"Governance and Firm-Specific Human Capital: Human Assets, Competitive Advantage, and HR Dilemmas"

Abstract

Drawing on human capital theory, strategy scholars often emphasize the importance of firm-specific human capital as a source of competitive advantage (Hatch and Dyer, 2004; Mayer, Somaya, and Williamson, 2012; Wang, He, and Mahoney, 2009). A key reason for this focus is that, in theory, when employees have skills that are less valuable outside of the firm, this creates a gap between value they create and their opportunity cost at another firm. These gains are assumed to be shared between employees and firms and, in turn, can penalize workers for moving to another firm in the form of lower wages (Becker, 1993; Williamson, 1975). An obvious, if simplistic, recommendation for firms might be to invest in firm- specific human capital. However, this ignores the many human resource management dilemmas associated with firm-specific human capital. First, a key paradox of firm-specific human capital is that workers may systematically under-invest in such skills. However, there are many other challenges associated with firm-specific human capital. The stylized economic model does not take seriously heterogeneity of resources across firms, imperfect information about firm specificity, how firm specific knowledge and skills are accumulated, the relational context in which such investments are made or management implications at the upper echelons of the firm. All of these pose challenges on HR systems that must be addressed for firms to achieve a competitive advantage. In this symposium, we bring together a set of papers that explore dilemmas arising from investments in firm-specific human capital. Collectively, these papers suggest a set of problems that are best explored in both the HR and strategy literatures. When do Employees Acquire Firm-Specific Human Capital? A Relational Approach Presenter: Seo-Young Byun; U. of Wisconsin, Madison Firm-specific Human Capital and Competitive Disadvantage: Negative Sorting and Worker Quality Presenter: Sangyun Kim; U. of Wisconsin, Madison The Stone the Builders Rejected: Gaining Competitive Advantage from General Human Capital Presenter: Olubukunola Akinsanmi-Oyedeji; U. of Wisconsin, Madison Firm-Specific Knowledge Assets and CEO Dismissal Presenter: Heli Wang; Singapore Management U. Resource Accumulation Lags and the Value of Strategic Human Capital Presenter: Kenneth Younge; Purdue U. Presenter: Benjamin A. Campbell; The Ohio State U.