Does human capital matter? A meta-analysis of the relationship between human capital and firm performance.

This research tested the effects of human resource (HR) investment through human capital (HC) to hi-tech firm's performance. Eleven hypotheses of relations among HR investment, HC and hi-tech firm's performance are proposed in the article. The research used a sample of Chinese hi-tech firms. A variance analysis indicated that HR investment is significantly related to higher level of HC in a hi-tech firm, and HR investment is indirectly related to overall hi-tech firm performance through firm-level HC.

Ever since Becker’s work on human capital, management scholars have aimed to determine whether and how human capital affects firm performance. In line with Becker’s arguments, research on both large, well-established organizations and entrepreneurial firms (new and small) supports a positive link, but the mechanisms of how the human capital of individuals at the top of organizations affects firm performance is not well understood. In this paper, we examine the role of business planning as a possible link between an individual’s human capital and firm performance. We analyze whether executives with greater human capital engage in more business planning activities and how the consequent business planning impacts firm performance. We test hypotheses, applying an evidence- based research approach that synthesizes 148 empirical studies linking human capital, business planning, and entrepreneurial firm performance. We confirm the positive relationship between human capital and firm performance, and find support for business planning as a partial mediator of the human capital–firm performance relationship. Further analyses tease out the differences between education-based human capital and work experience-based human capital. While education is more strongly connected with business planning than experience, we find that business planning only mediates the relationship between experience and firm performance, not the relationship between education and performance. Implications for human capital theory and research on planning are discussed.

IntroductionThe constantly changing global business environment requires firms to aim for competitive advantages through creative and innovative business strategies. This is essentially important for their long term sustainability. A study by Seleim, Ashour, and Bontis (2007) analysed the relationship between organizational performance of software companies and human capital. A positive association was found between human capital indicators and organizational performances. The indicators, such as training attended and team-work practices, tended to result in superstar performers which led to more productivity, which could be translated to organizational performances. A significant positive correlation was found by Dooley (2000) between the quality of developers and volume of market shares. It can be said that human capital indicators enhanced the firm performance directly or indirectly. A study by Bontis and Fitzenz (2002) established the relationship between human capital management and economic and business outcomes. Human capital development and enhancement in organizations contribute significantly to organizational competencies which in turn became a great boost for further enhancing innovativeness. Contemporary literature to a large extent supports the fact that firm performance is positively impacted by the presence of human capital practices (Noe et al., 2003; Youndt et al., 2004).Researchers have endorsed that human capital development is a prerequisite to good financial performance (Delaney & Huselid, 1996). The significance of organizational human capital with regard to firm performance was further supported by Hsu et al. (2007). It has been found in a survey (Schmidt, 2003) that there is a strong direct correlation between human resource involvement and 'success' in mergers and acquisitions. Since changing an organization ultimately comes down to changing the practices, attitudes, and behaviors of the people who compose it, human resources departments are an essential component of change management. This research paper aims to study the human capital development role of HR during mergers and acquisitions. Both quantitative as well as qualitative study has been carried out to capture a more complete portrayal of the subject.Literature ReviewDefining Human Capital DevelopmentAdam Smith defined four types of fixed capital (which is characterized as that which affords a revenue or profit without circulating or changing masters). The four types were: 1) useful machines, instruments of the trade; 2) buildings as the means of procuring revenue; 3) improvements of land and 4) human capital (Sullivan and Steven, 2003). 'Human capital represents the knowledge, skills and abilities that make it possible for people to do their jobs. Human capital development is about recruiting, supporting and investing in people through education, training, coaching, mentoring, internships, organizational development and human resource management (LISC, 2009). Human capital means a stock of skills and knowledge resulting in the ability to perform labor so as to produce economic value. It is the skills and knowledge gained by a worker through education and experience with different areas in that field (Wikipedia, 2009). Schultz (1993) defined the term 'human capital' as a key element in improving a firm assets and employees in order to increase productivity as well as to sustain competitive advantage. Human capitals involves processes that relate to training, education and other interventions in order to increase the levels of knowledge, skills, abilities, values, and social assets of an employee which will lead to the employee's satisfaction and performance, and eventually on a firm performance.Rastogi (2000) stated that human capital is an important input for organizations especially for employees' continuous improvement mainly on knowledge, skills, and abilities. Thus, the definition of human capital is referred to as 'the knowledge, skills, competencies, and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being' (OECD, 2001). …

Research on firm internationalisation has tended to focus on Large Enterprises(LEs), with relatively less focus on Small Medium Enterprises (SMEs), despite the importance of SMEs in generating national employment and economic development. In many countries the government has acknowledged SMEs as a key source of domestic income growth and employment creation, most particularly from export activities. Studies on internationalisation of SMEs, however, have been predominantly focused on developed countries. This study therefore is focused on the internationalisation of SMEs from Indonesia, which represents developing countries. Most studies of exporting SMEs focus on macroeconomic factors such as regulation, infrastructure and programs which assist SME development. On the other hand, management literature has recognised the important roles of senior managers in terms of their management know‐how and international business skills as human capital which can influence the export activity of the firm. At the same time, social capital is also recognised a further resource needed for SME internationalisation. Therefore this research will address this gap in order to examine the role of entrepreneur’s human and social capital in internationalisation of the firm. Further to this, findings on the relationship between firm internationalisation and firm performance are mixed. More specifically, the effect of internationalisation of SMEs on business performance has not been seriously investigated. This study therefore seeks to fill this gap by examining the unique effect of different dimensions of internationalisation on business performance. Overall, this study has three purposes: the first is to measure company resources (Human and Social Capital) influencing Indonesia’s manufacturing exporting SMEs in their internationalisation process; the second is to examine the effect of human and social capital in relation to three dimensions of internationalisation (international performance, number of markets and time to internationalise); and the third is to assess the effect of the aforementioned internationalisation dimensions on firm financial performance. This study used a mixed method combining quantitative and qualitative approaches. The quantitative data was drawn from 241 SMEs’ managers and/or owners who have exporting activities from a total of approximately 3 million SMEs based on the Indonesian government database. The qualitative data was collected through interviews with ten SMEs owner‐managers who were participating in the survey. Using Structural Equation Modelling (SEM) technique, the findings suggest that Management Know‐How have no positive relationship with any dimension of internationalisation, but, interestingly, it has a negative relationship with time for internationalisation; suggesting that it delays the internationalisation of the firms. The findings also show that both International Business Skills and Social Capital skills have a positive relationship with international performance and number of exporting markets, but not with time for internationalisation. With regard to the effect of internationalisation on business performance, the findings show that international performance has no effect on business performance, but the number of export market has a positive relationship with business performance. On the other hand, the time for internalisation has a negative effect on business performance, meaning that the later the SMEs internationalise, the better their performance. Qualitative findings indicate that good networks with competitors, suppliers and government will help a firm to serve the international market successfully. From theoretical perspectives, the findings support the Resource‐Based View theory as international business skills have positive relationships with two dimensions of internationalisation. The findings of this study also support the traditional view of incremental internationalisation advanced by Stage Theory. Consequently, the findings imply that International New Venture Theory, which supports born‐global or leap‐frog approach in internationalising SMEs, is not appropriate for Indonesian context. Finally, this study also supports the Network Perspective which suggests that the relationships built by firms with other businesses, community leaders, and government have significant effect on internationalisation of SMEs. Overall, this study demonstrates the unique effect of different organisational capitals (i.e. human and social) as key resources for facilitating internationalisation.

This study aims to determine the effect of organizational capital on the firm life cycle. The sample used is a manufacturing company listed on the Indonesia Stock Exchange for the 2009-2017 period, with a total of 580 observations of data from 116 companies and using a purposive sampling method. This study uses the independent variable organization capital which is proxied by OC/TA and the dependent variable company life cycle which is proxied by the dummy life cycle classification based on cash flow, retained earnings to total assets, and retained earnings to total equity. In addition, the control variables used are company size, market-to-book ratio, leverage, return on equity, company sales growth, capital expenditure, and asset turnover ratio. The analysis technique used is multinomial logistic regression. The results showed that organizational capital has a significant effect on the firm life cycle, where companies with high organizational capital are in the introduction and decline stages, while companies with low organizational capital are in the growth and maturity stages. Development requires quality human resources (HR). This human resource can act as a factor of labor production that can master technology so as to increase economic productivity. To achieve quality human resources requires the formation of human capital (human capital). The formation of this human capital is a way to obtain a number of people who have strong characters who can be used as important capital in development. This character can be in the form of level of expertise and level of community education. The concept of human capital investment that supports economic growth has existed since the days of Adam Smith (1776), Heinrich Von Thunen (1875) and other classical theorists before the 19th century who emphasized the importance of investment. human skills. Schultz (1961) and Deninson (1962) then showed that the development of the education sector with human resources as its core focus has contributed directly to a country's economic growth, through increasing the skills and productive capabilities of the workforce. These findings and perspectives have stimulated the interest of a number of experts to research the economic value of education (Nurulpaik, 2005). Human capital is a stock of productive abilities and knowledge found in society. Alfred Marshal once said "the most valuable of all capital is that invested in human beings" (Becker, 1975). In this case human capital is a long-term investment in the development of human resources to increase productivity. The importance of human capital is that the knowledge that exists in human resources is the driving base in increasing productivity. Human capital can be distinguished from human resources management, but can also synergize. Human capital views humans more as intangible assets and human resources management views humans as costs or costs that are detrimental to the company. The concept of human capital emerged, due to a shift in the role of human resources. Human capital arises from the idea that humans are assets that have many advantages, namely human capabilities when used and disseminated will not decrease but increase both for the individual concerned and for the organization, humans are able to transform data into meaningful information. The concept of innovation has been continuously developed by a number of experts and institutions in the last 50 years. This is based on Resource Based Theory (Barney, 1991). In the perspective of Resource Based View (RBV), internal resources and the internal environment are the main keys for determining strategies to achieve high performance (Hitt et al., 2011). Resource Based Theory (RBT) focuses on the concept of attributes of excellence that are difficult to imitate as a source of superior performance and competitive advantage (Barney, 1991). Resources based theory is the company's resources as the main driver behind the company's performance and competitiveness. Based on this resources based theory, an organization can be assessed as a collection of physical resources, human resources, and organizational resources (Barney, 1991). Barney (1991) categorizes three types of resources: Physical capital resources (technology, plant and equipment) Human capital capital (training, experience, and insight), and Organizational resource capital (formal structure)

This article examines whether founders’ human capital affects not only actual investment but also required investment in research and development (R&D), using the original data of Japanese start-up firms. The estimation results indicate that higher levels of founders’ human capital, especially their education levels, increase both actual and required investment in R&D and thus do not necessarily contribute to reducing the funding gap for R&D.

Intellectual capital is an investment in the organization and it is perceived to be a strategic resource and a source of competitive advantage. The purpose of this chapter is to test the relationship between intellectual capital and business performance of pharmaceutical firms in Kenya. The specific objectives are to determine whether human capital, structural capital and relational capital influence business performance of pharmaceutical firms in Kenya. The results indicate that human capital, structural capital and relational capital influence business performance of pharmaceutical firms in Kenya. Human capital and structural capital relationship strongly exist among the studied pharmaceutical firms and significantly influenced business performance positively. In addition, the study confirmed that human capital, structural capital and relational capital are dimensions of intellectual capital. The developed model confirm that the theory fitted data with fit indices above or below the required thresholds and the empirical results provided strong support for the model.

Intellectual capital is an investment in the organization and it is perceived to be a strategic resource and a source of competitive advantage. The purpose of this chapter is to test the relationship between intellectual capital and business performance of pharmaceutical firms in Kenya. The specific objectives are to determine whether human capital, structural capital and relational capital influence business performance of pharmaceutical firms in Kenya. The results indicate that human capital, structural capital and relational capital influence business performance of pharmaceutical firms in Kenya. Human capital and structural capital relationship strongly exist among the studied pharmaceutical firms and significantly influenced business performance positively. In addition, the study confirmed that human capital, structural capital and relational capital are dimensions of intellectual capital. The developed model confirm that the theory fitted data with fit indices above or below the required thresholds and the empirical results provided strong support for the model.

With rising globalisation and the overcrowding of the employment market because of recent crises in numerous economies throughout the world, human capital is receiving more attention. Both developed and developing countries place a greater emphasis on human capital development to accelerate economic growth by dedicating the required time and effort. As a result, one of the most important means of accessing the global stage is to build human capital. Firms must devote the required resources to building human capital, which has a significant influence on performance. From several critical viewpoints, this research investigates the extent to which human capital has direct implications on corporate performance. This survey also intends to review 42 human capital related papers. Additionally, this paper provides a comprehensive study concerning the chronological review based on each publication, while also focusing on and reviewing the topic knowledge utilizing a systematic literature review. Finally, this paper develops a model that explains the relationship between human capital and firm performance. Keywords: HRM practices, organization performance, human resource capital, human capital investment, employee engagement

PurposeThe purpose of this paper is to investigate whether board diversity in human capital and social capital effectively mitigates the negative impacts of crises on firm performance.Design/methodology/approachCross-sectional time series data for 2001-2011 are collected from all the tourism-related public listed firms across four Asian markets. Linear and non-linear effects of board diversity on firm performance are examined.FindingsThis study finds that board diversity in human capital and social capital does not significantly improve firm performance, but it significantly mitigates the negative impacts of crises striking firm performance. The effects of board diversity show difference with sudden and gradual crises. The effects of board diversity show non-linear when tackling sudden crises. Only high levels of board diversity in external network ties are effective to tackle gradual crisis.Practical implicationsThe best composition of board capital should depend on the external environment. Only through adopting excessively high board diversity in social capital is suitable when the firms have lower frequency of industry cycle, or prone to the crisis which is likely to sustain. Instead, a moderate level of board diversity in human and social capital is crucial if the firms are always situated in harsh circumstances such as high competition environment, or prone to face industrial bubble.Originality/valueThis study directly investigates board diversity in human capital and social capital, rather than investigating through the proxy of age, gender, ethnicity, etc. This study sheds light on the influence of the board diversity in the crisis periods, the findings are enhanced with the classification of crises into sudden and gradual-onset type.

This study investigates the impact of various dimensions of intellectual capital including Human Capital, Innovation Capital, Relational Capital, and Structural Capital on Firm Performance, with Dynamic Capability examined as a mediating variable. Using Structural Equation Modeling (SEM), the results reveal that Human Capital significantly influences both Dynamic Capability and Firm Performance directly and indirectly, highlighting its crucial role in organizational success. Relational Capital also shows a positive effect on Dynamic Capability but lacks a significant direct or indirect impact on performance. Conversely, Innovation Capital and Structural Capital do not demonstrate significant effects on either Dynamic Capability or Firm Performance, suggesting a more complex or context-dependent role. The mediation analysis confirms that Dynamic Capability serves as an effective conduit through which Human Capital enhances performance outcomes. Based on these findings, the study recommends prioritizing human capital development and external relationship management to foster adaptability and improve performance. Future research directions include exploring moderating factors, adopting longitudinal and industry-specific approaches, and examining broader performance metrics to deepen understanding of intellectual capital’s strategic role.

This study aims to investigate the features of managing intellectual capital regarding the influence on firm performance in the Russian banking sector after COVID-19. The study considered general importance of intellectual capital firm’s bundle of all knowledge assets that can be utilized for different strategic moves. The research used primary data collected from managers in the Russian financial sector using a structured questionnaire from 364 respondents. The intellectual capital aspects used were human, relational, and structural capital. Organizational learning capability was a mediator, while firm performance was the independent variable. The hypotheses were evaluated using Structural Equation Modeling. The study results indicated that relational and human capital have a positive and significant influence on firm performance, but not structural capital. Relational capital, structural capital, and human capital were found to positively and significantly influence firm performance. Organizational learning capability was found to have a positive and significant effect on firm performance and a mediator of the impact of intellectual capital on firm performance. The study recommends that managers in the banking sector enhance their relations and interactions with customers, suppliers, and trade partners.

SMEs represent more than 90 percent of the establishment in many countries including Malaysia. However, from 98.5 percent of SMEs establishment, only 37 percent represent bumiputera SMEs. Human capital and self-efficacy are identified as internal factors of the organisation and function as a possible solution to address bumiputera SMEs’ difficulties. Hence, the primary objective of this study is to investigate the mediating effect of self-efficacy in the interaction between human capital and the SMEs performance in Malaysia. This study has investigated 203 Malay-owned small and medium enterprises. Structural Equation Modelling (SEM) was employed to analyse the data. The results demonstrated that human capital and self-efficacy influence each other and have a significantly positive impact on firm performance. Mediation simultaneously affirms that the relationship between human capital and firm performance is mediated by self-efficacy. This study concluded that these two internal factors can provide a holistic model to improve bumiputera SMEs performance in Malaysia.

PurposeThe paper investigates into the human capital–economic growth nexus by arguing that investment in early education and health helps in achieving higher economic growth. Early investment in human capital matters most for economic growth than the increase in human capital over the years.Design/methodology/approachA dynamic vector error correction model (VECM) together with the impulse response function and variance decomposition are used on data for Mauritius from 1983 to 2019. The paper distinguishes between the short-run and the long-run effects of human capital measured by the pupil–teacher ratio in pre-primary education and life expectancy at birth.FindingsThis study’s findings reveal that investment in early education and health has contributed positively to growth performance. There is evidence for long-run growth effects arising from a positive shock in the education and health indicators.Originality/valueThis paper contributes to both the theoretical and empirical literature on the human capital–growth nexus. Mauritius as a natural resource poor small economy is an important case study as it has started early in investing in its people to promote economic growth.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-11-2021-0674.

Renewable energy and CO2 emissions: Does human capital matter?