Voluntary Turnover Rate Fluctuations, Human Resource Practices, and Innovation: A Within‐Organization Investigation

ABSTRACT Organizations constantly navigate voluntary employee departures to facilitate organizational effectiveness. To date, most studies on the implications of voluntary turnover rate have been conducted at the between‐organization level, comparing organizations with varying levels of voluntary turnover rates. Building upon complex adaptive system (CAS) theory, we develop within‐organization theorizing regarding the implications of voluntary turnover rate fluctuations for organizational innovation. We propose a U‐shape threshold model, where the relationship between voluntary turnover rate fluctuations and innovation takes a negative form when voluntary turnover rate fluctuations are within the normal range for an organization, and a positive form when voluntary turnover rate fluctuations surpass a critical threshold reflecting far‐from‐equilibrium conditions. Furthermore, we investigate how organizations may utilize human resource (HR) practices to shift the critical threshold. Specifically, we argue that increased reliance on interaction‐facilitating HR practices (employee participation and group‐based pay) lowers the threshold, while increased reliance on interaction‐inhibiting HR practices (individual‐based pay) raises the threshold. With firm‐fixed effects modeling, we found general support for our hypotheses using a large‐scale, multi‐level, longitudinal dataset from Statistics Canada (7110 workplace‐year observations from 1980 workplaces). We provide a novel theoretical lens to understand the nature and management of collective turnover.