Navigating Institutional Complexity: How Context Shapes Talent Management Implementation in Small and Medium-Sized Enterprises

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Abstract: Small and medium-sized enterprises (SMEs) face distinctive challenges when implementing talent management (TM) practices, yet research has historically focused on large organizations in Anglo-American contexts. This article examines how institutional environments shape TM implementation in SMEs through the lens of institutional logics. Drawing on qualitative research with French SMEs and broader comparative evidence, we identify three dominant institutional logics—state, union, and market—that function as antecedents to TM implementation. Critically, SMEs are not passive recipients of institutional pressures but exercise agency through various tactics: minimal formal compliance supplemented by informal practices, collaborative narratives with symbolic adherence, and cost-focused imitation. These agentic responses generate persistent tensions—flexibility versus security, effectiveness versus legitimacy, and authenticity versus conformity—that fundamentally shape how TM unfolds in practice. We contribute to the TM literature by contextualizing implementation challenges, revealing the interplay between institutional structures and organizational agency, and providing actionable insights for practitioners navigating complex institutional environments. The findings challenge one-size-fits-all TM approaches and underscore the importance of understanding context-specific belief systems, regulatory frameworks, and stakeholder expectations when designing and implementing talent strategies in resource-constrained organizations.

Talent management has emerged as a strategic imperative for organizations seeking competitive advantage through the systematic attraction, development, and retention of high-performing employees (Vaiman et al., 2021). While the TM literature has extensively documented positive organizational outcomes in large multinational corporations, it has paid considerably less attention to how context—particularly institutional environments—shapes TM implementation in small and medium-sized enterprises (Abid & Jooss, 2026; Jooss et al., 2023). This gap matters because SMEs constitute the backbone of most economies, operate within markedly different organizational and institutional contexts than large firms, and face unique challenges that render many mainstream TM prescriptions impractical or counterproductive (Harney et al., 2022; McDonnell & Wiblen, 2021).

The stakes are significant. SMEs account for 99.9% of French businesses and experienced 7.7% growth between 2020 and 2022 (OECD, 2024). Yet these organizations frequently struggle with TM implementation in ways that cannot be explained solely by resource constraints or managerial capability deficits. Emerging research suggests that implementation challenges often reflect deeper institutional configurations—embedded regulatory frameworks, cultural norms, and economic structures that define what constitutes legitimate or desirable TM practice (Abid & Jooss, 2026; Lewis et al., 2019; McCarthy et al., 2024).

The Context Problem in Talent Management

Gallardo-Gallardo and colleagues (2020) argue persuasively that TM is never context-neutral. Rather, it is profoundly shaped by external factors including competitive markets, technological change, and institutional environments, as well as internal factors such as industry characteristics, organizational ownership, and workforce composition. Despite this recognition, context typically remains a byproduct rather than the central analytical focus in TM research. When context is addressed, discussions tend to center on TM strategy rather than implementation, and on macro-level comparisons rather than the micro-level mechanisms through which context actually shapes practice (Gallardo-Gallardo & Thunnissen, 2016).

This creates what Painter-Morland and colleagues (2019) identify as an analytical blind spot: TM implementation challenges are historically treated as matters of poor execution or insufficient resources, even as mounting evidence points to deeper institutional, organizational, and contextual configurations that constrain what is possible. This blind spot becomes particularly pronounced in the SME context, where organizations face distinct pressures stemming from their size, structure, and embeddedness in local institutional environments (Cantoni et al., 2025; Festing et al., 2013).

The SME Context and Its Implications

SMEs operate under what Harney and colleagues (2022) term the RECIPE framework: resource constraints (limited financial resources, time, and HR expertise); environmental vulnerability (sensitivity to exogenous shocks without protective buffers); concentrated control (powerful owner-managers who shape TM philosophy); informality (ad hoc, reactive approaches rather than systematic processes); proximity of relations (flat structures and smaller workforces creating visibility); and employee dynamics (workforce tensions arising from differentiation practices in close-knit settings).

Each of these characteristics has direct implications for how TM can and cannot be implemented. Resource constraints limit proactive TM strategies and place SMEs at a legitimacy disadvantage as employers of choice (Krishnan & Scullion, 2017). Environmental vulnerability pushes SMEs toward short-term, reactive workforce planning rather than long-term strategic talent investment (Howe-Walsh et al., 2023). Concentrated ownership means TM implementation is heavily dependent on individual owner-managers' philosophies and capabilities (Kravariti et al., 2021). Informality enables flexibility but limits consistency and strategic coherence (Harney & Alkhalaf, 2021). Proximity makes workforce differentiation immediately visible and potentially damaging to cohesion (Tyskbo & Wikhamn, 2023). Employee dynamics create tensions when exclusive TM practices are perceived as favoritism in small, close-knit teams (Gelens et al., 2014).

Yet even this comprehensive framework does not fully explain the variation observed across SMEs operating in similar resource conditions. Why do some SMEs adopt inclusive TM approaches while others attempt differentiation? Why do seemingly similar organizations facing comparable resource constraints produce markedly different TM outcomes? We contend that answering these questions requires understanding not only SME characteristics but also the institutional logics that shape what SME actors perceive as legitimate, desirable, or viable in TM practice.

Institutional Logics as Antecedents

Institutional logics are socially constructed belief systems, principles, and rules that guide behavior and define what constitutes appropriate action within a given domain (Thornton et al., 2012). Unlike the "old neoinstitutionalism" that emphasized isomorphic pressures leading to organizational conformity, contemporary institutional theory—what Lewis and colleagues (2019) term "new neoinstitutionalism"—recognizes that organizations are simultaneously shaped by and shape their institutional contexts. Multiple logics often coexist, interact, and compete within the same organizational field, creating institutional complexity that actors must navigate (Besharov & Smith, 2014; McCarthy et al., 2024).

In TM research, institutional logics have received limited attention despite their explanatory power. Recent studies have begun identifying distinct logics shaping TM strategies and practices: Tyskbo (2021) documents how multinationals exhibit multiple organizational logics (headquarters-business logic versus subsidiary engineering logic); Glaister and colleagues (2021) show how state logic encouraged managers to emphasize societal wellbeing in TM; and McCarthy and colleagues (2024) reveal how competing logics create paradoxical tensions for public sector TM actors. Yet we lack systematic understanding of which institutional logics function as antecedents to TM in SMEs, how these logics manifest in practice, and how SME actors navigate the complexity these logics create.

Agency and the Navigation of Institutional Complexity

Identifying institutional antecedents provides only a partial picture. Without examining how SMEs exercise agency—their capacity to navigate and respond to institutional contexts—we risk portraying these organizations as passive recipients of external pressures (Festing et al., 2013). Agency matters because it helps explain why organizations facing similar institutional logics and similar resource constraints produce different TM arrangements. As Bandura (2006) argues, actors do not merely respond to environmental conditions but intentionally influence organizational functioning. This is particularly salient for SMEs, where concentrated ownership and proximity of relations may afford forms of agency unavailable to larger, more bureaucratized organizations (Tasoulis et al., 2025).

Recent institutional scholarship emphasizes the dialectical relationship between structure and agency (Battilana & D'Aunno, 2009). Actors interpret, blend, negotiate, and sometimes resist institutional logics rather than simply conforming to them (Alvehus, 2018; Cardinale, 2018). In the TM context, this means implementation is not a straightforward execution of planned practices but an ongoing process of adjustment, negotiation, and compromise as stakeholders render TM workable within their specific constraints (Jooss et al., 2024; Tahmasebi & Nijs, 2024).

Critically, agency is not costless. Meyer and colleagues (2026) conceptualize the "paradox of agency," whereby actors exert agency within restrictive environments yet may paradoxically perpetuate the very conditions they seek to navigate. Applied to TM, this suggests that SME agency tactics—however creative or pragmatic—may generate their own tensions and contradictions. Understanding these agency-generated tensions is essential for explaining why TM implementation in SMEs often appears fragmented, symbolic, or inconsistent despite actors' best efforts.

Article Objectives and Structure

This article advances the TM literature by examining both the institutional logics that serve as antecedents to TM implementation and the agentic responses through which SMEs navigate institutional complexity. We address two central research questions:

1. What are the antecedents of TM implementation in SMEs? Drawing on qualitative research in French SMEs (Abid & Jooss, 2026) and broader comparative evidence, we identify state, union, and market logics as dominant antecedents that shape managerial choices and constrain TM possibilities.

2. How do SMEs exercise agency in TM implementation? We reveal that SMEs are not passive but employ various tactics: minimal formal compliance supplemented by informal practices, collaborative narratives with symbolic adherence, and cost-focused imitation. Critically, these agentic responses generate persistent tensions—flexibility versus security, effectiveness versus legitimacy, and authenticity versus conformity—that fundamentally shape TM outcomes.

The article proceeds as follows. We first review the TM literature in the SME context, highlighting the importance of institutional environments and organizational agency. We then introduce institutional logics theory as our conceptual lens. After presenting research evidence from French SMEs and comparative contexts, we analyze three institutional logics (state, union, market), the agency tactics SMEs employ in response, and the tensions these tactics generate. We conclude with theoretical contributions and practical implications for SMEs, policymakers, and practitioners navigating complex institutional terrains.

The Talent Management Landscape in SMEs

Defining Talent Management in Context

Talent management encompasses the activities and processes involved in the systematic attraction, identification, development, engagement, retention, and deployment of employees who contribute to sustainable organizational performance (Gallardo-Gallardo et al., 2020). While definitions of "talent" vary considerably—from innate gifts to demonstrated performance to organizationally valued contributions—we adopt Gallardo-Gallardo and Thunnissen's (2016) conceptualization: talent comprises employees who combine excellent inputs (knowledge, skills, abilities) with excellent outputs (value creation).

This definition accommodates two broad TM philosophies that shape implementation. Exclusive approaches focus resources on a subset of high performers or high potentials, creating differentiated development pathways and retention incentives for this talent pool (Vardi & Collings, 2023). Inclusive approaches treat all employees as potential contributors and provide universal access to development opportunities, emphasizing collective capability building over individual differentiation (Festing et al., 2017). The choice between these philosophies—or hybrid approaches combining elements of both—has profound implications for TM legitimacy, organizational justice perceptions, and employee dynamics (Gelens et al., 2014; McDonnell et al., 2023).

Prevalence, Drivers, and Distribution in SME Contexts

Research reveals that TM in SMEs differs systematically from TM in large organizations across multiple dimensions. While multinationals typically implement formal TM systems with dedicated HR functions managing structured talent pools, identification processes, and differentiated development programs, SMEs more commonly exhibit emergent, informal, and reactive approaches (Harney & Alkhalaf, 2021; Jooss et al., 2023).

Prevalence patterns suggest that explicit TM awareness and formal TM systems are less common in SMEs. Many small organizations lack familiarity with TM terminology or frameworks (Valverde et al., 2013), and where TM constructs are applied, their meaning varies significantly across firms (Cui et al., 2018). Rather than systematic talent identification or formal succession planning, SMEs often rely on owner-managers' tacit knowledge, personal relationships, and intuitive judgment to recognize and develop critical employees (Kravariti et al., 2021).

Key drivers of TM adoption in SMEs include competitive pressures, growth ambitions, succession concerns, and labor market tightness. Krishnan and Scullion (2017) find that SMEs facing acute skill shortages or rapid expansion adopt more proactive TM practices, though these remain constrained by available resources. Bonneton and colleagues (2020) document how some French SMEs construct "elite communities" through exclusive TM practices when owner-managers prioritize meritocracy, while others maintain egalitarian approaches reflecting different philosophical commitments.

Geographic and sectoral distribution matters considerably. Urban SMEs, particularly those in knowledge-intensive sectors (technology, professional services, consulting), tend to adopt more sophisticated TM practices than rural or traditional manufacturing SMEs (Abid & Jooss, 2026). Access to industry networks, professional associations, and talent ecosystems concentrated in metropolitan areas provides urban SMEs with resources and legitimacy unavailable to geographically isolated counterparts. This creates spatial inequalities in TM capabilities that compound other resource disparities.

SME-Specific Implementation Challenges

SMEs confront distinctive challenges when implementing TM that extend beyond simple resource scarcity:

Legitimacy deficits undermine SMEs' ability to compete for talent against larger, better-known employers. Without brand recognition, career development infrastructure, or clear advancement pathways, SMEs struggle to signal employer quality to prospective employees (Krishnan & Scullion, 2017). This legitimacy gap becomes self-reinforcing: difficulty attracting talent limits organizational capability, which further constrains competitiveness and employer reputation.

Visibility and cohesion trade-offs emerge from SMEs' flat structures and proximity of relations. Practices that would be invisible in large organizations—sending three employees to a conference, providing differentiated training, offering selective bonuses—become immediately apparent to the entire workforce in small firms (Jooss et al., 2023). This visibility amplifies perceptions of fairness or favoritism, making workforce differentiation organizationally risky even when strategically desirable.

Informality versus systematization tensions reflect competing pressures. Informality enables flexibility, responsiveness, and personalization—advantages SMEs can leverage against larger competitors' bureaucratic rigidity (Dundon et al., 2009). Yet informality also creates inconsistency, limited transferability of practices across employees, and vulnerability to key person dependencies. When owner-managers leave or sell the business, informal TM knowledge often leaves with them.

Short-term versus long-term orientation creates temporal tensions. Environmental vulnerability and resource constraints push SMEs toward addressing immediate operational needs rather than investing in long-term capability development (Howe-Walsh et al., 2023). Temporary contracts and project-based hiring enable short-term agility but prevent deep skills development. Mandatory compliance requirements (training levies, social contributions) consume budgets that might otherwise support strategic TM investments.

Institutional Logics and Organizational Agency

Institutional Theory Foundations

Institutional theory examines how institutional environments—the "framework within which human interaction takes place" (North, 1990, p. 4)—shape organizational behavior. In contrast to rational-actor models emphasizing strategic choice and efficiency maximization, institutional perspectives recognize that organizations are embedded in broader social, political, and cultural systems that define what constitutes legitimate or appropriate action (Scott, 2014).

Early institutional theory, often termed "old neoinstitutionalism," emphasized isomorphic pressures—coercive (regulatory requirements), normative (professional standards), and mimetic (imitation of successful peers)—that lead organizations to become more similar over time (DiMaggio & Powell, 1983). This perspective helped explain organizational conformity but struggled to account for variation, change, or organizational agency.

Contemporary institutional theory—what Lewis and colleagues (2019) call "new neoinstitutionalism"—addresses these limitations. Rather than treating institutions as monolithic forces producing conformity, this perspective recognizes institutional complexity, multiplicity, and dynamism. Organizations face competing institutional demands, navigate tensions between different logics, and actively interpret and respond to institutional pressures rather than passively conforming (Battilana & D'Aunno, 2009; Thornton et al., 2012).

Institutional Logics Defined

Institutional logics are "socially constructed sets of material practices, assumptions, values, and beliefs that shape cognition and behavior" (Thornton et al., 2012, p. 2). These logics provide actors with vocabularies of motive, sense-making frameworks, and scripts for appropriate action within specific domains. Critically, logics do not simply constrain behavior; they also enable it by providing shared understandings, legitimating certain practices, and delegitimating others.

Friedland and Alford (1991) introduced the concept to explain how different institutional orders—including the market, state, family, religion, and profession—embody distinct logics that can come into conflict. For example:

• Market logic emphasizes competition, efficiency, commodification, and profit maximization

• State logic prioritizes bureaucratic procedure, public welfare, democratic accountability, and regulatory compliance

• Professional logic values expertise, autonomy, collegial governance, and service quality

• Family logic centers on reciprocity, unconditional loyalty, and reproduction of lineage

• Community logic emphasizes collective identity, solidarity, and mutual support

These ideal types help researchers identify and compare different organizing principles, though real-world logics are often hybrids or context-specific variants (Thornton et al., 2012).

Logic Multiplicity and Institutional Complexity

A key insight from institutional logics research is that multiple logics routinely coexist within the same organizational field, creating institutional complexity (Besharov & Smith, 2014). Organizations and individuals navigate demands from different logics that may be compatible, complementary, or contradictory. When logics conflict—for example, when market logic demands workforce flexibility while state logic mandates employment security—actors must find ways to balance, compartmentalize, or creatively reconcile competing expectations.

Besharov and Smith (2014) distinguish institutional complexity along two dimensions: the degree of centrality (how central different logics are to organizational functioning) and the degree of compatibility (how compatible or contradictory multiple logics are). High centrality and low compatibility create acute complexity, as multiple equally important logics impose contradictory demands. This typology helps explain why some multi-logic environments remain manageable while others generate persistent tensions.

For SMEs, institutional complexity poses particular challenges. Unlike large organizations that can create specialized units or subcultures aligned with different logics (e.g., a compliance department responding to state logic while business units follow market logic), SMEs' small size and flat structures prevent such compartmentalization (Keegan et al., 2018). Owner-managers and small management teams must personally navigate competing logics without the buffering mechanisms available to larger firms.

Institutional Logics and Talent Management

Application of institutional logics to TM remains underdeveloped despite growing recognition that TM is institutionally embedded (Lewis et al., 2019; Tyskbo, 2021). Recent studies have begun documenting specific logics shaping TM:

Organizational versus professional logics in multinationals create tensions between headquarters' business priorities and subsidiary professionals' expert judgment. Tyskbo (2021) shows how Swedish multinational subsidiaries navigate between corporate "headquarters-business logic" emphasizing standardization and efficiency, and local "engineering logic" valuing technical expertise and professional autonomy. These competing logics produce different talent definitions, identification criteria, and development priorities.

State logic and societal welfare can shape TM toward collective benefit rather than narrow organizational advantage. Glaister and colleagues (2021) document how Omanization policies embedded in state logic encouraged managers to implement TM practices emphasizing national skills development, employment equity, and corporate social responsibility beyond immediate business needs. State logic thus repositions TM from competitive weapon to societal obligation.

Egalitarian versus meritocratic logics reflect fundamental tensions around workforce differentiation. McCarthy and colleagues (2024) reveal how public science funding organizations navigate between bureaucratic state logic emphasizing equal treatment and professional logic valuing excellence and performance differentiation. HR actors develop tactics—such as framing differentiation as development for all—to maintain legitimacy across both logics.

These studies demonstrate that institutional logics function not as abstract background conditions but as active forces shaping day-to-day TM reasoning, practice design, and justification. Yet most research examines large organizations or public sector contexts. How institutional logics operate as antecedents to TM in SMEs, and how SME actors respond to logic multiplicity, remains underspecified.

Agency Within Institutional Constraints

Understanding institutional logics as antecedents is necessary but insufficient. It risks implying that SMEs are passive recipients of institutional forces without meaningful choice. Recent institutional scholarship emphasizes that actors possess agency—the capacity to reflexively navigate, interpret, and even reshape institutional contexts (Cardinale, 2018; Meyer et al., 2026).

Agency takes multiple forms within institutionalized settings:

• Compliance involves meeting minimum institutional requirements while reserving autonomy in unregulated domains

• Avoidance creates workarounds or operates in institutional gray areas

• Compromise balances competing logics through hybrid practices

• Manipulation actively works to change institutional expectations or rules

• Defiance openly challenges or ignores institutional pressures despite potential sanctions

In SMEs, agency is particularly significant because concentrated ownership and informal structures enable rapid, personalized responses unavailable to bureaucratized organizations (Harney et al., 2022). Owner-managers can implement creative solutions, experiment with unconventional practices, or strategically selective compliance without navigating multiple approval layers. This organizational nimbleness potentially compensates for resource disadvantages.

However, agency is not unconstrained. SMEs face bounded agency—their responses are enabled and constrained by institutional contexts, organizational characteristics, and resource availability (Meyer et al., 2026). More critically, agency may generate its own contradictions. The "paradox of agency" describes situations where actors' attempts to navigate restrictive structures inadvertently reinforce those very structures (Meyer et al., 2026). Applied to TM, this suggests that SME workarounds—however pragmatic—may produce unintended consequences that ultimately undermine TM effectiveness or sustainability.

Understanding SME agency in TM thus requires examining not only the tactics organizations employ but also the tensions these tactics generate and the trade-offs they entail.

Evidence-Based Organizational Responses to Institutional Complexity

Table 1: Institutional Logics and Talent Management Responses in SMEs

Institutional Logic	Key Manifestations	SME Agency Tactic	Resulting Tension	Flexibility/Security Impacts	Legitimacy/Effectiveness Impacts	Authenticity/Conformity Impacts
State Logic	Rigid employment laws, dismissal risks, and mandatory financial obligations (social contributions, training levies).	Minimal formal compliance supplemented by informal practices (e.g., temporary contracts, unofficial mentoring).	Flexibility-Security Tension	Temporary workers provide operational agility but lack long-term security and deep skill investment.	Legal compliance is achieved, but resource diversion to regulatory burdens limits innovation and effectiveness.	Official records show conformity to laws, while actual development occurs through undocumented, "authentic" informal ways.
Union Logic	Collective agreements (GPEC), egalitarian culture, and union gatekeeper functions prioritizing universal access.	Collaborative narratives and symbolic adherence (framing differentiation as a collective benefit).	Effectiveness-Legitimacy Tension	Security is prioritized through equal treatment, limiting the flexibility to fast-track or differentiate specific talent.	Legitimacy is maintained with stakeholders, but effectiveness is compromised by "designing for everyone, serving no one."	Firms conform to egalitarian norms publicly while attempting hidden customization for high-potential employees.
Market Logic	Competitive pressures, resource optimization, and spatial/geographic inequalities (metropolitan vs. rural).	Cost reduction and imitation of larger firms (e.g., credential-focused hiring) to gain external legitimacy.	Authenticity-Conformity Tension	Focus on "just-in-time" talent for immediate needs rather than long-term security or capability building.	Imitation provides a facade of legitimacy but often results in misaligned or under-resourced practices.	Context-specific expertise (authenticity) is displaced by standardized frameworks that do not fit SME realities.

Drawing on qualitative research with 25 French SMEs across diverse sectors, supplemented by comparative evidence from other European contexts, we identify three dominant institutional logics shaping TM implementation: state, union, and market logics (Abid & Jooss, 2026). Each logic manifests through specific instantiations, prompts characteristic SME agency responses, and generates distinctive tensions. We examine these patterns in depth while integrating findings from comparable research contexts.

State Logic: Regulatory Frameworks and Fiscal Obligations

State logic in the French context emphasizes strong government intervention, employee protection, and social welfare prioritization over market-driven flexibility. This logic manifests through two primary channels: rigid employment laws and procedures, and substantial financial obligations.

Rigid Employment Laws and Procedures

French employment law establishes procedural rigidity that fundamentally shapes what SMEs can and cannot do with their workforce. The Loi El Khomri (Law on Labour Modernisation of Social Dialogue and Securing Career Paths) and Loi de la Modernisation Sociale (Social Modernisation Law) codify strict requirements for hiring, dismissal, and employment conditions. These laws do not simply create compliance burdens; they construct employment as a socially safeguarded status requiring state oversight (Abid & Jooss, 2026).

Dismissal procedures exemplify this logic's impact. Licenciement pour Motif Personnel (Dismissal for Personal Reasons) processes require extensive documentation, justification, consultation periods, and procedural steps. While technically available for performance-based separations, the complexity and litigation risk make these procedures practically prohibitive for resource-constrained SMEs. As one French HR manager explained: "We do not have a legal department. When we need to let someone go, even for valid reasons, we have to hire an external lawyer. The cost alone makes us think twice, so we end up keeping underperformers longer than we should" (Abid & Jooss, 2026).

This deterrent effect operates through institutionalized risk rather than explicit prohibition. SMEs internalize legal norms as routine constraints, leading them to avoid performance-based differentiation not because it is impossible but because it appears institutionally dangerous. Another manager noted: "We want to reward our top performers, but the legal framework makes it challenging. The risk of disputes and legal repercussions is just too high" (Abid & Jooss, 2026).

Comparative evidence suggests similar patterns in other coordinated market economies with strong employment protection. German SMEs navigate Kündigungsschutzgesetz (Protection Against Dismissal Act) provisions that similarly constrain workforce adjustments (Festing et al., 2013). Spanish SMEs report that Estatuto de los Trabajadores (Workers' Statute) requirements create procedural barriers to performance management (Valverde et al., 2013). In each case, state logic transforms talent decisions from managerial prerogatives into socially regulated processes.

Financial Obligations and Resource Diversion

State logic also manifests through mandatory financial contributions that channel firm resources toward collective social investment. French SMEs face corporate tax rates up to 33%, substantial social security contributions, and mandatory participation in programs like the Compte Personnel de Formation (CPF; Personal Training Account). While designed to ensure universal skills development and social protection, these obligations significantly constrain SME budgets for discretionary TM investments.

One French manager explained the squeeze: "Our budget for TM initiatives is always squeezed by the need to comply with various labour laws; severance pay, mandatory training, you name it. It leaves us with little room to innovate or invest in our people" (Abid & Jooss, 2026). Another noted: "We are expected to continuously contribute to the CPF, but the funds available are often insufficient. This creates a situation where we are spending money but not necessarily seeing the benefits in terms of enhanced employee skills."

This financial channeling reflects state logic's redistributive orientation, where firm-level resources serve broader social purposes. Yet from SMEs' perspective, mandatory contributions limit strategic autonomy without necessarily enhancing organizational capability. The diversion of resources to compliance undermines competitive positioning, particularly when competing against firms in less regulated environments.

SME Agency: Minimal Compliance and Informal Supplementation

In response to state logic constraints, French SMEs typically exercise agency through minimal formal compliance supplemented by informal practices. They meet legal minimums to avoid penalties while simultaneously developing parallel, undocumented systems that provide operational flexibility.

Temporary contracts and subcontracting provide one mechanism. Rather than navigating costly dismissal procedures, SMEs rely on fixed-term contracts, project-based hiring, or external contractors who can be released without formal termination processes. As one manager stated: "We use temporary workers for roles we would otherwise fill permanently. It is the only way to stay agile" (Abid & Jooss, 2026).

Informal development programs create another workaround. Unable to invest significantly in formal training given resource constraints, SMEs develop unofficial mentoring, peer learning, and on-the-job development that remains undocumented. One manager explained: "The law is the law, but we try to innovate quietly… we have unofficial mentorship programmes where senior employees guide the new ones. It is not documented anywhere, but it works" (Abid & Jooss, 2026). Another noted: "We do what is necessary to avoid penalties, but that does not mean we cannot be creative… training happens outside the official records."

These agency tactics create a clear separation between formal-visible domains satisfying state logic through documented compliance and informal-invisible domains preserving operational autonomy through undocumented practices. This dual approach enables SMEs to simultaneously meet regulatory expectations and maintain flexibility for business needs.

Parallel patterns appear in other Continental European contexts. German SMEs navigate strict employment protection through extensive use of Minijobs (marginal employment) and Zeitarbeit (temporary agency work) that provide workforce flexibility while meeting legal requirements (Festing et al., 2013). Greek SMEs similarly rely on informal training and relationship-based development to circumvent bureaucratic requirements (Kravariti et al., 2021).

The Flexibility-Security Tension

While these agency tactics demonstrate organizational resourcefulness, they generate what Abid and Jooss (2026) term a persistent flexibility-security tension. This tension arises not from state logic alone but from the interaction between regulatory constraints and SME responses. It reflects an unintended consequence of tactics that resolve immediate compliance challenges while creating new operational difficulties.

On the flexibility side, temporary contracts and informal practices enable adaptability that rigid employment rules restrict. Temporary workers allow rapid workforce adjustments without costly dismissal procedures, while undocumented mentoring supports learning without bureaucratic burden. Such flexibility is often essential for SME survival in volatile markets.

Yet this comes at cost to security, both objective and subjective. Objective security—employees' actual skills, employment stability, and career prospects—erodes as temporary employment discourages systematic capability investment. As one French manager explained: "We hire temps to stay flexible, but then we cannot invest in training them… so we end up with a workforce that hardly develops the deep skills we need" (Abid & Jooss, 2026).

Subjective security—employees' psychological sense of stability, commitment, and organizational belonging—also suffers. Workforce instability signals precarity even to permanent staff: "Our permanent employees see us constantly bringing in temporary workers… they wonder if their jobs are next" (Abid & Jooss, 2026). Another manager noted: "We get compliance but not commitment."

This tension exposes SMEs to additional risks. Agency tactics operate in institutionally ambiguous space—neither fully compliant nor fully strategic—leaving firms vulnerable. As one manager observed: "If a disgruntled employee ever filed a complaint, we would be exposed." Moreover, informal workarounds have clear limits: "We can do informal mentoring, but we cannot do informal promotions or compensation increases" (Abid & Jooss, 2026).

Analytical generalization: The flexibility-security tension reveals a fundamental structural trade-off in resource-constrained organizations under rigid institutional regulation. When such organizations prioritize short-term operational flexibility through informal, adaptive, or workaround practices, they systematically undermine longer-term strategic capability development. This dynamic extends beyond SMEs to other resource-constrained entities in highly regulated environments—healthcare clinics, educational institutions, nonprofits, or start-ups in regulated industries—where flexibility is achieved through improvisation rather than institutionalized development. The commonality is not size per se but the combination of limited resources and rigid institutional demands pushing organizational responses into paradoxical patterns.

Union Logic: Collective Agreements and Egalitarian Culture

Union logic in France emphasizes collective protection, egalitarian treatment, and procedural fairness in employment relationships. Unlike state logic's regulatory mechanism, union logic operates through both formal employment agreements and informal cultural expectations. This dual nature makes union logic particularly pervasive and difficult to circumvent.

Employment Agreements and Gatekeeper Functions

Union actors function as gatekeepers, enforcing normative conformity by ensuring TM practices align with collectively bargained standards. The Convention Collective Nationale (National Collective Agreement) standardizes employment conditions across sectors, while Accords de Gestion Prévisionnelle des Emplois et des Compétences (GPEC; Forward-Looking Management of Jobs and Skills Agreements) mandate workforce planning processes. Though technically non-mandatory for firms under 300 employees, GPEC agreements are often imposed through union negotiations (Abid & Jooss, 2026).

These agreements embed union-driven egalitarian policies prioritizing universal access over targeted development. As one French manager explained: "Any attempt to differentiate talent is seen as favouritism; unions prioritise opportunities for everyone, regardless of merit" (Abid & Jooss, 2026). This framing transforms strategic TM practice into moral violation.

The gatekeeper function operates less through formal sanctions than through reputational consequences. Another manager noted: "If the union labels you as unfair or elitist, you will struggle to hire anyone decent. We cannot risk that" (Abid & Jooss, 2026). The threat thus works through local labor market dynamics where union influence shapes employer reputations and employment brand.

Opposition to high-potential recruitment reflects this logic. Initiatives to attract or fast-track specific talent profiles are viewed as discriminatory rather than strategic. Similarly, performance-based differentiation faces discouragement: "We would love to try a performance-based bonus, but the fear of legal backlash holds us back" (Abid & Jooss, 2026). While intended to promote equity, this limits managerial flexibility: "Our hands are tied by the collective agreement. We cannot offer additional training to our high-potential staff without offering the same to everyone."

Comparative evidence shows similar patterns across Continental Europe. German unions' co-determination rights through Betriebsräte (works councils) constrain TM differentiation, with councils often blocking exclusive high-potential programs as violations of equal treatment (Festing et al., 2013). Spanish unions similarly resist talent segmentation, viewing it as threats to collective solidarity (Valverde et al., 2013). Nordic egalitarian cultures, while less union-driven, produce comparable expectations that all employees receive equitable development opportunities (Tyskbo & Wikhamn, 2023).

Egalitarian Culture and Expectations of Uniformity

Beyond formal agreements, egalitarian culture in France reinforces expectations of uniformity and inclusivity. Rooted in republican values of L'Égalité des Chances (Equal Opportunities) and indirectly reflected in legislation like the Loi pour la Liberté de Choisir son Avenir Professionnel (Law for the Freedom to Choose One's Professional Future), this cultural logic makes exclusive development programs organizationally risky.

Employment agreements provide the formal architecture while egalitarian culture supplies normative foundation. As one French manager explained: "There is a strong sense of fairness here. Everyone expects to be treated the same, regardless of their performance or potential" (Abid & Jooss, 2026).

SMEs' small size intensifies this expectation through visibility effects. Differentiation that would be invisible in large organizations becomes immediately apparent: "In a large company, you can give special training to high performers, and most people will not notice. Here, everyone knows everything. If three people go to a conference and twenty do not, those twenty will be asking why" (Abid & Jooss, 2026). This visibility amplifies perceptions of fairness or favoritism, making workforce differentiation organizationally dangerous even when strategically desirable.

SME Agency: Collaborative Narratives and Symbolic Adherence

In response to union logic, SMEs exercise agency by building collaborative narratives and cultivating symbolic adherence. They frame targeted initiatives as collective benefits while implementing hidden differentiation beneath egalitarian surfaces.

Framing TM as collective enhancement provides one tactic. Rather than explicitly distinguishing high performers or high potentials, SMEs present development programs as universal opportunities that incidentally provide extra value to certain participants. As one French manager stated: "We present talent development programmes as collective enhancements rather than individual privileges. It is the only way to gain acceptance" (Abid & Jooss, 2026).

Symbolic adherence through universal programs with hidden customization enables another approach. SMEs announce broad training programs open to all employees while embedding differentiated modules, coaching, or opportunities for select individuals: "We present broad training, but within it, high-potential staff get extra focus—always under the guise of universal access" (Abid & Jooss, 2026). This maintains legitimacy through egalitarian appearance while pursuing effectiveness through selective investment.

Similar tactics appear across contexts where egalitarian norms prevail. Scandinavian SMEs frame leadership development as "collective capability building" while providing higher-potential employees with extended coaching and exposure (Tyskbo, 2021). Spanish SMEs offer "universal training programs" with informal fast-track pathways for selected participants (Valverde et al., 2013). Greek family businesses maintain egalitarian rhetoric while providing favored employees with additional mentoring and advancement opportunities (Kravariti et al., 2021).

The Effectiveness-Legitimacy Tension

These agency responses produce an effectiveness-legitimacy tension arising from competing demands that cannot be satisfied simultaneously (Abid & Jooss, 2026). Effectiveness requires at least some workforce differentiation—investing disproportionately in high performers, targeting critical talent, building capabilities where they matter most. Legitimacy requires demonstrating commitment to egalitarian principles—equal treatment, universal access, collective focus. In SMEs facing union logic, pursuing one goal inherently violates the other.

On the legitimacy side, maintaining credibility requires visible commitment to egalitarian treatment. As one French manager explained: "If we openly favour some employees over others, word gets out. The union will make our life difficult, but worse, people in town will think we are unfair. When you need to hire, and nobody applies because you have a bad reputation, that is when you realise legitimacy is not optional" (Abid & Jooss, 2026). Reputation damage persists and manifests precisely when SMEs are most vulnerable—during growth phases or crisis recovery when talent needs are acute.

On the effectiveness side, organizational survival often requires differentiation. Building competitive capabilities, retaining critical expertise, and developing leadership pipelines all depend on focusing resources where they generate greatest returns. Yet differentiation risks legitimacy violations. One manager described the bind: "The union expects us to treat everyone the same. Our employees expect it, too. But our business needs us to invest more in certain people, the ones who can really drive us forward. Every time we try to do both, we end up doing a poor job at both" (Abid & Jooss, 2026).

This is not a skill deficit but a structural feature. SME survival requires developing key talent through differentiation, yet community survival requires egalitarian treatment. Embedded in local labor markets, SMEs cannot sacrifice community standing for strategic effectiveness without undermining future hiring capacity.

The effectiveness-legitimacy tension creates a persistent gap between what SMEs hope for (some differentiation) and what they can safely practice (universal treatment). SME agency becomes constrained by what can be publicly justified under egalitarian norms rather than strategic necessity. As one manager noted, this produces "designing for everyone, serving no one": "We design everything for universal access, which means we cannot make it too advanced or specialised. Our best people are under-challenged, and our weakest people are overwhelmed. Nobody gets what they really need" (Abid & Jooss, 2026).

Analytical generalization: The effectiveness-legitimacy tension applies to any locally embedded organization facing egalitarian institutional norms. Cooperatives, family businesses, community organizations, and mission-driven enterprises all struggle to simultaneously preserve local legitimacy and implement differentiated practices. This is not merely a managerial dilemma requiring skillful navigation but a structural incompatibility between competing institutional logics—one demanding effectiveness through differentiation, another demanding legitimacy through equal treatment.

Market Logic: Resource Optimization and Spatial Inequalities

Market logic emphasizes competition, efficiency, cost minimization, and credibility signaling. In the French SME context, this logic manifests through intense pressure for resource optimization combined with spatial inequalities that disadvantage non-metropolitan firms.

Resource Optimization and Compliance Focus

Responding to competitive pressures and resource scarcity, French SMEs have increasingly adopted cost-management approaches that treat TM as an expense to minimize rather than an asset to develop. This reflects market logic's assumption that organizational survival depends on efficient resource allocation where every expenditure must justify its diversion from other uses (Abid & Jooss, 2026).

Financial resources are directed toward immediate, low-cost solutions rather than long-term talent investments. One French manager explained: "Our budget for TM initiatives is always squeezed by the need to comply with various labour laws; severance pay, mandatory training, you name it. It leaves us with little room to innovate or invest in our people" (Abid & Jooss, 2026). The focus on low innovation suggests market logic constrains not only TM quantity but also quality, preventing experimentation and strategic development.

SMEs prioritize short-term workforce needs and compliance over long-term strategies, reacting to immediate operational gaps: "We focus on what is needed now, not what is needed five years from now" (Abid & Jooss, 2026). This temporal orientation reflects both resource constraints and market-derived environmental vulnerability, as SMEs lack buffers to invest strategically while meeting operational demands.

Comparative evidence suggests similar patterns across market-driven contexts. UK SMEs increasingly adopt "just-in-time talent" approaches, hiring for immediate needs rather than developing internal capability (Harney & Alkhalaf, 2021). Australian SMEs report focusing on "survival skills" (basic capabilities ensuring operational continuity) over "thriving skills" (advanced capabilities enabling competitive advantage) due to market pressures (Tasoulis et al., 2025). American SMEs similarly prioritize cost containment in TM, treating development expenses as discretionary costs to minimize rather than strategic investments (Krishnan & Scullion, 2017).

Spatial Inequalities and Geographic Marginalization

Market logic also manifests through spatial inequalities between metropolitan and peripheral SMEs. While most interviewed SMEs were urban-based, they highlighted challenges for rural and peri-urban firms in regions like La Creuse and Haute-Loire, where geographic marginalization compounds other disadvantages (Abid & Jooss, 2026).

Legitimacy deficits affect rural SMEs lacking the visibility and credibility of metropolitan firms, undermining their appeal to skilled workers. Restricted access to industry networks concentrated in cities like Paris, Lyon, and Marseille disconnects peripheral firms from knowledge communities, trade associations, and professional networks that support talent growth.

Brain drain from rural to urban areas creates additional challenges: "We keep losing the most qualified young people, as they do not see a future here, no matter what we offer" (Abid & Jooss, 2026). Another manager noted: "We have had to lower hiring expectations, because the best talent often leaves for the cities."

These spatial dynamics reflect market logic's tendency to concentrate resources, opportunities, and talent in locations offering greatest returns. Metropolitan areas provide ecosystem advantages—dense networks, peer learning, career mobility, cultural amenities—that peripheral locations cannot match. This creates cumulative disadvantage where geographic isolation reinforces resource constraints and limited access to talent.

SME Agency: Cost Reduction and Imitation

In response to market logic, SMEs exercise agency by focusing on cost reduction and imitating other firms to gain legitimacy. They consciously minimize TM expenses while copying visible practices from larger, more credible organizations.

Credential-focused hiring represents one common imitation strategy: "We ask for the same diplomas as the big companies, even if we do not really need them for some specific job" (Abid & Jooss, 2026). Another manager explained: "We try to copy what larger firms do, but in reality, we do not have the systems or resources to follow through."

This imitation serves signaling functions. By adopting hiring criteria, job titles, or development language used by larger competitors, SMEs signal legitimacy and professionalism to prospective employees, clients, and stakeholders. Yet implementation often remains superficial: "Sometimes it feels like we copy their processes just to look credible, but in practice we cannot implement them fully" (Abid & Jooss, 2026).

Similar patterns appear across market-driven contexts. UK SMEs report adopting "competency frameworks" and "talent pipelines" language without corresponding systems or processes, primarily to appear professional in recruitment (Harney & Alkhalaf, 2021). American SMEs implement "employer branding" initiatives copying large-firm tactics despite lacking resources for sustained execution (Krishnan & Scullion, 2017). Australian SMEs hire "talent managers" with limited budgets or authority, creating symbolic legitimacy without functional capability (Tasoulis et al., 2025).

The Authenticity-Conformity Tension

These agency responses generate an authenticity-conformity tension arising from conflict between developing practices suited to the firm's context (authenticity) and adopting practices aimed at external legitimacy (conformity) (Abid & Jooss, 2026).

On the authenticity side, participants emphasized context-specific approaches grounded in tacit knowledge and relational judgment: "Our own ways of identifying and attracting talent, built from our experience, do not often translate into formal procedures we can show externally" (Abid & Jooss, 2026). Another noted: "What really matters for us is knowing talents, understanding how they fit with the team, and reading situations as they evolve. These are things you learn over time, not from a checklist."

These authentic practices leverage SME advantages—proximity, informality, personalized relationships—that large-firm models cannot replicate. They represent situated expertise developed through experience, responsive to local contexts and organizational cultures.

On the conformity side, SMEs replicate larger firms' practices to gain external credibility: "To some point, we even looked at what the big players are doing and tried to replicate it, but we lack the infrastructure to make it work properly" (Abid & Jooss, 2026). Another added: "There is pressure to appear professional, so sometimes we adopt their frameworks even when they do not suit our size or way of working."

Imitation is therefore aspirational rather than operational. SMEs copy visible forms (job titles, competency language, formalized processes) without underlying substance (systematic talent data, dedicated development budgets, professional HR expertise). This creates facade legitimacy—appearing credible to external audiences—without functional effectiveness.

Neither authenticity nor conformity is fully viable. SMEs may prioritize authenticity to produce contextually appropriate practices but sacrifice legitimacy signaling that attracts talent. Alternatively, they may conform for legitimacy but produce misaligned, under-resourced practices that satisfy neither strategic needs nor employee expectations.

As one manager described the consequences: "We have employees with advanced degrees, but the nature of our work does not always require that level of education. They often feel underutilised, which impacts their motivation and engagement" (Abid & Jooss, 2026). Another noted the cycle: "We hire underqualified candidates, face high upskilling costs, and risk losing trained employees to larger firms. It is a never-ending cycle."

The authenticity-conformity tension thus produces dual pathologies: overqualified employees feeling underutilized, and underqualified employees requiring extensive development that SMEs cannot afford. Both reflect the gap between imitated practices and organizational realities.

Analytical generalization: The authenticity-conformity tension applies broadly to resource-constrained organizations seeking legitimacy through isomorphism. When such organizations imitate practices designed for different contexts without resources for proper implementation, they sacrifice authentic, context-specific capabilities that constitute their actual competitive advantage. This extends beyond SMEs to nonprofits copying corporate governance, educational institutions mimicking business school models, or public agencies adopting private sector management techniques—situations where the pursuit of conformity-based legitimacy displaces contextually grounded effectiveness.

Building Long-Term Capability and Resilience

Given the institutional complexities and agency tensions identified, how can SMEs build sustainable TM capabilities rather than relying on short-term workarounds? We propose three forward-looking pillars that acknowledge institutional constraints while expanding strategic options.

Institutional Dialogue and Collective Advocacy

Rather than treating institutional logics as fixed constraints, SMEs can engage in dialogue with unions, government bodies, and industry associations to reshape what is considered legitimate. This requires moving beyond individual firm responses toward collective advocacy that makes SME-specific challenges visible to policymakers.

Practical approaches include:

• Participating in industry associations that aggregate SME voices and lobby for proportionate regulation recognizing size differences

• Engaging unions in co-design of TM approaches that balance egalitarian principles with organizational sustainability, making the case that undifferentiated investment may undermine long-term job security if competitive capability erodes

• Documenting implementation challenges through case studies, employer surveys, and research partnerships that provide evidence for regulatory reform

• Proposing alternative compliance mechanisms that achieve policy objectives (skills development, employment security, fairness) through SME-appropriate means rather than scaled-down versions of large-firm requirements

Schneider Electric's SME supplier program illustrates how large organizations can support institutional dialogue. The French multinational works with SME suppliers to jointly approach regulators regarding compliance burdens that threaten supply chain sustainability. By aggregating cases and presenting shared challenges, the consortium has successfully negotiated modified reporting requirements and extended compliance timelines for specific regulations (industry report, 2023).

Germany's IG Metall-SME partnership demonstrates union engagement potential. The metalworkers' union collaborates with SME associations on skills development programs that provide universal access while allowing focused investment in critical capabilities. Rather than opposing differentiation, the partnership establishes transparent criteria and ensures base-level opportunity for all employees, creating legitimacy for targeted development (Festing et al., 2013).

Ecosystem Approaches and Talent Coopetition

Recognizing that individual SMEs cannot match large-firm resources, ecosystem approaches enable collective capability building. Talent coopetition—simultaneously cooperating on talent attraction, development, and retention while competing on products and markets—allows SMEs to share costs, pool resources, and create offerings attractive to talent despite individual firm limitations (Jooss et al., 2023).

Practical mechanisms include:

• Shared development programs where multiple SMEs co-fund training, leadership development, or technical upskilling, spreading costs while providing participants with broader exposure and network access than any single firm could offer

• Collective employer branding that markets regional clusters, industry networks, or SME consortia as attractive employment destinations, counteracting legitimacy deficits faced by individual unknown firms

• Talent circulation agreements allowing temporary secondments or project-based movement between partner SMEs, providing variety and development opportunities typically requiring firm changes while retaining talent within the ecosystem

• Co-investment in infrastructure such as shared technical facilities, innovation labs, or learning spaces that enable capabilities beyond individual firm reach

France's Pôles de Compétitivité (competitiveness clusters) provide infrastructure for coopetition. These government-supported regional innovation ecosystems bring together SMEs, research institutions, and larger firms around specific industries (aerospace, biotechnology, digital). Some clusters have developed shared talent programs where participating SMEs co-design training curricula, share instructors, and enable cross-firm project work. Evaluation data suggests these programs improve SME retention rates while developing capabilities no single firm could afford independently (French Ministry of Economy data, 2022).

Northern Italy's industrial districts have long demonstrated coopetition advantages. In regions like Emilia-Romagna, networks of small manufacturers collaborate on workforce development through industry associations and technical schools. Young workers gain exposure to multiple firms during apprenticeships, firms share specialized training costs, and the region develops collective reputation attracting talent despite individual firm anonymity. This model has proven resilient across economic cycles, suggesting ecosystem approaches can address both resource constraints and legitimacy deficits (Tasoulis et al., 2025).

Authentic Differentiation Through Transparent Practices

Rather than hiding differentiation beneath egalitarian surfaces—which creates the effectiveness-legitimacy tension and risks exposure—SMEs can pursue authentic differentiation through transparent practices that make selection criteria, development processes, and differential investments openly visible and procedurally fair.

Key principles include:

• Establishing clear, public criteria for talent identification that employees understand and perceive as fair, even if they do not all qualify—for example, critical skill gaps, project leadership opportunities, or succession needs

• Providing universal baseline development ensuring all employees receive foundational training, feedback, and growth opportunities, with differentiation representing additional investment beyond the baseline rather than exclusion from basics

• Explaining business rationale for targeted investments in terms employees can understand—competitive positioning, client requirements, succession planning—rather than obscuring decisions or labeling them as "high potential" designations that carry exclusionary connotations

• Creating pathway transparency showing how employees can qualify for additional development opportunities, making differentiation feel accessible rather than predetermined

• Implementing procedural fairness through nomination processes, assessment transparency, and opportunities to contest decisions, even if outcomes remain differentiated

Haier's "platform organization" model, adapted by some French SMEs, demonstrates transparent differentiation. Rather than manager-designated talent programs, employees bid for participation in innovation projects, leadership roles, or skill development through visible processes. Selection is based on demonstrated capability, project needs, and employee proposals rather than opaque potential assessments. While differentiation still occurs—not everyone is selected—the transparent process maintains legitimacy (case documentation, 2024).

Spain's Mondragón cooperative network shows how transparent differentiation can operate in highly egalitarian contexts. Within Mondragón's cooperative principles emphasizing equality, individual cooperatives implement differential development through democratic processes. Members vote on investment priorities, selection criteria for leadership development, and allocation of training budgets. This procedural fairness maintains legitimacy even as outcomes vary, because differentiation results from collective decisions rather than managerial discretion (Valverde et al., 2013).

Conclusion

This article has examined how institutional context shapes talent management implementation in small and medium-sized enterprises, focusing on the antecedents of TM practices and the agentic responses through which SMEs navigate institutional complexity. Our analysis reveals that TM in SMEs is profoundly influenced by multiple, often competing institutional logics—specifically state, union, and market logics—that define what is considered legitimate, desirable, or viable. Critically, SMEs are not passive recipients of these institutional forces but exercise agency through various tactics: minimal formal compliance supplemented by informal practices, collaborative narratives with symbolic adherence, and cost-focused imitation.

However, these agentic responses are neither costless nor tension-free. They generate persistent contradictions: the flexibility-security tension where operational adaptability undermines capability development; the effectiveness-legitimacy tension where strategic differentiation violates egalitarian norms; and the authenticity-conformity tension where imitation for credibility displaces context-specific practices. These tensions help explain why TM implementation in SMEs often appears fragmented, symbolic, or inconsistent despite actors' best efforts—not because of managerial incompetence or mere resource scarcity, but because institutional complexity creates structural trade-offs that defy simple resolution.

Core Insights and Contributions

Our analysis makes several theoretical contributions to the TM literature:

First, we advance understanding of TM antecedents by identifying institutional logics as fundamental forces shaping what is possible in SME talent management. While prior research has documented context effects, it has typically treated context as background variable rather than constitutive force. By showing how state, union, and market logics operate as socially constructed belief systems—not merely external constraints but cognitive frameworks defining appropriate action—we help explain variation in TM approaches across seemingly similar organizations. This shifts scholarly focus from whether SMEs implement TM well or poorly to examining which logics dominate, how they interact, and why particular practices become viable or foreclosed.

Second, we challenge deterministic portrayals of SMEs as institutionally constrained entities lacking strategic manoeuvrability. Our evidence reveals active agency through which SME actors navigate, resist, and creatively adapt to institutional demands. Yet we also specify that agency generates its own contradictions: tactics that resolve immediate institutional pressures often produce new operational difficulties. This refinement extends Meyer and colleagues' (2026) concept of the "paradox of agency" to the TM domain, showing that actors' attempts to navigate restrictive structures may inadvertently reinforce or produce new constraints.

Third, we contextualize TM research by providing rich empirical insights into the French institutional environment and comparative evidence from other Continental European settings. This helps rebalance a field dominated by Anglo-American, large-firm perspectives, demonstrating that institutional configurations—particularly the intersection of strong state intervention, union influence, and egalitarian cultural norms—fundamentally reshape what TM means and how it can be implemented.

Practical Implications for Stakeholders

For SME managers and owners, our findings suggest that effective TM requires understanding operating contexts through an outside-in perspective that starts with institutional logics rather than importing best practices from different settings. Practically, this means:

• Analyzing which institutional logics dominate in your context and how they manifest as regulatory requirements, cultural expectations, or stakeholder pressures

• Recognizing the tensions inherent in common agency responses—understanding that flexibility-enhancing tactics may undermine security, egalitarian framing may constrain effectiveness, and imitation may displace authentic capabilities

• Moving beyond short-term workarounds toward sustainable approaches: engaging in institutional dialogue, participating in ecosystem arrangements, and implementing authentic differentiation through transparent processes

• Being realistic about trade-offs rather than seeking to eliminate tensions that may be structurally inevitable, and making intentional choices about which tensions to prioritize

For policymakers and regulatory bodies, the analysis highlights unintended consequences of well-intentioned protections. Employment security regulations that deter performance management, training levies that divert resources without enhancing capability, and equal treatment mandates that prevent strategic investment all produce outcomes at odds with policy intentions. More proportionate regulation recognizing SME characteristics—size-appropriate compliance mechanisms, flexible implementation pathways, support for collective approaches—could maintain protections while reducing counterproductive constraints.

For union representatives and worker organizations, our findings demonstrate that rigid egalitarianism, while protecting against favoritism, may inadvertently undermine both organizational effectiveness and long-term employment security. Collaborative approaches that establish transparent criteria for differentiation, ensure universal baseline development, and create accessible pathways to advancement can preserve fairness while enabling organizational sustainability. The alternative—forcing differentiation underground—produces hidden inequities and organizational vulnerabilities.

For industry associations and ecosystem builders, the analysis underscores opportunities for collective action. Individual SMEs struggling with resource constraints and legitimacy deficits can achieve more through coordinated approaches: shared development programs, collective employer branding, talent circulation agreements, and co-investment in infrastructure. Facilitating such coopetition represents high-leverage intervention for ecosystem supporters.

Limitations and Future Research Directions

Our research has limitations that point toward future research opportunities. The study draws primarily on French SMEs with comparative insights from other Continental European contexts. While we propose analytical generalizations applicable to resource-constrained organizations facing institutional complexity, we cannot claim statistical generalizability. Future research should examine how institutional logics manifest in different national contexts—particularly liberal market economies with weaker employment protection, state-led economies with different intervention forms, or emerging economies with evolving institutional frameworks.

The interaction between multiple logics deserves deeper investigation. While we identified three dominant logics, their interpretation and enactment remain contextually embedded and contingent. Longitudinal research could explore how logic multiplicity evolves, how balance shifts between logics over time, and how SMEs learn to navigate complexity more effectively. Do certain configurations of institutional logics prove more manageable than others? Can organizations develop dynamic capabilities for institutional navigation that reduce agency tensions?

The tensions we identify—flexibility-security, effectiveness-legitimacy, authenticity-conformity—emerge as consequences of agency responses, but their interactions remain underexplored. Do these tensions operate independently, or do they compound when SMEs employ multiple agency tactics simultaneously? Can organizations develop approaches that mitigate multiple tensions simultaneously, or does addressing one inherently exacerbate others? What role do SME characteristics (size, industry, ownership, location) play in determining which tensions prove most salient or most manageable?

Microfoundational research examining how individual actors—owner-managers, employees, union representatives—enact, negotiate, or resist institutional logics would complement our organizational-level analysis. How do actors' professional identities, career histories, and personal values shape their interpretation of competing logics? Under what conditions do institutional logics shift from constraining to enabling? When and how do actors engage in institutional work aimed at changing rather than navigating logics?

Future research should also investigate coopetition strategies in greater depth. While we propose ecosystem approaches as promising responses to institutional complexity, we lack detailed understanding of what makes coopetition sustainable, how SMEs manage tensions between cooperation and competition, and which governance mechanisms support effective talent sharing. Comparative studies across industries and regions could identify success factors and transferable lessons.

Finally, quantitative research examining relationships between institutional logics and TM outcomes would complement qualitative insights. Large-sample studies could test whether specific logic configurations predict particular TM approaches, whether certain agency tactics prove more effective under specific conditions, and whether the tensions we identify manifest similarly across contexts. Such research would require developing valid measures of institutional logics, agency tactics, and TM outcomes appropriate to SME settings.

Concluding Reflections

Talent management in small and medium-sized enterprises is not a scaled-down version of large-firm TM but a fundamentally different phenomenon shaped by distinctive organizational characteristics and institutional contexts. The institutional logics perspective reveals that TM implementation challenges often reflect not technical failures or resource deficits but conflicts between competing belief systems about what constitutes legitimate employment practice. State logic's emphasis on employee protection through regulatory procedure, union logic's commitment to egalitarian treatment through collective agreements, and market logic's imperative for efficiency through cost minimization create a complex terrain that SMEs must navigate daily.

SMEs exercise considerable agency within this terrain, developing creative tactics that enable them to balance compliance with operational needs. Yet agency is inherently paradoxical: responses that resolve immediate pressures often generate new tensions that shape subsequent possibilities. Understanding this dialectic between institutional structure and organizational agency is essential for both scholarly analysis and practical intervention.

The path forward requires moving beyond individual workarounds toward systemic solutions: institutional dialogue that makes SME realities visible to regulators, ecosystem approaches that enable collective capability building, and authentic differentiation through transparent practices that maintain legitimacy while enabling effectiveness. Such approaches acknowledge that institutional complexity cannot be eliminated but can be navigated more productively when actors at all levels—managers, employees, union representatives, policymakers—recognize the structural tensions at play and work collaboratively toward sustainable resolutions.

Ultimately, our analysis suggests that the question is not whether institutional logics constrain or enable TM, but how organizations can develop capacity for navigating institutional complexity as an enduring feature of their environment. This capacity—recognizing dominant logics, anticipating tensions, exercising agency with awareness of its paradoxes, and engaging in collective institutional work—may represent the most critical talent management capability for SMEs in complex institutional environments.

Research Infographic

SME Talent Architecture Slide Deck

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Jonathan H. Westover, PhD is Chief Research Officer (Nexus Institute for Work and AI); Associate Dean and Director of HR Academic Programs (WGU); Professor, Organizational Leadership (UVU); OD/HR/Leadership Consultant (Human Capital Innovations). Read Jonathan Westover's executive profile here.

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Suggested Citation: Westover, J. H. (2026). Navigating Institutional Complexity: How Context Shapes Talent Management Implementation in Small and Medium-Sized Enterprises. Human Capital Leadership Review, 36(1). doi.org/10.70175/hclreview.2020.36.1.3