Expenditures on human resource development and firm financial performance: from the resource orchestration perspective

Abstract

Firms spend enormous amounts of resources for human resource development (HRD) based on the belief that HRD contributes to firm performance by enhancing employees' capabilities. However, whether investment in HRD actually creates value to firms is inconclusive. We explore whether and when a firm's HRD investment pays off by investigating the relationship between the monetary amount spent for HRD and a firm accounting‐based performance measure (ROE). Using a representative sample of 309 Korean firms from the Human Capital Corporate Panel database between 2009 and 2017, this study finds that HRD expenditures do not have any significant impact on ROE, while its impact is dependent on decoupling in HRD programs and the presence of an HRD department. These findings suggest that without appropriate use, HRD investment would fail to generate superior returns.