Exploitative training versus explorative training: the effect of strategic human capital investment on organizational performance

Abstract

PurposeNotwithstanding its significance as a form of strategic human capital investment, employee training has not yielded consistent conclusions among scholars regarding its impact on organizational performance. Some studies deem it effective, while others regard it as ineffective. We contend that distinct types of training impact various facets of firm performance.Design/methodology/approachIn this study, we categorize employee training as either exploitative or explorative. Specifically, we examine their impact on two aspects of organizational performance: short-term performance and long-term competence, using a quasi-experimental setting and a difference-in-differences (DID) method.FindingsWe find that exploitative training is more effective in improving firms’ short-term performance (e.g. firms’ sales revenue), while explorative training is more effective in enhancing firms’ long-term competence (e.g. firms’ innovation output).Originality/valueThe findings of this study illuminate concrete benefits of training for practitioners, suggesting that firms can strategically select employee training category to maximize returns on their investment in strategic human capital based on their strategic orientations.