The Role of Firm Size and Knowledge Intensity in the Performance Effects of Collective Turnover

Abstract

As employees are among firms’ most important resources and labor markets are facing serious labor shortages, firm-level collective turnover is one of the most important challenges facing organizations. Context-emergent turnover theory provides a theoretical framework for the performance implications of collective turnover and argues that context, and in particular, firm size, plays a crucial role in the collective turnover–performance relationship. Yet, the moderating role of firm size remains undertheorized, empirically understudied, and thus, unclear. Based on the resource-based view of the firm, we develop a theoretical framework for two competing perspectives (a negative and a positive one) on the role of firm size and put forward the firm’s knowledge intensity as a crucial additional moderator. The main premise is that whereas firm size determines what resources firms have to successfully cope with turnover, knowledge intensity determines the resources firms need to do so. We propose a three-way interaction, suggesting that firm size reinforces the harmful effect of turnover in highly knowledge-intensive firms and buffers it in firms with low levels of knowledge intensity. Using a unique multi-industry and longitudinal administrative data set of 6,913 Belgian firms (2012–2016), we find support for these assumptions. This study highlights the importance of the context in which firms have to deal with turnover, and it spurs researchers to go beyond studying turnover in narrow study contexts, to take into account the interplay among different but intertwined organizational contingencies, and to acknowledge both the quantitative (how many employees leave) and qualitative components (who leaves) of turnover.