walk out of one company and in
to another with transfer of key employees with critical skills (Boxall, 1998). Besides, if
tacit knowledge is transformed into codified form, the protection provided by complexity,
unobservability, and other such features of tacit knowledge is lost for good. Therefore,
knowing how to protect and appropriate tacit knowledge is relevant.
The appropriability regime (Teece, 1986) of a firm refers to factors that govern an
innovator's ability to capture the profits generated by the innovation. Recent research has
suggested that the appropriability regime consists of several mechanisms, both formal
and informal. The formal mechanisms include the use of intellectual property rights
(IPRs) (Cohen et al., 2000, Davis, 2004, Hannah, 2005, Hertzfeld et al., 2006), contracts,
and labor legislation. The informal mechanisms include the creation of lead time, the use
of HRM related mechanisms, and practical and technical means of protection
(Hurmelinna-Laukkanen and Puumalainen, 2007).
Formal means of protection offer relatively little protection for tacit kind of
knowledge. Regarding IPRs, for example, grant of a patent even requires the knowledge
to be explicit and made publicly available in the patent application. Also, enforcing
company rights to trade secrets can be difficult. Labor legislation and contracts may
suffer similar shortcomings. Surely, non disclosure agreements (NDAs) can be made with
employees that have access to company-critical knowledge and they oblige the employee
not to divulge company secrets outside of the company even after the expiration of the
employment relationship. Their efficacy has been questioned in practice, however. In
addition to the protective features of NDAs, some norms, like the Finnish labor

legislation, include concepts such as the employer’s direction right, which means that the
employer may choose which tasks each employee should be part of – which can be used
as a protective measure in terms of knowledge leaks. Likewise, the loyalty principle built
in the labor legislation assumes the employee to be loyal to the employer and not, for
example, compete with the employer or reveal company-critical information. However,
emphasizing the rights of the employer may hurt the innovativeness or actual loyalty felt
by the employees (Hannah, 2005).
In fact, the possibilities of a company to protect tacit knowledge depend quite heavily
on its employees. In the present day labor markets the employees change more and more
often between jobs after short periods. This is partly due to the competitive situation in
many industries and the geographic centralization and urbanization giving employees
more to choose from. On the other hand, economic pressure pushes companies to
lay-offs. However, this transition seems to be the trend in all of the industrialized
countries. The leaving of employees in their best work age, no matter what the reason is,
is always a loss for the company as the tacit knowledge stored in the heads of the
employees is likely to disappear with a leaving employee. Especially in
knowledge-intensive industries where companies rely heavily on knowledge assets of the
employees the consequences can be critical (Droeger and Hoobler, 2003).
Labor law seems to support knowledge from not leaving or leaking the company as
long as the employees follow the rules of labor law. Enhancing the employees’
willingness to protect the knowledge from leaking and leaving could improve the level of
protection. The next chapter will introduce mechanisms for enhancing loyalty of the
employees to create a mutually beneficial situation.
3 Enhancing loyalty by HRM practices
Labor legislation and HRM as appropriability mechanisms are quite distinct ways to
protect tacit knowledge. For example, the law may allow an employer to give a task for
the employees to take part in IPR training, but it cannot determine whether the employees
are willing to learn. HRM, for its part, can be utilized to ensure that.
HRM as an appropriability mechanism includes several different areas. In the heart of
it are means that increase loyalty of employees. The role of loyalty enhancing practices
will be emphasized in the future because of the competition for competent workforce. It
is important to success in recruiting but also in retaining current personnel. Employee
commitment, psychological contract, and motivation are important in enhancing
employee’s loyalty toward organization and in preventing information leaks from
organization.
3.1 Employee commitment
Organizational commitment is commonly conceptualized as an affective attachment to an
organization characterized by shared values, a desire to remain in the organization, and a
willingness to exert effort on its behalf (Mowday et al., 1979). Organizational
commitment is an individual attitude that reflects one’s identification with and
involvement in a particular organization (Mowday et al., 1982). It can be characterized by
three related factors: 1) strong belief in the organization’s goals and values, 2)
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willingness to exert extra effort on its behalf, and 3) strong desire to maintain
membership (Mowday et al., 1982). Especially the two last-mentioned factors are
relevant for knowledge protection – one tackling the knowledge leaking and the other
knowledge leaving risks. Reichers (1985) conceptualizes commitment as side-belts (the
rewards and costs of organizational membership), attributions (the “binding” of the
individual to behavior over a period of time) and goal congruence between the employee
and the organization. Most theorists agree that organizational commitment can be seen in
terms of two dominant dimensions: affective and calculative, or continuance
commitment. Affective commitment is an attitudinal phenomenon related to personality
traits and job-related factors, and leads to the willingness of an employee to support
organizational goals. Calculative or continuance commitment is the result of an
employee’s perception that organizational membership will serve his/her self-interest and
results in the continued participation of the individual in the organization. Commitment
to an organization and its goals as well as the intent to stay with the organization are seen
as desirable outcomes promoting positive organizational citizenship behaviour, reduced
turnover, increased productivity and job satisfaction (Mir et al. 2002).
According to Allen and Mayer (1997) factors that affect the commitment of a person
are personal characteristics, working experience (e.g. fulfilment of expectations, reward
system, career progression possibilities, personal relations in the organization, personal
ranking in the organization), work role (wide and challenging tasks, interest, autonomy,
significance, responsibility and power in the organization, clarity of work role) and
organizational structure (organization’s age, managerial traditions, size of the
organization, control system).
3.1.1 Psychological contract
Psychological contract theory refers to the implicit, reciprocal rights and obligations that
individuals perceive within exchange relations (Rousseau, 1995), and can also be used to
understand commitment (Rousseau and Wade-Benzoni, 1995). Commitment and loyalty
are two-way contracts. Commitment is connected to a psychological contract between the
employer and the employee. The concept of the psychological contract can be defined as
an exchange agreement of promises and contributions between two parties, an employee
and an employer (Janssens et al., 2003). Chris Argyris (1960) is originally responsible for
the concept of psychological contract. Psychological contracting between an individual
and an organization is the process which holds the whole organizational enterprise
together. It is the invisible glue which binds individuals to the organization over time.
The individual’s objective, external career is the sequence of the positions he/she holds in
the organization, but his/her subjective internal career is the process of psychological
contracting (Herriot, 1992). Psychological contracts in employment are the belief systems
of individual workers and employers regarding their mutual obligations (Rousseau and
Schalk, 2000). From the employees’ point of view, the psychological contract is the
agreement that they have with their employer about what they will contribute to the
employer through their work, and what they can expect in return. A relational contract
refers to a long-term relationship based on trust and mutual respect. The employees offer
loyalty, conformity to requirements, and commitment to their employer’s goals, and trust
that their employer will not abuse their goodwill. In return, the organization is supposed
to offer security of employment, promotion prospects, training and development and
some flexibility about the demands made on employees if they are in difficulties.

However, global competition, new technology, downsizing, delayering and the rest have
put an end to all this. Many employers no longer keep their side of the bargain. Instead of
a contract being based on a long-term relationship, it is much more likely a short-term
transactional, economic exchange (Arnold, 1997). Lawler (2003) argues that the shear
concept of loyalty is starting to disappear in the organizational context because of moving
employees and global competition. Also lay-offs related to the increasing competitive
situation and global financial crises may send a signal to the employees that it may not be
wise to commit to any one company. In this situation however, it is more important than
ever to attract new talent, and keep the existing key talents in house for example by
substantial efforts creating high-level of motivation.
3.2 Motivation
Herzberg’s motivation-hygiene theory (or two-factor theory or satisfier-dissatisfier
theory) is widely used in motivation research (Herzberg, 1974). The two ‘factors’ in this
theory refer to sets of hygiene factors and motivation factors, or ‘motivators’. If the
hygiene factors are not satisfied, employees are dissatisfied and unmotivated. If only the
hygiene factors are satisfied, personnel are not dissatisfied but not motivated either. If
both hygiene and motivation factors are satisfied, employees are happy and motivated.
According to Herzberg, the hygiene factors are:
• company policy and administration
• level and quality of supervision
• quality of interpersonal relations
• working conditions
• salary and other forms of remuneration
• status
• job security
Motivators are:
• achievement
• recognition for achievement
• work itself
• responsibility
• advancement
• growth
For example, to provide someone a larger office is a quick fix which just ensures the
employee is not dissatisfied. Building in more responsibility to the individual’s work is a
motivator that makes the employee more satisfied.
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4 Cross-industry qualitative study on HRM-related protection and the
roles of commitment, trust, and sense of duty towards the
organization
4.1 Methods and analysis
As the research questions that our study aims to answer were how important human
resources are for the innovative efforts of large firms and how large companies can use
human resources management related protection mechanisms in order to preserve their
knowledge, and what the roles of commitment, trust, and sense of duty toward the
employer are in preparing for knowledge leaking and leaving related risks, we took a
qualitative research approach and examined two Finnish large companies’ Finnish R&D
units. The case companies were engineering company and an IT company. The two
industries varied considerably in the speed of the technological change, for example, the
first one having relatively long product life cycle with incremental innovation and the
second one being in a fast changing industry with continuous radical and incremental
innovation with short product life cycles and an environment known for its fierce
competition. We conducted 22 interviews: 12 interviews in the engineering company and
10 interviews in the IT company. We took a multi-level research setting examining
interviewees from four levels within the R&D units: strategy, expert (HR-managers,
R&D managers, legal experts), superiors, and operative level employees. The interviews
were conducted in Fall 2011.
We constructed a semi-structured theme interview form covering issues related to the
role of human resources management related practices in knowledge protection based on
literature review. This enabled taking theoretical background into consideration already
when conducting the interviews, but also allowed for further in-depth questions during
the interviews. The interviews lasted approximately 90 minutes each, and were recorded
with the permission of the interviewee and later transcribed for analysis purposes.
The analysis was conducted using the transcribed material which consisted of 262
pages of interview transcripts. Abductive logic was applied for the analysis. In the first
analysis round, we adopted content-analysis technique where the coding frame was based
on the themes arising from the theory including dependency on employees, loss of tacit
knowledge with leaving employee, enhancing commitment and loyalty, and sense of
responsibility towards employer. In the second analysis round, we adopted a comparative
case study approach (Eisenhardt and Graebner, 2007) comparing the cases from different
industries as well as comparing the conceptions of employees across different levels
within the companies. In both rounds of analysis, research triangulation was applied, as
two authors participated in the coding phase and contributed to the key findings
individually. The findings were then discussed and agreed upon jointly to enhance their
consistency.
Table 1 Case companies and number of interviewees per level
Company (A &
B)
Strategy
(#
e
Operativ
e
Altogether

m
p
l
o
y
e
e
s
)
(A) Engineering 2 4 2 4 12
(B) IT 2 2 2 4 10
Altogether 4 6 4 8 22
4.2 Dependency on key individuals in a large company
As noted earlier, tacit knowledge constitutes a key asset for also the case firms’
innovativeness. In both engineering and IT companies, human resources were considered
critical for innovativeness and competitiveness. Across all organizational levels in both
companies, the interviewees emphasized the role of professional knowledge and skills
residing in firm employees.
“We have an organization of professional software developers, it is a type of
organization that always depends on what people know, and we have different skills and
competence areas. Which means that the role of individual employees is accentuated.”
(R&D employee, company A)
“Of course you may store knowledge in systems, but to be able to use that documentation
meaningfully, you need people and their brains. The potential to apply knowledge and
solve problems, it can only reside on people.” (manager, company A)
“This is knowledge-intensive business and it means our core knowledge is in our
personnel.” – “It is accentuated in the early stages, when you only have a fuzzy idea, or
belief this is truly important, it all derives from the individual. But in the later phases,
some of that core knowledge already resides in technology and processes as well.”
(managers, company B)
In terms of formal mechanisms, on-going employment contracts were made and
non-disclosure agreements were a regular practice on all levels interviewed. As the
on-going employment contracts may be a good sign of the company’s commitment to the
employee, and non-disclosure agreements were seen to provide with formal reminder of
responsibilities related to confidential knowledge, these were considered inadequate to
cover for both leaking and leaving related knowledge risks.
In the engineering company (firm A) continuous effort had been placed on reducing
dependency on single actors by careful documentation which was especially clear on the
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strategy level interviews. In company B documentation was also considered important,
even though not an unproblematic ways to prevent knowledge from leaving. Also
company B seems to be in favour of more informal ways of preparing for risks of
knowledge leaking and leaving.
“We can only hope we’ve done a good job in documenting everything in advance, in case a
key employee leaves.” (Manager, company B)
“In case someone left, their job had been focusing on documentation during the last weeks
of employment.” (R&D employee, company B)
However, the operative level employees of company A felt the knowhow within the
employees could not be captured so easily and sustaining the competitiveness was more
about keeping the people, and keeping them committed and motivated. In sum, it can be
seen that leaving of an employee could cause serious harm for the company, and thus
different kinds of means were taken not to lose all of the tacit knowledge with leaving
employee.
4.3 The roles of enhancing commitment and loyalty
As Mowdy et al. (1982) recognized, commitment can enhance individual’s willingness to
exert extra effort on the company’s behalf and also increase the willingness of an
individual to stay within the company. In both firms, this had been grasped and effort had
been taken to succeed in keeping employees within the firm. The means used to enhance
commitment were different kinds of rewards and career paths with varying tasks
according to working years in the company and considered accumulated abilities.
Across all organizational levels, the role of intangible rewards in increasing
commitment was accentuated. Even if there were tangible reward systems applied, they
were considered either not very well matching with the content of work (company B) or
favouring top management instead of operational level (company A). This was seen to
erode the positive atmosphere. While not giving as much weight to bonuses or other
concrete rewards, many interviewees noted the role of giving positive feedback and
appraisal of good work. Yet there was significant concern how the Finnish culture does
not seem to favour openness in giving feedback. It was also not systematic but more
coupled with the personality of managers and supervisors, which was seen as a challenge.
“We should have more means to give intangible rewards to our employees.” – “It is a
problem that we do not usually thank employees in public.” (managers, company A)
“It depends much on the person you are dealing with, people have quite different habits
in how they give feedback.” (R&D employee, company B)
However, in terms of enhancing commitment, getting feedback for a job well done was
considered very important on the operative level in both companies:
“Feedback has a quite a lot of effect, of course it is nicer to get some positive than

negative feedback but the most essential thing is it is based on honesty and reality.”
(R&D employee, company A)
“Definitely it feels good to hear that you have done things right.” – “For instance,
successful projects have been highlighted in shared events and people are given
recognition.” (R&D employees, company B)
Affective commitment was looked for rather than calculative commitment, which does
not create long-term commitment towards the company. As it could be seen from many
of the interviews, the employees felt quite enthusiastic about their work and willing to
give their best input to the company. Even with the company B being under considerable
challenges with competitive environment and having had to do lay-offs in the past, the
employees were still quite affectively committed. This was also related to the unique
work opportunities offered, as one interviewee pointed out.
“For me, all this commitment thing is that we are working on a Finnish company, with
good managers, and with an opportunity to get a job for years.” (R&D employee,
company A)
“We have people who share this thing, interest in advances in technology and willing to
do certain type of work to advance it further. This is why we may openly and informally
discuss with each other, not based on formal roles. I think it is the best way to make
people committed.” (R&D employee, company B)
“It is a bit difficult to say if the company’s actions have much effect [on commitment], it
is more like personal characteristics and choices. And I also have to say that this
workplace is quite unique, our people could not find similar job elsewhere.” (R&D
employee, company B)
In company A, career paths had only recently been taken to the company agenda but
there was rapid advance already. Even if not all work positions offered opportunities to
promote, overall the company was seen to offer good opportunities for learning and
professional development. The same applied for company B. Even if the market situation
for these companies was different, short-term thinking was a shared concern. The
changes in competitive environment were seen to have resulted in “quarter management”
approach and less options for long-term development and technological advance, which
still is the key target for R&D employees.
4.3.1 Psychological contract and sense of responsibility towards employer
In both companies, the informants from managerial level identified a common “sense of
justice” as a typical cultural characteristic in Finland and other Western countries,
resulting in shared assumption that people feel sense of responsibility towards their
employer and do not aim at harming its business:
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“Our values here are based on the assumption that you take care of the confidentiality
issues, particularly with external stakeholders, and it is taken seriously.” (manager,
company A)
“If you wanted to leak knowledge, of course you could do that. But protection is based on
trust and employee willingness to follow that norm.” – “It starts with our employees
realizing the importance of protecting knowledge, and acting morally and ethically right
as company representatives.” (managers, company B)
In addition to the general sense of justice, employees were seen to demonstrate sense of
responsibility towards the company based on their experience on its practices. Both firms
were seen as trusted employers with a long tradition, resulting in a shared positive image
among employees – particularly among personnel with the most working-years. Even
leaving employees were seen to follow the responsibility standards. However, as one
interviewee pointed out, in knowledge-intensive business it may be challenging to draw a
line between general professional skills and business-critical knowledge to be protected.
Again, employees’ own judgement and acting according to the general moral standards
was underlined.
Relational contract refers to a long-term relationship based on trust and mutual
respect. The employees offer loyalty, conformity to requirements, and commitment to
their employer’s goals, and trust that their employer will not abuse their goodwill. Also in
the interviews, the role of trust and respect was highlighted. The practices related to trust
building were open communication and equal treatment of employees. As one
interviewee stated, there is a mutual “moral collaboration agreement” between employees
and superiors. Therefore, ethical standards are followed, but violating the moral
collaboration agreement could be assumed to result e.g. in frustration and purposeful
knowledge leaks.
4.4 Motivation
With the salary, working conditions and job security (e.g. safety at work) as hygiene
factors (Herzberg, 1974) being on fair levels, the interest turns into the internal
motivation factors. In addition to above mentioned recognition for achievement, the
companies were also using advancement and giving more responsibility with recognized
talent and according to years in the company. Quite naturally in a unit with researchers
interested in special professional domains, challenging and motivating tasks in their
specific fields were found important in keeping the employees happy and motivated with
their work. It was also a question of empowerment: people were allowed more freedom
in completing tasks and organizing their work.
“The important thing is that we have meaningful tasks that are of interest for our
employees.” (manager, company A)
“We need to give our people jobs and tasks which inspire them, based on their areas of
expertise.” (manager, company B)

Even if the above-mentioned career paths and opportunities to promote were noted in
both companies, their role did not turn out as significant as being motivated. Many
interviewees described how the “burning desire” to achieve and create new pushes them
forward as professionals. On operational level, the following notion well demonstrates
the internal motivation that many employees seem to possess:
“Even if there were no means to reward people, they might still work as much as they do
now, because we want to innovate and create new.” (R&D employee, company A)
This kind of internal motivation together with affective commitment to the company
creates a rather stable situation in both companies. As long as the hygiene-factors are at a
reasonable level and the job keeps motivating the personnel, knowledge protection in
terms of knowledge leaving seems to remain at an acceptable level.
5 Discussion
A variety of mechanisms and practices were identified in order to prevent knowledge
leaving. Across different organizational levels, it was also seen as a greater challenge
than the actual knowledge leakages in these case companies. Even though in many of the
previous studies the emphasis in terms of employee-related knowledge risks has been on
knowledge leaks (e.g. Mohamed, 2007, Norman, 2001) and also in the general opinion, in
our study these were not considered to be the greatest risk in terms of employees. Instead,
in both large firms the leaving of core knowledge (i.e. loosing of core tacit knowledge)
was considered the bigger risk. This result is in line with what has been found in the
study by Olander et al. (2011) in the context of SMEs. The firm B considered knowledge
leaking to be a rather small chance and only critical close to product launches, and could
be diminished by restricting exclusive core knowledge, whereas both companies
identified they had a lot invested in the intellectual assets of the key employees and their
talent, and leaving of such employee could be somewhat bigger a problem.
In terms of decreasing unwanted turnover of key talent, we examined the use of HRM
related means. Firstly, we focused on the roles of enhancing commitment and loyalty. All
in all, affective commitment (Mir et al., 2002) was perceived as rather high in both
companies. The presence of more calculative type of commitment could be more
expected from employees in company B due to turbulences in the organizational
environment. Rather surprisingly, the commitment seemed to be affective and on
relatively same levels within both of the companies. While rapid change and turbulence
were seen to erode the “family-like” atmosphere and opportunities for long-term
technological development - thus making it more challenging to enhance employee
commitment - it did not seem to hamper the employees’ internal motivation greatly.
Uncertainty often comes together with researcher’s interesting and challenging
occupation in different types of organizational environments in Finland. We suspect that
employees having a professional status and long experience may have accepted the
turbulence in the current working environments, have gotten used to it, and found means
to adapt to the new situation. It could also be that employees are more than previously
committed to their professional competence than on the organization, and thus have trust
12

in their own “market value”, and can thus bear some uncertainty with one aspect of job
security as hygiene factor (Herzberg, 1974).
In order to enhance commitment, the companies offered various opportunities for
advancing career and also applied rewards systems. Interestingly, positive feedback and
appraisal for a good job was recognized as important, yet not sufficiently common across
all organizational levels, and pronounced on operative researcher level. Currently the
R&D employees felt that rewarding was too focused on tangible outcomes. More
attention should thus be paid to giving feedback on an on-going basis. We believe this too
could have something to do with the researcher mindset and aim for accomplishment.
Secondly, enhancing sense of responsibility seemed to be tightly coupled with the
trust-building practices. Hereby, we noted the focal role of immediate superiors and
middle managers who “give face” to the organization, act as role models, and guide their
subordinates to act in line with sense of duty and obligation. Trust was seen to derive
from the simultaneous presence of R&D employees and supervisors, engaging in mutual
problem-solving and open communication in their everyday work. It is important to note
it was mainly the operative personnel who pinpointed the importance of interpersonal and
mutual trust, whereas for upper level managers it was more like role-based expectations
of acting as an example and listening to employees. Open communication, in turn, was
emphasized across all organizational levels, but it may not be perceived in the same vein:
operational-level interviewees in both companies noted how trust in top management
remained lower than in one’s immediate superiors, as decision-making was not
considered open enough and there was also lower level of presence and interaction. In
order not to erode trust on institutional levels, it is important to give face also to top
management and particularly to respond quickly in challenging situations.
Thirdly, the role of internal motivation among dedicated and enthusiastic R&D
personnel became salient in the interviews. It is important to note that motivation was not
seen just as a passive state - outside the sphere of influence by the company - but some
appropriate means to cultivate employee motivation were identified. Most of all it was an
issue of empowering employees, allowing them enough freedom and selecting optimally
challenging tasks.
6 Conclusions
In this study it was recognized that the firms are to an extent dependent on talented
key-employees, even if the firms employ practices to reduce the dependency on single
actors, and at the same time hold on to valuable resources by increasing commitment. It
seems that for people in R&D, who may have a greater internal motivation, HR practices
related to increasing commitment play an important role. At the same time, the R&D
professionals feel a strong loyalty towards their employer as long as they feel their
employer is perceived to be trustworthy. We believe this could be special to the Finnish
work ethics and appear especially with personnel with several years within the company.
At the operational level, the role of trust and appreciation is recognized much more
important than on the management and strategy levels, which implies there may be a
mismatch between the wishes of employees and the message that is coming through from
managers. In sum, while the focal role of employees in sharing/protecting knowledge has
been identified within large firms, it has thus far not been managed consistently. In sum,

it seems that employees within R&D intensive large firms indeed are invaluable
inventors, and not the weakest links, as long as they are being managed the right way.
Loyalty and commitment can be enhanced, but there may be signs of the present day
competitive situation calling for new kinds of approaches for enhancing loyalty and
commitment of employees.
Loyalty of employees was considered to be on rather good levels in the studied
companies, which (apart from management culture) could have something to do with
Finnish culture and mindset as well as reputation issues in a rather small country. Also
characteristics of the Finnish market area, such as the legal system known to be viable
and effective, may enhance the use of trust-based approaches within and between
companies. Therefore, it would be relevant to study these issues in large firms in different
market areas.
The qualitative approach taken in this study allows reaching in-depth views, but for
wider generalization, other industries and more quantitative studies should be carried out.
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